UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
xQuarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2019.March 31, 2020.
or
¨
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number: 001-35376
GLOWPOINT,OBLONG, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
77-0312442
(I.R.S. Employer Identification No.)

999 18th Street,25587 Conifer Road, Suite 1350S, Denver,105-231, Conifer, CO 8020280433
(Address of Principal Executive Offices, including Zip Code)

(303) 640-3838
(Registrant’s Telephone Number, including Area Code)

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

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.0001 per share GLOWOBLG NYSE American

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 x No o

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 x  No o

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 o
Accelerated filer o
Non-accelerated filer x
Smaller reporting company x
 
Emerging growth company o

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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)
Yes o No x

The number of shares outstanding of the registrant’s common stock as of November 8, 2019June 25, 2020 was 5,140,500.5,226,879.

GLOWPOINT,OBLONG, INC.
Index
PART I - FINANCIAL INFORMATION 
Item 1. Financial Statements
1
 Condensed Consolidated Balance Sheets at September 30, 2019March 31, 2020 (unaudited) and December 31, 20182019
10
 Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30,March 31, 2020 and 2019 and 2018
2
 Unaudited Condensed Consolidated Statement of Stockholders’ Equity for the three and nine months ended September 30,March 31, 2020 and 2019 and 2018
3
 Unaudited Condensed Consolidated Statements of Cash Flows for the ninethree months ended September 30,March 31, 2020 and 2019 and 2018
5
 Notes to unaudited Condensed Consolidated Financial Statements
6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
1622
Item 3. Quantitative and Qualitative Disclosures About Market Risk
2028
Item 4. Controls and Procedures
2028
   
PART II - OTHER INFORMATION 
Item 1. Legal Proceedings
2028
Item 1A. Risk Factors
2028
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
2229
Item 3. Defaults Upon Senior Securities
2329
Item 4. Mine Safety Disclosures
2329
Item 5. Other Information
2329
Item 6. Exhibits
2431
Signatures
2632

RELIANCE ON SECURITIES AND EXCHANGE COMMISSION ORDER

On May 15, 2020, Oblong, Inc. (the “Company”) filed a Current Report on Form 8-K (the “May 15 Form 8-K”) indicating its intention to rely on the Securities and Exchange Commission’s (the “SEC”) Order under Section 36 of the Securities Exchange Act of 1934 Granting Exemptions from Specified Provisions of the Exchange Act and Certain Rules Thereunder, dated March 4, 2020 (Release No. 34-88318), as superseded by the SEC’s Order under Section 36 of the Securities Exchange Act of 1934 Modifying Exemptions from the Reporting and Proxy Delivery Requirements for Public Companies, dated March 25, 2020 (Release No. 34-88465) (collectively, the “Order”), to delay the filing of its Quarterly Report on Form 10-Q for the three months ended March 31, 2020 (the “Quarterly Report”) due to circumstances related to the coronavirus pandemic. As stated in the May 15 Form 8-K, the coronavirus pandemic resulted in travel limitations, limited access to the Company’s facilities and remote work for key personnel involved in preparing the Quarterly Report, which has adversely impacted the Company’s ability to complete the Quarterly Report on a timely basis.

See “Part I. Item 1A. Risk Factors -- Risks Related to Our Business Resulting From the Coronavirus Pandemic” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on May 15, 2020 (the “2019 Annual Report”) and “Note 17 - Commitments and Contingencies - COVID-19” and “Note 21 - Subsequent Events - Suspension of Services by Major Customer” to the consolidated financial statements contained in Part II, Item 8 of the 2019 Annual Report for further discussion of the impact of the coronavirus pandemic on the Company’s business and risks related thereto.


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 Glowpoint,Oblong, Inc. (“Glowpoint”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 Glowpoint’sOblong’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 Glowpoint,Oblong, are intended to identify forward-looking statements. These statements are based on Glowpoint’sOblong’s current plans, and Glowpoint’sOblong’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. GlowpointOblong 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, 2018,2019, each included in our Annual Report on Form 10-K for the fiscal year ended December 31, 20182019 filed with the Securities and Exchange Commission (the “SEC”) on March 8, 2019,May 15, 2020, as well as under “Part II. Item 1A. Risk Factors” in this Report. GlowpointOblong 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 GlowpointOblong or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this Report. Forward-looking statements in this Report include, among other things: our ability to meet commercial commitments; our expectations and estimates relating to customer attrition, sales cycles, future revenues, expenses, capital expenditures and cash flows; evolution of our customer solutions and our service platforms; our anticipated capital expenditures; our ability to fund operations; our ability to finance investments in product developmentoperations and sales and marketing;continue as a going concern; expectations regarding adjustments to our cost of revenue and other operating expenses; our ability to finance investments in product development and sales and marketing; matters related to our integration with Oblong Industries, Inc., and any benefits thereof; our ability to raise capital through sales of additional equity securities;or debt securities and/or loans from financial institutions; our beliefs about employee relations; statements relating to market need, evolution of our solutions and our service platforms; our beliefs about the service offerings of our competitors and our ability to continue as a going concern; anddifferentiate Oblong’s services; adequacy of our internal controls.controls; statements regarding our information systems and our ability to protect and prevent security breaches; expectations relating to additional patent protection; and beliefs about the strength of our intellectual property, including patents. For additional information regarding known material factors that could cause our actual results to differ materially from our projected results, please see “Part II. Item 1A. Risk Factors” in this Report. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:

the continued impact of the coronavirus pandemic on our business, including its impact on our customers and other business partners, our ability to conduct operations in the ordinary course, and our ability to obtain capital financing important to our ability to continue as a going concern;
our ability to continue as a going concern;
our ability to raise capital in one or more debt and/or equity offerings in order to fund operations or any growth initiatives;
our ability to innovate technologically, and, in particular, our ability to develop next generation Oblong technology;
customer acceptance and demand for our video collaboration services and network applications;
the quality and reliability of our services;
the prices for our products and services;
customer renewal rates;
risks related to the concentration of our customers and the degree to which our sales, now or in the future, depend on certain large client relationships;
customer acquisition costs;
our ability to compete effectively in the video collaboration services and network services businesses;
actions by our competitors, including price reductions for their competitive services,services;
potential federal and state regulatory actions;
our need for and the availability of adequate working capital;
our ability to raise capital in one or more debt and/or equity offerings in order to fund operations or any growth initiatives;
our ability to successfully integrate the former Glowpoint, Inc. and Oblong Industries, Inc. businesses following the closing of our acquisition of Oblong Industries, Inc. on October 1, 2019;
our ability to innovate technologically, and, in particular, our ability to develop next generation Oblong technology;
our ability to satisfy the standards for initial listing of common stock for the combined organization of Glowpoint and Oblong Industries, Inc. on the NYSE American stock exchange;
our ability to satisfy the standards for continued listing of our common stock on the NYSE American stock exchange;
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.operations.



PART I - FINANCIAL INFORMATION

GLOWPOINT,ITEM 1. FINANCIAL STATMENTS

OBLONG, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value, stated value, and shares)
September 30, 2019 December 31, 2018March 31, 2020 December 31, 2019
(Unaudited)  (Unaudited)  
ASSETS      
Current assets:      
Cash$1,271
 $2,007
$2,059
 $4,602
Inventory1,439
 1,816
Accounts receivable, net1,089
 1,371
4,209
 2,543
Prepaid expenses and other current assets376
 547
1,098
 965
Total current assets2,736
 3,925
8,805
 9,926
Property and equipment, net359
 728
1,091
 1,316
Goodwill2,342
 2,795
7,366
 7,907
Intangibles, net404
 499
11,961
 12,572
Operating lease - right of use asset, net2,602
 3,117
Other assets37
 15
128
 71
Total assets$5,878
 $7,962
$31,953
 $34,909
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Current portion of long-term debt, net of discount$3,550
 $2,664
Accounts payable424
 222
921
 647
Accrued expenses and other liabilities744
 910
Accrued expenses and other current liabilities1,262
 1,752
Deferred revenue2,673
 1,901
Current portion of operating lease liabilities1,294
 1,294
Total current liabilities1,168
 1,132
9,700
 8,258
Commitments and contingencies (see Note 9)

 

Long-term liabilities:   
Long-term debt, net of current portion and net of discount1,991
 2,843
Operating lease liabilities, net of current portion1,487
 2,020
Other long-term liabilities—
 3
Total long-term liabilities3,478
 4,866
Total liabilities13,178
 13,124
Commitments and contingencies (see Note 13)

 

Stockholders’ equity:      
Preferred stock Series A-2, convertible; $.0001 par value; $7,500 stated value; 7,500 shares authorized, 32 shares issued and outstanding and liquidation preference of $331 and $308 at September 30, 2019 and December 31, 2018, respectively—
 —
Preferred stock Series B, convertible; $.0001 par value; $1,000 stated value; 2,800 shares authorized, no shares issued and outstanding and liquidation preference of $0 at September 30, 2019 and 75 shares issued and outstanding and liquidation preference of $75 at December 31, 2018—
 —
Preferred stock Series C, convertible; $.0001 par value; $1,000 stated value; 1,750 shares authorized, 475 shares issued and outstanding and liquidation preference of $475 at September 30, 2019 and 525 shares issued and outstanding and liquidation preference of $525 at December 31, 2018—
 —
Common stock, $.0001 par value; 150,000,000 shares authorized; 5,238,900 issued and 5,140,500 outstanding at September 30, 2019 and 5,113,700 issued and 4,981,200 outstanding at December 31, 20181
 1
Treasury stock, 98,400 and 132,500 shares at September 30, 2019 and December 31, 2018, respectively(165) (496)
Additional paid-in capital184,660
 184,998
Accumulated deficit(179,786) (177,673)
Total stockholders’ equity4,710
 6,830
Total liabilities and stockholders’ equity$5,878
 $7,962
Preferred stock Series A-2, convertible; $.0001 par value; $7,500 stated value; 7,500 shares authorized, 45 and 32 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively and liquidation preference of $336 at March 31, 2020 and $237 at December 31, 2019—
 —
Preferred stock Series C, convertible; $.0001 par value; $1,000 stated value; 1,750 shares authorized, 325 and 475 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively and liquidation preference of $325 and $475 at March 31, 2020 and December 31, 2019, respectively—
 —
Preferred stock Series D, convertible; $.0001 par value; $28.50 stated value; 1,750,000 shares authorized, 1,720,460 and 1,734,901 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively and liquidation preference of $49,163 and $49,445 at March 31, 2020 and December 31, 2019, respectively—
 —


Preferred stock Series E, convertible; $.0001 par value; $28.50 stated value; 175,000 shares authorized, 131,579 shares issued and outstanding at March 31, 2020 and December 31, 2019 and liquidation preference of $3,750 at March 31, 2020 and December 31, 2019—
 —
Common stock, $.0001 par value; 150,000,000 shares authorized; 5,316,828 shares issued and 5,211,543 outstanding at March 31, 2020 and 5,266,828 shares issued and 5,161,543 outstanding at December 31, 20191
 1
Treasury stock, 105,285 shares at March 31, 2020 and December 31, 2019(172) (165)
Additional paid-in capital207,509
 207,383
Accumulated deficit(188,563) (185,434)
Total stockholders’ equity18,775
 21,785
Total liabilities and stockholders’ equity$31,953
 $34,909


GLOWPOINT,OBLONG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months EndedThree Months Ended
September 30, September 30,March 31,
2019 2018 2019 20182020 2019
Revenue$2,370
 $2,931
 $7,403
 $9,698
$5,328
 $2,594
Cost of revenue (exclusive of depreciation and amortization)2,374
 1,675
Gross profit2,954
 919
   
Operating expenses:          
Cost of revenue (exclusive of depreciation and amortization)1,582
 1,804
 4,901
 5,881
Research and development190
 215
 652
 690
1,327
 213
Sales and marketing38
 58
 111
 278
1,220
 33
General and administrative1,035
 1,170
 2,917
 3,132
2,028
 1,112
Impairment charges20
 975
 473
 3,150
541
 —
Depreciation and amortization145
 179
 461
 596
815
 159
Total operating expenses3,010
 4,401
 9,515
 13,727
5,931
 1,517
Loss from operations(640) (1,470) (2,112) (4,029)(2,977) (598)
Interest and other expense, net(154) —
Foreign exchange gain2
 —
Interest and other expense, net—
 —
 (1) (415)(152) —
Net loss(640) (1,470) (2,113) (4,444)(3,129) (598)
Preferred stock dividends4
 3
 23
 9
4
 15
Net loss attributable to common stockholders$(644) $(1,473) $(2,136) $(4,453)$(3,133) $(613)
          
Net loss attributable to common stockholders per share:          
Basic and diluted net loss per share$(0.12) $(0.30) $(0.42) $(0.94)$(0.60) $(0.12)
          
Weighted-average number of shares of common stock:          
Basic and diluted5,184
 4,885
 5,128
 4,749
5,204
 5,104



GLOWPOINT,OBLONG, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
Three and Nine Months Ended September 30, 2019March 31, 2020
(In thousands, except shares of Series A-2, Series B and Series C Preferred Stock)shares)
(Unaudited)

Series A-2 Preferred Stock Series B Preferred Stock Series C Preferred Stock Common Stock Treasury Stock Additional Paid-In Capital Accumulated Deficit  Series A-2 Preferred Stock Series C Preferred Stock Series D Preferred Stock Series E Preferred Stock Common Stock Treasury Stock      
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount TotalShares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Additional Paid-In Capital Accumulated Deficit Total
Balance at December 31, 201832
 $—
 75
 $—
 525
 —
 5,114
 $1
 133
 $(496) $184,998
 $(177,673) $6,830
Balance at December 31, 201932
 $—
 475
 $—
 1,734,901
 $—
 131,579
 $—
 5,266,828
 $1
 105,285
 $(165) $207,383
 $(185,434) $21,785
Net loss—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (598) (598)—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (3,129) $(3,129)
Stock-based compensation—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 29
 —
 29
—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 32
 —
 $32
Preferred stock conversion—
 —
 (75) —
 (50) —
 43
 —
 —
 —
 —
 —
 —
—
 —
 (150) —
 
 —
 —
 —
 50,000
 —
 —
 —
 —
 —
 $—
Issuance of stock on vested restricted stock units—
 —
 —
 —
 —
 —
 17
 —
 —
 —
 —
 —
 —
Forfeitures of restricted stock—
 —
 —
 —
 (14,441) —
 —
 —
 —
 —
 —
 —
 —
 —
 $—
Preferred stock dividends—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (15) —
 (15)—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (4) —
 $(4)
Issuance of preferred stock for accrued dividends13
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 98
 —
 $98
Purchase of treasury stock—
 —
 —
 —
 —
 —
 —
 —
 —
 (1) —
 —
 (1)—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (7) —
 —
 $(7)
Balance at March 31, 201932
 —
 —
 —
 475
 —
 5,174
 1
 133
 (497) 185,012
 (178,271) 6,245
Net loss—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (875) (875)
Stock-based compensation—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 24
 —
 24
Issuance of stock on vested restricted stock units—
 —
 —
 —
 —
 —
 —
 —
 (75) 382
 (382) —
 —
Preferred stock dividends—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (4) —
 (4)
Purchase of treasury stock—
 —
 —
 —
 —
 —
 —
 —
 24
 (34) —
 —
 (34)
Balance at June 30, 201932
 —
 —
 —
 475
 —
 5,174
 1
 82
 (149) 184,650
 (179,146) 5,356
Net loss—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (640) (640)
Stock-based compensation—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 14
 —
 14
Issuance of stock on vested restricted stock units—
 —
 —
 —
 —
 —
 65
 —
 —
 —
 —
 —
 —
Preferred stock dividends—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (4) —
 (4)
Purchase of treasury stock—
 —
 —
 —
 —
 —
 —
 —
 16
 (16) —
 —
 (16)
Balance at September 30, 201932
 $—
 —
 $—
 475
 $—
 5,239
 $1
 98
 $(165) $184,660
 $(179,786) $4,710
Balance at March 31, 202045
 $—
 325
 $—
 1,720,460
 $—
 131,579
 $—
 5,316,828
 $1
 105,285
 $(172) $207,509
 $(188,563) $18,775



GLOWPOINT,
OBLONG, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
Three and Nine Months Ended September 30, 2018March 31, 2019
(In thousands, except shares of Series A-2, Series B and Series C Preferred Stock)shares)
(Unaudited)


Series A-2 Preferred Stock Series B Preferred Stock Series C Preferred Stock Common Stock Treasury Stock Additional Paid-In Capital Accumulated Deficit  Series A-2 Preferred Stock Series B Preferred Stock Series C Preferred Stock Common Stock Treasury Stock      
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount TotalShares Amount Shares Amount Shares Amount Shares Amount Shares Amount Additional Paid-In Capital Accumulated Deficit Total
Balance at December 31, 201732
 $—
 450
 $—
 —
 —
 4,516
 $1
 65
 $(352) $183,118
 $(170,505) $12,262
Balance at December 31, 201832
 $—
 75
 $—
 525
 $—
 5,113,726
 $1
 132,519
 $(496) $184,998
 $(177,673) $6,830
Net loss—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (1,285) (1,285)—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (598) (598)
Stock-based compensation—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 50
 —
 50
—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 29
 —
 29
Issuance of preferred stock, net of expenses—
 —
 —
 —
 1,750
 —
 —
 —
 —
 —
 1,527
 —
 1,527
—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Preferred stock conversion—
 —
 (75) —
 (475) —
 185
 —
 —
 —
 —
 —
 —
—
 —
 (75) —
 (50) —
 43,402
 —
 —
 —
 —
 —
 —
Issuance of stock on vested restricted stock units—
 —
 —
 —
 —
 —
 31
 —
 —
 —
 —
 —
 —
—
 —
 —
 —
 —
 —
 16,824
 —
 —
 —
 —
 —
 —
Preferred stock dividends—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (3) —
 (3)—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (15) —
 (15)
Purchase of treasury stock—
 —
 —
 —
 —
 —
 —
 —
 18
 (53) —
 —
 (53)—
 —
 —
 —
 —
 —
 —
 —
 900
 (1) —
 —
 (1)
Balance at March 31, 201832
 —
 375
 —
 1,275
 —
 4,732
 1
 83
 (405) 184,692
 (171,790) 12,498
Net loss—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (1,689) (1,689)
Stock-based compensation—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 109
 —
 109
Preferred stock dividends—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (3) —
 (3)
Purchase of treasury stock—
 —
 —
 —
 —
 —
 —
 —
 —
 1
 —
 —
 1
Balance at June 30, 201832
 —
 375
 —
 1,275
 —
 4,732
 1
 83
 (404) 184,798
 (173,479) 10,916
Net loss—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (1,470) (1,470)
Stock-based compensation—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 111
 —
 111
Preferred stock conversion—
 —
 —
 —
 (500) —
 167
 —
 —
 —
 —
 —
 —
Issuance of stock on vested restricted stock units—
 —
 —
 —
 —
 —
 24
 —
 —
 —
 —
 —
 —
Preferred stock dividends—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (3) —
 (3)
Purchase of treasury stock—
 —
 —
 —
 —
 —
 —
 —
 49
 (91) —
 —
 (91)
Balance at September 30, 201832
 $—
 375
 $—
 775
 $—
 4,923
 $1
 132
 $(495) $184,906
 $(174,949) $9,463
Balance at March 31, 201932
 —
 —
 —
 475
 —
 5,173,952
 1
 133,419
 (497) 185,012
 (178,271) 6,245







