What changed in TaoWeave, Inc.'s 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of TaoWeave, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+185 added−192 removedSource: 10-K (2024-03-19) vs 10-K (2023-03-21)
Top changes in TaoWeave, Inc.'s 2023 10-K
185 paragraphs added · 192 removed · 124 edited across 5 sections
- Item 1A. Risk Factors+107 / −103 · 63 edited
- Item 7. Management's Discussion & Analysis+46 / −65 · 39 edited
- Item 1. Business+24 / −16 · 16 edited
- Item 5. Market for Registrant's Common Equity+5 / −5 · 4 edited
- Item 2. Properties+3 / −3 · 2 edited
Item 1. Business
Business — how the company describes what it does
16 edited+8 added−0 removed36 unchanged
Item 1. Business
Business — how the company describes what it does
16 edited+8 added−0 removed36 unchanged
2022 filing
2023 filing
Biggest changeWhile pre-pandemic momentum suggested end-users were beginning to embrace simple, easy to install, intuitive, and affordable collaboration solutions that integrate with cloud-based collaboration software services, we believe as businesses continue to reopen there will be significant demand for higher forms of engagement that combines robust video conferencing with enhanced content sharing as users adapt to more flexible workplace alternatives.
Biggest changeWe believe as businesses continue to reopen from the COVID-19 pandemic there will be demand for higher forms of engagement that combines robust video conferencing with enhanced content sharing as users adapt to more flexible workplace alternatives. This combination focuses on allaying customer apprehension with regards to how to cost-effectively pursue an expanded collaboration strategy without replacing their existing investments.
Pursuant to the Merger Agreement, among other things, Oblong Industries became a wholly owned subsidiary of the Company (the “Merger”). On March 6, 2020, Glowpoint changed its name to Oblong, Inc. -6- Available Information We are subject to the reporting requirements of the Exchange Act.
Pursuant to the Merger Agreement, among other things, Oblong Industries became a wholly owned subsidiary of the Company (the “Merger”). On March 6, 2020, Glowpoint changed its name to Oblong, Inc. Available Information We are subject to the reporting requirements of the Exchange Act.
In the rapidly evolving “Ideation” -5- market, certain elements of our application compete with Microsoft, Google, InFocus, Bluescape, Mersive, Barco, Nureva and Prysm. With respect to our managed services for video collaboration, we primarily compete with managed services companies, videoconferencing equipment resellers and telecommunication providers, including BT Conferencing, AT&T, Verizon, LogMeIn, Yorktel, ConvergeOne, and AVI-SPL.
In the rapidly evolving “Ideation” market, certain elements of our application compete with Microsoft, Google, InFocus, Bluescape, Mersive, Barco, Nureva and Prysm. With respect to our managed services for video collaboration, we primarily compete with managed services companies, videoconferencing equipment resellers and telecommunication providers, including BT Conferencing, AT&T, Verizon, LogMeIn, Yorktel, ConvergeOne, and AVI-SPL.
Share up to 10 connected devices including laptops, in-room PCs, and digital media players. Upload images and slides to present and explore content alongside live video streams. • Capture Ideas Instantly. Save snapshots of on-screen content to make sure good ideas don’t get lost. Annotate content in the Mezzanine ™ app and share thoughts with others.
Share up to 10 connected devices including laptops, in-room PCs, and digital media players. Upload images and slides to present and explore content alongside live video streams. -3- • Capture Ideas Instantly. Save snapshots of on-screen content to make sure good ideas don’t get lost. Annotate content in the Mezzanine ™ app and share thoughts with others.
Download meeting materials to reference or share after the meeting. -3- • Visualize Options and Outcomes . Mezzanine ™ content spans multiple displays so the information needed is in sight and on hand. Share more content, see more detail, and improve visual storytelling. Arrange content for side-by-side comparisons and cross-referencing. • Unite Distributed Teams.
Download meeting materials to reference or share after the meeting. • Visualize Options and Outcomes . Mezzanine ™ content spans multiple displays so the information needed is in sight and on hand. Share more content, see more detail, and improve visual storytelling. Arrange content for side-by-side comparisons and cross-referencing. • Unite Distributed Teams.
We also compete with companies that offer hosted videoconference bridging solutions, including Blue Jeans, Vidyo and Zoom. Lastly, the technology and software providers, including Cisco, LifeSize, Microsoft, and Polycom, are delivering competitive cloud-based videoconferencing and calling services.
We also compete with companies that offer hosted videoconference bridging solutions, including, Vidyo and Zoom. Lastly, the technology and software providers, including Cisco, LifeSize, Microsoft, and Polycom, are delivering competitive cloud-based videoconferencing and calling services.
As discussed below, sales of our Mezzanine product have been adversely affected by commercial response to the COVID-19 pandemic. Like many technology companies in recent months, we will continue to monitor and manage our costs relative to demand with the goal of growing the Company’s revenue in the future.
As discussed below, sales of our Mezzanine™ products have been adversely affected by commercial response to the COVID-19 pandemic and its aftermath. Like many technology companies in recent months, we will continue to monitor and manage our costs relative to demand with the goal of growing the Company’s revenue in the future.
Sales and Marketing We use a variety of marketing, sales, and support activities to generate and cultivate ongoing customer demand for our product offerings and managed services. We have a team of direct sales representatives and sales engineers. We sell globally through both direct customer sales and channel partners.
Sales and Marketing We use a variety of marketing, sales, and support activities to generate and cultivate ongoing customer demand for our product offerings and managed services. We have limited sales and marketing resources and we currently have a small sales team. We sell globally through both direct customer sales and channel partners.
For the years ended December 31, 2022, and 2021, one major customer accounted for approximately 46.8% and 34.7% of the Company’s total consolidated revenue, respectively. Competition The market for communication and collaboration technology services is competitive and rapidly changing.
For the years ended December 31, 2023, and 2022, one major customer accounted for approximately 56% and 47% of the Company’s total consolidated revenue, respectively. -5- Competition The market for communication and collaboration technology services is competitive and rapidly changing.
Our managed videoconferencing services are offered to our customers on either a usage basis or on a monthly subscription. These services include call scheduling and launching, and videoconference monitoring, support and reporting. -4- • Remote Service Management provides an overlay to enterprise information technology (“IT”) and channel partner support organizations and provides 24/7 support and management of customer video environments.
These services include call scheduling and launching, and videoconference monitoring, support and reporting. • Remote Service Management provides an overlay to enterprise information technology (“IT”) and channel partner support organizations and provides 24/7 support and management of customer video environments.
We deliver our services through a hybrid service platform or as a service layer on top of our customers’ video infrastructure. We provide our customers with the following services to meet their videoconferencing needs: • Managed Videoconferencing is a “high-touch” concierge-based offering where we set up and manage customer videoconferences.
We provide our customers with the following services to meet their videoconferencing needs: • Managed Videoconferencing is a “high-touch” concierge-based offering where we set up and manage customer videoconferences. Our managed videoconferencing services are offered to our customers on either a usage basis or on -4- a monthly subscription.
Research and Development The Company incurred research and development expenses during the years ended December 31, 2022 and 2021 of $1.7 million and $2.9 million, respectively, related to the development of features and enhancements to our Mezzanine ™ product offerings. Employees As of December 31, 2022, we had 22 total employees including 20 full-time employees.
Research and Development The Company incurred research and development expenses during the years ended December 31, 2023 and 2022 of $0.02 million and $1.7 million, respectively, related to the development of features and enhancements to our Mezzanine ™ product offerings. During late 2022, we ceased the majority of R&D activities as a cost savings measure.
Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants. Our compensation program is designed to attract, retain, and motivate highly qualified employees and executives and is comprised of a mix of competitive base salary, bonus and equity compensation awards, as well as other employee benefits.
Our compensation program is designed to attract, retain, and motivate highly qualified employees and executives and is comprised of a mix of competitive base salary, bonus and equity compensation awards, as well as other employee benefits. Our employees are not covered by a collective bargaining agreement, and we consider our relations with our employees to be good.
This combination focuses on allaying customer apprehension with regards to how to cost-effectively pursue an expanded collaboration strategy without replacing their existing investments. Managed Services for Video Collaboration We provide a range of managed services for video collaboration, from automated to orchestrated, to simplify the user experience in an effort to drive adoption of video collaboration throughout our customers’ enterprise.
Managed Services for Video Collaboration We provide a range of managed services for video collaboration, from automated to orchestrated, to simplify the user experience in an effort to drive adoption of video collaboration throughout our customers’ enterprise. We deliver our services through a hybrid service platform or as a service layer on top of our customers’ video infrastructure.
Our employees are not covered by a collective bargaining agreement, and we consider our relations with our employees to be good. We are committed to diversity and inclusion as well as equitable pay within our workforce. In addition, the health and safety of our employees, customers and communities are of primary concern to us.
We are committed to diversity and inclusion as well as equitable pay within our workforce. In addition, the health and safety of our employees, customers and communities are of primary concern to us. Strategy In recent years, our Company has faced significant challenges, leading to declining revenues for both our Mezzanine™ product offerings and our Managed Services.
During the COVID-19 pandemic, we took significant steps to protect our workforce, including but not limited to, working remotely, and implementing social distancing protocols consistent with guidelines issued by federal, state, and local law. Corporate History Oblong, Inc. was formed as a Delaware corporation in May 2000. Prior to March 6, 2020, Oblong, Inc. was named Glowpoint, Inc. (“Glowpoint”).
Corporate History Oblong, Inc. was formed as a Delaware corporation in May 2000. Prior to March 6, 2020, Oblong, Inc. was named Glowpoint, Inc. (“Glowpoint”).
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Employees As of December 31, 2023, we had 21 total employees including 17 full-time employees. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants.
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These setbacks have prompted us to undertake a comprehensive review of our strategic direction with the aim of enhancing shareholder value through various means. Our exploration of strategic alternatives is diverse, encompassing the consideration of a range of transformative actions.
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These include the possibility of a business combination, where we might merge with or be acquired by another company; a -6- 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.
