Index
| Item · Page |
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| PART I |
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| 1. | Business | 3 |
| 1A. | Risk Factors | 7 |
| 1B. | Unresolved Staff Comments | 22 |
| 1C. | Cybersecurity | 22 |
| 2. | Properties | 22 |
| 3. | Legal Proceedings | 22 |
| 4. | Mine Safety Disclosures | 22 |
| PART II |
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| 5. | Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities | 23 |
| 6. | Reserved | 23 |
| 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 |
| 7A. | Qualitative and Quantitative Disclosures About Market Risk | 30 |
| 8. | Financial Statements and Supplemental Data | 30 |
| 9 | Change in and Disagreements with Accountants on Accounting and Financial Disclosure | 30 |
| 9A. | Controls and Procedures | 31 |
| 9B. | Other Information | 31 |
| 9C. | Disclosures Regarding Foreign Jurisdictions that Prevent Inspections | 31 |
| PART III |
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| 10. | Directors, Executive Officers and Corporate Governance | 32 |
| 11. | Executive Compensation | 38 |
| 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 43 |
| 13. | Certain Relationships and Related Transactions, and Director Independence | 44 |
| 14. | Principal Accounting Fees and Services | 44 |
| PART IV |
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| 15. | Exhibits and Financial Statement Schedules | 45 |
| 16. | Signatures | 49 |
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K (this“Report”) contains statements that are considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and its rules and regulations (the“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, and its rules and regulations (the“Exchange Act”). These forward-looking statements include, but are not limited to, statements about the plans, objectives, expectations, and intentions of Oblong, Inc. (“Oblong”* or*“we”* or*“us”* or the*“Company”). All statements other than statements of current or historical fact contained in this Report, including statements regarding Oblong’s future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. The words“anticipate,”* “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” and similar expressions, as they relate to Oblong, are intended to identify forward-looking statements. These statements are based on Oblong*’s current plans, and Oblong’s actual future activities and results of operations may be materially different from those set forth in the forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. Any or all of the forward-looking statements in this Report may turn out to be inaccurate. Oblong has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy, and financial needs. The forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks, uncertainties, and assumptions. There are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including our plans, objectives, expectations, and intentions and other factors that are discussed in“Item 1A. Risk Factors”* and/or listed below. Oblong undertakes no obligation to publicly revise these forward-looking statements to reflect events occurring after the date hereof. All subsequent written and oral forward-looking statements attributable to Oblong or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this Report. Forward-looking statements in this Report include, among other things: opportunities for and benefits of potential strategic alternatives; our expectations and estimates relating to customer attrition, demand for our product offerings, sales cycles, future revenues, expenses, capital expenditures and cash flows; our ability to develop and launch new product offerings; evolution of our customer solutions and our service platforms; our ability to fund operations and continue as a going concern; expectations regarding adjustments to our cost of revenue and other operating expenses; our ability to finance investments in product development and sales and marketing; the future exercise of warrants; our ability to raise capital through sales of additional equity or debt securities and/or loans from financial institutions; our beliefs about employee relations; our beliefs about the ongoing performance of our Managed Service business; statements relating to market need and evolution of the industry, our solutions and our service platforms; our beliefs about the service offerings of our competitors and our ability to differentiate Oblong*’s services; adequacy of our internal controls; and statements regarding our information systems and ability to prevent cybersecurity incidents. For additional information regarding known material factors that could cause our actual results to differ materially from our projected results, please see“Item 1A. Risk Factors.”* 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:*
RISK FACTORS SUMMARY
The following is a summary of the principal risk factors that make an investment in our company speculative or risky, all of which are further described below in the section titled “Risk Factors” in Part I, Item 1A of this Report. This summary should be read in conjunction with the “Risk Factors” section and should not be relied upon as an exhaustive summary of the material risks facing our business.
