Oblong Inc
For the period ended Jun 30, 2024. Filed Aug 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 7, 2024
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-08.
0000746210-24-000019
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0001437749-24-025172
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 41 previous paragraphs and 65 current paragraphs.
19 unchanged; 17 reworded; 18 added; 5 removed; 0 previous and 11 current paragraphs rearranged.
Tables are not compared: 5 previous and 20 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (18)
Current report
Letter of Intent
Current report
On June 4, 2024, we announced a non-binding letter of intent to acquire 100% of the outstanding equity interests of Dwellwell Analytics (“Dwellwell”). The proposed transaction was subject to conditions, including due diligence, negotiation of definitive documentation and board and shareholder approval. The exclusivity period under the letter of intent has expired. While the parties remain in communication, it appears unlikely that the transaction with Dwellwell will be pursued.
Current report
Strategy
Current report
In recent years, our Company has faced significant challenges, leading to declining revenues for both our Mezzanine™ product offerings and our Managed Services. These setbacks have prompted us to undertake a comprehensive review of our strategic direction with the aim of enhancing shareholder value through various means.
Current report
Our exploration of strategic alternatives is diverse, encompassing the consideration of a range of transformative actions. These include the possibility of a business combination, where we might merge with or be acquired by another company; a reverse merger, where a private company merges with us to become public without going through the traditional initial public offering process; or outright sale of the company. Each option is being carefully evaluated to ensure it aligns with our overarching goal of sustainable growth and value creation.
Current report
Our strategy for growth is twofold: (i) we aim to grow organically by expanding our market presence and increasing adoption of our products and services, and (ii) we are actively seeking inorganic growth opportunities through strategic partnerships or acquisitions. Specifically, we are interested in early-stage technology companies that are not just innovating but have also developed minimum viable products (MVPs) that have gained some measure of market acceptance. These companies may complement our existing offerings but, could also open new avenues for expansion by tapping into significant market opportunities.
Current report
In our quest to find the right partners or acquisition targets, we are particularly focused on ventures that have demonstrated their ability to innovate and capture early-stage interest of their target markets, indicating a clear path to scalability and a substantial market presence.
Current report
However, it's important to note that while we are committed to this strategic review process, there is no guaranteed outcome. The process of identifying and executing on the right strategic alternative, whether it be a merger, sale, or business combination, is complex and uncertain. We want our shareholders to understand that, despite our best efforts, there is no assurance that this strategic review will culminate in a definitive transaction involving the Company. Our priority remains clear: to explore every avenue that could potentially enhance the value we deliver to our shareholders and ensure the long-term success of our Company.
Current report
Sales and Marketing Expenses. The increase in sales and marketing expenses for the 2024 Second Quarter compared to the 2023 Second Quarter is primarily attributable to a reversal of approximately $294,000 in accrued compensation during the 2023 Second Quarter.
Current report
*Casualty Gain/Loss.*In June 2022, the Company discovered that $533,000 of inventory was stolen from the Company's warehouse in City of Industry, California, and we recorded a casualty loss in operating expenses. During the 2023 Second Quarter, we recorded a recovery payment from one of our insurance policies of $400,000 as an offset to this casualty loss.
Current report
*Loss from Operations.*The decrease in the Company’s loss from operations for the 2024 Second Quarter compared to the 2023 Second Quarter is mainly attributable to lower operating expenses during the 2024 Second Quarter, partially offset by the casualty loss recovery we recorded in the 2023 Second Quarter, as addressed above.
Current report
Oblong’s Results of Operations
Current report
Six Months Ended June 30, 2024**(the***** “2024 Second Quarter”) compared to the Six Months Ended June 30, 2023*** (the**“2023 Second Quarter”)
Current report
Managed Services
Current report
Collaboration Products
Current report
Our Managed Services segment recorded a 32% gross profit as a percentage of sales for the six months ended June 30, 2024 compared to a gross profit as a percentage of revenue of 33% in the six months ended June 30, 2023.
