8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 1, 2019

GLOWPOINT, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of Incorporation or organization)	001-35376 (Commission File Number)	77-0312442 (IRS Employer Identification No.)
999 18th Street, Suite 1350S Denver, Colorado 80202 (Address of principal executive offices, zip code)
(303) 640-3838 (Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

▪ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

▪ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a‑12)

▪ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

▪ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	GLOW	NYSE American

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (ß 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (ß 240.12b-2 of this chapter). Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

US 167099915v2

Explanatory Note

As previously disclosed, on October 1, 2019 (the "Closing Date"), Glowpoint, Inc., a Delaware corporation (the "Company' or "Glowpoint"), closed its previously announced acquisition of Oblong Industries, Inc., a Delaware corporation ("Oblong" and, such transaction, the "Acquisition"). The Acquisition was consummated through the merger of Glowpoint Merger Sub II, Inc., a Delaware corporation and wholly-owned subsidiary of Glowpoint (the "Merger Sub"), with and into Oblong on the Closing Date, with Oblong continuing as the surviving corporation and as a wholly-owned subsidiary of Glowpoint, all as more fully described in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 7, 2019 (the "Original 8-K").

This Amendment No. 1 to the Original 8-K is being filed solely to include the financial statements and other information required by Items 9.01(a) and (b) of Form 8-K, which were excluded from the Original 8-K in reliance on paragraph (a)(4) of Item 9.01 of Form 8-K. Except for the foregoing, this Amendment No. 1 to the Original 8-K does not modify or update any other disclosure contained in the Original 8-K.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired.

The audited financial statements of Oblong as of December 31, 2018 and for the years then ended, and the notes related thereto, is attached hereto as Exhibit 99.2, and is incorporated herein by reference. The audited financial statements of Oblong as of December 31, 2017 and 2016 and for the years then ended, and the notes related thereto, are attached hereto as Exhibit 99.3, and are incorporated herein by reference.

The unaudited financial statements of Oblong as of September 30, 2019 and for the nine month periods ended September 30, 2019 and 2018, and the notes related thereto, are attached hereto as Exhibit 99.4 and are incorporated herein by reference.

(b) Pro Forma Financial Information.

The unaudited pro forma condensed combined financial statements of the Company and Oblong as of September 30, 2019 and for the nine month period then ended, and for the year ended December 31, 2018, and the notes related thereto, are attached hereto as Exhibit 99.5 and are incorporated herein by reference.

(c) Exhibits.

Exhibit No.	Description
23.1	Consent of BDO USA, LLP, Independent Auditors.
23.2	Consent of Holthouse, Carlin & Van Trigt LLP, Independent Auditors.
99.2	Audited financial statements of Oblong Industries, Inc. as of December 31, 2018 and for the year then ended, and the notes related thereto.
99.3	Audited financial statements of Oblong Industries, Inc. as of December 31, 2017 and 2016 and for the years then ended, and the notes related thereto.
99.4	Unaudited financial statements of Oblong Industries, Inc. as of September 30, 2019, and for the nine month periods ended September 30, 2019 and 2018, and the notes related thereto.
99.5	Unaudited pro forma condensed combined financial statements of Glowpoint, Inc. and Oblong Industries, Inc. as of September 30, 2019 and for the nine month period then ended, and for the year ended December 31, 2018, and the notes related thereto.

US 167099915v2

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

GLOWPOINT, INC.

Date: December 17, 2019By:/s/ David Clark

Name: David Clark

Title: Chief Financial Officer

US 167099915v2

EX-23.1

Tel: 310-557-0300 Fax: 310-557-1777 www.bdo.com 515 Flower Street 47^th Floor Los Angeles CA 90071

Consent of Independent Registered Public Accounting Firm

Glowpoint, Inc.

Denver, Colorado

We hereby consent to the inclusion in the Form 8-K of our reissued report dated June 30, 2019 and December 17, 2019 as to the first paragraph of Note 8, relating to the consolidated financial statements of Oblong Industries, Inc. and Subsidiaries (collectively, "Oblong" or the "Company"), which comprise the consolidated balance sheet as of December 31, 2018 and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes to the consolidated financial statements.

/s/ BDO USA, LLP

Los Angeles, California

December 17, 2019

EX-23.2

Consent of Independent Auditor

We consent to the incorporation by reference in the Current Report on Form 8-K/A of Glowpoint, Inc. of our report dated June 30, 2018 (except for the first paragraph in Note 8 and Note 12, as to which the date is December 17, 2019), with respect to the consolidated financial statements of Oblong Industries, Inc. as of and for the years ended December 31, 2017 and 2016, included in this Current Report on Exhibit 99.3.

/s/ Holthouse, Carlin &Van Tright, LLP

Encino, California

December 17, 2019

EX-99.2

Exhibit 99.2

Oblong Industries, Inc. and Subsidiaries

Consolidated Financial Statements

Year Ended December 31, 2018

Oblong Industries, Inc. and Subsidiaries

Contents

Independent Auditor’s Report    3-4

Consolidated Financial Statements

Consolidated Balance Sheet as of December 31, 2018    6

Consolidated Statement of Operations and Comprehensive Loss

for the Year Ended December 31, 2018    7

Consolidated Statement of Convertible Preferred Stock and Stockholders’ Deficit

for the Year Ended December 31, 2018    8

Consolidated Statement of Cash Flows

for the Year Ended December 31, 2018    9

Notes to Consolidated Financial Statements    10-29

2

Independent Auditor’s Report

Board of Directors and Stockholders of

Oblong Industries, Inc.:

We have audited the accompanying consolidated financial statements of Oblong Industries, Inc. and subsidiaries (collectively, the “Company”), which comprise the consolidated balance sheet as of December 31, 2018, and the related consolidated statements of operations and comprehensive loss, changes in convertible preferred stock and stockholders’ deficit, and cash flows for the year then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements as of December 31, 2018 and the year then ended present fairly, in all material respects, the consolidated financial position of Oblong Industries, Inc. and subsidiaries as of December 31, 2018, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

3

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has incurred recurring losses from operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of uncertainty. Our opinion is not modified with respect to that matter.

Los Angeles, California

June 30, 2019, and December 17, 2019 as to the first paragraph of Note 8

4

Exhibit 99.2

Consolidated Financial Statements

5

Oblong Industries, Inc. and Subsidiaries

Consolidated Balance Sheet

December 31,		2018
Assets
Current assets
Cash, cash equivalents and restricted cash	$	8,647,940
Accounts receivable		2,229,622
Prepaid expenses and other current assets		805,280
Inventory		1,868,153
Total current assets		13,550,995
Property and equipment, net		1,800,078
Intangible assets, net		4,448,196
Other assets		260,844
Total Assets	$	20,060,113
Liabilities, Convertible Preferred Stock, and Stockholders’ Equity
Current liabilities
Accounts payable	$	550,425
Accrued expenses and other current liabilities		942,474
Customer deposits		433,199
Current portion of deferred revenue		2,652,249
Current portion of deferred rent		45,605
Current portion of debt		655,875
Total current liabilities		5,279,827
Deferred revenue, net current portion		715,854
Deferred rent, net current portion		171,625
Long-term debt		4,591,125
Other long-term liabilities		3,363
Total liabilities		10,761,794
Commitments and Contingencies (Note 6)
Convertible Preferred Stock
Convertible preferred stock		71,755,175
Stockholders’ equity
Common stock		2,731
Additional paid-in capital		43,607,483
Accumulated deficit		(105,673,080)
Accumulated other comprehensive loss		(393,990)
Total stockholders’ deficit		(62,456,856	)
Total Liabilities, Convertible Preferred Stock, and Stockholders’ Equity	$	20,060,113

See accompanying notes to consolidated financial statements.

6

Oblong Industries, Inc. and Subsidiaries

Consolidated Statement of Operations and Comprehensive Loss

Year ended December 31,		2018
Net Revenues	$	17,249,458
Cost of Revenues		4,499,818
Gross Profit		12,749,640
Operating Expenses
Research and development		9,211,973
General and administrative		7,146,762
Sales and marketing		12,470,067
Depreciation and amortization		1,330,010
Loss on impairment of intangible assets		330,917
Total Operating Expenses		30,489,729
Loss from Operations		(17,740,089)
Other Expenses (Income)
Interest expense, net		129,165
Other expense (income), net		(15,547)
Total Other Expenses, Net		113,618
Net Loss		(17,853,707)
Foreign Currency Translation Loss		(76,068)
Comprehensive Loss	$	(17,929,775)

See accompanying notes to consolidated financial statements.

7

Oblong Industries, Inc. and Subsidiaries

Consolidated Statement of Convertible Preferred Stock and Stockholders’ Equity

8

Oblong Industries, Inc. and Subsidiaries

Consolidated Statement of Cash Flows

Year ended December 31,		2018
Cash Flows from Operating Activities
Net loss	$	(17,853,707)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		1,463,260
Inventory write-off		559,587
Amortization of deferred financing costs		90,737
Stock-based compensation		225,795
Loss on disposal of property and equipment		16,249
Impairment of intangible assets		330,917
Property and equipment expensed to cost of revenues and operating expenses		122,258
Change in operating assets and liabilities:
Accounts receivable		6,081,553
Prepaid expenses and other current assets		(389,556)
Inventory		(398,326)
Other assets		28,331
Accounts payable		(658,962)
Accrued expenses and other current liabilities		(526,010)
Deferred revenue		(4,304,237)
Customer deposits		20,311
Deferred rent		(36,722)
Other long-term liabilities		22,979
Net cash used in operating activities		(15,205,543)
Cash Flows from Investing Activities
Purchase of property and equipment		(200,689)
Intangible asset costs		(264,338)
Net cash used in investing activities		(465,027)
Cash Flows from Financing Activities
Proceeds from sale of preferred stock and common stock warrants		9,480,952
Proceeds from exercise of stock options and warrants		7,299
Borrowings from revolving line of credit		3,026,639
Borrowings on term loan		2,484,259
Payments on revolving line of credit		(3,026,639)
Payments on term loan		(2,287,037)
Net cash provided by financing activities		9,685,473
Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash		(51,466)
Net Decrease in Cash, cash equivalents and restricted cash		(6,036,563)
Cash, Cash Equivalents and Restricted Cash, beginning of year (revised)		14,684,503
Cash, Cash Equivalents and Restricted Cash, end of year	$	8,647,940
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for interest	$	207,219
Cash paid during the year for income taxes		23,236
Non-Cash Investing and Financing Activities
Transfer of inventory to property and equipment	$	204,473
Conversion of preferred stock to common stock		38,538,597

See accompanying notes to consolidated financial statements.

9

Oblong Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1. Organization and Nature Of Business

Oblong Industries, Inc. (“Oblong”) was incorporated in the state of Delaware on July 31, 2006. Oblong’s wholly-owned subsidiaries consist of Oblong Industries Europe S.L.U. (“Euroblong”) and Oblong Europe Ltd (“Oblong UK”) (collectively, the “Company”). Euroblong was incorporated in Spain on March 12, 2007 and Oblong UK was incorporated in England on February 6, 2014. On January 27, 2017, Oblong UK established the branch entity, Oblong Europe Ltd. (German Branch) (“Oblong German Branch”).

The Company’s core platform is g-speak™ and Mezzanine™ is its flagship product built on this platform. Mezzanine offers advanced collaboration for conference room technology, which amplifies sales presentations, enhances group collaboration, and makes work sessions more productive. The Company offers g-speak development licenses to larger enterprise customers. Oblong is headquartered in Los Angeles, California with a sales and development office in Boston, Massachusetts; regional sales offices in Los Altos, California; New York City, New York; Washington D.C.; Chicago, Illinois; Houston and Dallas, Texas; and Atlanta, Georgia. The Euroblong office is in Barcelona, Spain and focuses on mobile research and development, while the Oblong UK and Oblong German Branch offices are in London, England and Munich, Germany, respectively, and focus on sales and marketing in the European region.

2. Summary of Significant Accounting Policies

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of $105,673,080 and net losses of $17,853,707 as of and for the year ended December 31, 2018. Cash used in operating activities amounted to $15,205,543 for the year ended December 31, 2018. In addition, as disclosed in Note 6, the Company’s revolving line of credit with a financial institution matures in October 2019. These conditions raise substantial doubt as to the Company’s ability to continue to operate as a going concern.

Since inception, the Company has financed its business activities through the issuance of equity instruments and debt. The Company is subject to various risks and uncertainties frequently encountered by newly formed companies. Such risks and uncertainties include, but are not limited to, undeveloped technology, its limited operating history, dependence on key personnel, and management of rapid growth. To address these risks, the Company must, among other things, successfully develop its customer base; successfully execute its business and marketing strategy; successfully develop its technology; provide superior customer service; and attract, retain, and motivate qualified personnel.

Based on the Company’s projected cash flows and operating results for 2019, management does not believe it has sufficient cash resources to fund operations and meet its obligations as they become due for the next twelve months. Management has no further funding commitments from current investors and is in active pursuit of finding new investors or potential acquirers. As a result, there is substantial doubt the Company will be able to raise adequate funds, get acquired, or achieve and sustain profitability or positive cash flows from its operations.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

10

Oblong Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Oblong and its wholly-owned subsidiaries Euroblong and Oblong UK, and branch entity, Oblong German Branch. All significant intercompany balances and transactions have been eliminated upon consolidation.

Accounting Method

The Company maintains its accounting records on an accrual method in conformity with accounting principles generally accepted in the United States of America (“US GAAP”).

Use of Estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include the valuation of certain accrued expenses, which have been prepared on the basis of the most current and best available information. However, actual results from the resolution of such estimates and assumptions may vary from those used in the preparation of the consolidated financial statements.

Revenue Recognition

As required by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition, the Company recognizes revenue when persuasive evidence of an arrangement exists, service has been rendered, the sales price is fixed or determinable, and collection is probable. Amounts billed in excess of revenue recognized are included in deferred revenue. Customer deposits represent payments received by the Company from customers for which revenue recognition criteria have not been met.

The Company’s products are systems that consist of hardware and software that function together to deliver the system’s essential functionality. The Company sells the systems as a complete package and does not sell the hardware and software separately. The Company also sells maintenance and support contracts and license agreements. The Company has determined that its systems and service contracts have value to a customer on a standalone basis; therefore, revenue from each item should be recognized separately.

The Company establishes the relative selling price of each deliverable based on estimated selling price. The Company recognizes product revenue from its systems upon shipment, installation revenue upon completed installation and revenue from maintenance contracts and license agreements ratably over the applicable periods, ranging from 12 to 36 months. Professional service contracts are billed based on time and materials at the contract rate as the services are rendered.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include all cash balances and highly liquid investments, such as money market funds, with original maturities of three months or less from the date of purchase. Restricted cash are cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements.

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Oblong Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

The Company used a bank guarantee in place of a cash deposit for the lease of the sales office in Munich, Germany. The bank guarantee was collateralized by a restricted cash bank account.

As of December 31, 2018, the Company had a restricted cash balance of $93,150.

In November 2016, the FASB issued Accounting Standards Update ("ASU") 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18). ASU 2016-18 provides guidance on how restricted cash must be presented on the consolidated statement of cash flows. ASU 2016-18 requires that consolidated statement of cash flows show the change during the period of the total cash, cash equivalents and restricted cash. Private companies are required to apply the guidance in ASU 2016-18 to fiscal years beginning after December 15, 2018, with early adoption permitted. The Company has early adopted this guidance, and restricted cash is included in cash, cash equivalents and restricted cash on the accompanying consolidated balance sheet as of December 31, 2018 and the consolidated statement of cash flows for the year ended December 31, 2018.

Fair Value Measurements

The Company accounts for the fair value of its financial instruments in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”). Non-recurring, nonfinancial assets and liabilities are also accounted for under the provisions of ASC 820.

ASC 820 defines fair value, establishes a framework for measuring fair value under US GAAP and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value.

The Company’s management used the following methods and assumptions to estimate the fair value of its financial instruments:

Level 1 – Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities.

Level 3 – Pricing inputs that are unobservable, supported by little or no market activity and that are significant to the fair value of the assets or liabilities, as described below.