| • | Our Company experienced declines in revenue in recent fiscal years and may continue to experience further revenue decline in future periods; |
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| • | Revenue growth and increase in the market share of our current product offerings depend on the successful adoption of our Mezzanine™ product offerings with our customers, which requires sufficient sales, marketing, and product development funding; |
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| • | We have a history of substantial net operating losses, and we may incur future net losses; |
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| • | Our business activities may require additional financing that might not be obtainable on acceptable terms, if at all, which could have a material adverse effect on our financial condition, liquidity, and our ability to operate as a going concern in the future; |
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| • | If we fail to achieve broad market acceptance on a timely basis, we will not be able to compete effectively, and we will likely experience continued declines in revenue and lower gross margins; |
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| • | Product quality problems could lead to reduced revenue, gross margins, and higher net losses; |
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| • | If we fail to predict and respond to emerging technological trends and customers' changing needs, our operating results may suffer; |
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| • | Our success depends on our ability to recruit and retain adequate engineering talent. |
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| • | Our success is highly dependent on the evolution of our overall market and general economic conditions. |
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| • | Changes in industry structure and market conditions could lead to charges related to discontinuances of certain of our products or businesses, asset impairments, and workforce reductions or restructurings; |
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| • | We may be unable to realize intended efficiencies and benefits from our ongoing cost-saving initiatives, which may adversely affect our results of operations, financial condition, or our business. To operate more efficiently and control costs, we have undertaken cost-saving initiatives, which have included a cessation of R&D activities, workforce reductions, and other cost-reduction initiatives. |
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| • | If we were deemed to be an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business, financial condition, and results of operations. |
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| • | Any future disposition of assets and business could have material and adverse effects on business, financial conditions, and operations if not consummated in a timely manner. |
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| • | The markets in which we compete are intensely competitive, which could adversely affect our achievement of revenue growth; |
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| • | Industry consolidation may lead to increased competition and may harm our operating results. |
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| • | We rely on a limited number of customers for a significant portion of our revenue, and the loss of any one of those customers, or several of our smaller customers, could materially harm our business; |
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| • | Any system failures or interruptions may cause a loss of customers. |
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| • | There is limited market awareness of our services; |
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| • | Our ability to sell our solutions is dependent in part on ease of use and the quality of our technical support, and any failure to offer high-quality technical support would harm our business, operating results, and financial condition. |
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| • | We rely on third-party software that may be difficult to replace or may not perform adequately. |
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| • | We depend upon our network providers and facilities infrastructure. |
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| • | Our network depends upon telecommunications carriers who could limit or deny us access to their network or fail to perform, which would have a material adverse effect on our business. |
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| • | A portion of our sales are through distribution channels, including both System and audio-visual (“AV”) integrators, which have been difficult to project and particularly volatile during the pandemic. Weakness in orders from our distribution channels may harm our operating results and financial condition; |
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| • | Disruption of or changes in our distribution model could harm our sales and margins. |
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| • | Inventory management relating to our sales to our two-tier distribution channel is complex. |
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| • | We may experience material disconnections and/or reductions in the prices of our services and may not be able to replace the loss of revenue; |
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| • | We are exposed to the credit and other counterparty risk of our customers in the ordinary course of our business. |
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| • | Failure to retain and recruit key personnel would harm our ability to meet key objectives. |
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| • | Supply chain issues, including financial problems of contract manufacturers or component suppliers or a shortage of adequate component supply or manufacturing capacity that increases our costs or causes a delay in our ability to fulfill orders, could have an adverse impact on our business and operating results, and our failure to estimate customer demand properly may result in excess or obsolete component supply, which could adversely affect our gross margins; |
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| • | We have made and may continue to make acquisitions that could disrupt our operations and harm our operating results. |
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| • | If our actual liability for sales and use taxes and federal regulatory fees is different from our accrued liability, it could have a material impact on our financial condition. |
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| • | The terms of the Series F Preferred Stock could limit our growth and our ability to finance our operations, fund our capital needs, respond to changing conditions, and engage in other business activities that may be in our best interests. |
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| • | Cyber-attacks, data incidents, malware, or an intrusion into our physical security systems may disrupt our business operations, result in the loss of critical and confidential information, harm our operating results and financial condition, and damage our reputation; and cyber-attacks or data incidents on our customers’ networks, or in cloud-based services provided by or enabled by us, could result in claims of liability against us, damage our reputation or otherwise harm our business. |
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| • | Vulnerabilities and critical security defects, prioritization decisions regarding remedying vulnerabilities or security defects, failure of third-party providers to remedy vulnerabilities or security defects, or customers not deploying security releases or deciding not to upgrade products, services, or solutions could result in claims of liability against us, damage our reputation or otherwise harm our business. |
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| • | Our business, operating results, and financial condition could be materially harmed by regulatory uncertainty applicable to our products and services. |
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| • | Our network could fail, which could negatively impact our revenues. |
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| • | Our failure to obtain or maintain the right to use certain intellectual property may negatively affect our business. |
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| • | We may not be able to protect the rights to or enforce our intellectual property. |
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| • | A number of our solutions incorporate software provided under open-source licenses, which may restrict or impose certain obligations on how we use or distribute our solutions or subject us to various risks and challenges, which could result in increased development expenses, delays, or disruptions to the release or distribution of those solutions, inability to protect our intellectual property rights and increased competition. |
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| • | Our stock price has fluctuated in the past, has recently been volatile, and may be volatile in the future, and as a result, investors in our common stock could incur substantial losses; |
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| • | Penny stock regulations may impose certain restrictions on the marketability of our securities; |
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| • | Future operating results may vary from quarter to quarter, and we may fail to meet the expectations of securities analysts and investors at any given time; |
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| • | Sales of substantial amounts of common stock in the public market, or the perception that such sales may occur, could reduce the market price of our common stock and make it more difficult for us and our stockholders to sell our equity securities in the future. |
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| • | The issuance of the securities in the March 2023 private placement significantly diluted the ownership interest of the existing holders of our common stock, and the market price of our common stock has declined significantly as a result of sales of such securities into the public market by the private placement investors and subsequent investors or the perception that such sales may occur; |
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| • | We might need to raise additional capital by issuing securities or debt, which may cause significant dilution to our stockholders and restrict our operations; and |
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| • | Our charter documents and Delaware law could discourage takeover attempts and lead to management entrenchment. |
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| • | We could fail to satisfy the standards to maintain our listing on a stock exchange. |
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| • | We incur significant accounting and administrative costs as a publicly traded corporation that impact our financial condition. |
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| • | Our cash and cash equivalents could be adversely affected if the financial institutions in which we hold our cash and cash equivalents fail. |
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