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Each option is being carefully evaluated to ensure it aligns with our overarching goal of sustainable growth and value creation. 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.
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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.
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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.
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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.
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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.
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
63 edited+44 added−40 removed193 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
63 edited+44 added−40 removed193 unchanged
2022 filing
2023 filing
Biggest changeOn February 17, 2022, the Company received written notice from the Nasdaq Stock Market, LLC ("Nasdaq") indicating that the bid price for the Company's common stock (the "Common Stock"), for the last 30 consecutive business days, had closed below the minimum $1.00 per share and, as a result, the Company was not in compliance with the $1.00 minimum -22- bid price requirement for the continued listing on the Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”).
Biggest changePreviously, on September 21, 2023, we received a letter from the listing qualifications staff of Nasdaq providing notification that the bid price for our Common Stock had closed below $1.00 per share for the previous 30 consecutive business days and our Common Stock no longer met the minimum bid price requirement for continued listing under Nasdaq Listing Rule 5550(a)(2).
Some factors could result in disruption of or changes in our distribution model, which could harm our sales and margins, including the following: competition with some of our Service Providers, including through our direct sales, which may lead these channel partners to use other suppliers that do not directly sell their own products or otherwise compete with them; some of our Service Providers may demand that we absorb a greater share of the -12- risks that their customers may ask them to bear; some of our Service Providers may have insufficient financial resources and may not be able to withstand changes and challenges in business conditions; and revenue from indirect sales could suffer if our distributors’ financial condition or operations weaken.
Some factors could result in disruption of or changes in our distribution model, which could harm our sales and margins, including the following: competition with some of our Service Providers, including through our direct sales, which may lead these channel partners to use other suppliers that do not directly sell their own products or otherwise compete with them; some of our Service Providers may demand that we absorb a greater share of the risks that their customers may ask them to bear; some of our Service Providers may have insufficient financial resources and may not be able to withstand changes and challenges in business conditions; and revenue from indirect sales could suffer if our distributors’ financial condition or operations weaken.
An adverse outcome as a defendant in any such litigation may result in impacts to the Company including, but not limited to: • Payment of substantial damages; • Diversion of technical and management personnel; • Cessation of the use, development, or sale of services that infringe upon patented intellectual property; • Entrance into license agreements; and • Expending significant resources to develop or acquire a non-infringing technology.
An adverse outcome as a defendant in any such litigation may result in impacts to the Company including, but not limited to: -18- • Payment of substantial damages; • Diversion of technical and management personnel; • Cessation of the use, development, or sale of services that infringe upon patented intellectual property; • Entrance into license agreements; and • Expending significant resources to develop or acquire a non-infringing technology.
Supply chain issues, including financial problems of contract manufacturers or component suppliers, or a shortage of adequate component supply or manufacturing capacity that increase our costs or cause 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 -13- properly may result in excess or obsolete component supply, which could adversely affect our gross margins.
Supply chain issues, including financial problems of contract manufacturers or component suppliers, or a shortage of adequate component supply or manufacturing capacity that increase our costs or cause 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.
Our common stock is presently subject to these regulations, which impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with a net worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse).
Our common stock is presently subject to these regulations, which impose additional sales -21- practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with a net worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse).
The market price for our common stock may be influenced by many factors, including the following: • investor reaction to our business strategy; • the success of competitive products or technologies; • our ability to comply with the continued listing standards of the Nasdaq Capital Market; • regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our products; • variations in our financial results or those of companies that are perceived to be similar to us; • our ability or inability to raise additional capital and the terms on which we raise it; • declines in the market prices of stocks generally; • trading volume of our common stock; • sales of our common stock by us or our stockholders; • general economic, industry and market conditions; • the transformation of our business to deliver more software and subscriptions offerings where revenue is recognized over time; • fluctuations in demand for our products and services, especially with respect to distributors and partners, in part due to changes in the global economic environment; • the introduction and market acceptance of new technologies and products, and our success in new evolving markets, and in emerging technologies, as well as the adoption of new standards; • the ability of our customers, channel partners, contract manufacturers and suppliers to obtain financing or to fund capital expenditures, especially during a period of global credit market disruption or in the event of customer, channel partner, contract manufacturer or supplier financial problem; • the overall movement toward industry consolidation among both our competitors and our customers; • changes in sales and implementation cycles for our products and reduced visibility into our customers’ spending plans and associated revenue; • the timing, size and mix of orders from customers; • manufacturing and customer lead times; • how well we execute on our strategy and operating plans and the impact of changes in our business model that could result in significant restructuring charges; • our ability to achieve targeted cost reductions; • benefits anticipated from our investments; • changes in tax law or accounting rules, or interpretations thereof; -20- • actual events, circumstances, outcomes and amounts differing from judgments, assumptions and estimates used in determining the values of certain assets (including the amounts of related valuation allowances), liabilities, and other items reflected in our Consolidated Financial Statements; • other events or factors, including those resulting from such events, or the prospect of such events, including war, terrorism and other international conflicts, public health issues including health epidemics or pandemics, such as the outbreak of COVID-19, and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States or elsewhere, could disrupt our operations, disrupt the operations of our suppliers or result in political or economic instability; and • the failure of any bank and the resulting economic uncertainty caused by such failures.
The market price for our common stock may be influenced by many factors, including the following: • conversions of Series F Preferred Stock into common stock and the subsequent sales of common stock; • investor reaction to our business strategy; • the success of competitive products or technologies; • our ability to comply with the continued listing standards of the Nasdaq Capital Market; • regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our products; • variations in our financial results or those of companies that are perceived to be similar to us; • our ability or inability to raise additional capital and the terms on which we raise it; • declines in the market prices of stocks generally; • trading volume of our common stock; • conversions of Series F Preferred Stock into common stock and the subsequent sales of common stock; • sales of our common stock by us or our stockholders; • general economic, industry and market conditions; -20- • the transformation of our business to deliver more software and subscriptions offerings where revenue is recognized over time; • fluctuations in demand for our products and services, especially with respect to distributors and partners, in part due to changes in the global economic environment; • the introduction and market acceptance of new technologies and products, and our success in new evolving markets, and in emerging technologies, as well as the adoption of new standards; • the ability of our customers, channel partners, contract manufacturers and suppliers to obtain financing or to fund capital expenditures, especially during a period of global credit market disruption or in the event of customer, channel partner, contract manufacturer or supplier financial problem; • the overall movement toward industry consolidation among both our competitors and our customers; • changes in sales and implementation cycles for our products and reduced visibility into our customers’ spending plans and associated revenue; • the timing, size and mix of orders from customers; • manufacturing and customer lead times; • how well we execute on our strategy and operating plans and the impact of changes in our business model that could result in significant restructuring charges; • our ability to achieve targeted cost reductions; • benefits anticipated from our investments; • changes in tax law or accounting rules, or interpretations thereof; • actual events, circumstances, outcomes and amounts differing from judgments, assumptions and estimates used in determining the values of certain assets (including the amounts of related valuation allowances), liabilities, and other items reflected in our Consolidated Financial Statements; • other events or factors, including those resulting from such events, or the prospect of such events, including war, terrorism and other international conflicts, public health issues including health epidemics or pandemics, such as the outbreak of COVID-19, and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States or elsewhere, could disrupt our operations, disrupt the operations of our suppliers or result in political or economic instability; and • the failure of any bank and the resulting economic uncertainty caused by such failures.
To the extent that we raise additional capital by issuing equity securities, the terms of such an issuance may cause more significant dilution to our stockholders’ ownership, and the terms of any new equity securities may have preferences over the combined organization’s common stock. Any debt financing we enter into may involve covenants that restrict our operations.
To the extent that we raise additional capital by issuing equity securities, the terms of such an issuance may cause more significant dilution to our -22- stockholders’ ownership, and the terms of any new equity securities may have preferences over the combined organization’s common stock. Any debt financing we enter into may involve covenants that restrict our operations.
We will also need to respond effectively to new product announcements by our competitors by quickly introducing competitive products. In addition, we may not be able to successfully manage integration of any new product lines with our existing products. Selling new product lines in new markets will require our management to explore different strategies in order to be successful.
We will also need to respond effectively to new product announcements by our competitors by quickly introducing competitive products. -8- In addition, we may not be able to successfully manage integration of any new product lines with our existing products. Selling new product lines in new markets will require our management to explore different strategies in order to be successful.
Factors that cause fluctuation in our results of operations include lack of revenue growth or declines in revenue and declines in gross margins and increases in operating expenses. Accordingly, it is possible that in one or -21- more future quarters our operating results will be adversely affected and fall below the expectations of securities analysts and investors.
Factors that cause fluctuation in our results of operations include lack of revenue growth or declines in revenue and declines in gross margins and increases in operating expenses. Accordingly, it is possible that in one or more future quarters our operating results will be adversely affected and fall below the expectations of securities analysts and investors.
Companies that are strategic alliance partners in some areas of our business may acquire or form alliances with our competitors, thereby reducing their business with us. We believe that industry consolidation may result in stronger competitors that are better able to compete as sole-source vendors for customers.
Companies -11- that are strategic alliance partners in some areas of our business may acquire or form alliances with our competitors, thereby reducing their business with us. We believe that industry consolidation may result in stronger competitors that are better able to compete as sole-source vendors for customers.
Systems integrators and channel partners typically sell directly to end users and often provide system installation, technical support, professional services, and other support services in addition to network equipment sales. Systems integrators also typically integrate our products into an overall solution, and a number of service providers are also systems integrators.
Systems integrators and channel partners typically sell directly to end users and often provide -13- system installation, technical support, professional services, and other support services in addition to network equipment sales. Systems integrators also typically integrate our products into an overall solution, and a number of service providers are also systems integrators.
Certain significant components of our solutions incorporate or are based upon open-source software, and we may incorporate open-source software into other solutions in the future. Such open-source software is generally licensed under open-source licenses, including, for example, the GNU General Public License, the GNU Lesser General Public License, "Apache-style" licenses, "BSD-style" licenses and other open-source licenses.