12

Oblong Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

The Company has money market funds, which are stated at fair value based on Level 1 inputs at each reporting period.

December 31, 2018		Level 1		Level 2		Level 3		Total
Money market funds	$	8,390,865	$	-	$	-	$	8,390,865

Accounts Receivable

Accounts receivables are receivables from customers carried at their estimated collectible amounts. Credit is generally extended on a short-term basis; thus, accounts receivables do not bear interest. The Company extends credit based upon past credit history and an evaluation of the customers’ financial condition. Generally, collateral is not required. Accounts receivables are periodically evaluated and charged against an allowance account, if deemed to be uncollectible. The Company believes the accounts receivable balances outstanding as of December 31, 2018 are fully collectible; therefore, no allowance has been recorded.

Stock-based Compensation

The Company accounts for stock-based compensation in accordance with FASB ASC Topic 718, Compensation – Stock Compensation, which requires all share-based payments to employees and non-employees, including grants of employee stock options, to be recognized in the consolidated statements of operations and comprehensive loss based on the fair value of those awards calculated ratably over the requisite service period using an option valuation model on the grant date.

Financial Instruments and Concentrations of Business and Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit and business risk consist of cash, cash equivalents and restricted cash, marketable securities, accounts receivable and accounts payable.

The Company maintains cash, cash equivalents and restricted cash balances that at times exceed amounts insured by the Federal Deposit Insurance Corporation. The Company has not experienced any losses in these accounts and believes it is not exposed to any significant credit risk in this area.

The Company’s customer concentrations expose it to credit risks such as collectability and business risks such as sales concentration. The Company grants credit in the normal course of business to customers in the United States and other world-wide locations. The Company periodically performs credit analysis and monitors the financial condition of its customers to reduce credit risk. On a case-by-case basis, the Company requires deposits from customers who are unable to verify acceptable credit standards.

For the year ended December 31, 2018, two customers accounted for approximately 44% of total net revenues. Amounts outstanding from these two customers accounted for approximately 44% of total accounts receivable as of December 31, 2018.

The Company’s supplier concentrations expose it to business risks, which the Company mitigates by attempting to diversify its supply chain. There was no supplier concentration for the year ended December 31, 2018.

13

Oblong Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Inventory

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-11 requires that inventory be measured at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This eliminates the need to determine and consider replacement cost or net realizable value less an approximately normal profit margin when measuring inventory. ASU 2015-11 is effective for private entities for annual reporting periods beginning after December 15, 2016. The Company adopted this standard prospectively for the year ended December 31, 2017. The adoption did not have a material impact on the Company’s consolidated financial position or results of operations.

Inventory consists primarily of equipment, including cameras, tracking hardware, computer equipment, display equipment, and mounts, and was stated at the lower of cost or net realizable value, determined using average cost. The Company uses the average cost costing method for inventory. The Company periodically performs analyses to identify any obsolete or slow-moving inventory. The obsolete or slow-moving inventory reserved and disposed of totaled $159,577 for the years ended December 31, 2018. There was no additional inventory reserve balance as of December 31, 2018. The Company periodically performs cycle counts, which may result in inventory write-offs. Write-offs are also due to excess and obsolete inventory identified as part of the analysis performed annually. The total inventory written-off and disposed of totaled $400,010 for the years ended December 31, 2018.

Deferred Financing Costs

Deferred financing costs represent fees incurred in connection with financing transactions. These fees are capitalized and amortized to interest expense over the terms of the related financing agreements using a method that approximates the effective interest method. FASB ASU 2015-03, Interest-Imputation of Interest (Subtopic 835-30) requires that deferred financing costs are presented, net of accumulated amortization, as an asset for amounts relating to revolving lines of credit, and as direct deductions from the face amounts of all other related long-term debt.

Deferred financing costs related to long-term debt amounted to $285,363, net of accumulated amortization of $90,737 as of December 31, 2018.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the related assets, which range from two to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of their estimated useful lives or the term of the related lease.

Betterments, renewals and extraordinary repairs that materially extend the useful life of the asset are capitalized; other repairs and maintenance charges are expensed as incurred. The cost and related accumulated depreciation and amortization applicable to assets retired are removed from the accounts, and the gain or loss on disposition, if any, is recognized in the consolidated statement of operations and comprehensive loss for that period. The costs of replacement parts and supplies are charged to expense as they are used. Maintenance costs are expensed as incurred.

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Oblong Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Intangible Assets

Intangible assets are stated at cost, net of accumulated amortization and consist primarily of patents. Intangible assets with definite useful lives are amortized using the straight-line method over the useful lives.

The Company has applications for patents, which consist of technology, know-how, information, and intellectual property relevant to gestural and dynamic spatial-visual human machine interface. As of December 31, 2018, 78 patents have been granted.

It is the belief of the Company that the remaining patent submissions will be approved; however, amortization of the patents will not occur until approval has been granted. Should a patent be denied or it become likely that a patent application will not be granted, the patent will be considered abandoned and the associated costs will be expensed as an impairment. For the year ended December 31, 2018, the Company expensed $330,917 of patent costs for abandoned patents (see Note 4).

Impairment of Long-lived Assets

The Company is subject to the provisions of FASB ASC Topic 360, Property, Plant and Equipment – Impairment or Disposal of Long-lived Assets, which requires impairment losses to be recorded on long-lived assets with definite lives when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of the assets. In such cases, the carrying value of assets to be held and used are adjusted to their estimated fair value and assets held for sale are adjusted to their estimated fair value less selling expenses. Other than the patents costs that were abandoned (see Note 4), no impairment losses were recognized for the year ended December 31, 2018.

Indefinite lived intangible assets are tested for impairment using a qualitative approach by first assessing qualitative factors to determine whether it is more-likely-than-not that the fair value of an indefinite lived intangible asset is impaired as a basis for determining whether it is necessary to perform quantitative impairment testing. The Company’s indefinite-lived intangible assets consist of trade marks with a carrying value of $69,952 at December 31, 2018. The results of the qualitative analysis of the Company’s indefinite lived intangible assets, indicated that the fair value of the indefinite lived intangible assets exceeded their carrying value. The Company foregoes a qualitative assessment and tests indefinite-lived intangible assets for impairment when it concludes that it is more-likely-than-not there may be an impairment. If needed, the annual or interim quantitative test of the recovery of indefinite-lived intangible assets involve a comparison of the estimate fair value of the indefinite-lived assets to its carrying value. If the estimated fair value of the indefinite-lived assets exceeds its carrying value, the indefinite-lived intangible assets are not impaired. If the carrying value of the indefinite-lived assets exceeds the estimated fair value, an impairment loss equal to the excess is recorded.

Research and Development Expenses

Research and development costs are expensed as incurred and consist primarily of costs associated with the development and testing of the Company’s products. Research and development expenses include the cost of certain personnel and benefits, consultants, facility costs, supplies and other direct and allocated indirect expenses incurred to support the Company’s research and development programs. Research and development expenses totaled $9,211,973 for the year ended December 31, 2018.

Shipping and Handling Costs

15

Oblong Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

The Company has included shipping and handling costs of $73,503 in cost of revenues and $200,415 in general and administrative expenses for the year ended December 31, 2018 on the accompanying consolidated statements of operations and comprehensive loss. Shipping and handling costs billed to customers are included in revenues.

Advertising

Advertising costs are expensed as incurred. Total advertising expenses of $2,119,277 are included in sales and marketing expense on the accompanying consolidated statements of operations and comprehensive loss for the year ended December 31, 2018.

Sales Taxes

The Company accounts for sales taxes in accordance with FASB ASC Subtopic 605-45, Revenue Recognition – Principal Agent Considerations, which provides that the presentation of taxes assessed by a governmental authority that are directly imposed on revenue-producing transactions (e.g. sales, use, and excise taxes) between a seller and a customer on either a gross basis (included in revenues and costs) or on a net basis (excluded from revenues) is an accounting policy decision that should be disclosed. In addition, for any such taxes that are reported on a gross basis, the amounts of those taxes should be disclosed in the consolidated financial statements for each period for which a statement of operations and comprehensive loss is presented if those amounts are significant. The Company records sales taxes on a net basis.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with FASB ASC Topic 740, Income Taxes (“ASC 740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

The Company follows the provisions of uncertain tax positions as addressed in FASB ASC Subtopic 740-10, Income Taxes. The Company did not recognize a liability for unrecognized tax benefits. Management estimates the tax positions as of December 31, 2018 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility is immaterial to the consolidated financial statements. The Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense. No such interest or penalties were recognized during the periods presented. The Company had no accruals for interest and penalties as of December 31, 2018.

With few exceptions, the Company is subject to examination by United States federal tax authorities for returns filed for the prior three years and by foreign and state tax authorities for returns filed for the prior four years.

Leases

The Company’s leases are accounted for under the provisions of FASB ASC Topic 840, Leases, which require that leases be evaluated and classified as operating or capital leases for financial reporting purposes. Costs for

16

Oblong Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

operating leases that include incentives such as payment escalations or rent abatements are recognized on a straight-line basis over the term of the lease.

Additionally, inducements received from lessors are treated as a reduction of costs over the term of the agreement. Costs for capital leases are capitalized at the present value of the future minimum lease payments, less any taxes and fees, with the corresponding obligation recorded in liabilities. Capital leases are amortized in accordance with property and equipment policies, and the corresponding obligations are reduced as lease payments are made. As of December 31, 2018, the Company had no capital leases.

Comprehensive Income and Foreign Currency Translation

Comprehensive income is defined as the change in equity during a period from transactions and other events from non-owner sources. Comprehensive income is the total of net income and other comprehensive income, which includes foreign currency translation adjustments. The functional currencies of the Company’s foreign operations are the reported local currencies. Translation adjustments result from translating the Company’s foreign subsidiaries’ financial statements into United States dollars. Assets and liabilities of the Company’s foreign subsidiaries are translated into United States dollars using the exchange rate in effect at the consolidated balance sheet dates. Equity is translated at the historical rate of the transaction.

Revenues and expenses are translated using average exchange rates for each month during the fiscal year. The Company considers intercompany balances as long-term investments in nature as they do not expect repayment, and therefore, translates the transactions at the historical rate. The resulting translation losses are recorded as a component of accumulated other comprehensive loss in stockholders’ equity. The cumulative foreign currency translation adjustment totaled $393,990 as of December 31, 2018. Foreign currency translation gains (losses) were $(76,068) during 2018 and are reported on the consolidated statement of operations and comprehensive loss.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability, measured on a discounted basis, on the consolidated balance sheets for all leases with terms greater than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated statements of operations and comprehensive loss. A modified retrospective transition approach is required for capital and operating leases existing at the date of adoption, with certain practical expedients available. The Company is currently in the process of evaluating the potential impact of this new guidance, which is effective for the Company beginning on January 1, 2020.

On May 28, 2014, the FASB issued Accounting Standards Update Topic 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers. ASU 2014-09 supersedes existing revenue recognition guidance, including ASC 605-35. ASU 2014-09 outlines a single set of comprehensive principles for recognizing revenue under US GAAP. Among other things, it requires companies to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time. These concepts, as well as other aspects of ASU 2014-09, may change the method and/or timing of revenue recognition for certain of the Company contracts. ASU 2014-09 will be effective for privately held companies for annual reporting periods beginning after December 15, 2018 and may be applied either retrospectively or through the use of a modified-retrospective method. Management is currently evaluating both methods of adoption as well as the effect ASU 2014-09 will have on the Company’s consolidated financial position, results of operations and cash flows.

17

Oblong Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which provides clarification regarding how certain cash receipts and cash payment are presented and classified in the statement of cash flows. This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. This update is effective for nonpublic companies for annual and interim periods beginning after December 15, 2018, which will require the Company to adopt these provisions in the first quarter of fiscal 2019 using a retrospective approach. Early adoption is permitted. The Company is currently evaluating the effect of this ASU on our consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software). The amendments in this ASU require an entity (customer) in a hosting arrangement that is a service to (1) determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense; (2) expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement; (3) apply the existing impairment guidance to the capitalized implementation costs as if the costs were long-lived assets; (4) present the expense related to the capitalized implementation costs in the same line item in the statement of income as the fees associated with the hosting element (service) of the arrangement and classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting arrangements; and (5) present the capitalized implementation costs in the statement of financial position in the same line item that a prepayment for the fees of the associated hosting arrangement would be presented. ASU 2018-15 is effective for nonpublic companies for annual periods beginning after December 15, 2020. The Company is currently evaluating the effect of this ASU on our consolidated financial statements and related disclosures.

3. Revision of Previously Issued Financial Statements for Correction of Immaterial Error

The Company determined that its holdings of certain money market funds with a financial institution were erroneously classified as marketable securities on its balance sheet as of 2017 and instead should have been included in cash and cash equivalents. Cash, cash equivalents and restricted cash, beginning of year (December 31, 2017) in the accompanying consolidated statement of cash flows has been adjusted for the effects of this revision.

The following table illustrates the effect this revision :

		December 31, 2017
Oblong Industries, Inc. Consolidated Balance Sheet		As previously reported		Adjustment		As revised
Cash, cash equivalents and restricted cash	$	631,331	$	14,053,172	$	14,684,503
Marketable Securities		14,053,172		(14,053,172)		—

18

Oblong Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

4. Property and Equipment

Property and equipment consists of the following:

December 31,		2018
Computer equipment	$	5,226,067
Furniture and fixtures		305,169
Leasehold improvements		989,927
Tooling		170,742
		6,691,905
Less: accumulated depreciation and amortization		(4,891,827)
Property and equipment, net	$	1,800,078

For the year ended December 31, 2018, depreciation and amortization expense related to property and equipment totaled $1,026,131, of which $973,899 and $52,232 were included in operating expenses and cost of revenues, respectively.

5. Intangible Assets

Identifiable intangible assets consist of the following:

December 31, 2018		Gross Carrying Amount	Useful Life In Years		Accumulated Amortization			Impairment			Net Carrying Amount
Patent cost	$	4,713,750	10 - 20	$		(608,199	)    $		(330,917	)    $	3,774,634
Trademarks		69,952	Indefinite			-			-		69,952
Certification costs		340,798	3			(184,700	)		-		156,098
Software systems		711,602	5			(264,090	)		-		447,512
Total	$	5,836,102		$		(1,056,989	)    $		(330,917	)    $	4,448,196

The gross carrying amount of patent costs consist of the following:

December 31,		2018
Granted patents	$	3,045,438
Pending patents		1,337,395
Abandoned patents		330,917
Total	$	4,713,750

19

Oblong Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

For the year ended December 31, 2018, amortization expense related to identifiable intangible assets totaled $437,129, of which $356,112 and $81,017 were included in operating expenses and cost of revenues, respectively.

Future amortization expense for intangibles subject to amortization are as follows:

Years ending December 31,		Amount
2019	$	461,854
2020		414,708
2021		387,208
2022		247,454
2023		226,903
Thereafter		1,302,722
Total	$	3,040,849

6. Long-term Debt

The Company is party to a loan and security agreement with a financial institution consisting of a term loan (the “Term Loan”) and revolving line of credit (the “Revolver”). The loan and security agreement is collateralized by substantially all of the Company’s assets, not including the intellectual property consisting of copyrights, trademarks and patents. In October 2018, the Company modified the Term Loan with the Sixth Amendment to Amended and Restated Loan and Security Agreement (“Sixth Amendment”). The Term Loan decreased to $5,247,000 and the Revolver decreased to $1,500,000. The financial covenants were revised to exclude any requirements related to the Company’s quick ratio. The financial covenants require the Company to maintain minimum bookings pre-determined and satisfactory to the bank. The Term loan matures in September 2021 and the Revolver matures in October 2019. The Term Loan and Revolver bear interest at the Wall Street Journal prime rate plus 0.375% (5.875% as of December 31, 2018).

The borrowings available under the Revolver were $1,500,000 as of December 31, 2018. The Revolver consists of interest-only payments, payable in arrears, and principal is due in full at maturity. There was no outstanding balance on the Revolver as of December 31, 2018.