GLOWPOINT,OBLONG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)


Nine Months Ended September 30,Three Months Ended March 31,
2019 20182020 2019
Cash flows from operating activities:      
Net loss$(2,113) $(4,444)$(3,129) $(598)
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation and amortization461
 596
815
 159
Bad debt expense12
 5
13
 (4)
Amortization of debt discount, net of gain on extinguishment—
 104
Amortization of debt discount34
 —
Amortization of right of use asset302
 —
Payments on lease liability(317) —
Loss on disposal of equipment22
 —
Stock-based compensation67
 270
32
 29
Impairment charges473
 3,150
541
 —
Changes in operating assets and liabilities:      
Accounts receivable270
 (171)(1,679) (67)
Inventory377
 —
Prepaid expenses and other current assets171
 249
(133) (72)
Other assets76
 —
(59) 24
Accounts payable202
 23
274
 (15)
Accrued expenses and other liabilities(287) (391)
Accrued expenses and other current liabilities(398) 136
Deferred revenue772
 —
Other liabilities(3) —
Net cash used in operating activities(668) (609)(2,536) (408)
Cash flows from investing activities:      
Purchases of property and equipment(17) (311)—
 (9)
Net cash used in investing activities(17) (311)—
 (9)
Cash flows from financing activities:      
Principal payments under borrowing arrangements—
 (1,832)
Proceeds from Series C Preferred Stock issuance, net of expenses of $223—
 1,527
Preferred stock dividends—
 —
Purchase of treasury stock(51) (143)(7) (1)
Net cash used in financing activities(51) (448)(7) (1)
Decrease in cash and cash equivalents(736) (1,368)(2,543) (418)
Cash at beginning of period2,007
 3,946
4,602
 2,007
Cash at end of period$1,271
 $2,578
$2,059
 $1,589
      
Supplemental disclosures of cash flow information:      
Cash paid during the period for interest$—
 $318
$90
 $—
      
Non-cash investing and financing activities:      
Accrued preferred stock dividends$23
 $9
$4
 $15
Issuance of common stock for vested restricted stock units$382
 $—
Issue of preferred stock in exchange for accrued dividends$98
 $—




GLOWPOINT,OBLONG, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2019March 31, 2020
(Unaudited)

Note 1 - Business Description and Significant Accounting Policies

Business Description

Glowpoint,Oblong, Inc. (“Glowpoint,” “we,” “us,”Oblong” or “we” or “us” or the “Company”“Company”) is a managed service provider of video collaboration and network applications. Our services are designed to provide a comprehensive suite of automated and concierge applications to simplify the user experience and expedite the adoption of video as the primary means of collaboration. Our customers include Fortune 1000 companies, along with small and medium sized enterprises in a variety of industries. We market our services globally through a multi-channel sales approach that includes direct sales and channel partners. The Company was formed as a Delaware corporation in May 2000. The Company operates in one segment2000 and therefore segment information is not presented.a provider of patented multi-stream collaboration technologies and managed services for video collaboration and network applications. Prior to March 6, 2020, Oblong, Inc. was named Glowpoint, Inc. (“Glowpoint”). On March 6, 2020, Glowpoint changed its name to Oblong, Inc.

On October 1, 2019, Glowpointthe Company closed its previously announcedan acquisition of all of the outstanding equity interest of Oblong Industries, Inc., a privately held Delaware corporation founded in 2006 (“Oblong”Oblong Industries” and, such transaction, the “Oblong Transaction”“Acquisition”); see further discussion in Note 3 - Oblong Industries Acquisition. Oblong is a provider of technology products and solutions for immersive visual collaboration. Oblong's flagship product, Mezzanine™, is the technology platform that allows meeting participants to share, arrange, and manipulate multiple streams of content, across screens and among multiple locations, all at the same time. Oblong’s customersIn this Report, we use the platformterms “Oblong” or “we” or “us” or the “Company” to collaborate more effectively, both in a single room and across distance. Oblong’s principal operations are located in Los Angeles, California. The company supplies Mezzanine™ systemsrefer to Fortune 500 enterprise customers and reseller partners. Because(i) Oblong (formerly Glowpoint), for periods prior to the closing of the Merger, and (ii) the “combined organization” of Oblong Transaction occurred(formerly Glowpoint) and Oblong Industries for periods after September 30, 2019, the Company’s condensed consolidated financial statements included in this Quarterly Report on Form 10-Q do not reflect the Company’s acquisition of Oblong. For further discussionclosing of the Merger. For purposes of segment reporting, we refer to the Oblong Transaction, see Note 12 “Subsequent Events”.

Principles of Consolidation

The condensed consolidated financial statements include(formerly Glowpoint) business as “Glowpoint” herein, and to the accounts of Glowpoint and our 100%-owned subsidiary, GP Communications, LLC, whoseOblong Industries business function is to provide interstate telecommunications services for regulatory purposes. All material inter-company balances and transactions have been eliminated in consolidation.as “Oblong Industries” herein.

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, 2018.2019. 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, 20182019 year-end condensed consolidated balance sheet data in this document was derived from audited consolidated financial statements. These condensed consolidated financial statements and notes included in this quarterly report on Form 10-Q does 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, 20182019 and notes thereto included in the Company's fiscal 20182019 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 8, 2019May15, 2020 (the “2018“2019 10-K”).

The results of operations and cash flows for the interim periods included in these condensed consolidated financial statements are not necessarily indicative of the results to be expected for any future period or the entire fiscal year. Because the closing of the acquisition of Oblong Industries occurred on October 1, 2019, the Company’s condensed consolidated financial statements for the three months ended March 31, 2019 included in this Report do not reflect Oblong Industries’ financial results.

Significant Accounting PoliciesPrinciples of Consolidation

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





- 6-


Segments

Prior to the acquisition of Oblong Industries on October 1, 2019, the Company operated in one segment. Following October 1, 2019, the former businesses of Glowpoint and Oblong Industries have been managed separately and involve different products and services. Accordingly, the Company currently operates in two segments: 1) the Glowpoint (now named Oblong) business which includes managed services for video collaboration and network applications and 2) the Oblong Industries business which includes products and services for visual collaboration technologies. See Note 12 - Segment Reporting for further discussion.

Use of Estimates

Preparation of the condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from the estimates made. We continually evaluate estimates used in the preparation of our financial statements for reasonableness. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. The significant areas of estimation include determining the allowance for doubtful accounts, the estimated lives and recoverability of property and equipment, and intangible assets, the inputs used in the fair value of equity based awards as well as the values ascribed to assets acquired and liabilities assumed in the business combination.

Significant Accounting Policies

The significant accounting policies used in preparation of these condensed consolidated financial statements are disclosed in our 20182019 10-K.

Leases

The Company determines if an arrangement is a lease at inception. For the Company’s operating leases, the right-of-use (“ROU”) assets represents the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent an obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Since all of the lease agreements do not provide an implicit rate, the Company estimated an incremental borrowing rate in determining the present value of the lease payments. Operating lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms. Variable lease costs such as operating costs and property taxes are expensed as incurred.

Treasury Stock

Purchases and sales of treasury stock are accounted for using the cost method. Under this method, shares acquired are recorded at the acquisition price directly to the treasury stock account. Upon sale, the treasury stock account is reduced by the original acquisition price of the shares and any difference is recorded in equity, on a first-in first-out basis. The Company does not recognize a gain or loss to income from the purchase and sale of treasury stock.

Recently Adopted Accounting Standards

In February 2016 the FASB issued ASU 2016-02, “Leases (Topic 842),” which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. On January 1, 2019, the Company adopted the new lease standard using the optional transition method under which comparative financial information will not be restated and continue to apply the provisions of the previous lease standard in its annual disclosures for the comparative periods. In addition, the new lease standard provides a number of optional practical expedients in transition. The Company elected the package of practical expedients. As such, the Company did not have to reassess whether expired or existing contracts are or contain a lease; did not have to reassess the lease classifications or reassess the initial direct costs associated with expired or existing leases.

The new lease standard also provides practical expedients for an entity's ongoing accounting. The Company elected the short-term lease recognition exemption under which the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases. The Company elected the practical expedient to not separate lease and non-lease components for certain classes of assets (office buildings). For leases that qualify as short-term leases, the Company has elected to not apply the balance sheet recognition requirements of Topic 842, and instead we recognize the lease payments in the condensed consolidated statement of operations on a straight-line basis over the lease term.

On January 1, 2019, the Company recognized ROU assets and lease liabilities of approximately $99,000 and $111,000, respectively, using an estimated incremental borrowing rate of 7.75%. The ROU assets are recorded in other assets and the lease liabilities are recorded in accrued expenses on the Company’s condensed consolidated balance sheet.

In June 2018 the FASB issued ASU 2018-07, “Compensation - Stock Compensation (Topic 718).” The guidance simplifies the accounting for share-based payments to non-employees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The new guidance expands the scope to include share-based payments granted to non-employees in exchange for goods or services used or consumed in an entity’s own operations and supersedes the guidance in ASC 505-50. Effective January 1, 2019, we adopted Topic 718 and this guidance did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements

In June 2016 the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326),” which was subsequently amended in February 2020 by ASU 2020-02 “Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842).” The amendments introduceTopic 326 introduces an impairment model that is based on expected credit losses, rather than incurred losses, to estimate credit losses on certain types of financial instruments (e.g., accounts receivable, loans and held-to-maturity securities), including certain off-balance sheet financial instruments (e.g., loan commitments). The expected credit losses should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. Financial instruments with similar risk characteristics may be grouped together when estimating expected credit losses. In addition, the amendments provide for a simplified accounting model for purchased financial assets with a more-than-insignificant amount of credit deterioration since their origination. The updateTopic 326 is effective for fiscal years beginning after January 1, 2023,December 15, 2022, including interim periods within those


- 7-


fiscal years. We believeThe Company is currently evaluating the effect of adopting thisimpact the new guidance will have on ourits consolidated financial statements and related disclosures will not be material.statements.

Note 2 - Liquidity and Going Concern Uncertainty

As of September 30, 2019,March 31, 2020, we had $1,271,000$2,059,000 of cash, $5,609,000 of total obligations under the Silicon Valley Bank (“SVB”) Loan Agreement, and a working capital deficit of $1,568,000.$895,000. For the ninethree months ended September 30, 2019,March 31, 2020, we incurred a net loss of $2,113,000$3,129,000 and used $668,000$2,536,000 of net cash in operating activities. As discussed further in Note 12 “Subsequent Events”, on October 1, 2019, in connection with the Oblong Transaction:

a) The Company consummated the sale of 88,070 shares of its Series E Convertible Preferred Stock (“Series E Preferred Stock”) for gross proceeds of $2.51 million (the “Series E Financing”). Certain investors in the Series E Financing have committed to purchase an additional $1.25 million of Glowpoint’s Series E Preferred Stock, upon demand by Glowpoint, on the same terms. The 88,070 shares of Series E Preferred Stock issued by Glowpoint in the Series E Financing have an aggregate Accrued Value of $2.51 million and upon their conversion will convert at a conversion price of $2.85 per share into 880,700 common shares.

- 7-


b) The Company and Oblong, as borrowers, and Silicon Valley Bank (“SVB”), as lender, executed a Second Amended and Restated Loan and Security Agreement (the “SVB Loan Agreement”), which amended and restated, in its entirety,
As of March 31, 2020, the Amended and Restated Loan and Security Agreement by and between Oblong and SVB. The SVB Loan Agreement provides for a term loan facility of approximately $5.2 million (the “Loan”), all of which was outstanding at the effective time of the Oblong Merger and remains outstanding. The SVB Loan Agreement providesprovided that interest-only payments will bewere due through March 31, 2020, after which equal monthly principal and interest payments will bewere payable in order to fully repay the loan by September 1, 2021. On June 26, 2020, the Company and SVB entered into a Default Waiver and First Amendment (the “Amendment”) to the SVB Loan Agreement. Under the Amendment, the Bank agreed to extend the interest-only payment period under the Loan Agreement through September 30, 2020, after which equal monthly principal payments of $291,500 are payable over an eighteen-month period from October 1, 2020 through March 1, 2022 to fully repay the loan. See further discussion of the Amendment in Note 14 - Subsequent Events.

In April 2020, we received cash proceeds from a loan for $2,416,600 (the “PPP Loan”) from MidFirst Bank under the Paycheck Protection Program (PPP) contained within the Coronavirus Aid, Relief, and Economic Security (CARES) Act (see Note 14 - Subsequent Events. The PPP Loan has a term of two years, is unsecured, and is guaranteed by the U.S. Small Business Administration (SBA). The PPP Loan carries a fixed interest rate of one percent (1.0%) per annum, with the first six months of interest deferred.

Our capital requirements in the future will continue to depend on numerous factors, including the timing and amount of revenue for the combined organization, customer renewal rates and the timing of collection of outstanding accounts receivable, in each case particularly as it relates to the combined organization’s major customers, the expense to deliver services, expense for sales and marketing, expense for research and development, capital expenditures, the cost involved in protecting intellectual property rights, debt service obligations under the SVB Loan Agreement, the amount of forgiveness of the PPP Loan, if any, and expense related to the Oblong Transaction (such costs for Glowpoint totaled $255,000 fordebt service obligations under the three months ended September 30, 2019) includingPPP Loan, and expenses required to successfully integrate Glowpoint and Oblong.Oblong Industries. While our acquisition of Oblong Industries does provide additional revenues to the Company, the cost to further develop and commercialize Oblong’sits product offerings is expected to exceed its revenues for the foreseeable future. We have achieved certain cost synergies in connection with combining Glowpoint and Oblong Industries; we reduced the total of general and administrative, research and development, sales, and marketing expenses by $1,081,000 or 19% from the fourth quarter of 2019 as compared to the first quarter of 2020 (or a total of $5,656,000 in the fourth quarter of 2019 as compared to $4,575,000 in the first quarter of 2020). We expect to further reduce the Company’s operating expenses in the future as compared to its annualized operating expenses for the three months ended March 31, 2020.

We also expect to continue to invest in product development and sales and marketing expenses with the goal of growing the Company’s revenue in the future. The Company believes that, based on the combined organization’s current projection of revenue, expenses, capital expenditures, debt service obligations, and cash flows, it will not have sufficient resources to fund its operations for the next twelve months following the filing of this Report. We believe additional capital will be required to fund operations and provide growth capital including investments in technology, product development and sales and marketing. To access capital to fund operations or provide growth capital, we will need to and raise capital in one or more debt and/or equity offerings. There can be no assurance that we will be successful in raising necessary capital or that any such offering will be on terms acceptable to the Company. If we are unable to raise additional capital that may be needed on terms acceptable to us, it could have a material adverse effect on the Company. The factors discussed above raise substantial doubt as to our ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from these uncertainties.

See Note 13 - Commitments and Contingencies to our condensed consolidated financial statements for discussion regarding certain additional factors that could impact the Company’s liquidity in the future.

Note 3 - Reverse Stock SplitOblong Industries Acquisition

On April 17,October 1, 2019 (the “Closing Date”), the Company filed an amendment toclosed its certificateacquisition of incorporation that effectedOblong Industries, Inc. The acquisition was consummated through the merger of Glowpoint Merger Sub II, Inc., a one-for-ten reverse stock splitDelaware corporation and wholly-owned subsidiary of the Company's issuedCompany (the “Merger Sub”), with and outstanding shares of common stock. The reverse stock split did not affectinto Oblong Industries on the number of authorized sharesClosing Date, with Oblong Industries continuing as the surviving corporation and as a wholly-owned subsidiary of the Company’s common stock or the par value ofCompany.

The acquisition was accounted for in accordance with FASB Accounting Standards Codification Topic 805 “Business Combinations” (“ASC 805”) as a sharebusiness combination, which requires an allocation of the Company’s common stock. Proportionate adjustments were madepurchase price of an acquired entity to the per share exercise or conversionassets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The purchase price and the number of shares issuable upon the exercise or conversion of all outstanding options and other convertible or exchangeable securities, including issued and outstanding sharesfair value of the Company’s convertible preferred stock. All sharesassets acquired and liabilities assumed were based on management estimates and values with assistance from an outside appraisal. Pursuant to ASC 805, the purchase price of common stock, as well$18,862,000 was measured as the per share exercise or conversion price and the number of shares issuable upon the exercise or conversion of all outstanding options and other convertible or exchangeable securities, including issued and outstanding sharesfair value of the consideration exchanged in the acquisition.