Certain significant components of our solutions incorporate or are based upon open-source software, and we may incorporate open-source software into other solutions in the future. Such open-source software is generally licensed under open-source licenses, including, for example, the GNU General Public -19- License, the GNU Lesser General Public License, "Apache-style" licenses, "BSD-style" licenses and other open-source licenses.
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 -7- to us, it could have a material adverse effect on the Company.
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.
Our inability to hire qualified personnel on a timely basis, or the departure of key employees (including Peter Holst, the Company’s President and CEO) without a suitable replacement therefor could materially and adversely affect our business development and therefore, our business, prospects, results of operations and financial condition.
Our inability to hire qualified personnel on a timely basis, or the departure of key employees (including Peter Holst, the Company’s President and CEO) without a suitable replacement could materially and adversely affect our business development and therefore, our business, prospects, results of operations and financial condition.
Vulnerabilities and critical security defects, prioritization errors in 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.
Vulnerabilities and critical security defects, prioritization errors in 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 -17- upgrade products, services or solutions could result in claims of liability against us, damage our reputation or otherwise harm our business.
Any failure to maintain high-quality installation and technical support, or a market perception -11- that we do not maintain high-quality support, could harm our reputation and brand, adversely affect our ability to sell our solutions to existing and prospective end customers, and could harm our business, operating results, and financial condition.
Any failure to maintain high-quality installation and technical support, or a market perception that we do not maintain high-quality support, could harm our reputation and brand, adversely affect our ability to sell our solutions to existing and prospective end customers, and could harm our business, operating results, and financial condition.
As a result of one or more of these factors, we may increase our hiring in geographic areas outside the United States, which could subject us to additional geopolitical and exchange rate risk.
As a result of one or more of these factors, we may increase our hiring in -14- geographic areas outside the United States, which could subject us to additional geopolitical and exchange rate risk.
Although we believe that we have complied with our obligations under the various -18- applicable licenses for open-source software that we use, our processes used to monitor how open-source software is used could be subject to error.
Although we believe that we have complied with our obligations under the various applicable licenses for open-source software that we use, our processes used to monitor how open-source software is used could be subject to error.
If we are unable to react quickly to changes in the market, if the market fails to develop or develops more slowly than expected, or if our services do not achieve market acceptance, then we are -9- unlikely to achieve profitability.
If we are unable to react quickly to changes in the market, if the market fails to develop or develops more slowly than expected, or if our services do not achieve market acceptance, then we are unlikely to achieve profitability.
A security breach at any one of our physical facilities, such as that which occurred during 2022, could result in a significant loss of inventory, or increase expenses relating to the resolution and future prevention of similar thefts, any of which could have an adverse effect on our business, financial condition, and results of operations.
A security incident at any one of our physical facilities, such as that which occurred during 2022, could result in a significant loss of inventory, or increase expenses relating to the resolution and future prevention of similar thefts, any of which could have an adverse effect on our business, financial condition, and results of operations.
T he products and services we sell to customers, and our servers, data centers and the cloud-based solutions on which our data, and data of our customers, suppliers and business partners are stored, are vulnerable to improper functioning, cyber-attacks, data breaches, malware, and similar disruptions from unauthorized access or tampering by malicious actors or inadvertent error.
T he products and services we sell to customers, and our servers, data centers and the cloud-based solutions on which our data, and data of our customers, suppliers and business partners are stored, are vulnerable to improper functioning, cyber-attacks, data incidents, malware, and similar disruptions from unauthorized access or tampering by malicious actors or inadvertent error.
We may also become subject to tax audits or similar procedures in states where we already pay -15- sales and use taxes. The assessment of taxes, interest, and penalties as a result of audits, litigation, or otherwise could be materially adverse to our current and future results of operations and financial condition.
We may also become subject to tax audits or similar procedures in states where we already pay -16- sales and use taxes. The assessment of taxes, interest, and penalties as a result of audits, litigation, or otherwise could be materially adverse to our current and future results of operations and financial condition.
The Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2022 have been prepared assuming that the Company will continue as a going concern. We have experienced declines in revenue in recent fiscal years and we have incurred net losses.
The Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2023 have been prepared assuming that the Company will continue as a going concern. We have experienced declines in revenue in recent fiscal years and we have incurred net losses.
Consequently, our financial results may fluctuate significantly from period-to-period based on the actions of one -10- or more significant customers.
Consequently, our financial results may fluctuate significantly from period-to-period based on the actions of one or more significant customers.
As part of our efforts to appropriately structure and compensate our sales force such that their incentives are properly aligned with our growth strategy, we have made changes to our sales processes, sales segmentation and leadership structures for our sales teams and may need to make additional changes in the future.
As part of our efforts to appropriately structure and compensate our sales team such that their incentives are properly aligned with our growth strategy, we have made changes to our sales processes, sales segmentation and leadership structures for our sales teams and may need to make additional changes in the future.
We have been issued numerous patents, other patent applications are currently pending, and some of our intellectual property is not covered by any patent. As we further develop our services and related intellectual property, we expect to seek additional patent protection.
We have been issued numerous patents, other patent applications are currently pending, and some of our intellectual property is not covered by any patent. If we further develop our services and related intellectual property, we expect to seek additional patent protection.
Sales to the Service Providers have been characterized by large and sporadic purchases, in addition to longer sales cycles. Product orders by the Service Providers decreased during 2021 and 2022 and at various times in the past we have experienced significant weakness in product orders from Service Providers.
Sales to the Service Providers have been characterized by large and sporadic purchases, in addition to longer sales cycles. Product orders by the Service Providers decreased during 2022 and 2023 and at various times in the past we have experienced significant weakness in product orders from Service Providers.
Despite our implementation of security measures, there can be no assurance our safety and security measures will detect and prevent security breaches in a timely manner or otherwise prevent damage or interruption of our systems and operations or inventory theft.
Despite our implementation of security measures, there can be no assurance our safety and security measures will detect and prevent security incidents in a timely manner or otherwise prevent damage or interruption of our systems and operations or inventory theft.
Our estimates with respect to the useful life or ultimate recoverability of our carrying basis of assets, including intangible assets, could change as a result of such assessments and decisions.
Our estimates with respect to the useful life or ultimate recoverability of our carrying basis of assets, could change as a result of such assessments and decisions.
Additionally, our level of product gross margins could decline in future periods due to adverse impacts from other factors including: • Changes in customer, geographic or product mix, including mix of configurations within each product group; • Introduction of new products, including products with price-performance advantages, and new business models including the transformation of our business to deliver more software and subscription offerings; • Our ability to reduce production costs; • Entry into new markets or growth in lower margin markets, including markets with different pricing and cost structures, through acquisitions or internal development; • Sales discounts; • Increases in material, labor or other manufacturing-related costs, which could be significant especially during periods of supply constraints such as those impacting the market for memory components; • Excess inventory, inventory holding charges and obsolescence charges; • Changes in shipment volume; • The timing of revenue recognition and revenue deferrals; • Increased cost (including those caused by tariffs), loss of cost savings or dilution of savings due to changes in component pricing or charges incurred due to inventory holding periods if parts ordering does not correctly anticipate product demand or if the financial health of either contract manufacturers or suppliers deteriorates; • Lower than expected benefits from value engineering; • Increased price competition; • Changes in distribution channels; • Increased warranty or royalty costs; • Increased amortization of purchased intangible assets; and • Our success in executing on our strategy and operating plans. -8- If we cannot successfully introduce new product lines, either through rapid innovation or acquisition of new products or product lines, we may not be able to maintain or increase the market share of our products.
Additionally, our level of product gross margins could decline in future periods due to adverse impacts from other factors including: • Changes in customer, geographic or product mix, including mix of configurations within each product group; • Introduction of new products, including products with price-performance advantages, and new business models including the transformation of our business to deliver more software and subscription offerings; • Our ability to reduce production costs; • Entry into new markets or growth in lower margin markets, including markets with different pricing and cost structures, through acquisitions or internal development; • Sales discounts; • Increases in material, labor or other manufacturing-related costs, which could be significant especially during periods of supply constraints such as those impacting the market for memory components; • Excess inventory, inventory holding charges and obsolescence charges; • Changes in shipment volume; • The timing of revenue recognition and revenue deferrals; • Increased cost (including those caused by tariffs), loss of cost savings or dilution of savings due to changes in component pricing or charges incurred due to inventory holding periods if parts ordering does not correctly anticipate product demand or if the financial health of either contract manufacturers or suppliers deteriorates; • Lower than expected benefits from value engineering; • Increased price competition; • Changes in distribution channels; • Increased warranty or royalty costs; • Increased amortization of purchased intangible assets; and • Our success in executing on our strategy and operating plans.
As indicated above, our growth is dependent in large part on the success of our sales force and in particular our ability to structure our sales force and sales compensation in a way that aligns with our growth strategy.
As indicated above, our growth is dependent in large part on the success of our sales team and in particular our ability to structure our sales organization and sales compensation in a way that aligns with our growth strategy.
Acquisitions may also cause us to: • Issue common stock that would dilute our current shareholders’ percentage ownership; • Use a substantial portion of our cash resources, or incur debt; • Significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition; • Assume liabilities; • Record goodwill and intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges’ • Incur amortization expenses related to certain intangible assets; • Incur tax expenses related to the effect of acquisitions on our legal structure; • Incur large write-offs and restructuring and other related expenses; or • Become subject to intellectual property or other litigation.
Acquisitions may also cause us to: • Issue common stock that would dilute our current shareholders’ percentage ownership; • Use a substantial portion of our cash resources, or incur debt; • Significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition; • Assume liabilities; • Record goodwill and intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges’ • Incur amortization expenses related to certain intangible assets; • Incur tax expenses related to the effect of acquisitions on our legal structure; • Reduce the utilization of, and the timing of utilization, of the federal and state net operating loss carryforwards; • Incur large write-offs and restructuring and other related expenses; or • Become subject to intellectual property or other litigation.
For the year ended December 31, 2022, one major customer accounted for 46.8% of the Company’s total consolidated revenue. The composition of our significant customers will vary from period-to-period, and we expect that most of our revenue will continue, for the foreseeable future, to come from a relatively small number of customers.