The Term Loan consist of interest-only payments through September 30, 2019 followed by twenty-seven equal monthly payments of principal, plus monthly payments of accrued interest through maturity. The outstanding balance on the Term Loan was $5,247,000 as of December 31, 2018.

The Sixth Amendment included a final payment related to the Term Loan over and above the principal balance due at maturity in the amount of $262,350. The Company recorded these loan costs on the consolidated balance sheets and is amortizing the costs as interest expense over the amended terms of the loans to recognize the effective interest rate related to the loans.

The Company was in compliance with the minimum booking as of December 31, 2018, but was not in compliance with the minimum booking from October to November during the year ended December 31, 2018.

20

Oblong Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Future maturities of the Term Loan are as follows:

Years ending December 31,		Amount
2019	$	655,875
2020		2,623,500
2021		1,967,625
Total	$	5,247,000

7. Commitments and Other Contingencies

Lease Commitments

The Company leases its facilities under non-cancellable operating lease agreements that expire on various dates through May 2023. In addition, the Company has facility leases that provide for rent adjustment increases. The accompanying consolidated statements of operations and comprehensive loss reflect rent expense on a straight-line basis over the term of the leases.

The differences between rent expense recorded and the amount paid are credited or charged to deferred rent, which were included in the accompanying consolidated balance sheets. Under these agreements, net rent expense was $1,457,082 for the year ended December 31, 2018. Total deferred rent as of December 31, 2018 was $217,230.

The approximate aggregate future minimum lease commitments for these leases are as follows:

Years ending December 31,		Cash Payments		Straight-line Rent Expense		Deferred Rent
2019	$	1,452,304	$	1,427,912	$	24,392
2020		1,332,544		1,260,122		72,422
2021		1,157,501		1,089,273		68,228
2022		589,312		545,004		44,308
Thereafter		196,915		189,035		7,880
Total	$	4,728,576	$	4,511,346	$	217,230

Litigation

The Company is subject to certain legal proceedings and claims that arise in the normal course of business. Based on the advice of legal counsel, management believes that no actions or claims depart from customary litigation or claims incidental to the business or the subsidiaries and that the resolution of all such litigation or claims will not have a material adverse effect on the Company’s consolidated financial position, results of operations and cash flows.

21

Oblong Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

8. Convertible Preferred Stock

Convertible Preferred Stock

The convertible preferred stock described below has been classified outside of stockholders' equity to comply with Regulation S-X because the shares contain certain redemption features that are not solely within the control of the Company.

In September 2018, the Company and its investors agreed to enter into an agreement to sell and issue Series E convertible preferred stock (“Series E”) with a par value of $.0001 and warrants to purchase common stock. To facilitate this sale, the Company amended and restated its certificate of incorporation to increase the authorized shares to 65,000,000 of common stock at par value of $.0001 and to decrease the authorized shares to 23,007,000 of preferred stock at par value of $.0001 designated as 19,757,000 as Series D, and 3,250,000 as Series E. The Company had authorized to sell 3,039,514 shares of Series E convertible stock, and issued 2,899,266 shares, which are outstanding as of December 31, 2018. The 2,899,266 share of Series E preferred stock were sold along with 2,899,266 common stock purchase warrants, exercisable for $0.01 per share, for cash proceeds of $9,480,952, net of issuance costs of $57,633. The $9,480,952 of net cash proceeds was allocated to the Series E preferred stock and the common stock warrants, as an increase to additional paid in capital, based on the relative fair value of the Series E preferred stock and common stock warrants. The fair value of the Series E preferred stock and common stock warrants was based on a third-party valuation. The liquidation preference on Series E is $9,538,585 as of December 31, 2018.

In September 2018, the Company and its investors approved the conversion of all of its outstanding shares of Series A convertible preferred stock, Series B convertible preferred stock, and Series C convertible preferred stock, totaling 15,380,339 preferred stock into 15,506,592 common stock (the “Conversion”). Prior to the Conversion, the Company had 6,596,516 Series A convertible preferred stock issued and outstanding, 6,114,632 Series B convertible preferred stock issued and outstanding, and 2,669,191 Series C convertible preferred stock issued and outstanding. Series A and C outstanding preferred stock were converted using a 1:1 ratio. Series B outstanding preferred stock using a 1.0206 ratio.

As of December 31, 2018, the Company had authorized 19,757,000 shares of Series D convertible preferred stock (“Series D”) with a par value of $0.0001. The Company issued no shares of Series D during 2018. The Company had 19,756,834 shares of Series D issued and outstanding as of December 31, 2018. The liquidation preference on Series D is $64,999,984 as of December 31, 2018.

Following the Conversion, holders of Series D and Series E (collectively “Post-Conversion Series Preferred"), in preference to the holders of common stock, are entitled to receive cash dividends at the annual rate of $0.2632 per share. The dividends are payable only when and if declared by the Board of Directors and are non-cumulative. No dividends were paid in 2018 and 2017.

Conversion Rights

Each share of Post-Conversion Series Preferred is convertible into shares of common stock at the option of the holder at any time after the date of issuance. The number of shares of common stock into which a holder of Post-Conversion Series Preferred can convert is obtained by multiplying the conversion rate that is in effect by the number of shares of Post-Conversion Series Preferred being converted. The conversion rate is determined by dividing the original issue price by the applicable conversion price (initially the original issue price, as adjusted for certain dilutive events).

22

Oblong Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Under the terms, each share of Post-Conversion Series Preferred will be automatically converted into shares of common stock (based on the then effective Post-Conversion Series Preferred conversion price) immediately upon closing of a firm underwritten public offering pursuant to an effective registration statement on Form S-1 or SB-2 under the Securities Act of 1933, as amended, covering the offer and sale of common stock for the account of the Company in which the per share price to the public is at least $6.92 and the gross cash proceeds to the Company (before underwriting discounts, commissions, and fees) are at least $30,000,000 or if there is an affirmative election of the holders of the majority of the outstanding shares of Post-Conversion Series Preferred on an as-converted basis.

Liquidation Rights

In accordance with the certificate of incorporation, upon any liquidation, dissolution, change in control, or winding up of the Company (“Liquidating Event”), the holders of Series E are entitled to be paid out of the assets of the Company legally available for distribution an amount per share of Post-Conversion Series Preferred equal to the original issue price plus all declared and unpaid dividends on the Series E, before any distribution or payment is made to the holders of any Series D or common stock.

If after the liquidation preference there are assets remaining, the assets will be distributed to the Series D before any distribution or payment is made to the holders of common stock.

If after the liquidation preference there are assets remaining, the assets will be distributed ratably amongst the common stock. Post-Conversion Series Preferred will be deemed converted to common stock upon a Liquidating Event if the holder would receive a greater amount than if they had not been converted. If the Company has insufficient assets upon the Liquidating Event to make payment in full to all holders of Post-Conversion Series Preferred their liquidation preference, then such assets (or consideration) will be distributed among the holders of Post-Conversion Series Preferred ratably in proportion to the full amounts to which they would otherwise be respectively entitled. Any transaction or series of transactions that meets the definition of a Liquidating Event may be waived as a Liquidating Event by a majority vote of the Post-Conversion Series Preferred holders.

Voting Rights

Post-Conversion Series Preferred holders are entitled to the number of votes equal to the number of common shares the preferred shares is convertible into. So long as at least 2,500,000 shares of Post-Conversion Series Preferred remain outstanding, the vote or written consent of the holders of a majority of the outstanding Post-Conversion Series Preferred, respectively, shall be necessary for defined significant events.

9. Stockholders’ Equity

Common Stock

As of December 31, 2018, the Company had authorized 65,000,000 shares of common stock with a par value of $0.0001. During 2018, the Company issued 7,916 shares of common stock, through the exercise of stock options. In 2018, the holders of the Company’s Series A, B and C convertible preferred stock converted all outstanding shares, consisting of 15,380,339 shares of preferred stock, into 15,506,592 shares of common stock. The Company had 27,304,479 of common stock shares issued and outstanding as of December 31, 2018.

Stock Options

On January 22, 2007, the Company adopted the 2007 Stock Plan (the “Plan”) under which the Company is authorized to grant incentive and non-qualified stock option awards to employees, directors, consultants, and affiliates of the Company. The Plan provides both for the direct award or sale of shares and for the grant of options

23

Oblong Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

to purchase shares. The Company is authorized to grant up to 5,405,376 shares of stock awards. The option price and vesting terms are determined by the Board of Directors of the Company and evidenced in the award agreement extended to the employee. The options granted generally vest over a period of one to four years and terminate ten years from the grant date. As of December 31, 2018, $294,749 remained to be expensed over the requisite service period, which approximates the vesting period and the forfeiture rate has been estimated at 10%. During the year ended December 31, 2018, the Company recognized $225,795 in stock-based compensation expense.

The following presents the activity for options outstanding:

	Incentive Stock Options		Non-Qualified Stock Options		Weighted Average Exercise Price
December 31, 2017	3,838,140		78,833	$		0.82
Granted	316,500		100,000			0.97
Exercised	(7,916	)	-			0.25
Forfeited/canceled	(570,526	)	(23,833	)		0.90
December 31, 2018	3,576,198		155,000	$		0.82

The following table presents the composition of options outstanding and exercisable as of December 31, 2018:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number		Price*	Life*	Number		Price*
$0.13	-	$	0.13	-	-	$	0.13
$0.16	-		0.16	-	-		0.16
$0.21	185,000		0.21	2.04	185,000		0.21
$0.30	155,000		0.30	2.98	155,000		0.30
$0.71	409,000		0.71	4.08	409,000		0.71
$0.80	667,303		0.80	4.80	667,303		0.80
$0.84	810,315		0.84	6.48	721,347		0.84
$0.90	653,160		0.90	7.44	419,641		0.90
$0.93	392,500		0.93	8.29	168,349		0.93
$0.94	69,000		0.94	6.80	55,715		0.94
$0.97	992,195		0.97	9.27	24,393		0.97
December 31, 2018	4,333,473	$	0.82	6.63	2,805,748	$	0.76

* Price and Life reflect the weighted average exercise price and weighted average remaining contractual life, respectively.

24

Oblong Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

The fair value of each option grant was estimated on the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions:

Year ended December 31,	2018
Approximate risk-free rate	2.56 – 2.96	%
Average expected life	6.25	years
Dividend yield	0	%
Volatility	55 – 62	%
Fair value of common stock	$0.78 - $0.98
Estimated fair value of options granted	$0.43 - $0.58
Estimated forfeiture rate	10	%

Warrants In 2008 through 2013, and 2018, the Company issued warrants to a bank and stockholders. The following presents activity for warrants for the years ended December 31, 2018:

	Series A Warrants	Series B Warrants	Common Stock Warrants
January 1, 2018	-	43,731	807,110
Granted	-	-	2,899,266
Exercised	-	-	-
Forfeited/canceled	-	-	-
December 31, 2018	-	43,731	3,706,376

In connection with the Series E preferred stock purchase, common stock warrants were issued to stockholders on September 25, 2018 in the amount of 2,899,266 shares, with an exercise price of $0.01 per share. The common stock warrants are set to expire on September 25, 2025.

10. Income Taxes

The provision (benefit) for income taxes is as follows:

25

Oblong Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Year ended December 31,		2018
Current:
Federal	$	-
State		17,174
Foreign		(7,125	)
		10,049
Deferred:
Federal		(3,431,230	)
State		(7,573,379	)
Foreign		-
		(11,004,609	)
Less: change in valuation allowance		11,004,609
Total	$	10,049

The provision for income taxes of $10,049 for the year ended December 31, 2018 is included in “Other expenses, net” on the accompanying consolidated statement of operations and comprehensive loss.

The reconciliation of income taxes calculated at the U.S. federal tax statutory rate to the Company’s effective tax rate is set forth below:

Year ended December 31,	2018
U.S. federal statutory rate	21.00		%
State income tax, net of federal benefit	(1.70		)%
Change in valuation allowance	(19.24		)%
Other	(0.12		)%
Federal rate change	0.00	%
Effective income tax rate	(0.06		)%

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities were as follows as of December 31:

26

Oblong Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

As of December 31,		2018
Deferred tax assets:
Net operating loss carry forwards	$	32,464,517
Tax credit carryforwards		2,949,393
Accruals and reserves		981,396
Others		280,614
Total gross deferred tax assets		36,675,920
Deferred tax liabilities:
State income taxes		(1,433,898	)
Depreciation and amortization		(1,012,776	)
Total gross deferred tax liabilities		(2,446,674	)
Less: valuation allowance		(34,229,246	)
Total	$	-

The Company’s ability to utilize net operating loss carryforwards may be limited in the event of an ownership change as defined in the Internal Revenue Code. As of December 31, 2018, the Company had net operating loss carryforwards for federal and state income tax purposes of $98,969,930 and $140,067,968, respectively. If not utilized, the federal and state net operating losses will begin to expire in 2028. In addition, the Company has research and development (“R&D”) credits for federal and state income tax purposes of $2,160,260 and $1,638,253, respectively. The federal R&D credits, if not utilized, will begin to expire in 2027. The California R&D credits can be carried forward indefinitely. The Company also has a carryover of California Enterprise Zone and New Job credits totaling $100,508, which will expire beginning in 2019.

Significant management judgement is required in determining the provision for income taxes and in particular, any valuation allowance recorded against the Company’s deferred tax assets. The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based on the Company’s history of operating losses, the Company has concluded that it is more likely than not that the benefit of its deferred tax assets will not be realized. The Company’s effective income tax rate differs from the statutory federal income tax rate due to the change in valuation allowance.

The Company’s subsidiaries, Oblong Europe, Ltd. and Oblong Industries Europe, S.L.U. are subject to foreign income tax in Germany, Spain, and United Kingdom. The amount of such foreign current income tax benefit incurred amounted to ($7,125) for 2018.

Internal Revenue Code section 382 places a limitation (the “Section 382 Limitation”) on the amount of taxable income that can be offset by net operating loss carryforwards after a change in control of a loss corporation. Generally, after a change in control, a loss corporation cannot deduct operating loss carryovers in excess of the Section 382 limitation. The Company has not performed an analysis to determine if a limitation applies and whether the limitation would cause the net operating losses to expire unutilized.

On December 22, 2017, H.R.1, also known as the Tax Cuts and Jobs Act (the “Tax Reform Act”), was enacted into law. The Tax Reform Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (i) reducing the U.S. federal statutory tax rate from 35% to 21%; (ii) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries (the “Transition Tax”); (iii) generally

27

Oblong Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (iv) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (v) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; (vi) creating the base erosion anti-abuse tax (BEAT), a new minimum tax; (vii) creating a new limitation on deductible interest expense, and (viii) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.

On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740, Income Taxes (“ASC 740”) for the year ended December 31, 2017. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. The Company has finished their analysis as of the measurement period closing of December 22, 2018 after application of law changes were reviewed by the Company. There were no subsequent adjustments as the conclusions remained the same.

As of December 31, 2018, the Company has unrecognized tax benefit of $949,628. There were no accrued interest and penalties during the year ended December 2018. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.

The Company is subject to taxation in various jurisdictions, including federal, state and foreign. The Company’s federal and state income tax returns are generally not subject to examination by taxing authorities for years before 2014 for federal purposes and 2013 for state purposes. The exceptions to this are the net operating loss carryovers and R&D credit carryovers. These amounts are subject to audit for a period of three years after utilization for federal purposes and four years after utilization for state purposes.

11. Profit Sharing Plan

The Company sponsors a 401(k) Plan (the “Plan”) for all eligible employees. All full-time employees are eligible to participate in the Plan during their first payroll period. The Company contributions to the Plan are at the sole discretion of the Company’s Board of Directors. Employees may elect to have a portion of their compensation deferred and contributed to their 401(k) accounts. Vesting and the allocation of Company contributions to the eligible employee accounts are determined in accordance with the terms of the Plan. Matching contributions were discontinued in September 2012. There were no Company contributions for the year ended December 31, 2018.