- 8-


The Company acquired net assets of $11,496,000, including $12,780,000 of identifiable intangible assets, in the acquisition. The purchase price exceeded the fair value of the net assets acquired by $7,366,000, which was recorded as goodwill.

The accompanying condensed consolidated financial statements do not include any revenues or expenses related to the Oblong Industries business on or prior to October 1, 2019 (the Closing Date of the Acquisition).

The preliminary allocation of the purchase price was based upon a valuation for which the estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). The final allocation price could differ materially from the preliminary allocation. Any subsequent changes to the purchase price allocation that result in material changes to the Company’s convertible preferred stock, presentedconsolidated financial results will be adjusted accordingly.

The condensed consolidated statement of operations for the three months ended March 31, 2020 includes $3,283,000 of revenue and net loss of $2,234,000 related to Oblong Industries. The Company's unaudited pro forma results for the three months ended March 31, 2019 are summarized in this Reportthe table below, assuming the Acquisition had occurred on January 1, 2019. These unaudited pro forma results have been retroactively adjustedprepared for comparative purposes only and do not purport to give effectbe indicative of the results of operations which would have actually resulted had the acquisition occurred on January 1, 2019, nor to this reverse stock split.be indicative of future results of operations.

  Pro forma and unaudited (as if the acquisition of Oblong Industries had occurred on January 1, 2019)
  Three Months Ended March 31, 2019
  ($ in thousands)
Revenue  
Glowpoint $2,594
Oblong Industries 4,718
Pro forma total revenue $7,312
Net loss  
Glowpoint $(598)
Oblong Industries (3,592)
Pro forma net loss $(4,190)

Note 4 - Goodwill & IntangiblesInventory

Goodwill is not amortized but is subjectInventory was $1,439,000 and $1,816,000 as of March 31, 2020 and December 31, 2019, respectively, and consisted primarily of equipment related to periodic testing for impairmentour Mezzanine™ product offerings, including cameras, tracking hardware, computer equipment, display equipment and amounts related to the Oblong Industries business. Inventory consists of finished goods and was determined using average costs and was stated at the lower of cost or net realizable value. The Company periodically performs analyses to identify obsolete or slow-moving inventory, and any such amounts are written off to expense.

Note 5 - Goodwill

As of March 31, 2020 and December 31, 2019, goodwill was $7,366,000 and $7,907,000, respectively. As of March 31, 2020, goodwill was comprised of $7,366,000 recorded in accordanceconnection with ASC Topic 350 “Intangibles - Goodwillthe October 1, 2019 acquisition of Oblong Industries. As of December 31, 2019, goodwill was comprised of (i) $7,366,000 recorded in connection with the October 1, 2019 acquisition of Oblong Industries and Other - Testing Indefinite-Lived Intangible Assets for Impairment.” (ii) $541,000 related to the Glowpoint reporting unit as discussed below.
We test goodwill for impairment on an annual basis on September 30 of each year or more frequently if events occur or circumstances change indicating that the fair value of the goodwill may be below its carrying amount. TheFollowing the acquisition of Oblong Industries, the Company operates asoperated two reporting units, Glowpoint and Oblong Industries. As of March 31, 2020, we considered the novel Coronavirus (COVID-19) pandemic and resulting declines in certain of the Company’s revenue to be a singletriggering event for an interim goodwill impairment test for both reporting units. To determine the fair value of each reporting unit, as of March 31, 2020 for the goodwill impairment tests, we used a weighted average of the discounted cash flow method and used its market capitalization to determinea market-based method (comparing the Company’s equity and analyzing multiples of revenue for comparable companies). For the Oblong Industries reporting unit, the fair value of the reporting unit as of the test date. In order to determine the market capitalization, the Company used the trailing 20 day volume weighted average price (“VWAP”) of its stock as of September 30, 2019. As of September 30, 2019, the fair value of our reporting unit exceeded its carrying amount;amount, therefore no impairment charges were required incharge was required. For the three months ended September 30, 2019. The CompanyGlowpoint reporting unit, we recorded an impairment charge on goodwill impairment charges of $453,000 in$541,000 for the nine months ended September 30, 2019. These charges are recognized as “Impairment charges” on our Condensed Consolidated Statements of Operations. The remaining goodwill balance as of September 30, 2019 was $2,342,000. The continued future decline of ourthree


- 8-9-


months ended March 31, 2020 as the carrying amount of the reporting unit exceeded its fair value on the test date. This charge is recognized as “Impairment Charges” on our condensed consolidated Statements of Operations. The activity in goodwill during the three months ended March 31, 2020 and the year ended December 31, 2019 is shown in the following table ($ in thousands):
GoodwillGlowpoint Oblong Industries Total
Balance December 31, 2018$2,795
 $—
 $2,795
Impairment(2,254) —
 (2,254)
Acquisition—
 7,366
 7,366
Balance December 31, 2019541
 7,366
 7,907
Impairment(541) —
 (541)
Balance March 31, 2020$—
 $7,366
 $7,366

In the event we experience future declines in our revenue, cash flows and/or stock price, this may give rise to a triggering event that may require the Company to record additional impairment charges on goodwill in the future.

Note 6 - Intangible Assets

The Company assessesfollowing table presents the impairmentcomponents of purchasednet intangible assets subject to amortization when events(in thousands):

 As of March 31, 2020 As of December 31, 2019
 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Glowpoint           
Customer Relationships$4,335
 $(4,335) $—
 $4,335
 $(4,335) $—
Affiliate network994
 (683) 311
 994
 (666) 328
Trademarks548
 (519) 29
 548
 (504) 44
   Subtotal$5,877
 $(5,537) $340
 $5,877
 $(5,505) $372
            
Oblong Industries           
Developed technology10,060
 (1,008) 9,052
 10,060
 (504) 9,556
Trade names2,410
 (120) 2,290
 2,410
 (60) 2,350
Distributor relationships310
 (31) 279
 310
 (16) 294
   Subtotal$12,780
 $(1,159) $11,621
 $12,780
 $(580) $12,200
      Total$18,657
 $(6,696) $11,961
 $18,657
 $(6,085) $12,572

As of March 31, 2020, we considered the novel Coronavirus (COVID-19) pandemic and circumstances indicate that the carrying valueresulting declines in certain of the assets might notCompany’s revenue to be recoverable.  Fair valuea triggering event for an interim impairment test of our intangible assets is determined using the relief from royalty methodology. This approach involves two steps: (a) estimating reasonable royalty rates for each intangible asset and (b) applying these royalty rates to a net revenue stream and discounting the resulting cash flows to determineboth reporting units. The fair value. This fair value is then compared with the carrying value of each reporting unit’s intangible asset. If the carrying value of the intangible asset is greater than its implied fair value, an impairment in the amount of the excess is recognized and charged to operations. The determination of related estimated useful lives and whether or not these assets are impaired involves significant judgments, related primarily to the future profitability and/or future value of the assets. Changes in the Company’s strategic plan and/or other-than-temporary changes in market conditions could significantly impact these judgments and could require adjustments to recorded asset balances. Long-lived assets are evaluated for impairment at least annually, as well as whenever an event or change in circumstances has occurred that could have a significant adverse effect on the fair value of long-lived assets.  The Company performed an evaluation of intangible assets as of September 30, 2019 and determined that the undiscounted cash flows of the long-lived assets exceeded the respective carrying value,amounts, therefore no impairment charges were required for the three and nine months ended September 30, 2019.March 31, 2020. Intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the assets, which range from five years to twelve years in accordance with ASC Topic 350. The weighted average lives for the components of intangible assets are as follows:


- 10-


Glowpoint
Affiliate network12 Years
Trademarks8 Years
Oblong Industries
Developed technology5 Years
Trade names10 Years
Distributor relationships5 Years

Related amortization expense was $611,000 and $707,000 for the three months ended March 31, 2020 and the year ended December 31, 2019, respectively. Amortization expense for each of the next five succeeding years will be as follows (in thousands):

Remainder of 2020$1,820
20212,388
20222,386
20232,378
20241,844
Thereafter1,145
Total$11,961

Note 57 - Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consisted of the following (in thousands):
 September 30, 2019 December 31, 2018
Accrued compensation costs$187
 $189
Accrued Oblong Transaction costs167
 —
Accrued sales taxes and regulatory fees118
 168
Other accrued expenses117
 223
Accrued dividends on Series A-2 Preferred Stock94
 71
Lease liability43
 —
Accrued professional fees18
 246
Deferred rent expense—
 13
Accrued expenses and other liabilities$744
 $910
 March 31, December 31,
 2020 2019
Accrued compensation costs596
 810
Other accrued expenses and liabilities661
 843
Accrued dividends on Series A-2 Preferred Stock$5
 $99
Accrued expenses and other liabilities$1,262
 $1,752

Note 68 - Debt

Debt consisted of the following (in thousands):
 March 31, December 31,
 2020 2019
Loan obligations$5,609
 $5,609
Unamortized debt discounts(68) (102)
Net carrying value5,541
 5,507
Less: current maturities, net of debt discount(3,550) (2,664)
Long-term obligations, net of current maturities and debt discount$1,991
 $2,843

Silicon Valley Bank Loan Agreement and Warrant

On October 1, 2019, in connection with the Acquisition of Oblong Industries, the Company and Oblong Industries, as borrowers, and SVB, as lender, executed an amendment to the SVB Loan Agreement. On October 24, 2019, GP Communications joined the SVB Loan Agreement as an additional co-borrower. The SVB Loan Agreement provides for a term loan facility of approximately $5,247,000, (the “Loan”), all of which is outstanding at December 31, 2019 and March 31, 2020. As of March 31, 2020, the SVB Loan Agreement provided that interest-only payments will be due through March 31, 2020, after which equal monthly principal and interest payments were payable in order to fully repay the Loan as of September 1, 2021. On June 26, 2020,


- 11-


the Company and SVB entered into a Default Waiver and First Amendment (the“Amendment”) to the SVB Loan Agreement. Under the Amendment, the Bank agreed to extend the interest-only payment period under the Loan Agreement through September 30, 2020, after which equal monthly principal payments of $291,500 are payable over an eighteen month period from October 1, 2020 through March 1, 2022 (the “Maturity Date”) to fully repay the loan. The Loan originally accrued interest at a rate equal to the Prime Rate (as defined in the SVB Loan Agreement) plus 200 basis points (for a total of 5.25% as of March 31, 2020 and 6.75% as of December 31, 2019). In connection with the Amendment, the interest rate under the Loan was increased to the Prime Rate plus 425 basis points.

In connection with its execution of the amended SVB Loan Agreement on October 1, 2019, the Company i) agreed to pay SVB a fee of $100,000 on April 1, 2020 (the “Deferral Fee”) and ii) issued a warrant to SVB that entitles SVB to purchase 72,394 shares of the Company’s Common Stock at an exercise price of $0.01 per share (the “SVB Warrant”). Pursuant to the Amendment, the due date for the Deferral Fee was changed to the earlier of (i) the maturity of the loan, (ii) the repayment in full of all principal and interest owing under the Loan Agreement, and (iii) occurrence of an event of default under the Loan Agreement. The SVB Warrant has a ten (10) year term. The fair value of the SVB Warrant was recorded to additional paid-in capital and was determined to be $72,000 using the Black-Scholes model, with the following weighted-average assumptions: (i) risk-free interest rate of 1.5%, (iii) expected volatility of 143% and (iv) expected term of ten years. The total obligations under the SVB Loan Agreement are $5,609,000, which are comprised of $5,247,000 for the term loan, the Deferral Fee and the Maturity Fee of $262,000 that was assumed on October 1, 2019 as part of the acquisition. The Deferral Fee, the fair value of the SVB Warrant, and $20,000 of debt issuance costs totaled $192,000 and was recorded as a discount to the debt. This debt discount is being amortized to interest expense using the effective interest method over the term of the debt.  During the three months ended March 31, 2019 and the year ended December 31, 2019, the Company amortized $34,000 and $90,000 of the debt discount, respectively, which is recorded in “Interest and other expense, Net” on our condensed consolidated Statements of Operations. The remaining unamortized debt discount as of March 31, 2020 and December 31, 2019 was $68,000 and $102,000, respectively.

The obligations under the SVB Loan Agreement are secured by substantially all of the assets of Oblong and its subsidiaries. The SVB Loan Agreement contains certain restrictions and covenants, which, among other things, subject to certain exceptions, restrict the Company’s ability to dispose of any portion of its business or property, engage in certain material changes to its business, enter into a merger, incur additional debt or make guarantees, pay dividends or make distribution payments on, or redeem, retire, or repurchase any capital stock (subject to certain exceptions), create liens or other encumbrances, or enter into related party transactions outside of the ordinary course of business. The SVB Loan Agreement also contains customary events of default, including failure to pay any principal or interest when due, failure to perform or observe covenants, breaches of representations and warranties, certain cross defaults, certain bankruptcy related events, monetary judgments defaults and the Company’s de-listing from the NYSE American without a listing of its Common Stock on another nationally recognized stock exchange. Upon the occurrence of an event of default, the outstanding obligations under the SVB Loan Agreement may be accelerated and become immediately due and payable.

Note 9 - Preferred Stock

Our Certificate of Incorporation authorizes us to issuethe issuance of up to 5,000,000 shares of preferred stock. As of September 30, 2019,March 31, 2020, there were: (i) 100 shares of Perpetual Series B-1 Preferred Stock authorized and no shares issued or outstanding; (ii) 7,500 shares of Series A-2 Convertible Preferred Stock authorized and 3245 shares issued and outstanding (the “Series A-2 Preferred Stock”); (iii) 2,800 shares of 0% Series B Convertible Preferred Stock (the “Series(“Series B Preferred Stock”) authorized and no shares issued and outstanding; (iv) 1,750 shares of 0% Series C Convertible Preferred Stock (the “Series(“Series C Preferred Stock”) authorized and 475325 shares issued and outstanding; (v) 4,000 shares of Series D Convertible Preferred Stock authorized and no shares issued or outstanding; and (vi) 100 shares of Perpetual Series B Preferred Stock authorized and no shares issued or outstanding. See Note 12 “Subsequent Events” for further discussionoutstanding; (vii) 1,750,000 shares of the Company’s Series D Convertible Preferred Stock authorized and 1,720,460 shares issued and outstanding; and (viii) 175,000 shares of 6.0% Series E Convertible Preferred Stock (“Series E Preferred Stock”) authorized and 131,579 shares issued on October 1, 2019.and outstanding.

Series A-2 Preferred Stock

Each share of Series A-2 Preferred Stock has a stated value of $7,500 per share (the “A-2 Stated Value”), a liquidation preference equal to the Series A-2 Stated Value, and is convertible at the holder’s election into common stock at a conversion price per share of $21.60 as of September 30, 2019.March 31, 2020. Therefore, each share of Series A-2 Preferred Stock is convertible into 34710,978 shares of common stock as of September 30, 2019.March 31, 2020. The conversion price is subject to adjustment upon the occurrence of certain events set forth in our Certificate of Incorporation.

The Series A-2 Preferred Stock is subordinate to the Series B-1 Preferred Stock and Series C-1 Preferred Stock but senior to all other classes of equity, has weighted average anti-dilution protection and, sinceeffective January 1, 2013, has been entitled to cumulative dividends at a rate of 5% per annum, payable quarterly, based on the Series A-2 Stated Value and payable at the option of the


- 12-


holder in cash or through the issuance of a number of additional shares of Series A-2 Preferred Stock with an aggregate liquidation preference equal to the dividend


- 9-


amount payable on the applicable dividend payment date. As of September 30, 2019,March 31, 2020 and December 31, 2020, the Company has recorded $94,000$5,000 and $99,000, respectively, in accrued dividends in “Accrued expenses and other liabilities” on the accompanying Condensed Consolidatedcondensed consolidated Balance SheetSheets related to the remaining Series A-2 Preferred Stock outstanding. During the three months ended March 31, 2020, $98,000, of accrued dividends, as of December 31, 2019, were exchanged for 13 shares of Series A-2 Preferred Stock. The Company, at its option, may redeem all or a portion of the Series A-2 Preferred Stock in cash at a price per share of $8,250 per share$8,250 (equal to $7,500$7,500 per share multiplied by 110%) plus all accrued and unpaid dividends.

Series B Preferred Stock

During the nine months ended September 30, 2019, 75 shares (constituting all issued and outstanding shares) of Series B Preferred Stock were converted to 26,786 shares of the Company’s common stock at the conversion price of $2.80 per share. As of September 30, 2019, no shares of Series B Preferred Stock remain issued and outstanding.

Series C Preferred Stock

In January 2018, the Company closed a registered direct offering of 1,750 shares of its Series C Preferred Stock for total gross proceeds to the Company of $1,750,000. The shares of Series C Preferred Stock were sold at a price equal to their stated value of $1,000 per share and are convertible into shares of the Company’s common stock at a conversion price of $3.00 per share. During the nine months ended September 30, 2019, 50 shares of Series C Preferred Stock were converted to 16,667 shares of the Company’s common stock. As of September 30, 2019, 475 shares of Series C Preferred Stock remain issued and outstanding, which are convertible to 158,333 shares of the Company’s common stock.

Subject to certain exceptions, the Company has agreed to provide the purchasers, during the period that the purchasers continue to hold Series C Preferred Stock, a right of participation for up to 100% of any future offering of its common stock or other securities or equity linked debt obligations until January 2020.

In accordance with ASC Topic 815, we evaluated whether our convertible preferred stock contains provisions that protect holders from declines in our stock price or otherwise could result in modification of the exercise price and/or shares to be issued under the respective preferred stock agreements based on a variable that is not an input to the fair value of a “fixed-for-fixed” option and require a derivative liability. The Company determined no derivative liability is required under ASC Topic 815 with respect to our convertible preferred stock. A contingent beneficial conversion amount is required to be calculated and recognized when and if the adjusted $21.60 conversion price of the Series A-2 Preferred Stock is adjusted to reflect a down round stock issuance. In the event there is an adjustment toissuance that reduces the conversion price our earningsbelow the $11.16 fair value of the common stock on the issuance date of the Series A-2 Preferred Stock.