For the year ended December 31, 2023, one major customer accounted for 56% of the Company’s total consolidated revenue. The composition of our significant customers will vary from period-to-period, and we expect that most of our revenue will continue, for the foreseeable future, to come from a relatively small number of customers.
Risks Related to Cybersecurity and Regulations Cyber-attacks, data breaches, malware, or a breach of 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 breaches 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.
Risks Related to Cybersecurity and Regulations 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.
Such transactions may include, but are not limited to (i) any future issuances by us of additional shares of our common stock or of other securities that are convertible or exchangeable for shares of common stock; and (ii) the resale of any previously issued but restricted shares of our common stock that become freely available for re- sale, whether through an effective registration statement or under Rule 144 of the Securities Act.
Such transactions may include, but are not limited to (i) conversions of Series F Preferred Stock into common stock and the subsequent sales of such common stock, (ii) any future issuances by us of additional shares of our common stock or of other securities that are convertible or exchangeable for shares of common stock; and (iii) the resale of any previously issued but restricted shares of our common stock that become freely available for re- sale, whether through an effective registration statement or under Rule 144 of the Securities Act.
A reduction or interruption in supply, including disruptions on our global supply chain as a result of the COVID-19 pandemic; a significant increase in the price of one or more components; a failure to adequately authorize procurement of inventory by our contract manufacturers; a failure to appropriately cancel, reschedule or adjust our requirements based on our business needs; or a decrease in demand for our products could materially adversely affect our business, operating results and financial condition and could materially damage customer relationships.
A reduction or interruption in supply; a significant increase in the price of one or more components; a failure to adequately authorize procurement of inventory by our contract manufacturers; a failure to appropriately cancel, reschedule or adjust our requirements based on our business needs; or a decrease in demand for our products could materially adversely affect our business, operating results and financial condition and could materially damage customer relationships.
Breaches of security in our customers’ networks, or in cloud-based services provided by or enabled by us, regardless of whether the breach is attributable to a vulnerability in our products or services, could result in claims of liability against us, damage our reputation, or otherwise harm our business.
Cybersecurity incidents in our customers’ networks, or in cloud-based services provided by or enabled by us, regardless of whether the incident is attributable to a vulnerability in our products or services, could result in claims of liability against us, damage our reputation, or otherwise harm our business.
The process of developing new technology related to market transitions—such as collaboration, digital transformation, and cloud—is complex and uncertain, and if we fail to accurately predict customers’ changing needs and emerging technological trends our business could be harmed.
If customers do not purchase and/or renew our offerings, our business could be harmed. The process of developing new technology related to market transitions—such as collaboration, digital transformation, and cloud—is complex and uncertain, and if we fail to accurately predict customers’ changing needs and emerging technological trends our business could be harmed.
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 raise capital in one or more debt and/or equity offerings.
We believe additional capital will be required, in the long-term, to fund operations and provide growth capital including 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.
We must commit significant resources, including the investments we have been making in our strategic priorities to developing new products and services before knowing whether our investments will result in products and services the market will accept.
We must commit significant resources to developing new products and services before knowing whether our investments will result in products and services the market will accept.
Our success depends upon our ability to deliver reliable, high-speed access to our channels’ and customers’ data centers and upon the ability and willingness of our telecommunications providers to deliver reliable, high-speed telecommunications service through their networks.
Our network could fail, which could negatively impact our revenues. Our success depends upon our ability to deliver reliable, high-speed access to our channels’ and customers’ data centers and upon the ability and willingness of our telecommunications providers to deliver reliable, high-speed telecommunications service through their networks.
Furthermore, because of the emerging nature of our solutions, our support organization often provides support for and troubleshoots issues for products of other vendors running on our solutions, even if the issue is unrelated to our solutions.
Once our solutions are deployed, our end customers depend on our support organization to resolve any technical issues relating to our solutions. Furthermore, because of the emerging nature of our solutions, our support organization often provides support for and troubleshoots issues for products of other vendors running on our solutions, even if the issue is unrelated to our solutions.
We may not be able to diversify sources in a timely manner, which could harm our ability to deliver products to customers and seriously impact present and future sales.
We may not be able to diversify sources in a timely manner, which could harm our ability to deliver products to customers and seriously impact present and future sales. -15- We have made and may continue to make acquisitions that could disrupt our operations and harm our operating results.
As we continue to expand globally, we may see new competition in different geographic regions. The collaboration industry is highly competitive and includes large, well-financed participants. Some of our competitors compete across many of our product lines, while others are primarily focused in a specific product area.
The collaboration industry is highly competitive and includes large, well-financed participants. Some of our competitors compete across many of our product lines, while others are primarily focused in a specific product area.
In addition, we anticipate that the sales cycles associated with major accounts will be longer than our traditional sales cycles, which will increase the time it will take our sales managers to become fully productive. In addition, as our organization continues to focus on major accounts and large deals, the productivity of our traditional sales teams may be impacted.
In addition, we anticipate that the sales cycles associated with major accounts will be longer than our traditional sales cycles, which will increase the time it will take our sales managers to become fully productive.
If we are unable to successfully address the challenges of integrating offerings based upon open-source technology into our business, our business and operating results may be adversely affected and our development costs may increase. We may incur non-cash impairment charges for our right-of-use and intangible assets which would negatively impact our operating results .
If we are unable to successfully address the challenges of integrating offerings based upon open-source technology into our business, our business and operating results may be adversely affected and our development costs may increase.
Additional areas of uncertainty that could impact sales of our products and offers include laws and regulations related to encryption technology, environmental sustainability, export control, product certification and national security controls applicable to our supply chain.
Additional areas of uncertainty that could impact sales of our products and offers include laws and regulations related to encryption technology, environmental sustainability, export control, product certification and national security controls applicable to our supply chain. Changes in regulatory requirements in these areas could have a material adverse effect on our business, operating results, and financial condition.
Although in certain instances our supply agreements allow us the option to cancel, reschedule and adjust our requirements based on our business needs prior to firm orders being placed, our loss contingencies may include liabilities for contracts that we cannot cancel with contract manufacturers and suppliers.
Although in certain instances our supply agreements allow us the option to cancel, reschedule and adjust our requirements based on our business needs prior to firm orders being placed, our loss contingencies may include liabilities for contracts that we cannot cancel with contract manufacturers and suppliers. -10- We may be unable to realize intended efficiencies and benefits from our ongoing cost-savings initiatives, and which may adversely affect our results of operations, financial condition, or our business.
Furthermore, in the event we expand our operations internationally, our support organization will face additional challenges, including those associated with delivering support, training, and documentation in languages other than English.
Furthermore, in the event we expand our operations internationally, our support organization will face additional challenges, including those associated with delivering support, training, and documentation in languages other than English. In addition, in the event we expand our product portfolio to include additional solutions our ability to provide high-quality support will become more difficult and will involve more complexity.
Our exposure to risks associated with the use of intellectual property may be increased as a result of acquisitions, as we have a lower level of visibility into the development process with respect to such technology or the care taken to safeguard against infringement risks. -17- An adverse outcome as plaintiff in any such litigation, in addition to the costs involved, may, among other things, result in the loss of the intellectual property (such as a patent) that was the subject of the lawsuit by a determination of invalidity or unenforceability, significantly increase competition as a result of such determination, and require the payment of penalties resulting from counterclaims by the defendant.
An adverse outcome as plaintiff in any such litigation, in addition to the costs involved, may, among other things, result in the loss of the intellectual property (such as a patent) that was the subject of the lawsuit by a determination of invalidity or unenforceability, significantly increase competition as a result of such determination, and require the payment of penalties resulting from counterclaims by the defendant.
An inability to cure a product defect could result in the failure of a product line, temporary or permanent withdrawal from a product or market, damage to our reputation, inventory costs or product reengineering expenses, any of which could have a material impact on our revenue, margins and net loss.
An inability to cure a product defect could result in the failure of a product line, temporary or permanent withdrawal from a product or market, damage to our reputation, inventory costs or product reengineering expenses, any of which could have a material impact on our revenue, margins and net loss. -9- We depend upon the development of new products and services, and enhancements to existing products and services, and if we fail to predict and respond to emerging technological trends and customer’s changing needs, our operating results may suffer.
Furthermore, we may not execute successfully on our vision or strategy because of challenges with regard to product planning and timing, technical hurdles that we fail to overcome in a timely fashion, or a lack of appropriate resources.
Furthermore, we may not execute successfully on our vision or strategy because of challenges with regard to product planning and timing, technical hurdles that we fail to overcome in a timely fashion, or a lack of appropriate resources, such as those that led to us ceasing the majority of research and development activities during late 2022 as a cost savings measure, and significant capital could be required to resume research and development activities.
We will need to raise additional capital by issuing securities or debt, which may cause significant dilution to our stockholders and restrict our operations. We will need to raise additional capital to fund our near and long-term operations. Additional financing may not be available when we need it or may not be available on favorable terms.
We might need to raise additional capital by issuing securities or debt, which may cause significant dilution to our stockholders and restrict our operations.
Risks Related to Our Business Our Company experienced declines in revenue in recent fiscal years and may continue to experience further revenue decline in future periods.
Risks Related to Our Business Our Company experienced declines in revenue in recent fiscal years and may continue to experience further revenue decline in future periods. In recent fiscal years, our Company has faced a troubling trend of decreasing revenue, a situation that may not only persist but potentially worsen in the future.
Some of our competitors are privately owned so their comparatively lower accounting and administrative costs can be a competitive disadvantage for us. Should our sales continue to decline or if we are unsuccessful at increasing prices to cover higher expenditures for internal controls and audits, our costs associated with regulatory compliance will rise as a percentage of sales.
Should our sales continue to decline or if we are unsuccessful at increasing prices to cover higher expenditures for internal controls and audits, our costs associated with regulatory compliance will rise as a percentage of sales. Our cash and cash equivalents could be adversely affected if the financial institutions in which we hold our cash and cash equivalents fail.