Current report
Our Collaboration Products segment recorded a negative gross profit as a percentage of sales of 103% for the six months ended June 30, 2024 compared to a negative gross profit as a percentage of sales of 6% in the six months ended June 30, 2023. This decrease was mainly attributable to an increase in personnel costs as a percentage of revenue, partially offset by a reduction in the expense related to our inventory obsolescence reserve of $130,000 in the six months ended June 30, 2024 compared to the six months ended June 30, 2023.
Current report
*Casualty Gain/Loss.*In June 2022, the Company discovered that $533,000 of inventory was stolen from the Company's warehouse in City of Industry, California, and we recorded a casualty loss in operating expenses. During the six months ended June 30, 2023, we recorded a recovery payment from one of our insurance policies of $400,000 as an offset to this casualty loss.
Removed paragraphs (5)
Previous report
•The decrease in revenue for video collaboration services is mainly attributable to lower revenue from existing customers (either from reductions in price or level of services) and loss of customers to competition.
Previous report
•The decrease in revenue for network services 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.
Previous report
•For the three months ended March 31, 2024, one customer made up 98% of Managed Services revenue. For the three months ended March 31, 2023, this same customer made up 80% of Managed Services revenue.
Previous report
•We expect revenue declines in our Managed Services segment will continue in the future.
Previous report
•Customers generally use our Mezzanine™ products in traditional office and operating center environments such as conference rooms or other presentation spaces. The year-over-year decrease in revenue for our Collaboration Products business is due to lower demand, largely a consequence of the work-place reactions to the COVID-19 pandemic and its prolonged effects. We believe the COVID-19 pandemic fundamentally altered the way businesses consider the use of physical office spaces and, consequently, the demand for technologies that enable in-person collaboration within these spaces. Our analysis indicates that the reduced demand for our Mezzanine™ products, particularly in the aftermath of COVID-19, reflects a broader reassessment among our customers regarding the necessity and investment in collaboration solutions tailored for traditional office environments.
Reworded paragraphs (17)
Previous wording
Three Months Ended March 31, 2024 (the “2024 First Quarter”) compared to the Three Months Ended March 31, 2023 (the “2023 First Quarter”)
Current wording
Three Months Ended June 30, 2024 (the*** “2024 Second Quarter”) compared to the Three Months Ended June 30, 2023*** (the**“2023 Second Quarter”)
Previous wording
Certain information concerning the Company’s segments for the three months ended March 31, 2024 and 2023 and is presented below (in thousands):
Current wording
Certain information concerning the Company’s segments for the three months ended June 30, 2024 and 2023 is presented below (in thousands):
Previous wording
Unallocated operating expenses in Corporate include costs during the 2024 and 2023 First Quarters 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.
Current wording
Unallocated operating expenses in Corporate include costs during the 2024 and 2023 Second Quarters 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.
Previous wording
Revenue. Total revenue decreased 40% in the 2024 First Quarter compared to the 2023 First Quarter. The following table summarizes the changes in components of our revenue (in thousands), and the significant changes in revenue are discussed in more detail below.
Current wording
*Revenue.*Total revenue decreased 36.1% in the 2024 Second Quarter compared to the 2023 Second Quarter. The following table summarizes the changes in components of our revenue (in thousands), and the significant changes in revenue are discussed in more detail below.
Previous wording
Cost of Revenue (exclusive of depreciation and amortization). Cost of revenue, exclusive of depreciation and amortization and casualty loss, includes all internal and external costs related to the delivery of revenue. Cost of revenue also includes taxes which have been billed to customers. Cost of revenue by segment is presented in the following table (in thousands):
Current wording
*Cost of Revenue (exclusive of amortization).*Cost of revenue, exclusive of amortization and casualty loss, includes all internal and external costs related to the delivery of revenue. Cost of revenue also includes taxes which have been billed to customers. Cost of revenue by segment is presented in the following table (in thousands):
Previous wording
The decrease in our consolidated cost of revenue is mainly attributable to lower costs associated with the decrease in revenue during the same period, offset by an increase in the expense related to our reserve for obsolescence on our inventory asset for our Collaboration Products segment. Our consolidated gross profit as a percentage of revenue was 0% in the 2024 First Quarter compared to a consolidated gross profit as a percentage of revenue of 27% in the 2023 First Quarter.