Series C Preferred Stock

On January 25, 2018, the Company closed a registered direct offering of 1,750 shares of its Series C Preferred Stock for total gross proceeds to the Company of $1,750,000. The shares of Series C Preferred Stock were sold at a price equal to their stated value of $1,000 per share calculationsand are convertible into shares of the Company’s common stock at a conversion price of $3.00 per share. During the three months ended March 31, 2020 and the year ended December 31, 2019, 150 and 50 shares of Series C Preferred Stock were converted to 50,000 and 16,667 shares of the Company’s common stock, respectively. As of March 31, 2020 325 shares of Series C Preferred Stock remained issued and outstanding.

The Company has agreed that it will not enter into certain “fundamental transactions,” including transactions constituting a change of control of the Company, certain reorganization transactions or a sale of all or substantially all of the Company’s assets, except as pursuant to written agreements in form and substance satisfactory to the holders of a majority of the outstanding shares of Series C Preferred Stock including the Lead Investor and on terms with respect to the Series C Preferred Stock as set forth in the Certificate of Designation of Rights, Powers, Preferences, Privileges and Restrictions of the Series C Preferred Stock.
Series D Preferred Stock

In connection with the Acquisition (see Note 3 - Oblong Industries Acquisition), the Company issued an aggregate of 1,686,659 shares of Series D Preferred Stock and an aggregate of 49,967 restricted shares of Series D Preferred Stock (“Restricted Series D Preferred Stock”), the latter of which are subject to vesting over a two-year period following the Closing Date of the Acquisition. Each share of Series D Preferred Stock is automatically convertible into a number of shares of the Company’s common stock equal to the accrued value of the share (initially $28.50), plus any accrued dividends thereon, divided by the Conversion Price (initially $2.85 per share, subject to specified adjustments) upon the completion of both (i) approval of such conversion by the Company’s stockholders (which occurred on December 19, 2019); and (ii) the receipt of all required authorizations and approval of a new listing application for the combined organization from the NYSE American.

Pursuant to the terms of the Series D Certificate of Designations, each share of Series D Preferred Stock is entitled to receive an annual dividend equal to 6.0% of its then-existing Accrued Value per annum, commencing on the first anniversary of the issuance of the Series D Preferred Stock (or October 1, 2020). Prior to the first anniversary of the issuance of the Series D Preferred Stock no dividends will accrue on such stock. Dividends are cumulative and accrue daily in arrears. If the Company’s Board of Directors does not declare any applicable dividend payment in cash, the Accrued Value of the Series D Preferred Stock will be impactedincreased by the resulting deemed dividend.amount of such dividend payment. As of March 31, 2020, no dividends have been accrued.

Series E Preferred Stock

On October 1, 2019, Oblong entered into a Series E Preferred Stock Purchase Agreement (the “Purchase Agreement”) with the investors party thereto, who, prior to the closing of the Acquisition, were stockholders of Oblong Industries (the “Purchasers”), relating to the offer and sale by the Company in a private placement (the “Offering”) of up to 131,579 shares of its Series E Preferred Stock at a price of $28.50 per share. At an initial closing on October 1, 2019 and a subsequent closing on December 18, 2019, the Company sold a total of 131,579 shares of Series E Preferred Stock for net proceeds of approximately $3,750,000. The 131,579 shares of Series E Preferred Stock issued by the Company in the Series E Financing have an aggregate Accrued Value of $3,750,000 and upon their conversion will convert at a conversion price of $2.85 per share into 1,315,790 common shares. Like


- 13-


the Series D Preferred Stock, each share of Series E Preferred Stock is automatically convertible into common stock upon the receipt of all required authorizations and approval of a new listing application for the combined organization from the NYSE American.

Pursuant to the terms of the Series E Certificate of Designations, each share of Series E Preferred Stock is entitled to receive an annual dividend equal to 6.0% of its then-existing Accrued Value per annum, commencing on the first anniversary of the issuance of the Series E Preferred Stock (or October 1, 2020 or December 18, 2020, as applicable). Prior to the first anniversary of the issuance of the Series E Preferred Stock no dividends will accrue on such stock. Dividends are cumulative and accrue daily in arrears. If the Company’s Board of Directors does not declare any applicable dividend payment in cash, the Accrued Value of the Series E Preferred Stock will be increased by the amount of such dividend payment. As of March 31, 2020, no dividends have been accrued.

In connection with the Purchase Agreement, the Company executed a Registration Rights Agreement, dated October 1, 2019 (the “Rights Agreement”). Pursuant to the Rights Agreement, among other things, the Company has provided the Purchasers with certain rights to require it to file and maintain the effectiveness of a registration statement with respect to the re-sale of shares of Common Stock underlying the shares of Series D Preferred Stock issued in the Oblong Transaction and Series E Preferred Stock sold in the Series E Financing.

If the Series D and Series E Preferred Stock had been converted to common stock as of March 31, 2020, 17,204,600 and 1,315,790 shares of common stock would have been issued for the Series D and Series E Preferred Stock, respectively, which would have increased our outstanding shares of common stock from 5,211,543 to 23,731,933. Both the Series D and Series E Preferred Stock remain outstanding as of March 31, 2020 and as of the filing of this Report. The Company intends to file a new listing application with the NYSE American as soon as possible upon satisfying the initial listing standards. Among other requirements, these standards require the Company to have at least $15 million of non-affiliate public float, which, under the Company’s current financial situation, may be difficult or impossible for the Company to satisfy.

Note 710 - Stock Based Compensation

Glowpoint 20142019 Equity Incentive Plan

On May 28, 2014,December 19, 2019, the Glowpoint,Oblong, Inc. 20142019 Equity Incentive Plan (the “2014“2019 Plan”) was approved by the Company’s stockholders at the Company’s 20142019 Annual Meeting of Stockholders. The purpose of the 20142019 Plan is an omnibus equity incentive plan pursuant to promotewhich the successCompany may grant equity and cash incentive awards to certain key service providers of the Company and to increase stockholder valueits subsidiaries. The 2019 Plan replaces the Glowpoint, Inc. 2014 Equity Incentive Plan (the “Prior Plan”), which was adopted by providing an additional means to attract, motivate, retain,the Company’s Board of Directors on April 22, 2014, and reward selected employeessubsequently approved by the Company’s stockholders. Following approval of the 2019 Plan, the Company terminated the Prior Plan and other eligible persons throughmay no longer make grants under the grant ofPrior Plan; however, any outstanding equity awards. Awards may beawards granted under the 2014Prior Plan will continue to officers, employees, directors and consultantsbe governed by the terms of the Company or its subsidiary. The 2014Prior Plan. As of the termination of the Prior Plan, permits the grant of stock options, stock appreciation rights, restricted shares, restricted stock units, cash awards and other awards, including stock bonuses, performance stock, performance units, dividend equivalents, or similar rights to purchase or acquire shares, whether at a fixed or variable price or ratio related to the Company’s common stock, upon the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions, or any combination thereof, or any similar securities with a value derived from the value of or related to the Company’s common stock, or returns thereon. A total of 440,000421,000 shares of the Company’s common stock were initiallyCommon Stock remained available for issuance under the 2014Prior Plan. AtAs of March 31, 2020, 23,334 restricted stock units were outstanding under the 2018 Annual MeetingPrior Plan. As of Stockholders held on MayMarch 31, 2018,2020, the share pool available for new grants under the 2019 Plan is 3,021,000, which is equal to the sum of (i) 2,600,000 shares of the Company’s stockholders approved an amendment toCommon Stock and (ii) the 2014 Plan to, among other things, increase the number of421,000 shares of common stockthe Company’s Common Stock that remained available for issuance under the 2014 Plan by 300,000 shares (the "Amendment"). As of September 30, 2019, 421,000 sharesPrior Plan. No equity awards were available for issuancegranted under the 2014 Plan.2019 Plan during the three months ended March 31, 2020.

Glowpoint 2007 Stock Incentive Plan

In May 2014, the Board terminated the GlowpointCompany’s 2007 Stock Incentive Plan (the “2007 Plan”). Notwithstanding the termination of the 2007 Plan, outstanding awards under the 2007 Plan will remain in effect in accordance with their terms. As of September 30, 2019,March 31, 2020, options to purchase a total of 107,500 shares of common stock and 627 shares of restricted stock were outstanding under the 2007 Plan. No shares are available for issuance under the 2007 Plan.


- 10-



Glowpoint 2000 Stock Incentive Plan

In June 2010, the Board terminated the Glowpoint 2000 Stock Incentive Plan (as amended, the “2000 Plan”). Notwithstanding the termination of the 2000 Plan, outstanding awards under the 2000 Plan will remain in effect in accordance with their terms. As of September 30, 2019, options to purchase a total of 25 shares of common stock were outstanding under the 2000 Plan. No shares are available for issuance under the 2000 Plan.

Stock Options

For the ninethree months ended September 30,March 31, 2020 and the year ended December 31, 2019, other than the options granted to certain former holders of options to purchase shares of Oblong’s common stock, for which no stock-based compensation was recorded as discussed below, no stock options were granted; therefore, no fair value assumptions are presented herein.granted. A summary of stock options expired and forfeited under our stock incentive plans and stock options outstanding as of, and changes made during, the ninethree months ended September 30,March 31, 2020 and the year ended December 31, 2019 is presented below:


- 14-
 Outstanding Exercisable
 Number of Shares Underlying Options Weighted
Average
Exercise
Price		 Number of Shares Underlying Options Weighted
Average
Exercise
Price
Options outstanding, December 31, 2018118,003
 $19.90
 118,003
 $19.90
Expired(440) 13.18
    
Forfeited(10,038) 22.79
    
Options outstanding, September 30, 2019107,525
 $19.64
 107,525
 $19.64


Stock-based
 Outstanding Exercisable
 Number of Options Weighted Average Exercise Price Number of Options Weighted Average Exercise Price
Options outstanding, December 31, 2018118,003
 $19.90
 118,003
 $19.90
Exchanged for Oblong Industries stock options107,845
 4.92
    
Exercised—
 —
    
Expired(440) 16.48
    
Forfeited(10,063) 23.20
    
Options outstanding, December 31, 2019215,345
 12.27
 215,345
 12.27
Options outstanding and exercisable, March 31, 2020215,345
 $12.27
 215,345
 $12.27

Additional information as of March 31, 2020 is as follows:

  Outstanding and Exercisable
Range of price 
Number
of Options
 
Weighted
Average
Remaining
Contractual
Life (In Years)
 
Weighted
Average
Exercise
Price
$0.00 – $10.00 110,345
 0.56 $5.01
$10.01 – $20.00 97,500
 2.81 19.32
$20.01 – $30.00 2,500
 2.19 21.80
$30.01 – $40.00 5,000
 1.95 30.20
  215,345
 1.63 $12.27

In connection with the Acquisition, all options to purchase shares of Oblong’s common stock held by previously terminated employees of Oblong Industries were assumed by the Company and deemed, in the aggregate, to constitute options to acquire a total of 107,845 shares of the Company’s common stock, at a volume weighted average exercise price of $4.92 per share and a remaining exercise period of one year. No stock-based compensation expense related towas recorded in the year ended December 31, 2019 for these stock options as the value for these options was $0recorded as part of the consideration of the Acquisition given that these options were issued to terminated employees.
The intrinsic value of vested options, unvested options and exercised options were not significant for the three and nine months ended September 30, 2019 and 2018.all periods presented. There iswas no remaining unrecognized stock-based compensation expense for stock options at March 31, 2020 as of September 30, 2019.all options were vested.

Restricted Stock Awards

A summary of unvested restricted stock awardsgranted, vested and unvested outstanding as of, and changes made during, the ninethree months ended September 30,March 31, 2020 and the year ended December 31, 2019, is presented below:

Restricted Stock Weighted Average
Grant Price		Restricted Shares Weighted Average Grant Date Price
Unvested restricted stock outstanding, December 31, 201811,320
 $14.88
11,320
 $14.88
Granted0
 —
Vested(1,372) —
(1,372) 15.72
Forfeited(9,321) —
(9,321) 14.70
Unvested restricted stock outstanding, September 30, 2019627
 $15.80
Unvested restricted stock outstanding, December 31, 2019627
 15.80
Unvested restricted stock outstanding, March 31, 2020627
 $15.80




- 15-


Stock-based compensation expense relatedrelating to restricted stock awards is allocated as follows (in thousands):
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2019 2018 2019 2018
General and administrative—
 2
 3
 14
 $—
 $2
 $3
 $14
 Three Months Ended March 31, Three Months Ended March 31,
 2020 2019
General and administrative—
 2
 $—
 $2

There is no material remaining unrecognized stock-based compensation expense for restricted stock awards as of September 30, 2019.at March 31, 2020.

Restricted Stock Units

A summary of unvested restricted stock units (“RSUs”) granted, vested, forfeited and unvested outstanding as of, and changes made during, the ninethree months ended September 30,March 31, 2020 and the year ended December 31, 2019, is presented below:


- 11-


 RSUs Weighted Average
Grant Price
Unvested restricted stock units outstanding, December 31, 2018503,518
 $1.94
Granted52,979
 1.31
Vested(112,005) 3.10
Forfeited(421,158) 1.54
Unvested restricted stock units outstanding, September 30, 201923,334
 $2.20

During the nine months ended September 30, 2019, 156,391 shares were issued to satisfy vested RSUs, of which 75,175 shares were issued from the Company’s treasury stock. The number of RSUs vested during the nine months ended September 30, 2019 includes 41,022 shares withheld and repurchased by the Company from employees to satisfy $51,000 of tax obligations relating to the vesting of such shares. Such shares are included in “Purchase of treasury stock” during the nine months ended September 30, 2019.
 Restricted Stock Units Weighted Average Grant Price
Unvested restricted stock units outstanding, December 31, 2018503,518
 $1.94
Granted55,479
 1.30
Vested(114,505) 3.05
Forfeited(421,158) 1.54
Unvested restricted stock units outstanding, December 31, 201923,334
 2.20
Unvested restricted stock units outstanding, March 31, 202023,334
 $2.20

As of September 30, 2019, 54,370March 31, 2020, 28,904 vested RSUs issued to non-employee directors remain outstanding as shares of common stock have not yet been delivered due tofor these units in accordance with the deferred payment provisions set forth in theseterms of the RSUs.

As of September 30, 2019,March 31, 2020, there were 11,667 unvested RSUs that have performance-based vesting provisions and are subject to forfeiture, in whole or in part, if these performance conditions are not achieved. Management assesses, on an ongoing basis, the probability of whether the performance criteria will be achieved and, once it is deemed probable, stock-based compensation expense is recognized over the relevant performance period.

As of September 30, 2019,March 31, 2020, there were 11,667 unvested RSUs that have timed-based vesting provisions, and the cost of the RSUs is expensed, which is determined to be the fair market value of the shares at the date of grant, on a straight-line basis over the vesting period.

Stock-based compensation expense relatedrelating to RSUsrestricted stock units is allocated as follows (in thousands):

Three Months Ended Nine Months Ended
September 30, September 30,Three Months Ended March 31, Three Months Ended March 31,
2019 2018 2019 20182020 2019
Cost of revenue$2
 $13
 $10
 $30
$—
 $4
Research and development2
 18
 11
 47
—
 4
Sales and marketing—
 1
 —
 5
—
 19
General and administrative10
 76
 43
 174
6
 27
$14
 $108
 $64
 $256
$6
 $54

There was no remaining unrecognized stock-based compensation expense for restricted stock units at March 31, 2020.

There was no tax benefit recognized for stock-based compensation expense for the three months ended March 31, 2020 or the year ended December 31, 2019. No compensation costs were capitalized as part of the cost of an asset during the periods presented.







- 16-


Restricted Series D Preferred Stock

In connection with the Acquisition, all options to purchase shares of Oblong Industries’ common stock held by existing employees of Oblong Industries were canceled and exchanged for an aggregate of 49,967 restricted shares of Series D Preferred Stock (“Restricted Series D Preferred Stock”), which are subject to vesting over a two-year period following the Closing Date.

Stock-based compensation expense relating to Restricted Series D Preferred Stock is allocated as follows (in thousands):

 Three Months Ended March 31, Three Months Ended March 31,
 2020 2019
Research and development$14
 $—
Sales and marketing4
 —
General and administrative8
 —
 $26
 $—

During the three months ended March 31, 2020, 14,441 shares of Restricted Series D Preferred Stock were forfeited. As of March 31, 2020, 1,720,460 shares of Restricted Series D Preferred Stock remain outstanding. The remaining unrecognized stock-based compensation expense for RSUs as of September 30, 2019Restricted Series D Preferred Stock at March 31, 2020 was $13,000. Of this amount $6,500 relates to time-based RSUs with$319,000, and will be recognized over a remaining weighted average period of 0.791.19 years. The remaining $6,500 of unrecognized stock-based compensation expense relates to performance-based RSUs for which expense will be recognized upon it becoming probable that the Company achieves defined financial targets or a change of control occurs.

Note 811 - Net Loss Per Share

Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. The weighted-average number of shares of common stock outstanding does not include any potentially dilutive securities or unvested restricted stock. Unvested restricted stock, although classified as issued and outstanding at September 30,March 31, 2020 and 2019, and 2018, is considered contingently returnable until the restrictions lapse and will not be included in the basic net loss per share calculation until the shares are vested. Unvested restricted stock does not contain non-forfeitable rights to dividends and dividend equivalents. Unvested RSUs are not included in calculations of basic net loss per share, as they are not considered issued and outstanding at time of grant.

Diluted net loss per share is computed by giving effect to all potential shares of common stock, including stock options, preferred stock, RSUs, and unvested restricted stock, to the extent they are dilutive. For the three and nine months ended


- 12-


September 30, March 31, 2020 and 2019, and 2018, all such common stock equivalents have been excluded from diluted net loss per share as the effect to net loss per share would be anti-dilutive (due to the net loss).