To regain compliance, the closing bid price of the Common Stock must have met or exceeded $1.00 per share for a minimum of ten consecutive business days during this 180-day period.
To regain compliance, the closing bid price of our Common Stock must meet or exceed $1.00 per share for a minimum of 10 consecutive business days at any time before the expiration of the initial compliance period.
We depend upon the development of new products and services, and enhancements to existing products and services, and if we fail to predict and respond to emerging technological trends and customer’s changing needs, our operating results may suffer. The markets for our products and services are characterized by rapidly changing technology, evolving industry standards and new product and service introductions.
The markets for our products and services are characterized by rapidly changing technology, evolving industry standards and new product and service introductions. Our operating results depend on our ability to develop and introduce new products and services into existing and emerging markets and to reduce the production costs of existing products.
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. Once our solutions are deployed, our end customers depend on our support organization to resolve any technical issues relating to our solutions.
In addition, as our organization continues to focus on major accounts and large deals, the productivity of our traditional sales teams may be impacted. -12- 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.
As a publicly traded corporation, we incur certain costs to comply with regulatory requirements. If regulatory requirements were to become more stringent or if controls thought to be effective later fail, we may be forced to make additional expenditures, the amounts of which could be material.
If regulatory requirements were to become more stringent or if controls thought to be effective later fail, we may be forced to make additional expenditures, the amounts of which could be material. Some of our competitors are privately owned so their comparatively lower accounting and administrative costs can be a competitive disadvantage for us.
In accordance with the Nasdaq Listing Rule 5810(c)(3)(A), the Company had a period of 180 calendar days, or until August 16, 2022, to regain compliance with the Bid Price Rule.
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided an initial period of 180 calendar days, until March 19, 2024, in which to regain compliance.
We could fail to satisfy the standards to maintain our listing on a stock exchange.
We could fail to satisfy the standards to maintain our listing on a stock exchange. Our Common Stock is listed on The Nasdaq Capital Market. In order to maintain that listing, we must satisfy minimum financial and other continued listing requirements and standards.
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. General Risks We incur significant accounting and administrative costs as a publicly traded corporation that impact our financial condition.
General Risks We incur significant accounting and administrative costs as a publicly traded corporation that impact our financial condition. As a publicly traded corporation, we incur certain costs to comply with regulatory requirements.
The Company believes that, based on our current projection of revenue, expenses, capital expenditures, 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 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.
Removed
We believe that revenue declines for our Managed Services business are primarily due to net attrition of customers and lower demand for these services given the competitive environment and pressure on pricing that exists in our industry.
Added
Specifically, our Managed Services revenue has suffered due to a -7- significant loss of customers and a decrease in demand for our offerings. This downturn can be attributed to the fiercely competitive landscape of our industry, where we face intense pressure to lower prices to remain competitive.
Removed
We believe that revenue declines for our Collaboration Products business are primarily due to the commercial response to the COVID-19 pandemic, as discussed further below.
Added
Similarly, our Mezzanine™ product offerings, designed for use in conventional settings like conference rooms and operational centers, have also experienced a marked decrease in revenue. This decline is largely a consequence of the commercial reactions to the COVID-19 pandemic and its prolonged effects.
Removed
The factors discussed above raise substantial doubt as to our ability to continue as a going concern. The accompanying Consolidated Financial Statements do not include any adjustments that might result from these uncertainties.
Added
We believe the pandemic has 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.
Removed
Our operating results depend on our ability to develop and introduce new products and services into existing and emerging markets and to reduce the production costs of existing products. If customers do not purchase and/or renew our offerings, our business could be harmed.
Added
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. Should this trend of reevaluation and reduced demand continue, it poses a significant risk of further revenue decline for our Company.
Removed
Additionally, as we expand into new markets, we will face competition not only from our existing competitors but also from other competitors, including existing companies with strong technological, marketing and sales positions in those markets.
Added
This situation highlights the critical need for our Company to adapt strategically, recognizing the shifting dynamics of workplace configurations and the evolving needs of our customers in the post-pandemic era.
Removed
In addition, in the event we continue to expand our product portfolio to include additional solutions our ability to provide high-quality support will become more difficult and will involve more complexity.
Added
If we cannot successfully introduce new product lines, either through rapid innovation or acquisition of new products or product lines, we may not be able to maintain or increase the market share of our products.
Removed
Certain of our distributors generally request business terms that allow them to return a portion of inventory, receive credits for changes in selling price, and participate in various cooperative marketing programs.
Added
To operate more efficiently and control costs, we have undertaken cost-savings initiatives, which have included a cessation of R&D activities, workforce reductions and other cost reduction initiatives. If we do not successfully manage our current cost-savings activities, our expected efficiencies, benefits and cost savings might be delayed or not realized, and our operations and business could be disrupted.
Removed
Over the long term we intend to invest in engineering, sales, service and marketing activities, and in key priority and growth areas, and these investments may achieve delayed, or lower than expected, benefits which could harm our operating results.
Added
Furthermore, a disruption to our operations or business may cause employee morale and productivity to suffer and may result in unwanted employee attrition. Such disruptions require substantial management time and attention and may divert management from other important work or result in a failure to meet operational targets.
Removed
While we intend to focus on managing our costs and expenses, over the long term, we also intend to invest in personnel and other resources related to our engineering, sales, service, and marketing functions as we realign on and dedicate resources on key priority and growth areas.
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Item 2. Properties
Properties — owned and leased real estate
2 edited+1 added−1 removed0 unchanged
Item 2. Properties
Properties — owned and leased real estate
2 edited+1 added−1 removed0 unchanged
2022 filing
2023 filing
Biggest changeItem 2. Properties We lease three facilities in Los Angeles, California providing office space. We also lease a facility in City of Industry, California, providing warehouse space. These leases expire between 2023 and 2024. During 2022, and through the date of this filing, we exited leases in Boston, Massachusetts, Dallas, Texas, and Austin, Texas.
Biggest changeItem 2. Properties As of December 31, 2023, we leased a facility in City of Industry, California, providing warehouse space. This lease expired in February 2024. During 2023, and through the date of this filing, we exited the City of Industry, CA lease as well as leases in Austin, TX and Los Angeles, CA.
For additional information regarding our obligations under leases, see Note 9 - Operating Lease Liabilities and Right-of-Use Assets to the Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report.
For additional information regarding our obligations under leases, see Note 8 - Operating Lease Liabilities and Right-of-Use Assets to the Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report.
Removed
We currently occupy the warehouse space in City of Industry; we have subleases in place for the one Los Angeles property. With the exception of these spaces described above, we currently operate out of remote employment sites with a remote office located at 25587 Conifer Road, Suite 105-231, -23- Conifer, Colorado 80433.
Added
We are currently in the process of securing a warehouse facility in, or around, Denver, CO. During the interim, our inventory is being stored in a secured third party location. With the exception of warehouse space described above, we currently operate out of remote employment sites with a remote office located at 110 16th Street, Suite 1400-1024, Denver, CO 80202.
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
4 edited+1 added−1 removed0 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
4 edited+1 added−1 removed0 unchanged
2022 filing
2023 filing
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Effective February 11, 2021, the Company’s common stock trades on the Nasdaq Capital Market under the symbol “OBLG.” Prior to February 11, 2021, the Company’s common stock traded on the NYSE American under the symbols “OBLG” and “GLOW”.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
We currently intend to retain any earnings to finance the growth and development of our business. Our board of directors will make any future determination of the payment of dividends based upon conditions then existing, including our earnings, financial condition and capital requirements, as well as such economic and other conditions as our board of directors may deem relevant.
We currently intend to retain any earnings to finance the growth and development of our business. Our -25- board of directors will make any future determination of the payment of dividends based upon conditions then existing, including our earnings, financial condition and capital requirements, as well as such economic and other conditions as our board of directors may deem relevant.
American Stock Transfer & Trust Company, LLC is the transfer agent and registrar of our common stock. Dividends Our board of directors has never declared or paid any cash dividends on our common stock and does not expect to do so for the foreseeable future.
As of March 8, 2024, there were 147 holders of record of our common stock. Equiniti is the transfer agent and registrar of our common stock. Dividends Our board of directors has never declared or paid any cash dividends on our common stock and does not expect to do so for the foreseeable future.
On March 20, 2023, the closing sale price of our common stock was $1.38 per share as reported on the Nasdaq Capital Market, and 2,063,308 shares of our common stock were issued and outstanding. As of March 20, 2023, there were 152 holders of record of our common stock.
Market Information The Company’s common stock trades on the Nasdaq Capital Market under the symbol “OBLG.” On March 8, 2024, the closing sale price of our common stock was $0.16 per share as reported on the Nasdaq Capital Market, and 16,684,571 shares of our common stock were issued and outstanding.
Removed
Subsequent to the date of this Report, on January 3, 2023, the Company effected a 1-for-15 reverse stock split for its Common Stock. All Common Stock share information in the discussion and tables of this Annual Report are shown as adjusted for this split.