Current wording
The decrease in our consolidated cost of revenue is mainly attributable to lower costs associated with the decrease in revenue during the same period, and by a decrease in the expense related to our reserve for obsolescence on our inventory asset for our Collaboration Products segment. Our consolidated gross profit as a percentage of revenue was 20% in the 2024 Second Quarter compared to a consolidated gross profit as a percentage of revenue of 13% in the 2023 Second Quarter.
Previous wording
Our Managed Services segment recorded a 29% gross profit as a percentage of sales for the 2024 First Quarter compared to 33% in the 2023 First Quarter. This decrease was mainly attributable to fixed overhead costs related to lower sales as addressed above.
Current wording
Our Managed Services segment recorded a 35% gross profit as a percentage of sales for the 2024 Second Quarter compared to 33% in the 2023 Second Quarter.
Previous wording
Our Collaboration Products segment recorded a negative gross profit as a percentage of sales of 150% for the 2024 First Quarter compared to a 13% gross profit as a percentage of revenue in the 2023 First Quarter. This decrease was mainly attributable to lower sales and an increase in our inventory obsolescence reserve of $35,000 in the 2024 First Quarter compared to the 2023 First Quarter.
Current wording
Our Collaboration Products segment recorded a negative gross profit as a percentage of sales of 55% for the 2024 Second Quarter compared to a negative gross profit as a percentage of sales of 28% in the 2023 Second Quarter. This decrease was mainly attributable to an increase in personnel costs as a percentage of revenue, partially offset by a reduction in the expense related to our inventory obsolescence reserve of $164,000 in the 2024 Second Quarter compared to the 2023 Second Quarter.
Previous wording
Research and Development. Research and development expenses include internal and external costs related to developing features and enhancements to our existing product offerings. The increase in research and development expenses for the 2024 First Quarter compared to the 2023 First Quarter is primarily attributable to an increase in consulting, and outsourced labor costs between these periods.
Current wording
Research and Development. Research and development expenses include internal and external costs related to developing features and enhancements to our existing product offerings. The increase in research and development expenses for the 2024 Second Quarter compared to the 2023 Second Quarter is primarily attributable to an increase in consulting, and outsourced labor costs between these periods.
Previous wording
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. The decrease in general and administrative expenses for the 2024 First Quarter compared to the 2023 First Quarter is primarily attributable to reduced overhead and professional service expenses as a result of cost-cutting measures.
Current wording
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. The decrease in general and administrative expenses for the 2024 Second Quarter compared to the 2023 Second Quarter is primarily attributable to reduced stock compensation expense and professional service expenses as a result of cost-cutting measures.
Previous wording
Depreciation and Amortization. The decrease in depreciation and amortization expenses for the 2024 First Quarter compared to the 2023 First Quarter is attributable to the disposition and impairment of certain assets during the year ended 2023.
Current wording
Amortization. The decrease in amortization expense for the 2024 Second Quarter compared to the 2023 Second Quarter is attributable to the impairment of certain assets during the year ended 2023.
Previous wording
Interest and Other Income, Net. Interest and other income, net for the 2024 First Quarter primarily comprised of interest income related to our cash accounts, partially offset by interest expense.
Current wording
*Interest Income, Net.*Interest income, net for the 2024 Second Quarter and the 2023 Second Quarter is primarily comprised of interest income related to our cash accounts.
Previous wording
Sales and Marketing Expenses. The decrease in sales and marketing expenses for 2024 First Quarter compared to the 2023 First Quarter is primarily attributable to lower personnel costs due to reduced headcount and less sales as discussed above and reduced marketing costs between these periods.
Current wording
Sales and Marketing Expenses. The decrease in sales and marketing expenses for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 is primarily attributable to lower personnel costs due to reduced marketing costs between these periods.
Previous wording
Loss from Operations. The decrease in the Company’s loss from operations for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 is mainly attributable to lower operating expenses, partially offset by lower gross profit, as addressed above.
Current wording
*Loss from Operations.*The decrease in the Company’s loss from operations for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 is mainly attributable to lower operating expenses during the six months ended June 30, 2024, partially offset by the casualty loss recovery we recorded during the six months ended June 30, 2023 and by lower gross profit, as addressed above.