12. Subsequent Events

The Company has evaluated subsequent events that have occurred from January 1, 2019 through the date of the independent auditor’s report, which is the date that the consolidated financial statements were available to be issued, and determined that there were no subsequent events or transactions that required recognition or disclosure in the consolidated financial statements, except as disclosed below.

On June 19, 2019, the Company executed the Seventh Amendment (see Note 5). The Seventh Amendment terminated the Revolver and waived the breach of the Minimum Bookings financial covenant in both October and November for the year ended December 31, 2018. Additionally, the Seventh Amendment set forth a replaced the financial covenant of Minimum Bookings measured on a trailing six-month bases with the following debt covenants:

• By no later than July 31, 2019, the Company shall deliver to Bank evidence satisfactory to Bank that the Company has received either

28

Oblong Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

◦ a fully executed term sheet for the sale and issuance of equity securities to investors, and on terms and conditions, satisfactory to Bank, to result in net cash proceeds of at least $20,000,000 (the “Equity Option”), or

◦ a letter of intent for the sale of all or substantially all of the Company’s assets or all of the equity interests in the Company on terms and conditions, and with an acquirer, satisfactory to Bank (the “Acquisition Option”)

• The Acquisition Option or the Equity Raise shall be consummated (and receive such net cash proceeds thereof) by no later than September 15, 2019.

In the event the Company elects the Equity Option, a new Minimum Bookings covenant satisfactory to Bank shall be established by no later than September 30, 2019.

29

EX-99.3

Exhibit 99.3

Oblong Industries, Inc.

CONSOLIDATED FINANCIAL STATEMENTS

AND

INDEPENDENT AUDITOR’S REPORT

December 31, 2017 AND 2016

Exhibit 99.3

Oblong Industries, Inc.

TABLE OF CONTENTS

	Page No.
Independent Auditor’s Report	1-2
Consolidated Financial Statements:
Consolidated Balance Sheets	3
Consolidated Statements of Operations and Comprehensive Loss	4
Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit	5
Consolidated Statements of Cash Flows	6
Notes to Consolidated Financial Statements	7 - 28

Exhibit 99.3

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors and Stockholders

of Oblong Industries, Inc.:

We have audited the accompanying consolidated financial statements of Oblong Industries, Inc. and subsidiaries (collectively, the "Company"), which comprise the consolidated balance sheets as of December 31, 2017 and 2016, and the related consolidated statements of operations and comprehensive loss, changes in convertible preferred stock and stockholders’ deficit, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Oblong Industries, Inc. and subsidiaries as of December 31, 2017 and 2016, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has incurred

Exhibit 99.3

recurring losses from operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of uncertainty. Our opinion is not modified with respect to that matter.

Restatement of Previously Issued Consolidated Financial Statements

As described in Note 11 to the consolidated financial statements, the Company has restated its consolidated balance sheets as of December 31, 2017 and 2016 and the related consolidated statements of cash flows for the years then ended. Our opinion is not modified with respect to that matter.

/s/ Holthouse Carlin & Van Trigt LLP

Encino, California

June 28, 2018

(except for the first paragraph in Note 8 and Note 12, as to

which the date is December 17, 2019)

Exhibit 99.3

Oblong Industries, Inc.

CONSOLIDATED BALANCE SHEETS

		As Restated			As Restated
AS OF DECEMBER 31,		2017			2016
ASSETS
Current assets:
Cash, cash equivalents and restricted cash	$	14,684,503		$	38,787,513
Accounts receivable		8,311,175			5,181,496
Note receivable, net (see Note 3)		—			—
Prepaid expenses and other current assets		855,494			1,095,333
Inventory		2,233,888			2,434,105
Total current assets		26,085,060			47,498,447
Property and equipment, net		2,574,175			2,392,721
Intangible assets, net		4,951,904			4,435,548
Other assets		357,198			648,930
Total assets	$	33,968,337		$	54,975,646
LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	1,209,369		$	1,287,810
Accrued expenses and other current liabilities		1,837,216			1,954,366
Customer deposits		412,888			674,595
Current portion of deferred revenue		6,144,134			3,275,893
Current portion of deferred rent		36,722			35,628
Current portion of long-term debt		2,744,444			1,372,222
Total current liabilities		12,384,773			8,600,514
Deferred revenue, net current portion		1,528,206			3,079,078
Deferred rent, net current portion		217,230			141,773
Long-term debt		2,058,334			5,065,967
Other long-term liabilities		265,746			296,693
Total liabilities		16,454,289			17,184,025
Commitments and contingencies
Convertible preferred stock:
Convertible preferred stock		103,490,937			103,490,937
Stockholders' deficit:
Common stock		1,179			1,172
Additional paid-in capital		2,159,227			1,789,721
Accumulated deficit		(87,819,373	)		(67,133,114	)
Accumulated other comprehensive loss		(317,922	)		(357,095	)
Total stockholders' deficit		(85,976,889	)		(65,699,316	)
Total liabilities, convertible preferred stock, and stockholders' deficit	$	33,968,337		$	54,975,646
See accompanying notes to consolidated financial statements (as revised, see note 12).

Exhibit 99.3

Oblong Industries, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE YEARS ENDED DECEMBER 31,		2017			2016
Revenues	$	22,283,271		$	25,082,930
Cost of revenues		7,304,646			8,476,696
Gross profit		14,978,625			16,606,234
Operating expenses:
Research and development		9,759,225			9,224,185
General and administrative		8,200,014			6,883,007
Sales and marketing		15,360,166			13,238,318
Depreciation and amortization		1,610,485			1,224,946
Loss on impairment of intangible assets		382,062			536,674
Total operating expenses		35,311,952			31,107,130
Loss from operations		(20,333,327	)		(14,500,896	)
Other expenses:
Interest expense, net		207,041			382,001
Other expenses, net		145,891			66,604
Total other expenses, net		352,932			448,605
Net loss		(20,686,259	)		(14,949,501	)
Foreign currency translation gain (loss)		39,173			(16,368	)
Comprehensive loss	$	(20,647,086	)		(14,965,869	)
See accompanying notes to consolidated financial statements.

Exhibit 99.3

Oblong Industries, Inc.

CONSOLIDATED STATEMENT OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT

Exhibit 99.3

Oblong Industries, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

		As Restated			As Restated
FOR THE YEARS ENDED DECEMBER 31,		2017			2016
Cash flows from operating activities:
Net loss	$	(20,686,259	)	$	(14,949,501	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		1,745,325			1,231,201
Inventory write-off		368,540			154,120
Amortization of deferred financing costs		137,167			132,563
Stock-based compensation		357,107			349,282
Loss on disposal of property and equipment		2,536			12,536
Impairment of intangible assets		382,062			536,674
Property and equipment expensed to cost of sales and operating expenses		90,739			—
Non-cash settlement of note receivable		—			(1,350,000	)
Change in operating assets and liabilities:
Accounts receivable		(3,129,679	)		184,951
Prepaid expenses and other current assets		256,463			(715,372	)
Inventory		(1,183,415	)		(1,567,652	)
Other assets		154,565			(112,567	)
Accounts payable		(78,442	)		(1,010,021	)
Accrued expenses and other current liabilities		27,532			624,844
Deferred revenue		642,773			2,902,831
Customer deposits		261,708			(374,040	)
Deferred rent		76,551			29,748
Other long-term liabilities		(23,114	)		(2,441	)
Net cash used in operating activities		(20,597,841	)		(13,922,844	)
Cash flows from investing activities:
Purchase of property and equipment		(612,535	)		(952,367	)
Intangible asset costs		(1,272,378	)		(843,430	)
Cash used in investing activities		(1,884,913	)		(1,795,797	)
Cash flows from financing activities:
Proceeds from exercise of stock options and warrants		12,406			29,344
Proceeds from sale of preferred stock		—			49,969,256
Borrowings from revolving line of credit		4,805,712			8,641,943
Borrowings on term loan		—			462,229
Payments on revolving line of credit		(5,068,901	)		(8,598,045	)
Payments on term loan		(1,372,222	)		(1,481,481	)
Net cash provided by (used in) financing activities		(1,623,005	)		49,023,246
Effect of foreign currency exchange rates on cash		2,749			(13,291	)
Net increase (decrease) in cash, cash equivalents and restricted cash		(24,103,010	)		33,291,314
Cash, cash equivalents and restricted cash, beginning of year		38,787,513			5,496,199
Cash, cash equivalents and restricted cash, end of year	$	14,684,503		$	38,787,513
Supplemental disclosures of cash flow information:
Cash paid during the year for interest	$	247,045		$	244,292
Cash paid during the year for income taxes	$	34,078		$	62,873
Non-cash investing and financing activities:
Transfer of inventory to property and equipment	$	1,015,093		$	412,436
Patents purchased through credit	$	—		$	364,230
Conversion of term loans and revolver to new loan facility	$	—		$	5,712,770
See accompanying notes to consolidated financial statements (as revised, see note 12).

Exhibit 99.3

Oblong Industries, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017 AND 2016

1.ORGANIZATION AND NATURE OF BUSINESS

Oblong Industries, Inc. ("Oblong") was incorporated in the state of Delaware on July 31, 2006. Oblong’s wholly-owned subsidiaries consist of Oblong Industries Europe S.L.U. ("Euroblong") and Oblong Europe Ltd ("Oblong UK") (collectively, the "Company'). Euroblong was incorporated in Spain on March 12, 2007 and Oblong UK was incorporated in England on February 6, 2014. On January 27, 2017, Oblong UK established the branch entity, Oblong Europe Ltd. (German Branch) ("Oblong German Branch").

The Company's core platform is g-speak™ and Mezzanine™ is its flagship product built on this platform. Mezzanine offers advanced collaboration for conference room technology, which amplifies sales presentations, enhances group collaboration, and makes work sessions more productive. The Company offers g-speak development licenses to larger enterprise customers. Oblong is headquartered in Los Angeles, California with a sales and development office in Boston, Massachusetts; regional sales offices in Los Altos, California; New York City, New York; Washington D.C.; Chicago, Illinois; Houston and Dallas, Texas; and Atlanta, Georgia. The Euroblong office is in Barcelona, Spain and focuses on mobile research and development, while the Oblong UK and Oblong German Branch offices are in London, England and Munch, Germany, respectively, and focus on sales and marketing in the European region.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company had net losses of $20,686,259 and $14,949,501 for the years ended December 31, 2017 and 2016, respectively, and accumulated deficits of $87,819,373 and $67,133,114, as of December 31, 2017 and 2016, respectively. Cash used in operating activities amounted to $20,597,841 and $13,922,844 for the years ended December 31, 2017 and 2016, respectively.

Since inception, the Company has financed its business activities through the issuance of equity instruments. The Company expects to obtain funding through additional private equity placement offerings until it achieves a positive cash flow from operations. The Company is subject to various risks and uncertainties frequently encountered by newly formed companies. Such risks and uncertainties include, but are not limited to, undeveloped technology, its limited operating history, dependence on key personnel, and management of rapid growth. To address these risks, the Company must, among other things, successfully develop its customer base; successfully execute its business and marketing strategy; successfully develop its technology; provide superior customer service; and attract, retain, and motivate qualified personnel. Additionally, the Company may be required to obtain additional debt and/or equity financing prior to achieving positive cash flows.

Based on the Company’s projected cash flows and operating results for 2017, management believes it has sufficient cash resources to fund operations and meet its obligations as they become due for the next twelve months. However, there can be no assurance the Company will be able to raise adequate funds, achieve or sustain profitability or positive cash flows from its operations. 

Exhibit 99.3

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Oblong and its wholly-owned subsidiaries Euroblong and Oblong UK, and branch entity, Oblong German Branch. All significant intercompany balances and transactions have been eliminated upon consolidation.

Accounting Method

The Company maintains its accounting records on an accrual method in conformity with accounting principles generally accepted in the United States of America ("US GAAP").

Reclassifications

Certain prior period amounts have been reclassified to conform with the current year presentation.

During 2017, the Company modified the classification of expenses related to the installation departments from sales and marketing to general and administrative, as the Company determined that the role of the department is more operational by providing install and support for internal systems in sales offices, install and support during trade shows, and support for existing customer systems. This resulted in a reclassification of $1,259,745 from sales and marketing to general and administrative.

During 2017, the Company modified the classification of salary expenses for time spent on custom solution professional services and on installation of product from research and development and general and administrative, respectively, to cost of revenues, as the Company determined that these expenses are direct costs of the related revenues. This resulted in a reclassification of $1,621,336 and $291,750 from research and development and general and administrative, respectively, to cost of revenues.

The above reclassifications have been made to the 2016 consolidated statement of operations and comprehensive loss balances to conform with the current year presentation, resulting in a $1,913,086 increase in cost of revenues, $1,621,336 decrease in research and development, $967,995 increase in general and administrative and $1,259,745 decrease in sales and marketing.

The Company reclassified the loss on impairment of intangible assets from other expenses to operating expenses on the 2016 consolidated statement of operations and comprehensive loss to conform with the current year presentation.

The Company reclassified the current portion of the term loan in 2016 from long-term debt to current portion of long-term debt to conform with the current year presentation (see Note 6).

The Company reclassified payments received from customers in advance of revenue recognition from current portion of deferred revenue to customer deposits. The balance of customer deposits was $412,888 and $674,595 for the years ended December 31, 2017 and 2016, respectively.

Use of Estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include the valuation of certain accrued expenses, which have been prepared on the basis of the

Exhibit 99.3

most current and best available information. However, actual results from the resolution of such estimates and assumptions may vary from those used in the preparation of the consolidated financial statements.

Revenue Recognition

As required by Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 605, Revenue Recognition, the Company recognizes revenue when persuasive evidence of an arrangement exists, service has been rendered, the sales price is fixed or determinable, and collection is probable. Amounts billed in excess of revenue recognized are included in deferred revenue. Customer deposits represent payments received by the Company from customers for which revenue recognition criteria have not been met.

The Company's products are systems that consist of hardware and software that function together to deliver the system's essential functionality. The Company sells the systems as a complete package and does not sell the hardware and software separately. The Company also sells maintenance and support contracts and license agreements. The Company has determined that its systems and service contracts have value to a customer on a standalone basis; therefore, revenue from each item should be recognized separately.

The Company establishes the relative selling price of each deliverable based on estimated selling price. The Company recognizes product revenue from its systems upon shipment, installation revenue upon completed installation and revenue from maintenance contracts and license agreements ratably over the applicable periods, ranging from 12 to 36 months. Professional service contracts are billed based on time and materials at the contract rate as the services are rendered.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include all cash balances and highly liquid investments, such as money market funds, with original maturities of three months or less from the date of purchase. Restricted cash are cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements.

The Company used a bank guarantee in place of a cash deposit for the lease of the sales office in Munich, Germany. The bank guarantee was collateralized by a restricted cash bank account. As of December 31, 2017, the Company had a restricted cash balance of $93,148. The Company had no restricted cash as of December 31, 2016.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash ("ASU 2016-18"). ASU 2016-18 provides guidance on how restricted cash must be presented on the consolidated statement of cash flows. ASU 2016-18 requires that consolidated statement of cash flows show the change during the period of the total cash, cash equivalents and restricted cash. Private companies are required to apply the guidance in ASU 2016-18 to fiscal years beginning after December 15, 2018, with early adoption permitted. The Company has early adopted this guidance, and restricted cash is included in cash, cash equivalents and restricted cash on the accompanying consolidated balance sheet as of December 31, 2017 and the consolidated statement of cash flows for the year ended December 31, 2017.

Fair Value Measurements

The Company accounts for the fair value of its financial instruments in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures ("ASC 820"). Non-recurring, nonfinancial assets and liabilities are also accounted for under the provisions of ASC 820.

ASC 820 defines fair value, establishes a framework for measuring fair value under US GAAP and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the price that would be

Exhibit 99.3

received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value.

The Company’s management used the following methods and assumptions to estimate the fair value of its financial instruments:

• Level 1 - Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

• Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities.

• Level 3 - Pricing inputs that are unobservable, supported by little or no market activity and that are significant to the fair value of the assets or liabilities, as described below.