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

Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
2019 2018 2019 20182020 2019
Numerator:          
Net loss$(640) $(1,470) $(2,113) $(4,444)$(3,129) $(598)
Less: preferred stock dividends4
 3
 23
 9
(4) (15)
Net loss attributable to common stockholders$(644) $(1,473) $(2,136) $(4,453)$(3,133) $(613)
Denominator:          
Weighted-average number of shares of common stock for basic and diluted net loss per share5,184
 4,885
 5,128
 4,749
Weighted-average number of shares of common stock for diluted net loss per share5,204
 5,104
Basic and diluted net loss per share$(0.12) $(0.30) $(0.42) $(0.94)$(0.60) $(0.12)

The weighted-average number of shares for all periods presentedthe three months ended March 31, 2020 and 2019 includes 54,37028,904 and 98,763 shares of vested RSUs, respectively, as discussed in Note 710 - Stock Based Compensation.



- 17-


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:effect (due to the net loss):
 Nine Months Ended September 30,
 2019 2018
Unvested restricted stock units23,334
 213,700
Unvested restricted stock awards627
 11,300
Outstanding stock options107,525
 118,300
Shares of common stock issuable upon conversion of Series A-2 Preferred10,978
 11,000
Shares of common stock issuable upon conversion of Series B Preferred—
 133,900
Shares of common stock issuable upon conversion of Series C Preferred158,333
 258,300
Total300,797
 746,500
 Three Months Ended
 March 31,
 2020 2019
Unvested restricted stock units23,334
 539,394
Outstanding stock options215,345
 117,902
Unvested restricted stock awards627
 11,318
Shares of common stock issuable upon conversion of Series A-2 preferred stock10,978
 79,043
Shares of common stock issuable upon conversion of Series C preferred stock108,333
 158,333
Shares of common stock issuable upon conversion of Series D preferred stock1,720,460
 —
Shares of common stock issuable upon conversion of Series E preferred stock1,315,790
 —
Warrants72,394
 —

Note 12 - Segment Reporting

Prior to the acquisition of Oblong Industries on October 1, 2019, the Company operated in one segment. Following October 1, 2019, the former businesses of Glowpoint and Oblong Industries were managed separately and involve different products and services. Accordingly, the Company currently operates in two segments: (1) the Glowpoint (now named Oblong) business which mainly consists of managed services for video collaboration and network applications; and (2) the Oblong Industries business which consists of products and services for visual collaboration technologies.

Because the closing of the acquisition of Oblong Industries occurred on October 1, 2019, the Company’s condensed consolidated financial statements as of and for the three months ended March 31, 2020 and 2019 included in this Report only reflect Oblong Industries’ financial results for the first quarter of 2020. Certain information concerning the Company’s segments for the three months ended March 31, 2020 is presented in the following tables (in thousands):
 Three Months ended March 31, 2020
 Glowpoint Oblong Industries Total
Revenue$2,045
 $3,283
 $5,328
Cost of revenues1,156
 1,218
 2,374
  Gross profit$889
 $2,065
 $2,954
  Gross profit %43% 63% 55%
      
Allocated operating expenses$1,290
 $2,073
 $3,363
Unallocated operating expenses—
 —
 2,568
  Total operating expenses$1,290
 $2,073
 $5,931
      
Loss from operations$(401) $(8) $(2,977)
Interest and other expense, net—
 —
 (152)
Net loss$(401) $(8) $(3,129)
      
 As of March 31, 2020
Total assets$3,743
 $28,210
 $31,953




- 18-


Unallocated operating expenses include costs for the three months ended March 31, 2020 that are not specific to a particular segment but are general to the group; included are expenses incurred for administrative and accounting staff, general liability and other insurance, professional fees and other similar corporate expenses. Interest and other expense, net, is also not allocated to the operating segments.
For the three months ended March 31, 2020 and 2019, there was no material revenue attributable to any individual foreign country. Approximately 1% of foreign revenue is billed in foreign currency and foreign currency gains and losses are not material. Revenue by geographic area is allocated as follows (in thousands):
 Three Months ended March 31,
 2020 2019
Domestic$3,602
 $1,796
Foreign1,726
 798
 $5,328
 $2,594
Disaggregated information for the Company’s revenue has been recognized in the accompanying condensed consolidated statements of operations and is presented below according to contract type (in thousands):
 Three Months ended March 31,
 2020 % of Revenue 2019 % of Revenue
Revenue: Glowpoint       
Video collaboration services$1,046
 20% $1,566
 60%
Network services925
 17% 965
 37%
Professional and other services74
 1% 63
 2%
      Total Glowpoint revenue$2,045
 38% $2,594
 100%
        
Revenue: Oblong Industries       
Visual collaboration product offerings$2,322
 44% $—
 —%
Professional services669
 13% —
 —%
Licensing292
 5% —
 —%
      Total Oblong Industries revenue$3,283
 62% $—
 —%
Total revenue$5,328
 100% $2,594
 100%
Glowpoint’s fixed assets were 100% located in domestic markets during as of March 31, 2020 and December 31, 2019. Oblong Industries’ long-lived assets were located 81% in domestic and 19% in foreign markets as of March 31, 2020.
The Company considers a significant customer to be one that comprises more than 10% of the Company’s consolidated revenues or accounts receivable. The loss of or a reduction in sales or anticipated sales to our most significant or several of our smaller customers could have a material adverse effect on our business, financial condition and results of operations.

Concentration of revenues was as follows:
   Three Months ended March 31,
   2020 2019
 Segment % of Revenue % of Revenue
Customer AGlowpoint 11% 21%
Customer BGlowpoint *
 28%
Customer CGlowpoint *
 10%
Customer DOblong Industries 22% —%
* The amount did not exceed 10% of the Company’s consolidated total revenues.


- 19-


Concentration of accounts receivable was as follows:

   Three Months ended March 31,
   2020 2019
 Segment % of Accounts Receivable % of Accounts Receivable
Customer AGlowpoint *
 11%
Customer BGlowpoint *
 48%
Customer CGlowpoint *
 *
Customer DGlowpoint *
 15%
Customer EOblong Industries 42% —%
Customer FOblong Industries 11% —%
* The amount did not exceed 10% of the Company’s consolidated total accounts receivable.

Note 913 - Commitments and Contingencies

Operating Leases

We lease two facilitiesoffice and warehouse space in Denver, COLos Angeles, California; Boston, Massachusetts; Atlanta, Georgia; Dallas, Texas; Los Altos, California; Herndon, Virginia; and Oxnard, CA that are under operatingMunich, Germany. These leases through December 31, 2019expire between October 2020 and March 31, 2020, respectively. Both of these leases require us to pay increases in real estate taxes, operating costs and repairs over certain base year amounts. Rent2023. Lease expense for the three and nine months ended September 30,March 31, 2020 and 2019 waswere $316,000 and $52,000, and $153,000, respectively. Rent expense for the three and nine months ended September 30, 2018 was $75,000 and $223,000, respectively.

Future minimum rental commitmentsThe Company primarily leases facilities for office and data center space under all non-cancelablenon-cancellable operating leases for its U.S. and international locations that expire at various dates through 2023. For leases with a term greater than 12 months, the Company recognizes a right-of-use asset and a lease liability based on the present value of lease payments over the lease term. Variable lease payments are not included in the lease payments to measure the lease liability and are expensed as incurred. The Company’s leases have remaining terms of one to four years and some of the leases include a Company option to extend the lease term for less than twelve months to five years, or more, which if reasonably certain to exercise, the Company includes in the determination of lease payments. The lease agreements do not contain any material residual value guarantees or material restrictive covenants. 

As the Company's leases do not provide a readily determinable implicit rate, the Company uses the incremental borrowing rate at lease commencement, which was determined using a portfolio approach, based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. The Company uses the implicit rate when a rate is readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term.
Leases with an initial term of 12 months or less are not recognized on the balance sheet and the expense for these short-term leases is recognized on a straight-line basis over the lease term. Common area maintenance fees (or CAMs) and other charges related to these leases continue to be expensed as incurred.

The following provides balance sheet information related to leases as of September 30, 2019, are as followsMarch 31, 2020 (in thousands):


- 13-


Year Ending December 31, Short-Term Lease ROU Lease Total
Remaining 2019 $20
 $22
 $42
2020 —
 23
 23
  $20
 $45
 $65
   March 31, 2020
Assets  
 Operating lease, right-of-use assets $2,602
    
Liabilities  
 Operating lease liabilities, current $1,294
 Operating lease liabilities, non-current 1,487
       Total operating lease liabilities $2,781

The following table summarizes the future undiscounted cash payments reconciled to the lease liability (in thousands):
Year Ending December 31,  
Remaining 2019 $22
2020 23
Total cash payments remaining $45
Effect of discounting (2)
Total accrued lease liability $43


Operating cash flow supplemental information as of September 30, 2019:

- 20-


Remaining Lease Payments  
Remainder of 2020 $981
2021 1,169
2022 716
2023 117
Total cash payments remaining $2,983
Effect of discounting (202)
Total lease liability $2,781

On January 1, 2019, initialthe Company recognized ROU assets and lease liabilities of approximately $99,000 and $111,000, respectively, using an estimated incremental borrowing rate of 7.75%. On October 1, 2019 (the closing date of the acquisition of Oblong Industries), the Company recognized ROU assets and lease liabilities for Oblong Industries of approximately $3,376,000and $3,578,000, respectively, using an estimated incremental borrowing rate of 6.00%. The ROU assets and lease liabilities are recorded on the Company’s condensed consolidated balance sheet as of March 31, 2020 and December 31, 2019. During the three months ended March 31, 2020, non-cash immaterial out-of-period adjustments of approximately $195,000 were recognized as a non-cash additionrecorded to reduce the right of use asset and lease liability. These adjustments related to an error in the calculation of these amounts , in connection with the adoptionOblong acquisition.

Series A-2 Preferred Stock

As discussed herein, on October 1, 2019, the Company closed its merger with Oblong Industries, in connection with which it became a co-borrower under the SVB Loan Agreement. Following consummation of the new lease standard. Cash paid for amounts includedmerger the Holder communicated to the Company his belief that the Company’s execution of the joinder to the SVB Loan Agreement without his consent contravened approval rights in the present valueSeries A-2 Certificate of Designations. The Company has not accrued any liabilities for this matter as of March 31, 2020. As of the operating lease liabilities was $66,000,filing of this Report, there has been no further update regarding this matter.

COVID-19

On March 11, 2020, the World Health Organization announced that infections of the novel Coronavirus (COVID-19) had become pandemic, and on March 13, the U.S. President announced a National Emergency relating to the disease. There is a possibility of continued widespread infection in the United States and abroad, with the potential for catastrophic impact. National, state and local authorities have required or recommended social distancing and imposed quarantine and isolation measures on large portions of the population, including mandatory business closures. These measures, while intended to protect human life, have had, and may continue to have, serious adverse impacts on domestic and foreign economies of uncertain severity and duration. On June 8, 2020, the National Bureau of Economic Research indicated that the U.S. economy had entered a recession. The sweeping nature of the coronavirus pandemic makes it extremely difficult to predict how the Company’s business and operations will be affected in the longer run, but we expect that it may materially affect our business, financial condition and results of operations. The extent to which was included within accrued expensesthe coronavirus impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. Moreover, the coronavirus outbreak has begun to have indeterminable adverse effects on general commercial activity and the world economy, and our business and results of operations could be adversely affected to the extent that this coronavirus or any other epidemic harms the global economy generally and/or the markets in which we operate specifically. Any of the foregoing factors, or other cascading effects of the coronavirus pandemic that are not currently foreseeable, could materially increase our costs, negatively impact our revenues and damage the Company’s results of operations and its liquidity position, possibly to a significant degree. The duration of any such impacts cannot be predicted. As discussed in Note 14 - Subsequent Events, an existing major customer of the Company suspended certain professional services we provided to the customer effective April 30, 2020 due to COVID-19. These services accounted for $0.5 million, or 13%, of the Company’s revenue for the ninethree months ended September 30, 2019.March 31, 2020. Uncertainties resulting from COVID-19 may result in additional customers delaying budget expenditures or re-allocating resources, which would result in a decrease in orders from these customers. Any such decrease in orders from these customers could cause a material adverse effect on our revenues and financial results and our ability to generate positive cash flows, all of which cannot be predicted at this time.

Note 10 – Major Customers

Major customers are defined as direct customers or channel partners that account for more than 10% of the Company’s revenue. For the three months ended September 30, 2019, three major customers represented 26%, 25%, and 11%, respectively, of our revenue. For the nine months ended September 30, 2019, the same three major customers represented 23%, 27%, and 10%, respectively, of our revenue. Two customers represented 51% and 15%, respectively, of our accounts receivable balance at September 30, 2019. For the three months ended September 30, 2018, two major customers represented 27% and 20%, respectively, of our revenue. For the nine months ended September 30, 2018, the same two major customers represented 25% and 21%, respectively, of our revenue.

Note 11 - Geographical Data
For the three and nine months ended September 30, 2019 and 2018, there was no material revenue attributable to any individual foreign country. Revenue by geographic area, based on customer location, is allocated as follows (in thousands):

- 21-

 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Domestic$1,571
 $1,982
 $5,043
 $6,477
Foreign799
 949
 2,360
 3,221
Total Revenue$2,370
 $2,931
 $7,403
 $9,698

Long-lived assets were 100% located in domestic markets as of September 30, 2019 and December 31, 2018.
Note 1214 - Subsequent Events

Oblong TransactionPaycheck Protection Program Loan

On September 12, 2019, Glowpoint entered into an Agreement and Plan of MergerApril 10, 2020 (the “Merger Agreement”) with Glowpoint Merger Sub II, Inc., a Delaware corporation and a direct wholly-owned subsidiary of Glowpoint (the “Merger Sub”), and Oblong (together with Glowpoint and the Merger Sub, the “Parties”), governing the Oblong Transaction. On October 1, 2019, prior to the Closing of the Oblong Transaction, the Parties entered into an Amendment to the Merger Agreement (the “Amendment”).



- 14-


On October 1, 2019 (the “Closing“Origination Date”), as contemplated by the Merger Agreement (as amended by the Amendment), the Oblong Transaction was effectedCompany received $2,416,600 in aggregate loan proceeds (the “PPP Loan”) from MidFirst Bank (the “Lender”) pursuant to the merger of Merger Sub withPaycheck Protection Program under the Coronavirus Aid, Relief, and into Oblong, with Oblong continuing asEconomic Security (CARES) Act. The Loan is evidenced by a Promissory Note (the “Note”), dated April 10, 2020, by and between the surviving corporationCompany and as a wholly-owned subsidiary of Glowpoint. At the closingLender. Subject to the terms of the Oblong Transaction (the “Closing”), (i)Note, the commonLoan bears interest at a fixed rate of one percent (1.0%) per annum. Payments of principal and preferred stockinterest are deferred for the first six months following the Origination Date. Following the deferral period, the Company will be required to make payments of Oblong issuedprincipal plus interest accrued under the Loan to the Lender in 18 monthly installments based upon an amortization schedule to be determined by the Lender based on the principal balance of the Note outstanding following the deferral period and outstanding immediatelytaking into consideration any portion of the Loan that is forgiven prior to that time. The Loan is unsecured and guaranteed by the effective timeU.S. Small Business Administration.

The Company may apply to the Lender for forgiveness of some or all of the Oblong Transaction were converted intoLoan, with the amount which may be forgiven equal to the sum of eligible payroll costs, mortgage interest, covered rent, and covered utility payments, in each case incurred by the Company during the twenty four-week period following the Origination Date, calculated in accordance with the terms of the CARES Act. Certain reductions in Company payroll costs during this period may reduce the amount of the Loan eligible for forgiveness. There is no guarantee that the Company will receive forgiveness for any fixed amount of any Loan principal received by the Company.
The Note provides for customary events of default including, among other things, failure to make any payment when due, cross-defaults under any loan documents with the Lender, certain cross-defaults under agreements with third parties, inaccuracy of representations and warranties, events of dissolution or insolvency, certain change of control events, and material adverse changes in the Company’s financial condition. If an event of default occurs, the Lender will have the right to receive an aggregateaccelerate indebtedness under the Loan and/or pursue other remedies available to the Lender at law or in equity.

Suspension of approximately 1.68 million shares of Glowpoint’s 6.0% Series D Convertible Preferred Stock (“Series D Preferred Stock”); (ii) all outstanding options exercisable for sharesServices by Major Customer

An existing major customer of Oblong common stock held by previously terminated employeesIndustries suspended certain professional services we provide to this customer effective April 30, 2020 due to the novel Coronavirus (COVID-19). These services accounted for $549,000 of Oblongthe Company’s revenue during the three months ended March 31, 2020, which represented 10% of the Company’s revenue for this period. These services were assumed by Glowpointnot related to the Company’s Mezzanine product and service offering. It is uncertain whether this customer will be deemed,resume these services later in 2020 or in the aggregate, to constitute options to acquire a total of approximately 100,000 shares of Glowpoint’s Common Stock at a volume weighted average exercise price of $4.92 per share; and (iii) all outstanding options exercisable for shares of Oblong common stock (whether or not vested) held by current employees of Oblong were cancelled and exchanged for an aggregate of approximately 50,000 restricted shares of Series D Preferred Stock (“Restricted Series D Preferred Stock”). Such shares of Restricted Series D Preferred Stock are subject to vesting over a two-year period following Closing, with twenty-five percent (25%) of such shares (the “Cliff Vesting Shares”) vesting on the first anniversary of the Closing (the “Cliff Vesting Date”) and the remaining seventy-five percent (75%) of such shares vesting in ratable monthly installments thereafter, subject to the holder’s continued employment through each such vesting date; provided, however, that in the event such holder’s employment is terminated prior to the Cliff Vesting Date without Cause (as defined in the Amendment), such holder shall remain eligible to vest in the Cliff Vesting Shares on the Cliff Vesting Date.

No fractional shares of Series D Preferred Stock were issued in the Oblong Transaction. Any fractional shares of Series D Preferred Stock that would have otherwise been issued in the Oblong Transaction were rounded up to the closest full share.