Previous wording
There have been no changes to our critical accounting policies during the three months ended March 31, 2024. 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 2023 Annual Report.
Current wording
There have been no changes to our critical accounting policies during the six months ended June 30, 2024. 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 2023 Annual Report.
Previous wording
As of March 31, 2024, we had $5,360,000 in cash and working capital of $4,436,000. For the three months ended March 31, 2024, we incurred a net loss of $1,136,000 and used $630,000 of net cash in operating activities.
Current wording
As of June 30, 2024, we had $5,858,000 in cash and working capital of $5,047,000. For the six months ended June 30, 2024 we incurred a net loss of $2,119,000, financing activities provided $1,478,000 of net cash, and we used $1,610,000 of net cash in operating activities.
Previous wording
We believe that our existing cash and cash equivalents will be sufficient to fund our operations and meet our working capital requirements for at least the next 12 months from the filing date of this Report with the SEC. We believe additional capital will be required, in the long-term, to fund operations and provide growth capital including our pursuit of potential strategic alternatives and investments in technology, product development and sales and marketing. To access capital to fund operations or provide growth capital, we will need to raise capital in one or more debt and/or equity offerings. There can be no assurance that we will be successful in raising necessary capital or that any such offering will be on terms acceptable to the Company. If we are unable to raise additional capital that may be needed on terms acceptable to us, it could have a material adverse effect on the Company.
Current wording
We believe that our existing cash and cash equivalents will be sufficient to fund our operations and meet our working capital requirements through 2025. We believe additional capital will be required, in the long term, to fund operations and provide growth capital including our pursuit of potential strategic alternatives and investments in technology, product development and sales and marketing. To access capital to fund operations or provide growth capital, we will need to raise capital in one or more debt and/or equity offerings. There can be no assurance that we will be successful in raising necessary capital or that any such offering will be on terms acceptable to the Company. If we are unable to raise additional capital that may be needed on terms acceptable to us, it could have a material adverse effect on the Company.
Rearranged current paragraphs (11)
Current report — wording carried from elsewhere
ITEM 2. MANAGEMENT**’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Current report — wording carried from elsewhere
Certain information concerning the Company’s segments for the six months ended June 30, 2024 and 2023 is presented below (in thousands):
Current report — wording carried from elsewhere
Unallocated operating expenses in Corporate include costs during the six months ended June 30, 2024 and 2023 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.
Current report — wording carried from elsewhere
*Revenue.*Total revenue decreased 38.0% in the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The following table summarizes the changes in components of our revenue (in thousands), and the significant changes in revenue are discussed in more detail below.
Current report — wording carried from elsewhere
*Cost of Revenue (exclusive of amortization).*Cost of revenue, exclusive of amortization and casualty loss, includes all internal and external costs related to the delivery of revenue. Cost of revenue also includes taxes which have been billed to customers. Cost of revenue by segment is presented in the following table (in thousands):
Current report — wording carried from elsewhere
The decrease in our consolidated cost of revenue is mainly attributable to lower costs associated with the decrease in revenue during the same period and by a decrease in the expense related to our reserve for obsolescence on our inventory asset for our Collaboration Products segment. Our consolidated gross profit as a percentage of revenue was 9% in the six months ended June 30, 2024 compared to a consolidated gross profit as a percentage of revenue of 20% in the six months ended June 30, 2023.
Current report — wording carried from elsewhere
Operating expenses are presented in the following table (in thousands):
Current report — wording carried from elsewhere
Research and Development. Research and development expenses include internal and external costs related to developing features and enhancements to our existing product offerings. The increase in research and development expenses for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 is primarily attributable to an increase in consulting, and outsourced labor costs between these periods.
Current report — wording carried from elsewhere
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. The decrease in general and administrative expenses for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 is primarily attributable to reduced stock compensation expense and overhead and professional service expenses as a result of cost-cutting measures.
Current report — wording carried from elsewhere
Amortization. The decrease in amortization expense for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 is attributable to the impairment of certain assets during the year ended 2023.
Current report — wording carried from elsewhere
*Interest Income, Net.*Interest income, net for the six months ended June 30, 2024 and 2023 is primarily comprised of interest income related to our cash accounts.