The Company's money market funds, which are classified as cash and cash equivalents, are stated at fair value based on Level 1 inputs at each reporting period.

As of December 31, 2017		Level 1		Level 2		Level 3		Total
Money market funds	$	14,053,172	$	—	$	—	$	14,053,172

As of December 31, 2016		Level 1		Level 2		Level 3		Total
Money market funds	$	38,754,929	$	—	$	—	$	38,754,929

Accounts Receivable

Accounts receivable are stated at the amounts due from customers, net of an allowance for doubtful accounts. At the time the accounts receivable are originated, the Company considers a reserve for doubtful accounts based on the creditworthiness of the customer. The allowance for uncollectible amounts is continually reviewed and adjusted to maintain the allowance at a level considered adequate to cover future losses. The allowance is management's best estimate of uncollectible amounts and is determined based on a combination of historical performance and current economic conditions tracked by the Company on an ongoing basis. The losses ultimately incurred could differ materially in the near term from the amounts estimated in determining the allowance. The Company believes the accounts receivable balances outstanding as of December 31, 2017 and 2016 are fully collectible; therefore, no allowance has been recorded.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with FASB ASC Topic 718, Compensation - Stock Compensation, which requires all share-based payments to employees and non-employees, including grants of employee stock options, to be recognized in the consolidated statements of operations and comprehensive loss based on the fair value of those awards calculated using an option valuation model on the grant date.

Financial Instruments and Concentrations of Business and Credit Risk

Exhibit 99.3

Financial instruments that potentially subject the Company to concentrations of credit and business risk consist of cash, cash equivalents and restricted cash, accounts receivable and accounts payable.

The Company maintains cash, cash equivalents and restricted cash balances that at times exceed amounts insured by the Federal Deposit Insurance Corporation. The Company has not experienced any losses in these accounts and believes it is not exposed to any significant credit risk in this area.

The Company’s customer concentrations expose it to credit risks such as collectability and business risks such as sales concentration. The Company grants credit in the normal course of business to customers in the United States and other world-wide locations. The Company periodically performs credit analysis and monitors the financial condition of its customers to reduce credit risk. On a case-by-case basis, the Company requires deposits from customers who are unable to verify acceptable credit standards.

For the year ended December 31, 2017, two customers accounted for 49% of total net revenues. Amounts outstanding from these two customers accounted for 47% of total accounts receivable as of December 31, 2017. For the year ended December 31, 2016, one customer accounted for 50% of total net revenues. Amounts outstanding from this one customer accounted for 63% of total accounts receivable as of December 31, 2016.

The Company’s supplier concentrations expose it to business risks, which the Company mitigates by attempting to diversify its supply chain. There was no supplier concentration for the year ended December 31, 2017. For the year ended December 31, 2016, one vendor accounted for 15% of total purchases. Amounts outstanding to this vendor accounted for 19% of total accounts payable as of December 31, 2016.

Inventory

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory ("ASU 2015-11"). ASU 2015-11 requires that inventory be measured at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This eliminates the need to determine and consider replacement cost or net realizable value less an approximately normal profit margin when measuring inventory. ASU 2015-11 is effective for private entities for annual reporting periods beginning after December 15, 2016. The Company adopted this standard prospectively for the year ended December 31, 2017. The adoption did not have a material impact on the Company’s consolidated financial position or results of operations.

As part of the implementation to a new accounting software system (NetSuite), the Company elected to change its inventory valuation method to the average cost costing method as of the go-live date of February 1, 2017. In prior years, inventory was valued using the first-in, first-out ("FIFO") method. The Company determined the average cost costing method of inventory valuation is preferable because (1) the costs of the Company’s inventories have remained fairly consistent during the past several years, which substantially negated the financial reporting benefits of the FIFO method to provide results in the valuation of inventories at more current costs on the consolidated balance sheets, and (2) the change conforms to a single cost for all of the Company’s inventory items when transferring data into the new accounting software system. The total financial impact of the change in inventory valuation method is immaterial (less than 0.5% total inventory value) to the overall consolidated financial statements.

Inventory consists primarily of equipment, including cameras, tracking hardware, computer equipment, display equipment, and mounts, and was stated at the lower of cost or net realizable value, determined using average cost. The Company periodically performs analysis to identify any obsolete or slow-moving inventory. The obsolete or slow-moving inventory reserved and disposed of totaled $292,139 and $27,175, respectively, for the years ended December 31, 2017 and 2016. There was no additional inventory reserve balance as of December 31, 2017 and 2016. The Company periodically performs cycle counts, which may result in inventory write-offs. The total inventory written-off and disposed of totaled $368,540 and $154,120 for the years ended December 31, 2017 and 2016.

Exhibit 99.3

Deferred Financing Costs 

Deferred financing costs represent fees incurred in connection with financing transactions. These fees are capitalized and amortized to interest expense over the terms of the related financing agreements using a method that approximates the effective interest method. FASB ASU 2015-03, Interest-Imputation of Interest (Subtopic 835-30) requires that deferred financing costs are presented, net of accumulated amortization, as an asset for amounts relating to revolving lines of credit, and as direct deductions from the face amounts of all other related long-term debt.

Deferred financing costs, net of accumulated amortization, related to long-term debt is included in other assets on the accompanying consolidated balance sheets, which is not in conformity with US GAAP, however, the Company believes that this departure from US GAAP does not have a material impact on the fair presentation of the financial position of the Company. Deferred financing costs related to long-term debt amounted to $124,688 and $261,854, net of accumulated amortization of $137,167 and $132,563, as of December 31, 2017 and 2016, respectively.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the related assets, which range from two to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of their estimated useful lives or the term of the related lease.

Betterments, renewals and extraordinary repairs that materially extend the useful life of the asset are capitalized; other repairs and maintenance charges are expensed as incurred. The cost and related accumulated depreciation and amortization applicable to assets retired are removed from the accounts, and the gain or loss on disposition, if any, is recognized in the consolidated statement of operations and comprehensive loss for that period. The costs of replacement parts and supplies are charged to expense as they are used. Maintenance costs are expensed as incurred.

Intangible assets

Intangible assets are stated at cost, net of accumulated amortization and consist primarily of patents. Intangible assets with definite useful lives are amortized using the straight-line method over the useful lives.

The Company has applications for patents, which consist of technology, know-how, information, and intellectual property relevant to gestural and dynamic spatial-visual human machine interface. As of December 31, 2017, 59 patents have been granted.

It is the belief of the Company that the remaining patent submissions will be approved; however, amortization of the patents will not occur until approval has been granted. Should a patent be denied or it become likely that a patent application will not be granted, the patent will be considered abandoned and the associated costs will be expensed as impairment. For the years ended December 31, 2017 and 2016, the Company expensed $382,062 and $536,674, respectively, of patent costs for abandoned patents (see Note 5).

Impairment of Long-lived Assets

The Company is subject to the provisions of FASB ASC Topic 360, Property, Plant and Equipment - Impairment or Disposal of Long Lived Assets, which requires impairment losses to be recorded on long-lived assets when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of the assets. In such cases, the carrying value of assets to be held and used are adjusted to their estimated fair value and assets held for sale are adjusted to their estimated fair value less

Exhibit 99.3

selling expenses. Other than the patents costs that were abandoned (see Note 5), no impairment losses were recognized for the years ended December 31, 2017 and 2016.

Research and Development Expenses

Research and development costs are expensed as incurred and consist primarily of costs associated with the development and testing of the Company’s products. Research and development expenses include the cost of certain personnel and benefits, consultants, facility costs, supplies and other direct and allocated indirect expenses incurred to support the Company’s research and development programs. Research and development expenses totaled $9,759,225 and $9,224,185 for the years ended December 31, 2017 and 2016, respectively.

Shipping and Handling Costs

The Company has included shipping and handling costs of $186,530 and $173,497 in cost of revenues and $226,168 and $147,231 in general and administrative expenses for the years ended December 31, 2017 and 2016, respectively, on the accompanying consolidated statements of operations and comprehensive loss. Shipping and handling costs billed to customers are included in revenues.

Advertising

Advertising costs are expensed as incurred. Total advertising expenses of $2,901,817 and $1,798,039 are included in sales and marketing expense on the accompanying consolidated statements of operations and comprehensive loss for the years ended December 31, 2017 and 2016, respectively.

Sales Taxes

The Company accounts for sales taxes in accordance with FASB ASC Subtopic 605-45, Revenue Recognition - Principal Agent Considerations, which provides that the presentation of taxes assessed by a governmental authority that are directly imposed on revenue-producing transactions (e.g. sales, use, and excise taxes) between a seller and a customer on either a gross basis (included in revenues and costs) or on a net basis (excluded from revenues) is an accounting policy decision that should be disclosed. In addition, for any such taxes that are reported on a gross basis, the amounts of those taxes should be disclosed in the consolidated financial statements for each period for which a statement of operations and comprehensive loss is presented if those amounts are significant. The Company records sales taxes on a net basis.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with FASB ASC Topic 740, Income Taxes ("ASC 740"). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

The Company follows the provisions of uncertain tax positions as addressed in FASB ASC Subtopic 740-10, Income Taxes. The Company did not recognize a liability for unrecognized tax benefits. Management estimates the tax positions as of December 31, 2017 and 2016 for which the ultimate deductibility is highly certain but

Exhibit 99.3

for which there is uncertainty about the timing of such deductibility is immaterial to the consolidated financial statements. The Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense. No such interest or penalties were recognized during the periods presented. The Company had no accruals for interest and penalties as of December 31, 2017 and 2016.

With few exceptions, the Company is subject to examination by United States federal tax authorities for returns filed for the prior three years and by foreign and state tax authorities for returns filed for the prior four years.

Leases

The Company’s leases are accounted for under the provisions of FASB ASC Topic 840, Leases, which require that leases be evaluated and classified as operating or capital leases for financial reporting purposes. Costs for operating leases that include incentives such as payment escalations or rent abatements are recognized on a straight-line basis over the term of the lease.

Additionally, inducements received from lessors are treated as a reduction of costs over the term of the agreement. Costs for capital leases are capitalized at the present value of the future minimum lease payments, less any taxes and fees, with the corresponding obligation recorded in liabilities. Capital leases are amortized in accordance with property and equipment policies, and the corresponding obligations are reduced as lease payments are made. As of December 31, 2017 and 2016, the Company had no capital leases.

Comprehensive Income and Foreign Currency Translation

Comprehensive income is defined as the change in equity during a period from transactions and other events from non-owner sources. Comprehensive income is the total of net income and other comprehensive income, which includes foreign currency translation adjustments. The functional currencies of the Company's foreign operations are the reported local currencies. Translation adjustments result from translating the Company's foreign subsidiaries’ financial statements into United States dollars. Assets and liabilities of the Company's foreign subsidiaries are translated into United States dollars using the exchange rate in effect at the consolidated balance sheet dates. Equity is translated at the historical rate of the transaction.

Revenues and expenses are translated using average exchange rates for each month during the fiscal year. The Company considers intercompany balances as long-term investments in nature as they do not expect repayment, and therefore, translates the transactions at the historical rate. The resulting translation losses are recorded as a component of accumulated other comprehensive loss in stockholders' equity. The cumulative foreign currency translation adjustment totaled $317,922 and $357,095, as of December 31, 2017 and 2016, respectively. Foreign currency translation gains (losses) were $39,173 and $(16,368) during 2017 and 2016, respectively, and are reported on the consolidated statements of operations and comprehensive loss.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases. The new standard establishes a right-of-use ("ROU") model that requires a lessee to record a ROU asset and a lease liability, measured on a discounted basis, on the consolidated balance sheets for all leases with terms greater than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated statements of operations and comprehensive loss. A modified retrospective transition approach is required for capital and operating leases existing at the date of adoption, with certain practical expedients available. The Company is currently in the process of evaluating the potential impact of this new guidance, which is effective for the Company beginning on January 1, 2020.

On May 28, 2014, the FASB issued Accounting Standards Update Topic 2014-09 ("ASU 2014-09"), Revenue from Contracts with Customers. ASU 2014-09 supersedes existing revenue recognition guidance, including ASC 605-35. ASU 2014-09 outlines a single set of comprehensive principles for recognizing revenue under

Exhibit 99.3

US GAAP. Among other things, it requires companies to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time. These concepts, as well as other aspects of ASU 2014-09, may change the method and/or timing of revenue recognition for certain of the Company contracts. ASU 2014-09 will be effective for privately held companies for annual reporting periods beginning after December 15, 2018 and may be applied either retrospectively or through the use of a modified-retrospective method. Management is currently evaluating both methods of adoption as well as the effect ASU 2014-09 will have on the Company’s consolidated financial position, results of operations and cash flows.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, to simplify several aspects of the accounting for share-based payment award transactions, including accounting for income tax consequences, classification of awards either equity or liability, and classification on the consolidated statement of cash flows. FASB ASU 2016-09 also simplifies the accounting for private entities such that private entities can (1) apply a practical expedient to estimate the expected term for all awards with performance or service conditions that have certain characteristics; and (2) make a one-time election to switch from measuring all liability-classified awards at fair value to measuring them at intrinsic value. FASB ASU 2016-09 is effective for private entities for annual periods beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating methods of adoption as well as the impact that adoption of this guidance will have on its consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, to provide guidance on determining which changes to the terms and conditions of equity-based payment awards require an entity to apply modification accounting under FASB ASC 718. FASB ASU 2017-09 is effective for all entities for years beginning after December 15, 2017, with early adoption being permitted. The Company is currently evaluating methods of adoption as well as the impact that adoption of this guidance will have on its consolidated financial statements.

3. NOTE RECEIVABLE

Intellectual Property Purchase

In 2013, the Company ("Seller") entered into an agreement with a technology company ("Buyer") to sell the rights, title and interests, other than the patent rights, in software code for geospatial visualization, analysis, and collaboration tool for synthesis of data from many sources. A $6,000,000 Secured Promissory Note was negotiated, in addition to issuance of 5% of total outstanding shares of Class A common stock of the Buyer which equated to 527,000 shares. The Senior Secured Promissory Note ("Note") had an initial payment in October 2013 and annual payments scheduled from October 2015 through October 2018.

Based on qualitative analysis of the Buyer’s business in the development stage and quantitative analysis of the Buyer’s financial condition, the Company considered the collectability of the Note as reasonably uncertain. As a result, the Company recognized revenue from this agreement upon cash collection and recorded an allowance for the entire balance of the Note at each year-end. Based on the same qualitative and quantitative analysis the fair market value of the Buyer’s common stock was deemed to be zero and was not recorded in the Company’s consolidated financial statements.

In 2015, the Company recognized the collected amount of $750,000 as revenue when received.

In March 2016, the Buyer and the Seller agreed to modify the terms of the Note as follows:

• The Buyer executed an Amended and Restated Senior Secured Promissory Note ("Amended Note") in the amount of $1,180,331 plus accrued interest. The payments for the Amended Note were to be made in three payments as follows:

Exhibit 99.3

◦Initial Payment: $250,000 on March 26, 2016.

◦Second Payment: $375,000 on or prior to November 1, 2016.

◦Third Payment: $625,000 on or prior to November 1, 2017.

• The Buyer assigned to the Seller 1.5 million shares of Oblong common stock, which was retired by the Board of Directors and not held as Treasury Stock. The Seller assigned back to the Buyer 527,000 shares of Class A common stock of the Buyer.

The Company performed another quantitative and qualitative analysis of the Buyer’s financial condition and determined revenue related to the Amended Note should be recognized as amounts are received. As a result, the transactions from the amended agreement were recorded as follows:

• The amounts of $250,000 and $375,000 were recognized as revenue when received in March and September 2016, respectively.

• The assignment and cancellation of the 1.5 million shares of the Seller’s common stock received by the Seller was recognized as revenue based on the fair value of the common stock at $0.90 per share at the time of the transaction.

• There was no transaction recorded by the Seller for the assignment of the Buyer’s Class A common stock because the fair value of the shares was zero on the Seller records.