Added
Recent Sales of Unregistered Securities Except as previously reported by us on our Current Reports on Form 8-K, we did not sell any securities during the period covered by this Annual Report that were not registered under the Securities Act.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
39 edited+7 added−26 removed23 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
39 edited+7 added−26 removed23 unchanged
2022 filing
2023 filing
Biggest changeCertain information concerning the Company’s segments for the years ended December 31, 2022 and 2021, is presented in the following table (in thousands): -25- Year Ended December 31, 2022 Managed Services Collaboration Products Corporate Total Revenue $ 3,348 $ 2,128 $ — $ 5,476 Cost of revenues 2,273 1,657 — 3,930 Gross profit $ 1,075 $ 471 $ — $ 1,546 Gross profit % 32 % 22 % — % 28 % Allocated operating expenses $ 19 $ 18,355 $ — $ 18,374 Unallocated operating expenses — — 5,160 5,160 Total operating expenses $ 19 $ 18,355 $ 5,160 $ 23,534 Income (loss) from operations $ 1,056 $ (17,884) $ (5,160) $ (21,988) Interest and other expense (income), net 12 (52) — (40) Income (loss) before income taxes $ 1,044 $ (17,832) $ (5,160) $ (21,948) Income tax expense $ (4) $ (3) $ — $ (7) Net income (loss) $ 1,048 $ (17,829) $ (5,160) $ (21,941) Year Ended December 31, 2022 Total assets $ 752 $ 1,824 $ 3,085 $ 5,661 Year Ended December 31, 2021 Managed Services Collaboration Products Corporate Total Revenue $ 4,270 $ 3,469 $ — $ 7,739 Cost of revenues 2,991 2,030 — 5,021 Gross profit $ 1,279 $ 1,439 $ — $ 2,718 Gross profit % 30 % 41 % — % 35 % Allocated operating expenses $ 591 $ 7,879 $ — $ 8,470 Unallocated operating expenses — — 6,042 6,042 Total operating expenses $ 591 $ 7,879 $ 6,042 $ 14,512 Income (loss) from operations $ 688 $ (6,440) $ (6,042) $ (11,794) Interest and other (income) expense, net 22 (227) (2,448) (2,653) Loss before income taxes $ 666 $ (6,213) $ (3,594) $ (9,141) Income tax benefit $ (15) $ (75) $ (90) Net income (loss) $ 681 $ (6,138) $ (3,594) $ (9,051) Year Ended December 31, 2021 Total assets $ 1,053 $ 18,615 $ 8,939 $ 28,607 Unallocated operating expenses in Corporate include costs 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.
Biggest changeCertain information concerning the Company’s segments for the years ended December 31, 2023 and 2022, is presented in the following table (in thousands): Year Ended December 31, 2023 Managed Services Collaboration Products Corporate Total Revenue $ 2,518 $ 1,292 $ — $ 3,810 Cost of revenues 1,671 1,228 — 2,899 Gross profit $ 847 $ 64 $ — $ 911 Gross profit % 34 % 5 % — % 24 % Allocated operating expenses $ 3 $ 481 $ — $ 484 Unallocated operating expenses — — 4,922 4,922 Total operating expenses $ 3 $ 481 $ 4,922 $ 5,406 Income (loss) from operations $ 844 $ (417) $ (4,922) $ (4,495) Interest and other income, net — — (138) (138) Income (loss) before income taxes $ 844 $ (417) $ (4,784) $ (4,357) Income tax expense $ 11 $ 16 $ — $ 27 Net income (loss) $ 833 $ (433) $ (4,784) $ (4,384) Year Ended December 31, 2023 Total assets $ 367 $ 568 $ 5,990 $ 6,925 -27- Year Ended December 31, 2022 Managed Services Collaboration Products Corporate Total Revenue $ 3,348 $ 2,128 $ — $ 5,476 Cost of revenues 2,273 1,657 — 3,930 Gross profit $ 1,075 $ 471 $ — $ 1,546 Gross profit % 32 % 22 % — % 28 % Allocated operating expenses $ 19 $ 18,355 $ — $ 18,374 Unallocated operating expenses — — 5,160 5,160 Total operating expenses $ 19 $ 18,355 $ 5,160 $ 23,534 Income (loss) from operations $ 1,056 $ (17,884) $ (5,160) $ (21,988) Interest and other (income) expense, net 12 (52) — (40) Income (loss) before income taxes $ 1,044 $ (17,832) $ (5,160) $ (21,948) Income tax benefit $ (4) $ (3) $ (7) Net income (loss) $ 1,048 $ (17,829) $ (5,160) $ (21,941) Year Ended December 31, 2022 Total assets $ 752 $ 1,824 $ 3,085 $ 5,661 Unallocated operating expenses in Corporate include costs 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.
The discussion of results, causes and trends should not be construed to imply any conclusion that such results or trends will necessarily continue in the future. -24- Business We are a provider of patented multi-stream collaboration products and managed services for video collaboration and network solutions.
The discussion of results, causes and trends should not be construed to imply any conclusion that such results or trends will necessarily continue in the future. Business We are a provider of patented multi-stream collaboration products and managed services for video collaboration and network solutions.
We provide our customers with i) managed videoconferencing, where we set up and manage customer videoconferences and ii) remote service management, where we provide 24/7 support and management of customer video environments. Managed Services for Network We provide our customers with network solutions that ensure reliable, high-quality and secure traffic of video, data and internet.
We provide our customers with i) managed videoconferencing, where we set up and manage customer videoconferences and ii) remote service management, where we provide 24/7 support and management of customer video environments. -26- Managed Services for Network We provide our customers with network solutions that ensure reliable, high-quality and secure traffic of video, data and internet.
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, exclusive of depreciation and amortization and casualty (gain)/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.
As discussed below, sales of our Mezzanine product have been adversely affected by commercial response to the COVID-19 pandemic. Like many technology companies in recent months, we will continue to monitor and manage our costs relative to demand with the goal of growing the Company’s revenue in the future.
As discussed below, sales of our Mezzanine product have been adversely affected by commercial response to the COVID-19 pandemic and its aftermath. Like many technology companies in recent months, we will continue to monitor and manage our costs relative to demand with the goal of growing the Company’s revenue in the future.
Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our consolidated balance sheets as of December 31, 2022 and 2021, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years ended December 31, 2022 and 2021, and the related notes attached thereto.
Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our consolidated balance sheets as of December 31, 2023 and 2022, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years ended December 31, 2023 and 2022, and the related notes attached thereto.
During the year ended December 31, 2022, we considered the declines in revenue for the Collaboration Products reporting segment and the decline in the Company’s market capitalization to be triggering events for an impairment test of our long-lived and intangible for this reporting unit.
During the year ended December 31, 2023, we considered the declines in revenue for the Collaboration Products reporting segment and the decline in the Company’s market capitalization to be triggering events for an impairment test of our long-lived and intangible assets for this reporting unit.
Results of Operations Year Ended December 31, 2022 (“2022”) versus Year Ended December 31, 2021 (“2021”) Segment Reporting The Company currently operates in two segments for purposes of segment reporting: (1) “Collaboration Products,” which represents the Oblong Industries business surrounding our Mezzanine™ product offerings and (2) “Managed Services,” which represents the Oblong (formerly Glowpoint) business surrounding managed services for video collaboration and network solutions.
Results of Operations Year Ended December 31, 2023 (“2023”) versus Year Ended December 31, 2022 (“2022”) Segment Reporting The Company currently operates in two segments for purposes of segment reporting: (1) “Collaboration Products,” which represents the Oblong Industries business surrounding our Mezzanine™ product offerings and (2) “Managed Services,” which represents the Oblong (formerly Glowpoint) business surrounding managed services for video collaboration and network solutions.
The recoverability tests consisted of comparing the estimated undiscounted cash flows expected to be generated by those assets to the respective carrying amounts, and involves significant judgements and assumptions, related primarily to the future revenue and profitability of the assets. For the year ended December 31, 2022, the Company recorded impairment charges on property and equipment assets of $59,000.
The recoverability tests consisted of comparing the estimated undiscounted cash flows expected to be generated by those assets to the respective carrying amounts, and involves significant judgements and assumptions, related primarily to the future revenue and profitability of the assets. During the year ended December 31, 2022, the Company recorded impairment charges of $61,000 on property and equipment assets.
See Note 15 - Commitments and Contingencies to our Consolidated Financial Statements for discussion regarding certain additional factors that could impact the Company’s liquidity in the future. -29- Critical Accounting Policies We prepare our Consolidated Financial Statements in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”).
See Note 14 - Commitments and Contingencies to our Consolidated Financial Statements for discussion regarding certain additional factors that could impact the Company’s liquidity in the future. -30- Critical Accounting Policies We prepare our Consolidated Financial Statements in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”).
Impairment Charges . The impairment charges in 2022 are attributable to impairment charges of $7,367,000 related to goodwill, impairment charges of $5,133,000 related to intangible assets, impairment charges of $59,000 related to property and equipment, and impairment charges of $179,000 related to right-of-use assets associated with two of our Los Angeles, CA leases.
The impairment charges in 2022 are attributable to impairment charges of $7,367,000 related to goodwill, impairment charges of $5,133,000 related to intangible assets, impairment charges of $59,000 related to property and equipment, and impairment charges of $179,000 related to right-of-use assets associated with two of our Los Angeles, CA leases. Casualty Loss (Gain), net.
Revenue for these services is recognized ratably over the service period. Deferred revenue, as of December 31, 2022, totaled $549,000 as certain performance obligations were not satisfied as of this date. During the year ended December 31, 2022, the Company recorded $776,000 of revenue that was included in deferred revenue as of December 31, 2021.
Revenue for these services is recognized ratably over the service period. Deferred revenue, as of December 31, 2023, totaled $158,000 as certain performance obligations were not satisfied as of this date. During the year ended December 31, 2023, the Company recorded $435,000 of revenue that was included in deferred revenue as of December 31, 2022.
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 raise capital in one or more debt and/or equity offerings.
We believe additional capital will be required, in the long-term, to fund operations and provide growth capital including 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.
During the year ended December 31, 2022, the Company recorded $7,000 of revenue that was included in deferred revenue as of December 31, 2021. During the year ended December 31, 2021, the Company recorded $24,000 of revenue that was included in deferred revenue as of December 31, 2020.
During the year ended December 31, 2023, the Company recorded $1,000 of revenue that was included in deferred revenue as of December 31, 2022. During the year ended December 31, 2022, the Company recorded $7,000 of revenue that was included in deferred revenue as of December 31, 2021.
Cost of revenue by segment is presented in the following table (in thousands): Year Ended December 31, 2022 2021 Cost of Revenue Managed Services $ 2,273 $ 2,991 Collaboration Products 1,657 2,030 Total cost of revenue $ 3,930 $ 5,021 The year over year decrease in cost of revenue is mainly attributable to lower costs associated with the decrease in revenue during the same period.
Cost of revenue by segment is presented in the following table (in thousands): Year Ended December 31, 2023 2022 Cost of Revenue Managed Services $ 1,671 $ 2,273 Collaboration Products 1,228 1,657 Total cost of revenue $ 2,899 $ 3,930 The year over year decrease in cost of revenue is mainly attributable to lower costs associated with the decrease in revenue during the same period.
