Oblong, Inc. — Form 10-Q Summary
Period: Quarter ended March 31, 2020. The filing identifies the registrant as Oblong, Inc. (formerly Glowpoint, Inc.); it does not identify Taoweave, Inc. as the filer.
Business context and reporting period
Oblong provides visual collaboration products and services, managed video-collaboration services, and network applications. It acquired Oblong Industries on October 1, 2019 and changed its name from Glowpoint to Oblong on March 6, 2020. Accordingly, Q1 2020 includes Oblong Industries, but Q1 2019 does not; reported year-over-year comparisons are not like-for-like.
Key financial metrics
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Revenue | $5.328 million | $2.594 million reported; 2019 pro forma including Oblong Industries was $7.312 million |
| Gross profit / margin | $2.954 million / 55% | $0.919 million / 35% |
| Operating loss | $2.977 million | $0.598 million |
| Net loss | $3.129 million | $0.598 million |
| Net loss attributable to common stockholders; loss per share | $3.133 million; $0.60 | $0.613 million; $0.12 |
| Cash from operating activities | $(2.536) million | $(0.408) million |
| Cash and working capital | $2.059 million cash; $0.895 million working capital deficit at March 31 | Cash was $4.602 million at December 31, 2019 |
| Debt | $5.609 million total obligations under SVB loan; $5.541 million net carrying value | $5.507 million net carrying value at December 31, 2019 |
Q1 2020 revenue included $3.283 million from Oblong Industries and $2.045 million from Glowpoint. Glowpoint video-collaboration revenue fell 33% to $1.046 million, and network-services revenue fell 4% to $0.925 million. On the filing’s pro forma basis, combined revenue was lower than the prior-year comparable quarter ($5.328 million versus $7.312 million).
Operating expenses were $5.931 million, including $0.541 million of goodwill impairment and $0.815 million of depreciation and amortization. Total assets were $31.953 million and total liabilities were $13.178 million at quarter-end. The filing reports no material off-balance-sheet arrangements.
Material changes and unusual items
- Reported revenue more than doubled year over year largely because of the acquisition; the comparable pro forma figures instead indicate a decline. Gross margin improved, reflecting Oblong Industries’ reported 63% margin and improved Glowpoint margin.
- COVID-19 triggered an interim goodwill test and a $0.541 million impairment of Glowpoint goodwill; no goodwill remained for that reporting unit at March 31. No impairment was recorded for Oblong Industries’ goodwill or the tested intangible assets.
- The company reported a $3.129 million net loss and $2.536 million of operating cash outflow. Management stated that projected resources were insufficient to fund operations for the 12 months following the filing and that substantial doubt existed about the company’s ability to continue as a going concern.
- After quarter-end, the company received a $2.4166 million PPP loan at 1% interest. Management estimated $1.7–$1.9 million might be forgiven, but forgiveness was not assured.
- On June 26, 2020, SVB waived specified covenant and payment defaults, including missed April–June principal payments and a $100,000 fee. The amendment extended interest-only payments through September 30, 2020, extended maturity to March 1, 2022, and increased the rate from Prime plus 2.0% to Prime plus 4.25%.
- An Oblong Industries customer suspended certain professional services effective April 30, 2020. Those services generated $549,000, or 10% of Q1 revenue, and were not related to the Mezzanine offering. Resumption was uncertain.
- Series D and E preferred shares remained unconverted pending required NYSE American listing approvals. Conversion would have increased common shares from 5.212 million to 23.732 million; the filing says the required public-float threshold may be difficult or impossible to meet.
Outlook, risks, and management commentary
Management expected 2020 revenue to exceed 2019 revenue, primarily because 2020 would include a full year of Oblong Industries revenue, while anticipating continued decline in the Glowpoint business. It planned to reduce operating expenses further while continuing product-development and sales-and-marketing investment, especially to expand Oblong Industries’ products through the Cisco sales channel and develop subscription, hybrid, and SaaS offerings. No specific numerical revenue or earnings guidance was provided.
Key risks include COVID-19 effects on customers and operations, customer concentration and attrition, competitive pressure and pricing, dependence on additional financing, going-concern uncertainty, debt-service and covenant obligations, integration and commercialization costs, potential further impairments, and NYSE American listing requirements. The company delayed this 10-Q under an SEC order, citing pandemic-related access restrictions and remote work that slowed its close and filing process.
Important facts for investors to verify
- Whether the company can secure sufficient financing and sustain operations, including the actual amount of PPP loan forgiveness and compliance with the amended SVB loan terms.
- Whether the suspended customer services resume and how COVID-19 affects renewals, collections, demand, and cash flow.
- Comparable revenue trends by segment, particularly ongoing Glowpoint declines versus Oblong Industries’ growth and operating costs.
- Whether NYSE American listing requirements are met and when, if ever, preferred shares convert; assess the resulting potential dilution.
- Reconcile apparent filing inconsistencies: the MD&A states an operating loss of $2.999 million in one passage versus $2.977 million in the financial statements; the G&A discussion calls the change a decrease although reported expense rose from $1.112 million to $2.028 million; and COVID-19 discussion describes the suspended services as 13% of revenue in one passage versus 10% in the subsequent-events note.