In October 2017, the Buyer communicated to the Seller the inability to make the payment of $625,000 on November 1, 2017. The Buyer and the Seller negotiated a settlement that was finalized in March 2018 (see Note 11).

As of December 31, 2017 and 2016, the net receivable balance of the Amended Note was zero, as the Company deemed collectability as reasonably uncertain.

4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:    

As of December 31,		2017		2016
Computer equipment	$	5,373,928	$	6,913,807
Furniture and fixtures		293,357		212,392
Leasehold improvements		952,069		1,508,913
Tooling		125,433		93,235
		6,744,787		8,728,347
Less: accumulated depreciation and amortization		(4,170,612)		(6,335,626)
Property and equipment, net	$	2,574,175	$	2,392,721

Exhibit 99.3

During the implementation of a new accounting software system (NetSuite), the Company elected to not transfer the accounting records and balances of fully depreciated assets, totaling approximately $3,400,000, as of the go-live date of February 1, 2017.

For the year ended December 31, 2017, depreciation and amortization expense related to property and equipment totaled $1,371,365, of which $1,333,953 and $37,412 were included in operating expenses and cost of revenues, respectively. For the year ended December 31, 2016, depreciation and amortization expense related to property and equipment totaled $1,133,686 and was included in operating expenses.

5.INTANGIBLE ASSETS

Identifiable intangible assets consist of the following:

As of December 31, 2017		Gross Carrying Amount	Useful Life In Years		Accumulated Amortization		Accumulated Impairment		Net Carrying Amount
Patent costs	$	5,472,749	10 - 20	$	(394,409)	$	(918,737)	$	4,159,603
Trademarks		69,952	Indefinite		N/A		—		69,952
Certification costs		236,198	3		(103,683)		—		132,515
Software systems		711,602	5		(121,768)		—		589,834
Total	$	6,490,501		$	(619,860)	$	(918,737)	$	4,951,904

The gross carrying amount of patent costs consist of the following:

As of December 31, 2017		Amount
Granted patents	$	2,308,805
Pending patents		2,245,207
Abandoned patents		918,737
Total	$	5,472,749

Identifiable intangible assets are as follows:

As of December 31, 2016		Gross Carrying Amount	Useful Life In Years		Accumulated Amortization		Accumulated Impairment		Net Carrying Amount
Patent costs	$	5,035,578	10 - 20	$	(239,646)	$	(536,674)	$	4,259,258
Trademarks		69,952	Indefinite		N/A		—		69,952
Certification costs		112,593	3		(6,255)		—		106,338
Total	$	5,218,123		$	(245,901)	$	(536,674)	$	4,435,548

For the year ended December 31, 2017, amortization expense related to identifiable intangible assets totaled $373,960, of which $276,532 and $97,428 were included in operating expenses and cost of revenues, respectively. For the year ended December 31, 2016, amortization expense related to identifiable intangible assets totaled $97,515 and was included in operating expenses.

Future amortization expense on granted patents are as follows:

Exhibit 99.3

For the Years Ending December 31:		Amount
2018	$	169,713
2019		169,713
2020		169,713
2021		169,713
2022		169,713
Thereafter		1,065,833
Total	$	1,914,398

6. LONG-TERM DEBT

In January 2014, the Company entered into a loan and security agreement with a financial institution, consisting of a term loan (the "Term Loan") with an original principal balance of $5,000,000 and a $5,000,000 revolving line of credit (the "Revolver"). The Revolver is subject to a borrowing base of 80% of eligible accounts receivable, plus the lesser of 50% of the value of the Company’s inventory or $500,000. The loan and security agreement is collateralized by substantially all of the assets, not including the intellectual property consisting of copyrights, trademarks and patents. The Term Loan matures in July 2018 and the Revolver matures in September 2019. The Term Loan and Revolver bear interest at the Wall Street Journal prime rate plus 0.375% (4.875% and 4.125% as of December 31, 2017 and 2016, respectively).

Pursuant to the First Amendment to Amended and Restated Loan and Security Agreement executed in July 2016, the Term Loan increased to $6,175,000 and the Revolver increased to $10,000,000. Pursuant to the Default Waiver and Second Amendment to the Amended and Restated Loan and Security Agreement ("Second Amendment") executed in June 2017, the financial covenants were revised to require the Company to maintain 75% of purchase order contracts compared to an annual published business plan that will be measured on a trailing 6-month basis, rather than trailing 12-month basis. Further, the Company’s adjusted quick ratio shall be no less than 1.10. Pursuant to the Default Waiver and Third Amendment to Amended and Restated Loan and Security Agreement ("Third Amendment") executed in December 2017, the Revolver decreased to $7,500,000 and the annual business plan to measure against 75% of purchase order contracts on a trailing 6-month basis for the financial covenant was revised.

The borrowings available under the Revolver were $7,139,589 and $5,265,459 as of December 31, 2017 and 2016, respectively. The Revolver consists of interest-only payments, payable in arrears, and principal is due in full at maturity. As of December 31, 2016, the outstanding balance on the Revolver was $263,189. There was no outstanding balance on the Revolver as of December 31, 2017.

The Term Loan consisted of interest-only payments through June 31, 2017 followed by twenty-seven equal monthly payments of principal, plus monthly payments of accrued interest through maturity. The outstanding balance on the Term Loan was $4,802,778 and $6,175,000 as of December 31, 2017 and 2016.

The Second Amendment included a final payment related to the Term Loan over and above the principal balance due at maturity in the amount of $216,125. The Company recorded these loan costs on the consolidated balance sheets and is amortizing the costs as interest expense over the amended terms of the loans to recognize the effective interest rate related to the loans.

The Company was in compliance with the quick ratio covenant as of December 31, 2017 but was not in compliance with the minimum booking from January to March and July to November during the year ended December 31, 2017. The Company was in compliance with the quick ratio covenant as of December 31, 2016 but was not in compliance with the minimum bookings from November to December during the year ended December 31, 2016. The lender waived default pursuant to the Third and Second Amendment, respectively.

Exhibit 99.3

Future maturities of the Term Loan are as follows:

Years Ending December 31:		Amount
2018	$	2,744,444
2019		2,058,334
Total	$	4,802,778

7. CONTRACTS AND OTHER CONTINGENCIES

Lease Commitments

The Company leases its facilities under non-cancellable operating lease agreements that expire on various dates through May 2023. In addition, the Company has facility leases that provide for rent adjustment increases. The accompanying consolidated statements of operations and comprehensive loss reflect rent expense on a straight-line basis over the term of the leases.

The differences between rent expense recorded and the amount paid are credited or charged to deferred rent, which were included in the accompanying consolidated balance sheets. Under these agreements, net rent expense was $1,425,151 and $976,121 for the years ended December 31, 2017 and 2016, respectively. Total deferred rent as of December 31, 2017 and 2016 was $253,952 and $177,401, respectively.

The approximate aggregate future minimum lease commitments for these leases are as follows:

Years Ending December 31:		Cash Payments		Straight-line Rent Expense		Deferred Rent
2018	$	1,502,436	$	1,465,714	$	36,722
2019		1,469,914		1,424,309		45,605
2020		1,247,835		1,181,359		66,476
2021		1,049,244		988,978		60,266
2022		450,339		413,336		37,003
Thereafter		115,668		107,788		7,880
Totals	$	5,835,436	$	5,581,484	$	253,952

In 2017 and 2016, the Company received $109,142 and $84,736, respectively, for reimbursement of tenant improvements from the landlord for lease facilities. The amount of this reimbursement was included with deferred rent and is amortized as a rent reduction over the term of the lease.

Purchase Commitments

In 2016, the Company entered into inventory purchase commitments with two vendors for future orders over the next twelve months. As a result, the Company committed to minimum purchases of $1,753,202. In 2017, the purchase commitment was amended. Correspondingly, the minimum purchase commitment increased to $1,757,370 and the commitment was extended through December 2018. Of the $1,757,370 committed, $395,786 remains outstanding as of December 31, 2017.

Litigation

The Company is subject to certain legal proceedings and claims that arise in the normal course of business. Based on the advice of legal counsel, management believes that no actions or claims depart from customary litigation or claims incidental to the business or the subsidiaries and that the resolution of all such litigation

Exhibit 99.3

or claims will not have a material adverse effect on the Company’s consolidated financial position, results of operations and cash flows.

8. CONVERTIBLE PREFERRED STOCK

The convertible preferred stock described below has been classified outside of stockholders' equity to comply with Regulation S-X because the shares contain certain redemption features that are not solely within the control of the Company.

In May 2016, the Company and its investors amended the Series D Purchase Agreement dated February 3, 2015 to extend the period during which additional Series D convertible preferred stock could be issued, through July 31, 2016. In May 2016, the Company issued an additional 4,559,269 shares of Series D at $3.29.

In July 2016, the Company and its investors agreed to amend the Series D Stock Purchase Agreement whereby the Company could sell up to 15,300,000, shares before September 30, 2016. To facilitate this amendment, the Company amended and restated the certificate of incorporation to increase the authorized shares to 50,000,000 shares of common stock at par value of $0.0001 and 32,150,000 shares of preferred stock with par value of $0.0001 designated as 6,800,000 as Series A; 7,300,000 as Series B; 2,750,000 as Series C; and 15,300,000 as Series D. In July 2016, the Company issued an additional 4,559,269 shares of Series D at $3.29.

In September 2016, the Company and its investors agreed to amend the Series D Stock Purchase Agreement whereby the Company could sell up to 19,800,000 shares before September 30, 2016. To facilitate this amendment, the Company amended and restated the certificate of incorporation to increase the authorized shares to 54,500,000 shares of common stock at par value of $0.0001 and 36,650,000 shares of preferred stock with par value of $0.0001 designated as 6,800,000 as Series A; 7,300,000 as Series B; 2,750,000 as Series C; and 19,800,000 as Series D. In September 2016, the Company issued an additional 6,079,027 shares of Series D at $3.29.

The Series D shares issued in 2016 were recorded net of issuance costs of $30,728. The Company issued no shares of Series D during 2017. The liquidation preference on Series D is $64,999,984 as of December 31, 2017 and 2016.

As of December 31, 2017, the Company had authorized 2,750,000 shares of Series C convertible preferred stock ("Series C") with a par value of $0.0001. The Company issued no shares of Series C during 2017 and 2016. The Company had 2,669,191 shares of Series C issued and outstanding as of December 31, 2017 and 2016, of which 1,453,386 shares were a result of a conversion of notes payable and accrued interest in previous years. The liquidation preference on Series C is $8,781,638 as of December 31, 2017 and 2016.

As of December 31, 2017, the Company had authorized 7,300,000 shares of Series B convertible preferred stock ("Series B") with a par value of $0.0001. During 2017 and 2016, the Company issued no shares of Series B. The Company had 6,114,632 shares issued and outstanding as of December 31, 2017 and 2016. The liquidation preference on Series B is $21,156,627 as of December 31, 2017 and 2016.

As of December 31, 2017, the Company had authorized 6,800,000 shares of Series A convertible preferred stock ("Series A") with a par value of $0.0001. During 2017 and 2016, the Company issued no shares of Series A. The Company had 6,596,516 shares issued and outstanding as of December 31, 2017 and 2016. The liquidation preference on Series A is $8,752,813 as of December 31, 2017 and 2016.

The rights associated with Series A, Series B, Series C and Series D (collectively "Series Preferred") are as follows:

Dividend Rights

Exhibit 99.3

Holders of Series A, Series B, Series C and Series D, in preference to the holders of common stock, are entitled to receive cash dividends at the annual rate of $0.1064, $0.2768, $0.2632, and $0.2632 per share, respectively. The dividends are payable only when and if declared by the Board of Directors and are non-cumulative. No dividends were paid in 2017 and 2016.

Conversion Rights

Each share of Series Preferred is convertible into shares of common stock at the option of the holder at any time after the date of issuance. The number of shares of common stock into which a holder of Series Preferred can convert is obtained by multiplying the conversion rate that is in effect by the number of shares of Series Preferred being converted. The conversion rate is determined by dividing the original issue price by the applicable conversion price (initially the original issue price, as adjusted for certain dilutive events). As a result of antidilution adjustments afforded by Series B, in connection with the issuance of shares of Series C and Series D, as of December 31, 2016, the conversion price of the Series B had been adjusted from $3.46 to $3.39. As a result, its conversion rate into shares of Common Stock is approximately 1.0206 as of December 31, 2017.

Under the terms, each share of Series Preferred will be automatically converted into shares of common stock (based on the then effective Series Preferred conversion price) immediately upon closing of a firm underwritten public offering pursuant to an effective registration statement on Form S-1 or SB-2 under the Securities Act of 1933, as amended, covering the offer and sale of common stock for the account of the Company in which the per share price to the public is at least $6.92 and the gross cash proceeds to the Company (before underwriting discounts, commissions, and fees) are at least $30,000,000 or if there is an affirmative election of the holders of the majority of the outstanding shares of Series Preferred on an as-converted basis.

To affect the automatic conversion of the Series B, the affirmative election of the holders of the majority of the outstanding shares of Series B, voting as a separate class, is also required. Similarly, to affect the automatic conversion of the Series C, the affirmative election of the holders of the majority of the outstanding shares of Series C, voting as a separate class, is required. Furthermore, to affect the automatic conversion of the Series D, the affirmative election of the holders of the majority of the outstanding shares of Series D, voting as a separate class, is required.

Liquidation Rights

In accordance with the certificate of incorporation, upon any liquidation, dissolution, change in control, or winding up of the Company ("Liquidating Event"), the holders of Series Preferred are entitled to be paid out of the assets of the Company legally available for distribution an amount per share of Series Preferred equal to the original issue price plus all declared and unpaid dividends on the Series Preferred, before any distribution or payment is made to the holders of any common stock.

If after the liquidation preference there are assets remaining, the assets will be distributed ratably amongst the common stock, Series A holders, and Series D holders, on an as-converted to common stock basis. Series Preferred will be deemed converted to common stock upon a Liquidating Event if the holder would receive a greater amount than if they had not been converted. If the Company has insufficient assets upon the Liquidating Event to make payment in full to all holders of Series Preferred their liquidation preference, then such assets (or consideration) will be distributed among the holders of Series Preferred ratably in proportion to the full amounts to which they would otherwise be respectively entitled. Any transaction or series of transactions that meets the definition of a Liquidating Event may be waived as a Liquidating Event by a majority vote of the Series Preferred holders.

Voting Rights

Exhibit 99.3

Series Preferred holders are entitled to the number of votes equal to the number of common shares the preferred shares is convertible into. So long as at least 2,500,000 shares of Series Preferred remain outstanding, 1,000,000 shares of Series B remain outstanding, 1,000,000 shares of Series C remain outstanding or 1,000,000 shares of Series D remain outstanding, the vote or written consent of the holders of a majority of the outstanding Series Preferred, Series B, Series C, or Series D, respectively, shall be necessary for defined significant events.

9. STOCKHOLDERS’ EQUITY

Common Stock

As of December 31, 2017, the Company had authorized 54,500,000 shares of common stock with a par value of $0.0001. During 2017 and 2016, the Company issued 69,125 and 34,709 shares of common stock, respectively, through the exercise of stock options. In 2016, the Company issued 646,275 shares of common stock related to the exercise of warrants. In March 2016, the Company re-acquired 1,500,000 shares of common stock related to a contract renegotiation, which shares were subsequently retired by the Company in May 2016 (see Note 3). The Company had 11,783,971 and 11,720,846, respectively, of common stock shares issued and outstanding as of December 31, 2017 and 2016.    

Stock Options

On January 22, 2007, the Company adopted the 2007 Stock Plan (the "Plan") under which the Company is authorized to grant incentive and non-qualified stock option awards to employees, directors, consultants, and affiliates of the Company. The Plan provides both for the direct award or sale of shares and for the grant of options to purchase shares. The Company is authorized to grant up to 5,405,376 shares of stock awards. The option price and vesting terms are determined by the Board of Directors of the Company and evidenced in the award agreement extended to the employee. The options granted generally vest over a period of one to four years and terminate ten years from the grant date. As of December 31, 2017 and 2016, $559,703 and $704,715, respectively, remained to be expensed over the vesting period and the forfeiture rate has been estimated at 10%. During the years ended December 31, 2017 and 2016, the Company recognized $357,107 and $349,282, respectively, in stock-based compensation expense.