Operating Lease Right-of-use-assets Right-of-use Assets are accounted for in accordance with ASC Topic 842 “Leases” (“ASC Topic 842”), and are amortized using a straight-line method over the estimated life of the lease. Right-of-use assets, net totaled $142,000 and $659,000, as of December 31, 2022 and 2021, respectively.
Intangible assets, net of accumulated amortization totaled zero and $604,000 as of December 31, 2023 and 2022, respectively. -31- Operating Lease Right-of-use-assets Right-of-use Assets are accounted for in accordance with ASC Topic 842 “Leases” (“ASC Topic 842”), and are amortized using a straight-line method over the estimated life of the lease.
During the year ended December 31, 2021, the Company recorded $1,193,000 of revenue that was included in deferred revenue as of December 31, 2020. Revenue recorded over time for the years ended December 31, 2022 and 2021 was $970,000 and $1,809,000, respectively.
During the year ended December 31, 2022, the Company recorded $776,000 of revenue that was included in deferred revenue as of December 31, 2021. Revenue recorded over time for the years ended December 31, 2023 and 2022 was $516,000 and $970,000, respectively.
Unallocated assets consist of unrestricted cash. -26- Revenue. Total revenue decreased for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Unallocated assets consist of unrestricted cash. Revenue. Total revenue decreased 30.4% for the year ended December 31, 2023 compared to the year ended December 31, 2022.
The following table summarizes the changes in components of our revenue, and the significant changes in revenue are discussed in more detail below (in thousands): Year Ended December 31, 2022 % of Revenue 2021 % of Revenue Revenue: Managed Services Video collaboration services $ 334 6 % $ 854 11 % Network services 2,954 54 % 3,347 43 % Professional and other services 60 1 % 69 1 % Total Managed Services revenue $ 3,348 61 % $ 4,270 55 % Revenue: Collaboration Products Visual collaboration product offerings $ 2,114 39 % $ 3,367 44 % Licensing 14 — % $ 102 1 % Total Collaboration Products revenue $ 2,128 39 % $ 3,469 45 % Total consolidated revenue $ 5,476 100 % $ 7,739 100 % Managed Services • The year over year 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. • The year over year 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. • We expect revenue declines in our Managed Services segment will continue in the future.
The following table summarizes the changes in components of our revenue, and the significant changes in revenue are discussed in more detail below (in thousands): Year Ended December 31, 2023 % of Revenue 2022 % of Revenue Revenue: Managed Services Video collaboration services $ 183 5 % $ 334 6 % Network services 2,301 60 % 2,954 54 % Professional and other services 34 1 % 60 1 % Total Managed Services revenue $ 2,518 66 % $ 3,348 61 % Revenue: Collaboration Products Visual collaboration product offerings $ 1,291 34 % $ 2,114 39 % Licensing 1 — % $ 14 — % Total Collaboration Products revenue $ 1,292 34 % $ 2,128 39 % Total consolidated revenue $ 3,810 100 % $ 5,476 100 % Managed Services • The year over year 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. -28- • The year over year 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. • We expect revenue declines in our Managed Services segment will continue in the future.
The year over year decrease in sales and marketing expenses for 2022 compared to 2021 is primarily attributable to lower office costs due to fewer real estate leases, and lower personnel costs due to reduced headcount. General and Administrative .
The year over year decrease in sales and marketing expenses for 2023 compared to 2022 is primarily attributable to lower personnel costs due to reduced headcount and reduced marketing expenses year over year. General and Administrative .
Revenue recorded at a period in time for the years ended December 31, 2022 and 2021 was $4,506,000 and $5,930,000, respectively.
Revenue recorded at a period in time for the years ended December 31, 2023 and 2022 was $3,294,000 and $4,506,000, respectively.
The Company recorded impairment Charges of $207,000 to purchased intangible assets for the year ended December 31, 2021. We tested goodwill for impairment on an annual basis, on September 30 th of each year, unless events occurred or circumstances changed indicating that the fair value of the goodwill may be below its carrying amount.
We tested goodwill for impairment on an annual basis, on September 30 th of each year, unless events occurred or circumstances changed indicating that the fair value of the goodwill may be below its carrying amount.
Recent Accounting Pronouncements See the sections titled “Summary of Significant Accounting Policies-Recently adopted accounting pronouncements” and “Recent accounting pronouncements not yet adopted” in Note 1 - Business Description and Significant Accounting Policies to our Consolidated Financial Statements for more information.
Off-Balance Sheet Arrangements As of December 31, 2023 and 2022, we had no off-balance sheet arrangements. -32- Recent Accounting Pronouncements See the sections titled “Summary of Significant Accounting Policies-Recently adopted accounting pronouncements” and “Recent accounting pronouncements not yet adopted” in Note 1 - Business Description and Significant Accounting Policies to our Consolidated Financial Statements for more information.
See Note 5 - Property and Equipment for further discussion. During the year ended December 31, 2021, the Company recorded impairment charges of $98,000 on property and equipment assets. For the year ended December 31, 2022, the Company recorded impairment charges of $5,133,000 on purchased intangible assets. See Note 7 - Intangible Assets for further discussion.
For the year ended December 31, 2023, the Company recorded impairment charges of $259,000 on purchased intangible assets. See Note 6 - Intangible Assets and Goodwill for further discussion. The Company recorded impairment Charges of $5,133,000 to purchased intangible assets for the year ended December 31, 2022.
Property and equipment assets, net of accumulated depreciation, totaled $3,000 and $159,000 as of December 31, 2022 and 2021, respectively. -30- Intangible Assets Intangible assets are accounted for in accordance with ASC Topic 350 “ Intangibles - Goodwill and Other” (“ASC Topic 350”), and intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the assets, which initially ranged from five to twelve years.
Long-Lived Assets and Intangible Assets Intangible Assets Intangible assets are accounted for in accordance with ASC Topic 350 “ Intangibles - Goodwill and Other” (“ASC Topic 350”), and intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the assets, which initially ranged from five to twelve years.
To determine the fair value of the reporting unit for the goodwill impairment test, we used a weighted average of the discounted cash flow method and market-based method. -31- During the year ended December 31, 2022, we recorded impairment charges of $7,367,000, related to the tests discussed above. See Note 6 - Goodwill for further discussion.
To determine the fair value of the reporting unit for the goodwill impairment test, we used a weighted average of the discounted cash flow method and market-based method. During the year ended December 31, 2022, we recorded impairment charges of $7,367,000 against goodwill, reducing the goodwill on our Consolidated Balance Sheets to zero.
Revenue related to professional services is recognized at the time the services are performed. The costs associated with obtaining a customer contract are deferred on our consolidated balance sheet and amortized over the expected life of the customer contract. Deferred revenue as of December 31, 2022 totaled $1,000 as certain performance obligations were not satisfied as of this date.
Revenue related to professional services is recognized at the time the services are performed. The costs associated with obtaining a customer contract are deferred on our consolidated balance sheet and amortized over the expected life of the customer contract. There was no deferred revenue related to Managed Services as of December 31, 2023.
We recorded an income tax benefit of $7,000 in 2022 and income tax benefit of $90,000 in 2021 (see Note 16 - Income Taxes to our Consolidated Financial Statements). Liquidity and Capital Resources As of December 31, 2022, we had $3,085,000 of cash and $2,959,000 of working capital.
Income Tax Benefit. We recorded income tax expense of $27,000 in 2023 and income tax benefit of $7,000 in 2022 (see Note 15 - Income Taxes to our Consolidated Financial Statements). Liquidity and Capital Resources As of December 31, 2023, we had $5,990,000 of cash and cash equivalents, and $5,498,000 of working capital.
Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.
Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.
The year over year decrease in research and development expenses for 2022 compared to 2021 is primarily attributable to lower personnel costs due to reduced headcount, partially offset by a $270,000 increase in consulting and outsourced labor costs between these periods. Sales and Marketing .
The year over year decrease in research and development expenses for 2023 compared to 2022 is primarily attributable to the ceasing of the majority of R&D activities during late 2022, which resulted in lower personnel costs due to reduced headcount and a reduction in consulting and outsourced labor costs between these periods. -29- Sales and Marketing .
The Company’s gross profit as a percentage of revenue was 28% in 2022 compared to 35% in 2021. This decrease in gross profit was primarily due to the decline in gross profit percentage for our Collaboration Products segment, as we maintained certain levels of personnel and other fixed costs to deliver lower revenue.
The Company’s gross profit as a percentage of revenue was 24% in 2023 compared to 28% in 2022. This decrease in gross profit was primarily due to the decline in gross profit percentage for our Collaboration Products segment. The gross profit as a percentage of revenue for our Collaboration Products segment was 5% in 2023 compared to 22% in 2022.
The year over year decrease in depreciation and amortization expenses in 2022 compared to 2021 is mainly attributable to the disposition and impairment of certain assets during 2021 and 2022 as well as a decrease in depreciation as certain assets became fully depreciated. Loss from Operations.
We do not expect any further recovery of the loss. Depreciation and Amortization . The year over year decrease in depreciation and amortization expenses in 2023 compared to 2022 is attributable to the disposition and impairment of certain assets during 2022 and 2023. Loss from Operations.
No impairments were recorded for Goodwill during the year ended December 31, 2021. Right-of-use assets are tested for impairment using guidance from ASC Topic 360. For the year ended December 31, 2022, the Company recorded aggregate impairment charges of $179,000 on two right-of-use assets. See Note 9 - Operating Lease Liabilities and Right-of-Use Assets for further discussion.
Right-of-use assets are tested for impairment using guidance from ASC Topic 360. For the year ended December 31, 2023, did not record any impairment charges on right-of-use-assets. The Company recorded aggregate impairment charges of $179,000 on two right-of-use assets for the year ended December 31, 2022.
For the years ended December 31, 2022 and 2021, we incurred net losses of $21,941,000 and $9,051,000, respectively, and net cash used in operating activities was $5,934,000 and $7,732,000, respectively.