Series E Financing

On October 1, 2019, Glowpoint entered into a Series E Preferred Stock Purchase Agreement (the “Purchase Agreement”) with the investors party thereto, who, prior to the Closing of the Oblong Transaction, were stockholders of Oblong (the “Purchasers”), relating to the offer and sale by Glowpoint in a private placement (the “Offering”) of up to 131,579 shares of its Series E Preferred Stock at a price of $28.50 per share. At an initial closing on October 1, 2019, Glowpoint sold, and the Purchasers purchased, 88,070 shares of Series E Preferred Stock for gross proceeds of approximately $2.51 million. The 88,070 shares of Series E Preferred Stock issued by Glowpoint in the Series E Financing have an aggregate Accrued Value of $2.51 million and upon their conversion will convert at a conversion price of $2.85 per share into 880,700 common shares. Glowpoint did not pay any commissions or discounts in connection with the Offering, and expects to use the net proceeds from the initial closing for general corporate purposes, which may include product development, sales and marketing, and/or general administrative expenses. Certain investors in the Series E Financing have committed to purchase an additional $1.25 million of Glowpoint’s Series E Preferred Stock, upon demand by Glowpoint, on the same terms.

In connection with the Purchase Agreement, Glowpoint and the Purchasers executed a Registration Rights Agreement, dated October 1, 2019 (the “Rights Agreement”). Pursuant to the Rights Agreement, among other things, Glowpoint has provided the Purchasers with certain rights to require Glowpoint to file and maintain the effectiveness of a registration statement with respect to the re-sale of shares of Glowpoint Common Stock underlying the shares of Series D Preferred Stock issued in the Oblong Transaction and Series E Preferred Stock sold in the Series E Financing and, in each case, held by the Purchasers.future.

SVB Loan Agreement and SVB Warrant

On October 1, 2019, in connection with the Closing of the Oblong Transaction on such date, Glowpoint and Oblong, as borrowers, and SVB, as lender, executed the SVB Loan Agreement. The SVB Loan Agreement provides for a term loan facility of approximately $5.2 million (the “Loan”), all of which is currently outstanding. The SVB Loan Agreement providesoriginally provided that interest-only payments will bewere due through March 31, 2020, after which equal monthly principal and interest payments will bewere payable in order to fully repay the Loanloan by September 1, 2021. TheAs discussed in Note 8 - Debt , on June 26, 2020, the Company and SVB entered into a Default Waiver and First Amendment (the “Amendment”) to the SVB Loan accruesAgreement. Under the Amendment, the Bank has agreed to waive the Company’s failure to comply with certain covenants set forth in the Loan Agreement as well as certain events which could be deemed to constitute events of default under the Loan Agreement, including Borrowers’ failure to timely pay principal payments due April 1, 2020, May 1, 2020 and June 1, 2020, as well as a $100,000 deferral fee due April 1, 2020. Payment of each of these amounts was previously deferred pursuant to verbal and/or email communications between representatives of the Company and the Bank pending negotiation of the Amendment. In addition, among other things, the Amendment amends the Loan Agreement to: (1) extend the interest-only payment period under the Loan Agreement through September 30, 2020, and provide for payment of principal and interest at aover an eighteen month period from October 1, 2020 through March 1, 2022; (2) extend the maturity date of the Loan Agreement from September 1, 2021 to March 1, 2022; (3) change the due date for the previously existing $100,000 deferral fee from April 1, 2020 to the earlier of (i) the maturity of the loan, (ii) the repayment in full of all principal and interest owing under the Loan Agreement, and (iii) occurrence of an event of default under the Loan Agreement; and (4) increase the interest rate equalapplying to principal outstanding under the SVB Loan Agreement from the Prime Rate (as defined in the SVB Loan Agreement) plus 200 basis points (for a total of 7.00% as of October 1, 2019)2.0%, to the Prime Rate plus 4.25%.

The obligations under the SVB Loan Agreement are secured by substantially all of the assets of Glowpoint and its subsidiaries, including accounts receivable, intellectual property, equipment and other personal property. The SVB Loan Agreement contains certain restrictions and covenants, which, among other things, subject to certain exceptions, restrict Glowpoint’s ability to dispose of any portion of its business or property, engage in certain material changes to its business, enter into a merger, incur additional debt or make guarantees, make distributions or create liens or other encumbrances, or enter into related party transactions outside of the ordinary course of business. The SVB Loan Agreement also contains customary events of default, including failure to pay any principal or interest when due, failure to perform or observe covenants, breaches of representations and warranties, certain cross defaults, certain bankruptcy related events, monetary judgments defaults and Glowpoint’s de-listing from the NYSE American






- 15-22-


without a listing of its Common Stock on another nationally recognized stock exchange. Upon the occurrence of an event of default, the outstanding obligations under the SVB Loan Agreement may be accelerated and become immediately due and payable.

In connection with its execution of the SVB Loan Agreement, Glowpoint also issued a warrant to SVB that entitles SVB to purchase 72,394 shares of Glowpoint’s Common Stock at an exercise price of $0.01 per share (the “SVB Warrant”). The SVB Warrant has a ten (10) year term.

ItemITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Glowpoint,Oblong, Inc. (“Glowpoint,” “we,” “us,”Oblong” or “we” or “us” or the “Company”“Company”) is a managed service provider of video collaboration and network applications. Our services are designed to provide a comprehensive suite of automated and concierge applications to simplify the user experience and expedite the adoption of video as the primary means of collaboration. Our customers include Fortune 1000 companies, along with small and medium sized enterprises in a variety of industries. We market our services globally through a multi-channel sales approach that includes direct sales and channel partners. The Company was formed as a Delaware corporation in May 2000. The Company operates2000 and is a provider of patented multi-stream collaboration technologies and managed services for video collaboration and network applications. Prior to March 6, 2020, Oblong, Inc. was named Glowpoint, Inc. (“Glowpoint”). On October 1, 2019, Glowpoint closed an acquisition of all of the outstanding equity interests of Oblong Industries, Inc., a privately held Delaware corporation (“Oblong Industries”), pursuant to the terms of an Agreement and Plan of Merger (as amended, the “Merger Agreement”), dated September 12, 2019, by and among Glowpoint, Oblong Industries and Glowpoint Merger Sub II, Inc., a Delaware corporation and a wholly owned subsidiary of Glowpoint (“Merger Sub”). Pursuant to the Merger Agreement, among other things, Merger Sub merged with and into Oblong Industries, with Oblong Industries surviving as a wholly owned subsidiary of Glowpoint (the “Merger”). See further discussion of the Merger in oneNote 3 - Oblong Industries Acquisition to our condensed consolidated financial statements attached hereto. On March 6, 2020, Glowpoint changed its name to Oblong, Inc. In this Report, we use the terms “Oblong” or “we” or “us” or the “Company” to refer to (i) Oblong (formerly Glowpoint), for periods prior to the closing of the Merger, and (ii) the “combined organization” of Oblong (formerly Glowpoint) and Oblong Industries for periods after the closing of the Merger. For purposes of segment reporting, we refer to the Oblong (formerly Glowpoint) business as “Glowpoint” herein, and therefore segment informationto the Oblong Industries business as “Oblong Industries” herein.

Since the closing of the Merger on October 1, 2019, we have been focused on the integration of the former businesses of Glowpoint and Oblong Industries into a combined organization. While our acquisition of Oblong Industries does provide additional revenues to the combined organization, the cost to further develop and commercialize its product offerings is not presented.expected to exceed its revenues for the foreseeable future. We have achieved certain revenue and cost synergies in connection with combining Glowpoint and Oblong Industries; we reduced the total of operating expenses (when including general and administrative, research and development and sales and marketing expenses) by $1,081,000 (or 19%) from the fourth quarter of 2019 as compared to the first quarter of 2020 (or a total of $5,656,000 in the fourth quarter of 2019 as compared to a total of $4,575,000 in the first quarter of 2020). We expect to further reduce the Company’s operating expenses in the future as compared to its annualized operating expenses for the three months ended March 31, 2020. We also expect to continue to invest in product development and sales and marketing expenses with the goal of growing the Company’s revenue in the future. We believe additional capital will be required to fund operations and provide growth capital including investments in technology, product development and sales and marketing. We intend to invest sales and marketing resources to expand awareness of Oblong Industries’ product offerings in the Cisco sales channel with the goal of increasing adoption and growing revenue. We expect to continue operating Glowpoint’s former business in the future as part of our combined organization; however, as discussed above, we expect to focus the majority of our future investments in product development and sales and marketing on our efforts to grow revenue from Oblong Industries’ products and service offerings.

Glowpoint’s Results of Operations

Three and Nine Months Ended September 30, 2019March 31, 2020 (the “2019 Third2020 First Quarter” and the “2019 Period,” respectively)) compared to Three and Nine Months Ended September 30, 2018March 31, 2019 (the “2018 Third“2019 First Quarter”)

Segment Reporting

As discussed above, on October 1, 2019, the Company acquired Oblong Industries, and Oblong Industries became a wholly owned subsidiary of the “2018 Period,” respectively)Company. Prior to the acquisition of Oblong Industries on October 1, 2019, the Company operated in one segment. Following October 1, 2019, the former businesses of Glowpoint and Oblong Industries were managed separately and involve different products and services. Accordingly, the Company currently operates in two segments: 1) the Glowpoint (now named Oblong) business which mainly consists of managed services for video collaboration and network applications and 2) the Oblong Industries business which consists of products and services for visual collaboration technologies.

Because the closing of the acquisition of Oblong Industries occurred on October 1, 2019, the Company’s condensed consolidated financial statements as of and for the three months ended March 31, 2019 included in this Report do not include Oblong Industries’ financial results. Certain information concerning the Company’s segments for the three months ended March 31, 2020 and 2019 is presented in the following table (in thousands):


- 23-


 Three Months ended March 31, 2020
 Glowpoint Oblong Industries Total
Revenue$2,045
 $3,283
 $5,328
Cost of revenues1,156
 1,218
 2,374
  Gross profit$889
 $2,065
 $2,954
  Gross profit %43% 63% 55%
      
Allocated operating expenses$1,290
 $2,073
 $3,363
Unallocated operating expenses—
 —
 2,568
  Total operating expenses$1,290
 $2,073
 $5,931
      
Loss from operations$(401) $(8) $(2,977)
Interest and other expense, net—
 —
 (152)
Net loss$(401) $(8) $(3,129)
      
 As of March 31, 2020
Total assets$3,743
 $28,210
 $31,953

Unallocated operating expenses include costs during the 2020 First Quarter (after the October 1, 2019 acquisition date) that are not specific to a particular segment but are general to the group; included are expenses incurred for administrative and accounting staff, general liability and other insurance, professional fees and other similar corporate expenses. Interest and other expense, net, is also not allocated to the operating segments.

As shown in the table below, the combined organization’s total revenue for the three months ended March 31, 2019 on a pro forma basis (as if the acquisition of Oblong Industries had occurred on January 1, 2019), was $7.3 million.
  Pro forma and unaudited (as if the acquisition of Oblong Industries had occurred on January 1, 2019)
  Three Months Ended March 31, 2019
  ($ in thousands)
Revenue  
Glowpoint $2,594
Oblong Industries 4,718
Pro forma total revenue $7,312
Net loss  
Glowpoint $(598)
Oblong Industries (3,592)
Pro forma net loss $(4,190)

Revenue. Total revenue decreased $561,000increased $2,734,000 (or 19%105%) to $2,370,000$5,328,000 in the 2020 First Quarter from $2,594,000 in the 2019 Third Quarter from $2,931,000 in the 2018 Third Quarter. Total revenue decreased $2,295,000 (or 24%) to $7,403,000 in the 2019 Period from $9,698,000 in the 2018 Period.First Quarter. The following table summarizes the changes in components of our revenue, and the significant changes in revenue are discussed in more detail below.
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2019 2018 2019 2018
Revenue       
Video collaboration services$1,317
 $1,803
 $4,335
 $5,763
Network services969
 1,032
 2,879
 3,369
Professional and other services84
 96
 189
 566
Total revenue$2,370
 $2,931
 $7,403
 $9,698



- 24-


 Three Months Ended March 31, 2019
 2020 % of Revenue 2019 % of Revenue
Revenue: Glowpoint       
Video collaboration services$1,046
 20% $1,566
 60%
Network services925
 17% 965
 37%
Professional and other services74
 1% 63
 2%
      Total Glowpoint revenue$2,045
 38% $2,594
 100%
        
Revenue: Oblong Industries       
Visual collaboration product offerings$2,322
 44% $—
 —%
Professional services669
 13% $—
 —%
Licensing292
 5% $—
 —%
      Total Oblong Industries revenue$3,283
 62% $—
 —%
Total revenue$5,328
 100% $2,594
 100%

Glowpoint

Revenue for managed services for video collaboration services decreased $486,000$509,000 (or 27%33%) to $1,317,000$1,046,000 in the 2020 First Quarter from $1,566,000 in the 2019 Third Quarter from $1,803,000 in the 2018 Third Quarter, and decreased $1,428,000 (or 25%) to $4,335,000 in the 2019 Period from $5,763,000 in the 2018 Period. These decreases areFirst Quarter. This decrease is mainly attributable to lower revenue from existing customers (either from reductions in price or level of services) and loss of customers to competition.

Revenue for network services decreased $63,000$40,000 (or 6%11%) to $969,000$925,000 in the 2020 First Quarter from $965,000 in the 2019 Third Quarter from $1,032,000 in the 2018 Third Quarter, and $490,000 (or 15%) to $2,879,000 in the 2019 Period from $3,369,000 in the 2018 Period. These decreases areFirst Quarter. This decrease is mainly attributable to net attrition of customers and lower demand for our services given the competitive environment and pressure on pricing that exists in the network services business.

Revenue for professional and other services decreased $12,000increased $11,000 (or 13%17%) to $84,000$74,000 in the 2020 First Quarter from $63,000 in the 2019 ThirdFirst Quarter.


Oblong Industries
For Oblong Industries, the increase in revenue in each of the different components was attributable to the acquisition of Oblong Industries on October 1, 2019 and includes Oblong Industries’ revenue for the 2020 First Quarter from $96,000 in the 2018 Third Quarter, and $377,000 (or 67%) as compared to $189,000 inno revenue for the 2019 Period from $566,000 in the 2018 Period. These decreases are mainly attributable to lower resale of video equipment.
First Quarter.

We expect that the year-over-year negativeCompany’s total revenue trendwill increase from calendar year 2019 to calendar year 2020, mainly driven by the inclusion of a full calendar year of revenue for Oblong Industries in calendar year 2020 (since calendar year 2019 only includes revenue for the 2018 Period tofourth quarter for Oblong Industries), partially offset by an expected continuing decline in revenue from the 2019 Period for Glowpoint’sGlowpoint business (not considering Oblong’s revenue contribution to the combined organization effective October 1, 2019) will continue for the foreseeable future given the dynamic and competitive environment for ourthese services. We believe sales cycles associated with selling our services directly to enterprise IT organizations and through our channel partners typically range from six to eighteen months. These factors create uncertainty as to when, and if, weadditional capital will be ablerequired to stabilizefund operations and ultimatelyprovide growth capital including investments in technology, product development and sales and marketing. We intend to invest sales and marketing resources to expand awareness of Oblong Industries’ product offerings in the Cisco sales channel with the goal of increasing adoption and growing revenue. We expect to continue operating Glowpoint’s former business in the future as part of our combined organization; however, we expect to focus the majority of our future investments in product development and sales and marketing on our efforts to grow revenue from Oblong Industries’ products and service offerings. We believe there is a substantial market opportunity for Oblong Industries’ product offerings and services, and we are in the process of transforming our revenue (see “offerings to meet the evolving needs of our customers. As part of the transformation of our business, we are evolving certain aspects of our model by designing and developing software to include subscription-based offerings. Historically, our technology products and services have been developed and consumed in conventional commercial real estate spaces such as conference rooms. As our core collaboration products evolve, we expect to add more contemporary software features along with expanded accessibility beyond commercial spaces through both hybrid and SaaS offerings. See “Part I. Item 1. Overview and Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 20182019 10-K) for further discussion).



- 16-25-


Cost of Revenue (exclusive of depreciation and amortization). Cost of revenue, exclusive of depreciation and amortization, includes all internal and external costs related to the delivery of revenue. Cost of revenue also includes taxes which have been billed to customers.
 For the Three Months Ended March 31,
 2020 2019
Cost of Revenue   
Glowpoint$1,156
 $1,675
Oblong Industries1,218
 —
Total cost of revenue$2,374
 $1,675

Cost of revenue decreasedincreased to $1,582,000$2,374,000 in the 2020 First Quarter from $1,675,000 in the 2019 Third Quarter from $1,804,000 in the 2018 Third Quarter.First Quarter. This $222,000 (or 12%) decreaseincrease in cost of revenue is mainly attributable to the cost of revenue for Oblong Industries for the 2020 First Quarter, partially offset by lower costs associated with the $561,000 decrease in Glowpoint revenue duringbetween the same period. Cost of revenue decreased to $4,901,000 in2020 First Quarter and the 2019 Period from $5,881,000 in the 2018 Period. This $980,000 (or 17%) decrease in cost of revenue is mainly attributable to lower costs associated with the $2,295,000 decrease in revenue during the same period. We reduced costs related to revenue in these areas during the 2019 Third Quarter and 2019 Period: personnel costs, network costs, taxes, and external costs associated with video meeting suites. Cost of revenue,First Quarter. The Company’s gross profit as a percentage of total revenue increased to 67%55% in the 2020 First Quarter as compared to 35% in the First Quarter 2019. This increase is due to inclusion of Oblong Industries’ gross profit (or 63%) in the 2020 First Quarter and 66% foran increase in Glowpoint’s gross profit from 35% in the 2019 ThirdFirst Quarter and 2019 Period, respectively, from 62% and 61% for to 43% in the 2018 Third Quarter and 2018 Period, respectively. These increases2020 First Quarter. The increase in cost of revenue as a percentage of total revenue are mainlyGlowpoint’s gross profit was due to higherreduced personnel costs as a percentage of total revenue.