The following presents the activity for options outstanding:

				Weighted
	Incentive	Non-Qualified		Average
	Stock	Stock		Exercise
As of December 31, 2017	Options	Options		Price
December 31, 2015	3,500,333	125,000	$	0.77
Granted	560,250	—	$	0.93
Exercised	(34,709)	—	$	0.66
Forfeited/canceled	(153,791)	(70,000)	$	0.55
December 31, 2016	3,872,083	55,000	$	0.77
Granted	631,195	23,833	$	0.97
Exercised	(69,125)	—	$	0.25
Forfeited/canceled	(596,013)	—	$	0.75
December 31, 2017	3,838,140	78,833	$	0.81

The following table presents the composition of options outstanding and exercisable as of December 31, 2017:

Exhibit 99.3

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number		Price*	Life*	Number		Price*
$0.13	—	$	0.13	—	—	$	0.13
$0.16	—	$	0.16	—	—	$	0.16
$0.21	185,000	$	0.21	2.04	185,000	$	0.21
$0.30	155,000	$	0.30	2.98	155,000	$	0.30
$0.71	409,000	$	0.71	4.08	409,000	$	0.71
$0.80	667,303	$	0.80	4.80	667,303	$	0.80
$0.84	810,315	$	0.84	6.48	721,347	$	0.84
$0.90	653,160	$	0.90	7.44	419,641	$	0.90
$0.93	392,500	$	0.93	8.29	168,349	$	0.93
$0.94	69,000	$	0.94	6.80	55,715	$	0.94
$0.97	575,695	$	0.97	9.28	15,066	$	0.97
December 31, 2017	3,916,973	$	0.81	6.35	2,796,421	$	0.76

* Price and Life reflect the weighted average exercise price and weighted average remaining contractual life, respectively.

The fair value of each option grant was estimated on the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions:

For the years ended December 31,	2017	2016
Approximate risk-free rate	1.84 - 2.33%	1.84 - 2.14%
Average expected life	6 years	6 years
Dividend yield	0%	0%
Volatility	62%	62%
Fair value of common stock	$0.83 - $0.97	$0.79 - $0.93
Estimated fair value of options granted	$0.58 - $0.66	$0.64 - $0.66
Estimated forfeiture rate	10%	10%

Warrants In 2008 through 2013, the Company issued warrants to a bank and stockholders. The following presents activity for warrants:

For the years ended December 31, 2017 and 2016	Series A Warrants	Series B Warrants	Common Stock Warrants
December 31, 2015	—	43,731	1,453,385
Granted	—	—	—
Exercised	—	—	(646,275)
Forfeited/canceled	—	—	—
December 31, 2016	—	43,731	807,110
Granted	—	—	—
Exercised	—	—	—
Forfeited/canceled	—	—	—
December 31, 2017	—	43,731	807,110

Exhibit 99.3

10. INCOME TAXES

The provision (benefit) for income taxes is as follows:

For the years ended December 31,		2017		2016
Current:
Federal	$	—	$	—
State		5,006		—
Foreign		96,708		—
		101,714		—
Deferred:
Federal		3,035,393		(4,452,330)
State		(150,834)		(1,986,746)
Foreign		—		—
		2,884,559		(6,439,076)
Less: change in valuation allowance		(2,884,559)		6,439,076
		—		—
Total	$	101,714	$	—

The provision for income taxes of $101,714 for the year ended December 31, 2017 is included in other expenses, net on the accompanying consolidated statement of operations and comprehensive loss.

The reconciliation of income taxes calculated at the U.S. federal tax statutory rate to the Company’s effective tax rate is set forth below:

For the years ended December 31,	2017	2016
U.S. federal statutory rate	34.00%	34.00%
State income tax, net of federal benefit	3.43%	4.43%
Change in valuation allowance	14.03%	(43.25%)
Other	(2.74%)	4.82%
Federal rate change	(48.72%)	0.00%
Effective income tax rate	0.00%	0.00%

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities were as follows as of December 31:

For the years ended December 31,		2017		2016
Deferred tax assets:
Net operating loss carry forwards	$	19,958,052	$	23,916,514
Income tax credits		3,007,357		2,560,882
Others		2,344,495		3,247,819
Total gross deferred tax assets		25,309,904		29,725,215
Deferred tax liabilities:
State income taxes		(1,151,908)		(1,810,332)
Property and equipment		147,988		(66,622)
Intangible assets		(1,081,346)		(1,739,066)
Total gross deferred tax liabilities		(2,085,266)		(3,616,020)
Less: valuation allowance		(23,224,638)		(26,109,195)
Total	$	—	$	—

Exhibit 99.3

The Company’s ability to utilize net operating loss carryforwards may be limited in the event of an ownership change as defined in the Internal Revenue Code. As of December 31, 2017 and 2016, the Company had net operating loss carryforwards for federal and state income tax purposes of $77,269,251 and $59,086,048, respectively. If not utilized, the federal and state net operating losses will begin to expire in 2028. In addition, the Company has research and development ("R&D") credits for federal and state income tax purposes of $1,573,336 and $1,172,653, respectively. The federal R&D credits, if not utilized, will begin to expire in 2027. The California R&D credits can be carried forward indefinitely. The Company also has a carryover of California Enterprise Zone and New Job credits totaling $147,676, which will expire beginning in 2018.

Based on pretax losses sustained by the Company and uncertainty of realizing future income, a valuation allowance was recorded against the net deferred tax assets. The Company’s effective income tax rate differs from the statutory federal income tax rate due to the change in valuation allowance.

The Company’s subsidiaries, Oblong Europe, Ltd. and Oblong Industries Europe, S.L.U. are subject to foreign income tax in Germany, Spain, and United Kingdom. The amount of such foreign current income tax expense incurred amounted to $96,708 for 2017.

On December 22, 2017, H.R.1, also known as the Tax Cuts and Jobs Act (the "Tax Reform Act"), was enacted into law. The Tax Reform Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (i) reducing the U.S. federal statutory tax rate from 35% to 21%; (ii) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries (the "Transition Tax"); (iii) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (iv) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (v) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; (vi) creating the base erosion anti-abuse tax (BEAT), a new minimum tax; (vii) creating a new limitation on deductible interest expense, and (viii) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017. As a result of the Tax Reform Act, the Company recorded an income tax benefit of $10,018,768 before the valuation allowance due to a remeasurement of deferred tax assets and liabilities using the income tax rate applicable for future periods in which they are expected to reverse.

11. Profit Sharing Plan

The Company sponsors a 401(k) Plan (the "Plan") for all eligible employees. All full-time employees are eligible to participate in the Plan during their first payroll period. The Company contributions to the Plan are at the sole discretion of the Company’s Board of Directors. Employees may elect to have a portion of their compensation deferred and contributed to their 401(k) accounts. Vesting and the allocation of Company contributions to the eligible employee accounts are determined in accordance with the terms of the Plan. Matching contributions were discontinued in September 2012. There were no contributions for the years ended December 31, 2017 and 2016.

12. Restatement of Previously Issued Financial Statements

The Company has restated its previously issued consolidated balance sheets as of December 31, 2017 and 2016 and the related consolidated statements of cash flows for the years ended. The Company determined that its holdings of certain money market funds with a financial institution were erroneously classified as marketable securities on its consolidated balance sheets as of December 31, 2017 and 2016, and instead should have been included in cash, cash equivalents and restricted cash. Cash, cash equivalents and restricted cash, beginning of year (December 31, 2017 and December 31, 2016), in the accompanying consolidated statements of cash flows have been adjusted for the effects of this revision.

Exhibit 99.3

		As Previously				As
Oblong Industries, Inc. Consolidate Balance Sheet		Reported		Adjustment		Restated
December 31, 2017
Cash, cash equivalents, and restricted cash	$	631,331	$	14,053,172	$	14,684,503
Marketable securities	$	14,053,172	$	(14,053,172)	$	—
December 31, 2016
Cash, cash equivalents, and restricted cash	$	32,584	$	38,754,929	$	38,787,513
Marketable securities	$	38,754,929	$	(38,754,929)	$	—

13. SUBSEQUENT EVENTS

The Company has evaluated subsequent events that have occurred from January 1, 2018 through the date of the independent auditor’s report, which is the date that the consolidated financial statements were available to be issued, and determined that there were no subsequent events or transactions that required recognition or disclosure in the consolidated financial statements, except as disclosed below.

On March 12, 2018, the Company executed a Debt Discharge Agreement with the Buyer (see Note 3). The Buyer and the Company agreed to the following terms and conditions, as set forth in the Debt Discharge Agreement:

• Buyer shall pay the Company $310,547 no later than March 15, 2018 via wire transfer, which the Company shall accept in full satisfaction of the indebtedness and any and all other obligations, deeming the Amended Note discharged.

On March 12, 2018, the Company received $310,547 from the Buyer and deemed the Amended Note and all other obligations discharged.

EX-99.4

Exhibit 99.4

OBLONG INDUSTRIES, INC.

As of September 30, 2019, and for the Nine Months Ended

September 30, 2019 and 2018 (Unaudited)

1

Exhibit 99.4

OBLONG INDUSTRIES, INC.

September 30, 2019 and 2018

Table of Contents

	Page
Financial Statements
Balance Sheet	3
Statements of Income	4
Statement of Convertible Preferred Stock and Stockholders' Deficit	5-6
Statements of Cash Flows	7
Notes to Financial Statements	8-20

2

Exhibit 99.4

Oblong Industries, Inc.

CONSOLIDATED BALANCE SHEET

		September 30, 2019
		(Unaudited)
ASSETS
Current assets:
Cash, cash equivalents and restricted cash	$	2,193,891
Accounts receivable		1,962,264
Prepaid expenses and other current assets		571,189
Inventory		1,618,118
Total current assets		6,345,462
Property and equipment, net		1,221,294
Intangible assets, net		3,595,117
Other assets		215,873
Total assets	$	11,377,746
LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	296,018
Accrued expenses and other current liabilities		1,024,365
Customer deposits		90,082
Current portion of deferred revenue		2,951,977
Current portion of deferred rent		62,157
Notes payable		3,000,000
Current portion of long-term debt		2,627,462
Total current liabilities		10,052,061
Deferred rent, net current portion		139,260
Long-term debt		2,619,538
Other long-term liabilities		93,661
Total liabilities		12,904,520
Convertible preferred stock:
Convertible preferred stock		71,755,175
Stockholders' deficit:
Common stock		2,735
Additional paid-in capital		43,863,065
Accumulated deficit		(116,715,472	)
Retained Earnings		(432,277	)
Total stockholders' deficit		(73,281,949	)
Total liabilities, convertible preferred stock, and stockholders' deficit	$	11,377,746
The accompanying notes are an integral part of these financial statements

3

Exhibit 99.4

Oblong Industries, Inc.

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE NINE MONTHS ENDED SEPTEMBER 30,		2019			2018
		(Unaudited)			(Unaudited)
Net Revenues	$	12,757,891		$	13,267,053
Cost of revenues		2,719,024			3,017,507
Gross profit		10,038,867			10,249,546
Operating expenses:
Research and development		6,321,182			6,917,877
General and administrative		5,623,661			5,425,866
Sales and marketing		7,585,375			9,409,313
Depreciation and amortization		852,272			1,016,782
Loss on impairment of intangible assets		426,785			136,894
Total operating expenses		20,809,275			22,906,732
Loss from operations		(10,770,408	)		(12,657,186	)
Other expenses:
Interest expense, net		260,334			51,703
Other expenses, net		11,650			27,996
Total other expenses, net		271,984			79,699
Net loss		(11,042,392	)		(12,736,885	)
Foreign currency translation loss		(38,287	)		(55,822	)
Comprehensive loss	$	(11,080,679	)		(12,792,707	)
The accompanying notes are an integral part of these financial statements

4

Exhibit 99.4

Oblong Industries, Inc.

CONSOLIDATED STATEMENT OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (Unaudited)

	Series D Convertible			Series E Convertible				Total Convertible					Additional					Accumulated Other			Total
FOR THE NINE MONTHS ENDED	Preferred Stock			Preferred Stock				Preferred Stock	Common Stock				Paid-in		Accumulated			Comprehensive			Stockholders'
SEPTEMBER 30, 2019	Shares		Amount	Shares		Amount		Amount	Shares		Amount		Capital		Deficit			Loss			Deficit
Balance at January 1, 2019	19,756,834	$	64,941,548	2,899,266	$	6,813,627	$	71,755,175	27,304,479	$	2,731	$	43,607,483	$	(105,673,080	)	$	(393,990	)	$	(62,456,856	)
Stock options exercised	—		—	—		—		—	35,219		4		17,630		—			—			17,634
Stock-based compensation	—		—	—		—		—	—		—		237,952		—			—			237,952
Foreign currency translation loss	—		—	—		—		—	—		—		—		—			(38,287	)		(38,287	)
Net loss	—		—	—		—		—	—		—		—		(11,042,392	)		—			(11,042,392	)
Balance at September 30, 2019	19,756,834	$	64,941,548	2,899,266	$	6,813,627	$	71,755,175	27,339,698	$	2,735	$	43,863,065	$	(116,715,472	)	$	(432,277	)	$	(73,281,949	)
See accompanying notes to consolidated financial statements.

5

Exhibit 99.4

Oblong Industries, Inc.

CONSOLIDATED STATEMENT OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (Unaudited)

6

Exhibit 99.4

Oblong Industries, Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS

	Nine Months Ended September 30,
	2019			2018
	(Unaudited)			(Unaudited)
Cash flows from operating activities
Net loss	$	(11,042,392	)	$	(12,736,885)
Adjustments to reconcile net loss to cash used in operating activities
Depreciation and amortization	1,027,670			1,074,118
Inventory write-off	187,650			120,521
Amortization of deferred financing costs	112,961			62,563
Stock-based compensation	237,952			201,735
Loss on disposal of property, plant, and equipment	9,438			6,647
Impairment of intangibles assets	426,785			254,594
Changes in operating assets and liabilities:
Accounts receivable	267,358			6,497,283
Prepaid expenses and other current assets	234,091			118,194
Inventory	62,385			(114,744)
Other assets	44,971			94,756
Accounts payable	(254,407		)	(658,768)
Accrued expenses	81,891			(974,479)
Deferred revenue	(416,126)			(3,187,917)
Customer deposits	(343,117)			(35,432)
Deferred rent	(15,813)			(27,542)
Other long-term liabilities	(22,663		)	(147,245		)
Net cash used in operating activities	(9,401,366)			(9,452,601		)
Cash flows from investing activities
Purchase of property and equipment	(60,025		)	(192,199)
Intangible asset costs	27,994			(193,798)
Net cash used/provided by investing activities	(32,031)			(385,997)
Cash flows from financing activities
Proceeds from exercise of options	17,634			7,299
Borrowing from revolving line of credit	—			2,750,065
Borrowing from promissory notes	3,000,000			—
Payments on revolving line of credit	—			(2,750,065		)
Payments on term loan	—			(2,058,333		)
Proceeds from sale of preferred stock	—			9,028,199
Net cash provided by financing activities	3,017,634			6,977,165
Effect of foreign currency on cash	(38,286		)	(55,822		)
Net decrease in cash	(6,454,049		)	(2,917,255		)
Cash, cash equivalents, and restricted cash, beginning of period	8,647,940			14,684,503
Cash, cash equivalents, and restricted cash, end of period	$	2,193,891		$	11,767,248

The accompanying notes are an integral part of these financial statements

7

Exhibit 99.4

OBLONG INDUSTRIES, INC.