For the years ended December 31, 2023 and 2022, we incurred net losses of $4,384,000 and $21,941,000, respectively, and net cash used in operating activities was $2,993,000 and $5,934,000, respectively. Net cash provided by investing activities for 2022 was $19,000, primarily related to the sale of property and equipment.
The year over year increase in the Company’s loss from operations is mainly attributable to the significant impairment charges recorded in 2022, as well as higher operating expenses and lower revenue and gross profit as addressed above. Interest and Other Income, Net .
The year over year decrease in the Company’s loss from operations is mainly attributable to the reduction in impairment charges and other operating expenses as addressed above. Interest and Other Income, Net . Interest and other income, net in 2023 and 2022 was primarily comprised of interest income related to our cash accounts, partially offset by interest expense.
Operating expenses are presented in the following table (in thousands): Year Ended December 31, 2022 2021 $ Change % Change Operating expenses: Research and development $ 1,699 $ 2,913 $ (1,214) (42) % Sales and marketing 1,431 2,195 (764) (35) % General and administrative 5,278 6,363 (1,085) (17) % Impairment charges 12,740 305 12,435 4077 % Casualty loss, net 483 — 483 100 % Depreciation and amortization 1,903 2,736 (833) (30) % Total operating expenses $ 23,534 $ 14,512 $ 9,022 62 % Research and Development .
Operating expenses are presented in the following table (in thousands): Year Ended December 31, 2023 2022 $ Change % Change Operating expenses (gains): Research and development $ 20 $ 1,699 $ (1,679) (99) % Sales and marketing 309 1,431 (1,122) (78) % General and administrative 4,870 5,278 (408) (8) % Impairment charges 262 12,740 (12,478) (98) % Casualty (gain) loss, net (400) 483 (883) 100 % Depreciation and amortization 345 1,903 (1,558) (82) % Total operating expenses $ 5,406 $ 23,534 $ (18,128) (77) % Research and Development .
The Company primarily leases facilities for office, warehouse, and data center space under non-cancellable operating leases for its U.S. and international locations, and accounts for these leases in accordance with ASC-842. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term.
Right-of-use assets, net totaled $17,000 and $142,000, as of December 31, 2023 and 2022, respectively. During 2022 and 2023, the Company leased facilities for office space and a warehouse under non-cancellable operating leases for its U.S. locations, and accounts for these leases in accordance with ASC-842.
During 2022, we received a recovery payment from one of our insurance policies of $50,000, resulting in a net casualty loss of $483,000 on our Consolidated Statements of Operations.
In June 2022, the Company discovered that $533,000 of inventory was stolen from the Company’s warehouse in City of Industry, California. During 2022 and 2023, we received recovery payments from our insurance policies of $50,000 and $400,000, respectively, resulting in a net casualty loss of $483,000 in 2022 and a casualty gain of $400,000 in 2023.
Collaboration Products • Historically, customers have used Mezzanine™ products in traditional office and operating center environments such as conference rooms or other presentation spaces.
Collaboration Products • 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.
Removed
The year over year decrease in revenue for our product offerings is primarily attributable to the ongoing effects of the COVID-19 pandemic on our existing and target customers as they continue to evaluate behavioral changes in how and when employees choose to work from traditional office environments.
Added
The Company currently operates in two segments: (1) “Collaboration Products,” which represents the business surrounding our Mezzanine™ product offerings, and (2) “Managed Services,” which represents the business surrounding managed services for video collaboration and network solutions.
Removed
The Company’s results reflect the challenges of long and unpredictable sales cycles, delays in customer retrofit budgets for commercial real estate spaces, project delays, and prospective orders in our distribution channels as a direct result of partner and customer implementation schedules shifting due to the COVID-19 pandemic and its aftermath.
Added
We believe the pandemic has 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.
Removed
The COVID-19 pandemic in particular has, and may continue to have, a significant economic and business impact on our Company.
Added
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. Cost of Revenue (exclusive of depreciation and amortization).
Removed
During 2021 and 2022, we experienced declines in revenue as our partners and customers across all sectors delayed potential orders in reaction to the ongoing impacts of the pandemic that caused our customers to suspend or postpone technology changes/upgrades due to budget and occupancy uncertainties.
Added
This decrease was mainly attributable to an increase in our inventory obsolescence reserve as a percentage of sales in 2023 vs. 2022.
Removed
We continue to monitor the impact of the pandemic on our customers, suppliers and logistics providers; the significance and duration of the ongoing impact on us is still uncertain.
Added
The year over year decrease in general and administrative expenses in 2023 compared to 2022 is mainly attributable to decreases of $344,000 in software license expense, and a $170,000 reduction to bad debt expense. Impairment Charges . The impairment charges in 2023 are primarily attributable to impairment charges of $259,000 related to intangible assets.
Removed
Material adverse effects of the COVID-19 pandemic, and its aftermath, on market drivers, our partners and customers, suppliers or logistics providers may be expected to continue to significantly impact our operating results. We will continue to actively follow, assess and analyze the ongoing impact of the pandemic and adjust our organizational structure, strategies, plans and processes to respond.
Added
There was no cash flow activity related to investing activities for 2023. Net cash provided by financing activities for 2023 was attributable to a private placement resulting in net proceeds of $5,364,000 and warrant exercises resulting in net proceeds of $534,000 (see Note 9 - Capital Stock and Note 10 - Preferred Stock to our Consolidated Financial Statements).
Removed
Because the situation continues to evolve, we cannot reasonably estimate the ultimate impact to our business, results of operations, cash flows and financial position that the pandemic may have.
Added
There was no cash flow related to financing activities for 2022. Future Capital Requirements 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.
Removed
Continuation of the ongoing effects of the pandemic, and government actions in response thereto, could cause further disruptions to our operations and the operations of our customers, suppliers and logistics partners and may be expected to continue to significantly adversely affect our near-term and long-term revenues, earnings, liquidity and cash flows. -27- Cost of Revenue (exclusive of depreciation and amortization and casualty loss).
Removed
The year over year decrease in general and administrative expenses in 2022 compared to 2021 is mainly attributable to decreases of $767,000 in stock-based expense and $203,000 in credit losses from accounts receivable, and lower consulting and professional fees and general office expenses, partially offset by an increase in personnel expenses, primarily attributable to receiving an Employee Retention Credit (“ERC”) during 2021.
Removed
The impairment charges in 2021 were attributable to impairment charges on property and equipment of $98,000 and impairment charges on intangible assets of $207,000 no longer in service.
Removed
Future declines of our revenue, cash flows and/or market capitalization may give rise to a triggering event that may require the Company to record impairment charges in the future related to our intangible assets and other long-lived assets. -28- Casualty Loss.
Removed
In June 2022, the Company discovered that $533,000 of inventory was stolen from the Company’s warehouse in City of Industry, California. The theft is being investigated further by the Los Angeles, CA Sheriff’s Department and claims have been filed with the Company’s insurance carriers.
Removed
Subsequent to the date of this report, we received notification from our other insurance carrier that they determined the Company was entitled to insurance proceeds of $315,000 relating to our inventory theft claim. The Company is currently in negotiations with the insurance carrier with the objective of increasing their determination of proceeds.
Removed
We will offset the casualty loss with the recognition of any proceeds once received from our insurance carrier. Depreciation and Amortization .
Removed
Interest and other income, net in 2022 was primarily comprised of interest income related to our cash accounts, partially offset by interest expense.
Removed
Interest and other income, net in 2021 was primarily comprised of (i) other income resulting from the settlement of an office lease, and (ii) a gain on extinguishment of debt resulting from the forgiveness of our Paycheck Protection Program loan (the “PPP Loan”). Income Tax Benefit.
Removed
Net cash provided by investing activities for the year ended December 31, 2022 was $19,000, primarily related to the sale of property and equipment, compared to net cash used in investing activities of $49,000 for the year ended December 31, 2021 primarily related to purchases of property and equipment.
Removed
There was no cash flow related to financing activities for the year ended December 31, 2022. Net cash provided by financing activities in 2021 was attributable to net proceeds of $11,504,000 from an equity financing.
Removed
Future Capital Requirements and Going Concern Our capital requirements in the future will continue to depend on numerous factors, including the timing and amount of revenue, customer renewal rates and the timing of collection of outstanding accounts receivable, in each case particularly as it relates to our major customers, the expense to deliver services, expense for sales and marketing, expense for research and development, capital expenditures, and the cost involved in protecting intellectual property rights.
Removed
The Company believes that, based on our current projection of revenue, expenses, capital expenditures, and cash flows, it will not have sufficient resources to fund its operations for the next twelve months following the filing of this Report.
Removed
The factors discussed above raise substantial doubt as to our ability to continue as a going concern. The accompanying Consolidated Financial Statements do not include any adjustments that might result from these uncertainties.
Removed
Long-Lived Assets, Goodwill, and Intangible Assets Property and Equipment Property and equipment are accounted for in accordance with ASC Topic 360 “ Property, Plant, and Equipment” (“ASC Topic 360”), stated at cost, and are depreciated using the straight-line method over the estimated economic lives of the assets, which range from three to ten years.
Removed
Leasehold improvements are amortized over the shorter of either the asset’s useful life or the related lease term. Depreciation is computed on the straight-line method for financial reporting purposes.
Removed
Intangible assets, net of accumulated amortization totaled $604,000 and $7,562,000 as of December 31, 2022 and 2021, respectively. Goodwill Goodwill is accounted for in accordance with ASC Topic 350 and is not amortized. Goodwill is subject to periodic testing for impairment.
Removed
As of December 31, 2021, goodwill of $7,367,000 was recorded on our Consolidated Balance Sheet in connection with the October 1, 2019 acquisition of Oblong Industries. As a result of the impairment charges discussed below, there was no goodwill recorded on our Consolidated Balance Sheet as of December 31, 2022.
Removed
There were no right-of-use asset impairments for the year ended December 31, 2021. Off-Balance Sheet Arrangements As of December 31, 2022 and 2021, we had no off-balance sheet arrangements.