Research and Development. Research and development expenses include internal and external costs related to developing new service offerings and features and enhancements to our existing services. Research and development expenses decreasedincreased to $190,000$1,327,000 in the 2020 First Quarter from $213,000 in the 2019 Third Quarter from $215,000 in the 2018 Third Quarter, and decreased to $652,000 in the 2019 Period from $690,000 in the 2018 Period. These decreases areFirst Quarter. This increase is primarily attributable to lower headcount$1,199,000 of research and corresponding personnel costs.development expenses for Oblong Industries in the 2020 First Quarter with no expenses included for Oblong Industries in the First Quarter 2019 as the acquisition of Oblong Industries occurred on October 1, 2019, offset by reductions in the Glowpoint related expenses.

Sales and Marketing Expenses. Sales and marketing expenses decreasedincreased to $38,000$1,220,000 in the 2020 First Quarter from $33,000 in the 2019 Third Quarter from $58,000 in the 2018 Third Quarter.First Quarter. This decreaseincrease is primarily attributable to a decrease in third party marketing costs$1,184,000 of $20,000. Salessales and marketing expenses decreased to $111,000for Oblong Industries in the 2019 Period from $278,0002020 First Quarter with no expenses included for Oblong Industries in the 2018 Period. This decrease is primarily attributable to a decrease in third party marketing costsFirst Quarter 2019 as the acquisition of $162,000.Oblong Industries occurred on October 1, 2019.

General and Administrative Expenses. General and administrative expenses include direct corporate expenses and costs of personnel in the various corporate support categories, including executive, finance and accounting, legal, human resources and information technology. General and administrative expenses decreased $135,000$916,000 (or 12%82%) to $1,035,000$2,028,000 in the 2020 First Quarter from $1,112,000 in the 2019 Third Quarter from $1,170,000 in the 2018 Third Quarter.First Quarter. This decreaseincrease is primarily attributable to a decrease$1,042,000 of $216,000 of advisory fees incurred in the 2018 Third Quarter relating to our consideration of potential M&A initiatives (including the potential SharedLabs merger which was terminated in April 2019), a $81,000 decrease in administrative and overhead expenses, a $68,000 decrease in stock compensation expense, a $25,000 decrease in personnel costs, partially offset by a $255,000 increase in professional expenses relating to the Oblong Transaction. Generalgeneral and administrative expenses decreased$215,000(or 7%) to $2,917,000for Oblong Industries for the 2020 First Quarter with no expenses included for Oblong Industries in the First Quarter 2019 Period from $3,132,000 inas the 2018 Period. This decrease is primarily attributable to a $285,000 decrease in administrative and overhead expenses, a $142,000 decrease in stock compensation expense, a decreaseacquisition of $43,000 in advisory fees relating to our consideration of potential M&A initiatives (including the potential SharedLabs merger which was terminated in April 2019), partially offset by an increase of $255,000 in advisory fees relating to the Oblong Transaction.Industries occurred on October 1, 2019.

Impairment Charges. Impairment charges in the 2019 Third2020 First Quarterand 2019 Period were $20,000 and $473,000, respectively,$541,000 as compared to $975,000 and $3,150,000$0 in the 2018 Third2019 First Quarterand 2018 Period, respectively. The impairment charges for the 2019 Third2020 First Quarterare primarily attributable to impairment charges$541,000 on the Glowpoint reporting unit’s goodwill. As of $20,000 on capitalized softwareMarch 31, 2020, there is no longer in service. The impairment chargesremaining goodwill balance for the 2019 Period are primarily attributable to impairment charges of $453,000 on goodwill. The impairment charges for the 2018 Third Quarter and 2018 Period are attributable to impairments on goodwill. The continued future decline of our revenue, cash flows and/or stock price may give rise to a triggering event that may require the Company to record impairment charges in the future related to our goodwill, intangible assets and other long-lived assets.Glowpoint reporting unit.

Depreciation and Amortization Expenses. Depreciation and amortization expenses decreasedincreased to $145,000$815,000 in the 2020 First Quarter from $159,000 in the 2019 Third Quarter from $179,000 in the 2018 Third Quarter.First Quarter. This $34,000 decrease$656,000 increase is mainly attributable to lower$740,000 of depreciation expense due to an increase in assets which became fully depreciated during 2018 and 2019. Depreciation and amortization expensesdecreased to $461,000expense recorded in the 2019 Period from $596,0002020 First Quarter related to assets recorded in connection with the 2018 Period. This $135,000 decrease is mainly attributable to lower depreciation expense due to an increase in assets which became fully depreciated during 2018 and 2019.acquisition of Oblong Industries.

Loss from Operations. The Company recorded a loss from operations of $640,000$2,999,000 in the 2019 Third2020 First Quarter as compared to a loss from operations of $1,470,000 in the 2018 Third Quarter. The Company recorded a loss from operations of $2,112,000$598,000 in the 2019 Period as compared to a loss from operations of $4,029,000 in the 2018 Period. These decreasesFirst Quarter. This increase in our loss from operations from the 2018 Third2019 First Quarter and 2018 Period to the 2019 Third2020 First Quarter and 2019 Period are is mainly attributable to decreasesthe increase in goodwill impairment charges,operating expenses discussed above, partially offset by decreasesan increase in gross margin (or revenue less cost of revenue)profit as discussed above.

Off-Balance Sheet Arrangements



- 17-


As of September 30, 2019,March 31, 2020, we had no off-balance sheet arrangements.




- 26-


Inflation

Management does not believe inflation had a significant effect on the condensed consolidated financial statements for the periods presented.

Critical Accounting Policies

Other than the adoption of Topic 842 and Topic 718, for non-employees, thereThere have been no changes to our critical accounting policies during the ninethree months ended September 30, 2019.March 31, 2020. Critical accounting policies and the significant estimates made in accordance with such policies are regularly discussed with our Audit Committee. Those policies are discussed under “Critical Accounting Policies” in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as in our condensed consolidated financial statements and the footnotes thereto, each included in our 20182019 10-K.

Oblong Transaction and Financial Data

On October 1, 2019, Glowpoint closed its previously announced acquisition of Oblong Industries, Inc., a Delaware corporation (“Oblong” and, such transaction, the “Oblong Transaction”). Oblong is a provider of technology products and solutions for immersive visual collaboration.  Oblong's flagship product Mezzanine™ is the technology platform that allows meeting participants to share multiple streams of content, from multiple locations and multiple screens, all at the same time. Oblong’s customers use the platform to collaborate more effectively. Oblong’s principal operations are located in Los Angeles, California and supplies Mezzanine™ systems to Fortune 500 enterprise customers and reseller partners.

Because the closing of the Oblong Transaction occurred after September 30, 2019, the Company’s condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, and this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” do not reflect the Company’s acquisition of Oblong. For further discussion of the Oblong Transaction see Note 12 “Subsequent Events”to the Company’s condensed consolidated financial statements in Item 1 of this Quarterly Report on 10-Q.

The financial statements of Oblong, a wholly-owned subsidiary of Glowpoint, will be included in Glowpoint’s future combined consolidated financial results beginning effective October 1, 2019. The summary Oblong standalone financial information set forth below has been derived from Oblong’s unaudited financial statements for the periods presented. This information has not been audited or reviewed by the auditors of Glowpoint or of Oblong. As a result, this information is being presented for illustrative purposes only and you should not rely on this financial information to provide the same quality of information associated with information that has been subject to an audit or review process. In addition, historical results are not necessarily indicative of results expected for future periods.

We expect to file the audited and unaudited historical financial statements of Oblong, together with the notes related thereto, and the unaudited pro forma financial statements of Glowpoint and Oblong, together with the notes related thereto, in each case required by Item 9.01 of Form 8-K within 71 days from October 7, 2019, the date on which our Current Report on Form 8-K disclosing the closing of the Oblong Transaction was, and was required to be, filed with the SEC. Once filed, please see these financial statements for further information regarding Oblong’s financial information discussed herein.



- 18-


OBLONG INDUSTRIES, INC.
SELECTED STATEMENT OF OPERATIONS DATA
(Unaudited and in thousands)
  Nine Months Ended September 30, Year Ended December 31,
  2019 2018 2018 2017
Total Revenue $12,758
 $13,267
 $17,249
 $22,283
Gross margin 10,039
 10,250
 12,750
 14,979
Gross margin % 79% 77% 74% 67%
Total operating expenses $20,684
 $22,907
 $30,490
 $35,312
Loss from operations (10,645) (12,657) (17,740) (20,333)
Other expense, net (272) (80) (114) (353)
Net loss $(10,917) $(12,737) $(17,854) $(20,686)

OBLONG INDUSTRIES, INC.
SELECTED BALANCE SHEET DATA
(Unaudited and in thousands)
  Nine Months Ended September 30, Year Ended December 31,
  2019 2018 2017
Cash, cash equivalents and restricted cash $2,194
 $8,648
 $14,685
Total current assets 6,345
 13,551
 26,085
Total assets 11,564
 20,060
 33,968
Total current liabilities 9,126
 5,280
 12,385
Long term deferred revenue —
 716
 1,528
Notes and lease payable, long term 3,498
 4,591
 2,058
Stockholders’ equity (deficit) $(1,401) $9,298
 $17,514


Liquidity and Capital Resources for Combined Company

As of September 30, 2019, GlowpointMarch 31, 2020, we had $1,271,000$2,059,000 of cash, anda working capital deficit of $1,568,000.$895,000, and $5,609,000 of total obligations under the SVB Loan Agreement. For the ninethree months ended September 30, 2019, GlowpointMarch 31, 2020, the Company incurred a net loss of $2,113,000$3,129,000 and used $668,000$2,536,000 of net cash in operating activities, $17,000$0 in investing activities and $51,000$7,000 in financing activities.

As discussed further in Note 12 “Subsequent Events” to the Company’s condensed consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q, on October 1, 2019, in connection with the Oblong Transaction:Future Capital Requirements and Going Concern

a) The Company consummated the saleAs of 88,070 shares of its 6.0% Series E Convertible Preferred Stock (“Series E Preferred Stock”), for gross proceeds of $2.51 million (the “Series E Financing”). Certain investors in the Series E Financing have committed to purchase an additional $1.25 million of Glowpoint’s Series E Preferred Stock, upon demand by Glowpoint, on the same terms.

b) The Company and Oblong, as borrowers, and Silicon Valley Bank (“SVB”), as lender, executed a Second Amended and Restated Loan and Security Agreement (the “SVB Loan Agreement”), which amended and restated, in its entirety, the Amended and Restated Loan and Security Agreement by and between Oblong and SVB.March 31, 2020, The SVB Loan Agreement provides for a term loan facility of approximately $5.2 million (the “Loan”), all of which was outstanding at the effective time of the Oblong Transaction and remains outstanding. The SVB Loan Agreement providesprovided that interest-only payments will bewere due through March 31, 2020, after which equal monthly principal and interest payments will bewere payable in order to fully repay the loan by September 1, 2021. On June 26, 2020, the Company and SVB entered into a Default Waiver and First Amendment(the “Amendment”) to the SVB Loan Agreement. Under the Amendment, the Bank agreed to extend the interest-only payment period under the Loan Agreement through September 30, 2020, after which equal monthly principal of $291,500 are payable over an eighteen month period from October 1, 2020 through March 1, 2022. See further discussion of the Amendment in Note 14 - Subsequent Events and Part II, Item 5 of this Quarterly Report.

AsIn April 2020, we received cash proceeds from a loan for $2,416,600 (the “PPP Loan”) from MidFirst Bank under the Paycheck Protection Program (PPP) contained within the Coronavirus Aid, Relief, and Economic Security (CARES) Act (see Note 14 - Subsequent Events). The PPP Loan has a term of September 30, 2019, Glowpoint had cashtwo years, is unsecured, and is guaranteed by the U.S. Small Business Administration (SBA). The PPP Loan carries a fixed interest rate of $1,271,000one percent (1.0%) per annum, with the first six months of interest deferred. The Company may apply to the Lender for forgiveness of some or all of the Loan, with the amount which may be forgiven equal to the sum of eligible payroll costs, mortgage interest, covered rent, and Oblong had cashcovered utility payments, in each case incurred by the Company during the twenty four-week period following the Origination Date, calculated in accordance with the terms of $2,194,000 (and these balances exclude the Series E Financing proceeds discussed above). CARES Act. Certain reductions in Company payroll costs during this period may reduce the amount of the Loan eligible for forgiveness. The Company estimates that approximately $1.7 million to $1.9 million of the PPP Loan will be forgiven. However, this estimate is subject to change and there is no guarantee that the Company will receive any forgiveness for any fixed amount of any PPP Loan principal received by the Company

Our capital requirements in the future will continue to depend on numerous


- 19-


factors, including the timing and amount of revenue for the combined organization, customer renewal rates and the timing of collection of outstanding accounts receivable, in each case particularly as it relates to the combined organization’s major customers, the expense to deliver services, expense for sales and marketing, expense for research and development, capital expenditures, the cost involved in protecting intellectual property rights, debt service obligations under the SVB Loan Agreement, the amount of forgiveness of the PPP Loan, if any, and expense related to the Oblong Transaction includingdebt service obligations under the PPP Loan, and expenses required to successfully integrate Glowpoint and Oblong.Oblong Industries. While our acquisition of Oblong Industries does provide additional revenues to the Company, the cost to further develop and commercialize Oblong’sits product offerings is expected to exceed its revenues for the foreseeable future. We expect to achievehave achieved certain revenue and cost synergies in connection with combining Glowpoint and Oblong Industries; we reduced total of general and alsoadministrative, research and development and sales and marketing expenses by $1,081,000 (or19%) from the fourth quarter of 2019 as compared to the first quarter of 2020 (or a total of $5,656,000 in the fourth quarter of 2019 as compared to a total of $4,575,000 in the first quarter of 2020). We expect to further reduce Oblong’sthe Company’s operating expenses in the future as compared to its annualized operating expenses for the ninethree months ended September 30, 2019. March 31, 2020.

We also expect to continue to invest in product development and sales and marketing expenses with the goal of growing Oblongthe Company’s revenue in the future. The Company believes that, based on the combined organization’s current projection of revenue, expenses, capital expenditures, debt service obligations, and cash flows, it will not have sufficient resources to fund its operations for the next twelve months following the filing of this Report. We believe additional capital will be required to fund operations


- 27-


and provide growth capital including investments in technology, product development and sales and marketing. To access capital to fund operations or provide growth capital, we will need to and raise capital in one or more debt and/or equity offerings. There can be no assurance that we will be successful in raising necessary capital or that any such offering will be on terms acceptable to the Company. If we are unable to raise additional capital that may be needed on terms acceptable to us, it could have a material adverse effect on the Company. The factors discussed above raise substantial doubt as to our ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from these uncertainties.


See Note 13 - Commitments and Contingencies to our condensed consolidated financial statements for discussion regarding certain additional factors that could impact the Company’s liquidity in the future.

ItemITEM 3. Quantitative and Qualitative Disclosures About Market RiskQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by the rules and regulations of the SEC, we are not required to provide this information.

ItemITEM 4. Controls and ProceduresCONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2019.March 31, 2020. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2019,March 31, 2020, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms and are designed to ensure that information required to be disclosed by the Company in the reports we file or submit under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

No change in our internal control over financial reporting occurred during the fiscal quarter ended September 30, 2019March 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

As discussed above under “Reliance on Securities and Exchange Commission Order” and in our Current Report on Form 8-K filed on May 15, 2020 (the “May 15 Form 8-K”), the Company expected that the filing of this Quarterly Report on Form 10-Q for the three months ended March 31, 2020, originally due on May 15, 2020, would be delayed due to circumstances related to the coronavirus pandemic. As stated in the May 15 Form 8-K, the coronavirus pandemic resulted in travel limitations, limited access to the Company’s facilities and remote work for key personnel involved in preparing the Quarterly Report, which has adversely impacted the Company’s ability to complete the Quarterly Report on a timely basis. The impact of these measures slowed our routine quarterly close processes and ability to prepare our unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2020, thus causing a delay in our ability to complete and file this Quarterly Report on Form 10-Q. The Company relied on Release No. 34-88465 issued by the SEC on March 25, 2020, pursuant to Section 36 of the Securities Exchange Act of 1934, as amended, to delay the filing of this Quarterly Report on Form 10-Q. However, the Company has taken steps to reduce the impact of these measures on our accounting personnel and as such currently expects to meet the filing deadline for the Quarterly Report on Form 10-Q for the three months ended June 30, 2020 even if circumstances related to the coronavirus pandemic continue to exist.

PART II - OTHER INFORMATION

ItemITEM 1. Legal ProceedingsLEGAL PROCEEDINGS

From time to time, we are subject to various legal proceedings arising in the ordinary course of business, including proceedings for which we have insurance coverage. As of the date hereof, we are not party to any legal proceedings that we currently believe will have a material adverse effect on our business, financial position, results of operations or liquidity.





- 28-

ItemITEM 1A. Risk FactorsRISK FACTORS

A description of the risks associated with our business, financial conditions and results of operations is set forth in “Part I. Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018,2019, filed with the Securities and Exchange Commission on March 8, 2019May 15, 2020 (the “2018“2019 Annual Report”), and in the additional risk factors set forth below. In April 2019 we entered into a Termination Agreement, which, among other things, terminated our previously existing Agreement and Plan of Merger with SharedLabs, Inc. As a result, many of the risks related to the previously contemplated merger with SharedLabs and set forth under “Part I. Item 1A. Risk Factors--Risks Related to the Proposed Merger with SharedLabs” are no longer applicable to us. Subject to the foregoing sentence, and other than the additional risk factors set forth below, there There have been no material changes to these risks during the ninethree months ended September 30, 2019.March 31, 2020. The risks described in the 20182019 Annual Report and below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

Our acquisition of Oblong in October 2019 could adversely affect our operations, financial results and financial condition.

In October 2019, we acquired Oblong, a privately-held visual collaboration company that develops, manufactures and markets multi-stream, concurrent multi-user, multi-screen, multi-device, and multi-location technology platforms for dynamic and immersive visual collaboration. With respect to our acquisition of Oblong and any future acquisitions, we may experience:

difficulties in integrating the acquired businesses and their respective personnel and products into our existing business;

difficulties in integrating commercial organizations;


- 20-


difficulties or delays in realizing the anticipated benefits of the acquisition;

diversion of our management’s time and attention from other business concerns;

challenges due to limited or no direct prior experience in new markets or countries we may enter;

inability to successfully develop new products and services on a timely basis that address our new market opportunities post-acquisition;

inability to compete effectively against companies already serving the broader market opportunities expected to be available to us post-acquisition; and

unanticipated costs and other contingent liabilities.

We have invested, and expect to continue to invest, significant cash and other resources in connection with our acquisition of Oblong, integration of its business and development and commercialization of its products. There can be no assurance that we will be successful in our efforts. Should we be unable to obtain adequate financing or generate sufficient revenue in the future, our business, result of operations, liquidity and financial condition could be materially and adversely harmed.

The failure to successfully operate and integrate our business and the business of Oblong in the expected timeframe could adversely affect the combined organization’s future results following the completion of the transaction.

The success of the Oblong Transaction will depend, in large part, on the ability of the combined organization following the completion of the transaction to realize the anticipated benefits from combining our and Oblong’s respective businesses. The failure to operate and integrate successfully and to manage successfully the challenges presented by the integration process may result in the combined organization’s failure to achieve some or all of the anticipated benefits of the transaction. Potential difficulties that may be encountered in the integration process include the following:

using the combined organization’s cash and other assets efficiently to develop the business of the combined organization;

appropriately managing the liabilities of the combined organization;

limited experience of management in performing acquisitions and managing growth;

potential unknown and unforeseen expenses, delays or regulatory conditions associated with the transaction; and

performance shortfalls at one or both of the companies as a result of the diversion of management’s attention caused by completing the transaction and integrating the companies’ operations.

If we do not achieve the contemplated benefits of our acquisition of Oblong, our business and financial condition may be materially impaired.

We may not achieve the desired benefits from our acquisition of Oblong. For any of the reasons described above and elsewhere in this report and even if we are able to successfully operate Oblong within our company, we may not be able to realize the revenue and other growth that we anticipate from the acquisition in the time frame that we currently expect, and the costs of achieving these benefits may be higher than what we currently expect, because of a number of risks, including the possibility that the acquisition may not further our business strategy as we expected and risks related to contingent liabilities related to the acquisition.

The conversion of our issued and outstanding shares of Series D and Series E Preferred Stock into shares of our common stock is contingent upon stockholder approval.

Pursuant to the Certificates of Designations governing our Series D and Series E Preferred Stock, respectively, such shares are convertible into shares of our common stock following the occurrence of both (i) approval of such conversion by our stockholders and (ii) receipt of all required authorizations and approvals from the NYSE American. We expect to file a proxy statement with the Securities and Exchange Commission for the purposes of holding a meeting of our stockholders to vote on proposals to approve the issuance of common stock upon such conversions. At this meeting, our stockholders may decide to approve or reject such proposals. If our stockholders elect to approve the issuance of common stock upon the conversion of shares of Series D and Series


- 21-

E preferred stock, then the issuance of such shares of common stock will result in substantial and significant dilution to our existing stockholders, with the Company’s existing stockholders only holding, in the aggregate, approximately 25% of the Company’s fully diluted shares of common stock. Alternatively, if our stockholders elect to reject proposals related to the issuance of common stock upon the conversion of shares of Series D and Series E Preferred Stock, then the continued existence of the Series D and Series E Preferred Stock may hinder the Company’s ability to seek additional equity and/or debt financing opportunities in the future. In addition, if such proposals are rejected and the Series D and Series E Preferred Stock therefore remain outstanding:

Each share of Series D and Series E Preferred Stock will be entitled to receive an annual dividend equal to 6.0% of its then-existing accrued value per annum, commencing on the first anniversary of its issuance;

Upon any liquidation of Glowpoint, the shares of Series D and Series E Preferred Stock will rank senior to Glowpoint’s common stock, but junior to Glowpoint’s outstanding Series A-2 Preferred Stock and Series C Preferred Stock;

Holders of Series D and Series E Preferred Stock will generally not have voting rights with respect to such shares, but for so long as at least twenty percent (20%) of the shares of Series D or Series E Preferred Stock issued by the Company are outstanding, respectively, the consent of such shares, as a class, will be required for the Company to take the following actions:

◦the liquidation, dissolution, or winding-up of the business and affairs of the Company, or the Company’s consent to any of the foregoing;

◦the amendment, altering or repeal of any provision of the Company’s certificate of incorporation or bylaws in any manner that adversely affects the powers, preferences or rights of the Series D or Series E Preferred Stock, respectively;

◦creating, or authorizing the creation of, or issuance or obligation of the Company to issue shares of, any additional class or series of the Company’s capital stock, other than Common Stock;

◦certain reclassifications, alterings or amendments of any existing security of the Company that is pari passu with, or junior to, the Series D Preferred Stock or Series E Preferred Stock, respectively;

◦taking or approving any of the foregoing actions with respect to a subsidiary of the Company; or

◦authorizing, creating or issuing any debt security, or permitting any subsidiary to take any such action with respect to any debt security, if the aggregate indebtedness of the Company and its subsidiaries for borrowed money following such action, in excess of the amount outstanding or available for borrowing under the Company’s loan agreement with Silicon Valley Bank, would exceed $500,000.

We could fail to satisfy the standards to maintain our listing on a stock exchange.

We could fail to satisfy the standards for continued exchange listing on the NYSE American, such as standards having to do with a minimum share price, the minimum number of public shareholders, a minimum amount of stockholders’ equity or the aggregate market value of publicly held shares. Further, in connection with the conversion of the Series D Preferred Stock issued by Glowpoint in the Oblong Transaction and Series E Preferred Stock issued by Glowpoint in the Series E Financing, we will be required to file an initial listing application with the NYSE American for the combined organization and to satisfy the initial listing requirements of such exchange in order to remain listed thereon. Receipt of the NYSE American’s approval of such initial listing application will require the combined organization to meet the NYSE American’s initial listing standards, including but not limited to standards with respect to such entity’s market value of public float, stockholders’ equity and minimum price per listed share, each of which may be difficult or impossible for the combined organization to satisfy.  As a result of each of the foregoing, we may be unable to maintain our listing on the NYSE American, which would negatively affect, among other things (i) our ability to raise capital on terms we deem advisable, or at all, and (ii) the liquidity of our common stock. Failure to obtain financing, or obtaining financing on unfavorable terms, could result in a decrease in our stock price, would have a material adverse effect on future operating prospects, and could require us to significantly reduce operations.  Any holder of our securities should regard them as a long-term investment and should be prepared to bear the economic risk of an investment in such securities for an indefinite period.

As a result of these risks, we may not achieve the anticipated strategic and financial benefits of the Oblong Transaction.

ItemITEM 2. Unregistered Sales of Equity Securities and Use of ProceedsUNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities by the Company

There have been no unregistered sales of securities by the Company during the period covered by this Report that have not been previously reported in a Current Report on Form 8-K.

Purchases of Equity Securities by the Company
Vesting of Stock Awards


- 22-

During the period covered by this Report, the Company repurchased 16,578 shares of the Company’s Common Stock (and recorded such shares in treasury stock) from employees to satisfy $16,000 of minimum statutory tax withholding requirements relating to the vesting of stock awards.
Stock Repurchase Program

On July 21, 2018, the Company’s Board of Directors authorized a stock repurchase program (the “Stock Repurchase Program”) granting the Company authority to repurchase up to $750,000 of the Company’s Common Stock, par value $0.0001 per share (“Common Stock”). All shares of Common Stock repurchased under the Stock Repurchase Program are recorded as treasury stock. The Stock Repurchase Program does not have an expiration date. No shares of Common Stock were purchased pursuant to our Stock Repurchase Program during the three months ended September 30, 2019.
Period 
Total Number of Shares Purchased (1)(2)
 
Average Price Paid Per Share (3)
 Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
July 1-31, 2019 — — — $673,000
August 1-31, 2019 16,578 $0.94 — $673,000
September 1-30, 2019 — — — $673,000
Total 16,578 $0.94 — $673,000
         
       (1) All shares purchased by the Company during the period covered by this Report were purchased from employees to offset $16,000 of minimum statutory tax withholding requirements relating to the vesting of stock awards.
     (2) As of September 30, 2019, the maximum number of shares that may yet be purchased by the Company would not exceed the employees’ portion of taxes withheld on the vesting of the following outstanding unvested equity awards: 627 shares of restricted stock, 107,525 stock options, and 23,334 restricted stock units, plus 421,000 shares yet to be granted under the 2014 Equity Incentive Plan as of September 30, 2019.
     (3) Price per share includes commissions and fees.

March 31, 2020. As of September 30, 2019,March 31, 2020, the Company had $673,000 remaining for future repurchases of Common Stock under the Stock Repurchase Program.

Limitations Upon the Payment of Dividends

The restrictions on the payment of dividends on our common stock have not materially changed during the three months ended March 31, 2020. Our ability to pay cash dividends is limited under the terms of the SVB Loan Agreement and by the Certificates of Designations governing our Preferred Stock. See Note 8 - Debt and Note 9 - Preferred Stock to our condensed consolidated financial statements contained herein for additional information.

ItemITEM 3. Defaults upon Senior SecuritiesDEFAULTS UPON SENIOR SECURITIES

Not applicable.See Part II, Item 5 below for a discussion of the Default Waiver and First Amendment (the “Amendment”), executed on June 26, 2020, to the Company’s Second Amended and Restated Loan and Security Agreement, dated October 1, 2019 (the “Loan Agreement”). Pursuant to the Amendment, the lender under the Loan Agreement agreed to waive the Company’s failure to comply with certain covenants set forth in the Loan Agreement as well as certain events of default under the Loan Agreement, including the Company’s failure to timely pay principal payments due April 1, 2020, May 1, 2020 and June 1, 2020, as well as a $100,000 deferral fee due April 1, 2020. Payment of each of these amounts was previously deferred pursuant to verbal and/or email communications between representatives of the parties to the Loan Agreement pending negotiation of the Amendment.

ItemITEM 4. Mine Safety DisclosuresMINE SAFETY DISCLOSURES

Not applicable.

ItemITEM 5. Other InformationOTHER INFORMATION

None.Form 8-K Item 1.01 Entry into a Material Definitive Agreement.

On June 26, 2020, the Company, Oblong Industries, and GP Communications, LLC, a Delaware limited liability company (“GP Communications” and, together with the Company and Oblong Industries, the “Borrowers”), as borrowers, and Silicon Valley Bank, a California corporation (“Bank”), as lender, entered into a Default Waiver and First Amendment (the “Amendment”) to the Second Amended and Restated Loan and Security Agreement, dated October 1, 2019, by and among the Borrowers and the Bank (the “Loan Agreement”).



- 23-29-

Under the Amendment, the Bank has agreed to waive the failure of the Borrowers to comply with certain covenants set forth in the Loan Agreement as well as certain events of default under the Loan Agreement, including Borrowers’ failure to timely pay principal payments due April 1, 2020, May 1, 2020 and June 1, 2020, as well as a $100,000 deferral fee due April 1, 2020. Payment of each of these amounts was previously deferred pursuant to verbal and/or email communications between representatives of the Company and the Bank pending negotiation of the Amendment.

In addition, among other things, the Amendment amends the Loan Agreement to: (1) extend the interest-only payment period under the Loan Agreement through September 30, 2020, and provide for payment of principal and interest over an eighteen month period from October 1, 2020 through March 1, 2022; (2) extend the maturity date of the Loan Agreement from September 1, 2021 to March 1, 2022; (3) change the due date for the previously existing $100,000 deferral fee from April 1, 2020 to the earlier of (i) the maturity of the loan, (ii) the repayment in full of all principal and interest owing under the Loan Agreement, and (iii) occurrence of an event of default under the Loan Agreement; and (4) increase the interest rate applying to principal outstanding under the SVB Loan Agreement from the Prime Rate (as defined in the SVB Loan Agreement) plus 2.0%, to the Prime Rate plus 4.25%.

The above description of the Amendment and the transactions contemplated thereby is only a summary and does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment, a copy of which is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q and incorporated herein by reference.

The representations, warranties and covenants contained in the Amendment were made only for purposes of the Amendment and as of specific dates, were solely for the benefit of the parties to the Amendment, and may be subject to limitations agreed upon by the contracting parties. Accordingly, the Amendment is incorporated herein by reference only to provide investors with information regarding the terms of the Amendment, and not to provide investors with any other factual information regarding the Borrowers or their business, and should be read in conjunction with the disclosures in the Company’s periodic reports and other filings with the Securities and Exchange Commission.

Form 8-K Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information provided in Item 1.01 above regarding the Amendment is hereby incorporated by reference in this Item 2.03.



- 30-

ItemITEM 6. ExhibitsEXHIBITS

Exhibit
Number
 Description
2.1Agreement and Plan of Merger, dated as of September 12, 2019, by and among Glowpoint, Inc., Oblong Industries, Inc. and Glowpoint Merger Sub II, Inc. (filed as Exhibit 2.1 to Registrant’s Current Report on Form 8-K filed with the SEC on September 16, 2019, and incorporated herein by reference).
2.2Amendment to Agreement and Plan of Merger, dated October 1, 2019, by and among Glowpoint, Inc., Oblong Industries, Inc. and Glowpoint Merger Sub II, Inc. (filed as Exhibit 2.2 to Registrant’s Current Report on Form 8-K filed with the SEC on October 7, 2019, and incorporated herein by reference).
3.1 
Amended and Restated Certificate of Incorporation (filed as Appendix D to View Tech, Inc.’s Registration Statement on Form S-4 (File No. 333-95145) filed with the SEC on January 21, 2000, and incorporated herein by reference).
3.2 
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Wire One Technologies, Inc. changing its name to Glowpoint,“Glowpoint, Inc.” (filed as Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 30, 2004, and incorporated herein by reference).
3.3 
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Glowpoint, Inc.the Registrant increasing its authorized common stock to 150,000,000 shares from 100,000,000 shares (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on September 24, 2007, and incorporated herein by reference).
3.4 
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Glowpoint, Inc.the Registrant effecting a one-for-four reverse stock split of the common stock of Glowpoint, Inc.the Registrant (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 13, 2011, and incorporated herein by reference).
3.5 
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Glowpoint, Inc.the Registrant effecting a one-for-ten reverse stock split of the common stock of Glowpoint, Inc.the Registrant (filed as Exhibit 3.5 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 15, 2019, and incorporated herein by reference).
3.6 
Certificate of DesignationsAmendment to the Amended and Restated Certificate of Incorporation of the 6.0% Series D Convertible Preferred Stock of Glowpoint,Registrant, changing its name to “Oblong, Inc.” (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 7, 2019,March 9, 2020, and incorporated herein by reference).
3.7 Certificate of Designations of the 6.0% Series E Convertible Preferred Stock of Glowpoint, Inc.
Amended and Restated By-laws (filed as Exhibit 3.23.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 7, 2019,December 8, 2011, and incorporated herein by reference).
4.110.1 Warrant to Purchase Common Stock,
Promissory Note, dated October 1, 2019April 10, 2020, by the Registrant in favor of MidFirst Bank (filed as Exhibit 4.110.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 7, 2019,April 16, 2020, and incorporated herein by reference).
10.110.2* Representation Agreement, dated July 19, 2019, by
Default Waiver and among Glowpoint, Inc. and the stockholders party thereto (filed as Exhibit 10.1First Amendment to Registrant’s Current Report on Form 8-K filed with the SEC on July 25, 2019, and incorporated herein by reference).
10.2Second Amended and Restated Employment Agreement, by and between Glowpoint, Inc. and Peter Holst, dated July 19, 2019 (filed as Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed with the SEC on July 25, 2019, and incorporated herein by reference).
10.3Amended and Restated Employment Agreement, by and between Glowpoint, Inc. and David Clark, dated July 19, 2019 (filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the SEC on July 25, 2019, and incorporated herein by reference).
10.4Series E Preferred Stock Purchase Agreement, dated October 1, 2019, by and among Glowpoint, Inc. and the Purchasers party thereto (filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the SEC on October 7, 2019, and incorporated herein by reference).
10.5Registration Rights Agreement, dated October 1, 2019, by and among Glowpoint, Inc. and the Purchasers party thereto (filed as Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed with the SEC on October 7, 2019, and incorporated herein by reference).
10.6Second Amended and Restated Loan and Security Agreement, dated October 1, 2019,June 26, 2020, by and among Glowpoint,Oblong, Inc., Oblong Industries, Inc., and GP Communications, LLC, as borrowers, and Silicon Valley Bank (filed as Exhibit 10.3 to Registrant’s Current Report on Form 8-K filed with the SEC on October 7, 2019, and incorporated herein by reference).lender.
31.1*
 
Rule 13a—14(a)/15d—14(a) Certification of the Chief Executive Officer.Officer.
31.2*
 
Rule 13a—14(a)/15d—14(a) Certification of the Chief Financial Officer.
32.1**
 
Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer.
101.INS XBRL Instance Document


- 24-

101.SCH XBRL Taxonomy Extension Schema
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
101.LAB XBRL Taxonomy Extension Label Linkbase
101.PRE XBRL Taxonomy Extension Presentation Linkbase

* Filed herewith.
** Furnished herewith.





- 25-31-


SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.    

 GLOWPOINT,OBLONG, INC.
   
November 14, 2019June 30, 2020By:/s/ Peter Holst
  Peter Holst
  Chief Executive Officer
  (Principal Executive Officer)

November 14, 2019June 30, 2020By:/s/ David Clark
  David Clark
  Chief Financial Officer
  (Principal Financial and Accounting Officer)


- 26-32-