Notes to Financial Statements

Information as of September 30, 2019 and for the Nine Months Ended

September 30, 2019 and 2018 is unaudited

Note 1 - Description of Business and Summary of Significant Accounting Policies

Nature of Operations

Oblong Industries, Inc. ("Oblong") was incorporated in the state of Delaware on July 31, 2006. Oblong’s wholly owned subsidiaries consist of Oblong Industries Europe S.L.U. ("Euroblong") and Oblong Europe Ltd ("Oblong UK") (collectively, the "Company"). Euroblong was incorporated in Spain on March 12, 2007 and Oblong UK was incorporated in England on February 6, 2014. On January 27, 2017, Oblong UK established the branch entity, Oblong Europe Ltd. (German Branch) ("Oblong German Branch").

The Company’s core platform is g-speak™ and Mezzanine™ is its flagship product built on this platform. Mezzanine offers advanced collaboration for conference room technology, which amplifies sales presentations, enhances group collaboration, and makes work sessions more productive. The Company offers g-speak development licenses to larger enterprise customers. Oblong is headquartered in Los Angeles, California with a sales and development office in Boston, Massachusetts; regional sales offices in Los Altos, California; New York City, New York; Washington D.C.; Chicago, Illinois; Houston and Dallas, Texas; and Atlanta, Georgia. The Euroblong office is in Barcelona, Spain and focuses on mobile research and development, while the Oblong UK and Oblong German Branch offices are in London, England and Munich, Germany, respectively, and focus on sales and marketing in the European region.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of $116,715,472 as of September 30, 2019, and net losses of $11,042,392 for the nine months ended September 30, 2019. Cash used in operating activities amounted to $9,401,366 for the nine months ended September 30, 2019. These conditions raise substantial doubt as to the Company’s ability to continue to operate as a going concern.

Since inception, the Company has financed its business activities through the issuance of equity instruments and debt. The Company is subject to various risks and uncertainties frequently encountered by newly formed companies. Such risks and uncertainties include, but are not limited to, undeveloped technology, its limited operating history, dependence on key personnel, and management of rapid growth. To address these risks, the Company must, among other things, successfully develop its customer base; successfully execute its business and marketing strategy; successfully develop its technology; provide superior customer service; and attract, retain, and motivate qualified personnel.

Based on the Company's projected cash flows and operating results for 2019, management does not believe it has sufficient cash resources to fund operations and meet its obligations as they become due for the next twelve months. Management has no further funding commitments from current investors and is in active pursuit of finding new investors or potential acquirers. As a result, there is substantial doubt the Company will be able to raise adequate funds, get acquired, or achieve and sustain profitability of positive cash flows from its operations.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

8

Exhibit 99.4

Interim Financial Statements

In the opinion of the Company's management, the accompanying unaudited consolidated financial statements of the Company contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly its financial position as of September 30, 2019 and the results of its operations and its cash flows for the nine months ended September 30, 2019 and 2018. These interim financial statements are condensed and therefore do not include all of the information and footnotes required by generally accepted accounting principles in the United States of America ("GAAP"). The actual results for the nine months ended September 30, 2019 are not necessarily indicative of the results that can be expected for the year ended December 31, 2019.

Accounting Method

The Company maintains its accounting records on an accrual method in conformity with accounting principles generally accepted in the United States of America ("US GAAP").

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Oblong and its wholly-owned subsidiaries Euroblong and Oblong UK, and branch entity, Oblong German Branch. All significant intercompany balances and transactions have been eliminated upon consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include the valuation of certain accrued expenses, which have been prepared on the basis of the most current and best available information. However, actual results from the resolution of such estimates and assumptions may vary from those used in the preparation of the consolidated financial statements.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include all cash balances and highly liquid investments, such as money market funds, with original maturities of three months or less from the date of purchase. Restricted cash are cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements.

The Company used a bank guarantee in place of a cash deposit for the lease of the sales office in Munich, Germany. The bank guarantee was collateralized by a restricted cash bank account of $93,150, which was included in cash, cash equivalents and restricted cash.

The Company has credit cards issued through the Company's bank. In September 2019, The Company was required to provide cash collateral equal to the credit limits on all open credit cards. All credit cards were closed and canceled as of September 30, 2019.

As of September 30, 2019, the Company's cash balance included restricted cash balance of $328,350.

In November 2016, the FASB issued Accounting Standards Update ("ASU") 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash ("ASU 2016-18"). ASU 2016-18 provides guidance on how restricted cash must be presented on the consolidated statement of cash flows. ASU 2016-18 requires that consolidated statement of cash flows show the change during the period of the total cash, cash equivalents and restricted cash. Private companies are required to apply the guidance in ASU 2016-18 to fiscal years beginning after December 15, 2018, with early adoption permitted.

9

Exhibit 99.4

The Company has early adopted this guidance, and restricted cash is included in cash, cash equivalents and restricted cash on the accompanying consolidated balance sheet as of September 30, 2019.

Fair Value Measurements

The Company accounts for the fair value of its financial instruments in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures ("ASC 820"). Non-recurring, nonfinancial assets and liabilities are also accounted for under the provisions of ASC 820.

ASC 820 defines fair value, establishes a framework for measuring fair value under US GAAP and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value.

The Company’s management used the following methods and assumptions to estimate the fair value of its financial instruments:

Level 1 - Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities.

Level 3 - Pricing inputs that are unobservable, supported by little or no market activity and that are significant to the fair value of the assets or liabilities, as described below.

As of September 30, 2019		Level 1		Level 2		Level 3		Total
Money market funds	$	2,131,671	$	—	$	—	$	2,131,671

Accounts Receivable

Accounts receivables are receivables from customers carried at their estimated collectible amounts. Credit is generally extended on a short-term basis; thus, accounts receivables do not bear interest. The Company extends credit based upon past credit history and an evaluation of the customers’ financial condition. Generally, collateral is not required. Accounts receivables are periodically evaluated and charged against an allowance account, if deemed to be uncollectible. The Company believes the accounts receivable balances outstanding as of September 30, 2019 are fully collectible; therefore, no allowance has been recorded.

Inventories

Inventory consists primarily of equipment, including cameras, tracking hardware, computer equipment, display equipment, and mounts. Inventory was stated at the lower of cost or net realizable value, determined using average cost. The Company uses the average cost costing method for inventory. The Company periodically performs analysis to identify any obsolete or slow-moving inventory. The obsolete or slow-moving inventory reserved and disposed of totaled $182,903 at September 30, 2019. There were no additional inventory reserve balances as of September 30, 2019. The Company periodically performs cycle counts, which may result in inventory write-offs. Write-offs are also due to excess and obsolete inventory identified as part of the analysis performed annually.

10

Exhibit 99.4

Deferred Financing Costs

Deferred financing costs represent fees incurred in connection with financing transactions. These fees are capitalized and amortized to interest expense over the terms of the related financing agreements using a method that approximates the effective interest method. FASB ASU 2015-03, Interest-Imputation of Interest (Subtopic 835-30) requires that deferred financing costs are presented, net of accumulated amortization, as an asset for amounts relating to revolving lines of credit, and as direct deductions from the face amounts of all other related long-term debt.

Deferred financing costs related to long-term debt amounted to $172,401, as of September 30, 2019, which is recorded in other long-term liabilities.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the related assets, which range from two to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of their estimated useful lives or the term of the related lease.

Betterments, renewals and extraordinary repairs that materially extend the useful life of the asset are capitalized; other repairs and maintenance charges are expensed as incurred. The cost and related accumulated depreciation and amortization applicable to assets retired are removed from the accounts, and the gain or loss on disposition, if any, is recognized in the consolidated statement of operations and comprehensive loss for that period. The costs of replacement parts and supplies are charged to expense as they are used. Maintenance costs are expensed as incurred.

Intangible Assets

Intangible assets are stated at cost, net of accumulated amortization and consist primarily of patents. Intangible assets with definite useful lives are amortized using the straight-line method over the useful lives.

The Company has applications for patents, which consist of technology, know-how, information, and intellectual property relevant to gestural and dynamic spatial-visual human machine interface. As of September 30, 2019, 80 patents have been granted.

It is the belief of the Company that the remaining patent submissions will be approved; however, amortization of the patents will not occur until approval has been granted. Should a patent be denied, or it becomes likely that a patent application will not be granted, the patent will be considered abandoned and the associated costs will be expensed as an impairment. For the period ended September 30, 2019, the Company expensed $426,785 of patent costs for abandoned patents.

Impairment of Long-lived Assets

The Company is subject to the provisions of FASB ASC Topic 360, Property, Plant and Equipment - Impairment or Disposal of Long-lived Assets, which requires impairment losses to be recorded on long-lived assets with definite lives when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of the assets. In such cases, the carrying value of assets to be held and used are adjusted to their estimated fair value and assets held for sale are adjusted to their estimated fair value less selling expenses. Other than the patents costs that were abandoned, no impairment losses were recognized for the period ended September 30, 2019.

Indefinite lived intangible assets are tested for impairment using a qualitative approach by first assessing qualitative factors to determine whether it is more-likely-than-not that the fair value of an indefinite lived intangible asset is impaired as a basis for determining whether it is necessary to perform quantitative impairment testing. The Company’s

11

Exhibit 99.4

indefinite-lived intangible assets consist of trade marks with a carrying value of $69,952 at September 30, 2019. The results of the qualitative analysis of the Company’s indefinite lived intangible assets, indicated that the fair value of the indefinite lived intangible assets exceeded their carrying value. The Company foregoes a qualitative assessment and tests indefinite-lived intangible assets for impairment when it concludes that it is more-likely-than-not there may be an impairment. If needed, the annual or interim quantitative test of the recovery of indefinite-lived intangible assets involve a comparison of the estimate fair value of the indefinite-lived assets to its carrying value. If the estimated fair value of the indefinite-lived assets exceeds its carrying value, the indefinite-lived intangible assets are not impaired. If the carrying value of the indefinite-lived assets exceeds the estimated fair value, an impairment loss equal to the excess is recorded.

Revenue Recognition

As required by Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 605, Revenue Recognition, the Company recognizes revenue when persuasive evidence of an arrangement exists, service has been rendered, the sales price is fixed or determinable, and collection is probable. Amounts billed in excess of revenue recognized are included in deferred revenue. Customer deposits represent payments received by the Company from customers for which revenue recognition criteria have not been met.

The Company's products are systems that consist of hardware and software that function together to deliver the system's essential functionality. The Company sells the systems as a complete package and does not sell the hardware and software separately. The Company also sells maintenance and support contracts and license agreements. The Company has determined that its systems and service contracts have value to a customer on a standalone basis; therefore, revenue from each item should be recognized separately.

The Company establishes the relative selling price of each deliverable based on estimated selling price. The Company recognizes product revenue from its systems upon shipment, installation revenue upon completed installation and revenue from maintenance contracts and license agreements ratably over the applicable periods, ranging from 12 to 36 months. Professional service contracts are billed based on time and materials at the contract rate as the services are rendered.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising expense for the nine months ended September 30, 2019 and 2018 was $745,386 and $1,602,242, respectively.

Research and Development Expenses

Research and development costs are expensed as incurred and consist primarily of costs associated with the development and testing of the Company’s products. Research and development expenses include the cost of certain personnel and benefits, consultants, facility costs, supplies and other direct and allocated indirect expenses incurred to support the Company’s research and development programs. Research and development expense for the nine months ended September 30, 2019 and 2018 was $6,321,182 and $6,917,877, respectively.

Sales Taxes

The Company accounts for sales taxes in accordance with FASB ASC Subtopic 605-45, Revenue Recognition - Principal Agent Considerations, which provides that the presentation of taxes assessed by a governmental authority that are directly imposed on revenue-producing transactions (e.g. sales, use, and excise taxes) between a seller and a customer on either a gross basis (included in revenues and costs) or on a net basis (excluded from revenues) is an accounting policy decision that should be disclosed. In addition, for any such taxes that are reported on a gross basis, the amounts of those taxes should be disclosed in the consolidated financial statements for each period for which a statement of operations and comprehensive loss is presented if those amounts are significant. The Company records sales taxes on a net basis.

12

Exhibit 99.4

Income Taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with FASB ASC Topic 740, Income Taxes ("ASC 740"). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

The Company follows the provisions of uncertain tax positions as addressed in FASB ASC Subtopic 740-10, Income Taxes. The Company did not recognize a liability for unrecognized tax benefits. Management estimates the tax positions as of September 30, 2019 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility is immaterial to the consolidated financial statements. The Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense. No such interest or penalties were recognized during the periods presented. The Company had no accruals for interest and penalties in the financial statements for the nine months ended September 30, 2019.

With few exceptions, the Company is subject to examination by United States federal tax authorities for returns filed for the prior three years and by foreign and state tax authorities for returns filed for the prior four years.

Stock-Based Compensation

The Company accounts for stock-based transactions using a fair-value-based method. Accordingly, compensation cost for stock is recognized on a straight-line basis over the requisite service (vesting) period for the entire award.

Litigation

The Company is subject to certain legal proceedings and claims that arise in the normal course of business. Based on the advice of legal counsel, management believes that no actions or claims depart from customary litigation or claims incidental to the business or the subsidiaries and that the resolution of all such litigation or claims will not have a material adverse effect on the Company’s consolidated financial position, results of operations and cash flows.

Financial Instruments and Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit and business risk consist of cash, cash equivalents and restricted cash, marketable securities, accounts receivable and accounts payable.

The Company maintains cash, cash equivalents and restricted cash balances that at times exceed amounts insured by the Federal Deposit Insurance Corporation. The Company has not experienced any losses in these accounts and believes it is not exposed to any significant credit risk in this area.

The Company’s customer concentrations expose it to credit risks such as collectability and business risks such as sales concentration. The Company grants credit in the normal course of business to customers in the United States and other world-wide locations. The Company periodically performs credit analysis and monitors the financial condition of its customers to reduce credit risk. On a case-by-case basis, the Company requires deposits from customers who are unable to verify acceptable credit standards.

13

Exhibit 99.4

During the nine months ended September 30, 2019, two customers accounted for 37% of total net revenues, and for the same period in 2018, two customers accounted 42% of total net revenues. At September 30, 2019, two customers accounted for 32% of total accounts receivable.

The Company’s supplier concentrations expose it to business risks, which the Company mitigates by attempting to diversify its supply chain. There was no supplier concentration for the period ended September 30, 2019.

Note 2 - Balance Sheet Disclosures

Property and equipment, net consisted of the following:

	September 30,
	2019
Computer Equipment	$	5,131,985
Furniture and fixtures	301,401
Leasehold Improvements	926,955
Tooling	170,741
	6,531,082
Less accumulated depreciation and amortization	5,309,788
	$	1,221,294

Depreciation and amortization expense for the nine months ended September 30, 2019 was $629,372 of which $586,686 and $42,686 were included in operating expenses and cost of revenues, respectively. Depreciation and amortization expense for the nine months ended September 30, 2018 was $790,586 of which $752,582 and $38,004 were included in operating expenses and cost of revenues, respectively.

Note 3 - Comprehensive Income and Foreign Currency Translation

Comprehensive income is defined as the change in equity during a period from transactions and other events from non-owner sources. Comprehensive income is the total of net income and other comprehensive income, which includes foreign currency translation adjustments. The functional currencies of the Company's foreign operations are the reported local currencies. Translation adjustments result from translating the Company's foreign subsidiaries’ financial statements into United States dollars. Assets and liabilities of the Company's foreign subsidiaries are translated into United States dollars using the exchange rate in effect at the consolidated balance sheet dates. Equity is translated at the historical rate of the transaction.

Revenues and expenses are translated using average exchange rates for each month during the fiscal year. The Company considers intercompany balances as long-term investments in nature as they do not expect repayment, and therefore, translates the transactions at the historical rate. The resulting translation losses are recorded as a component of accumulated other comprehensive loss in stockholders' equity. The cumulative foreign currency translation adjustment totaled $432,277 as of September 30, 2019. Foreign currency translation gains (losses) were ($38,287) and ($55,822) as of September 30, 2019 and 2018, respectively, and are reported on the consolidated statements of operations and comprehensive loss.

Note 4 - Employee Benefit Plan

14

Exhibit 99.4

The Company maintains a Section 401(k) plan (the "Plan"). Eligible employees may make voluntary contributions to the Plan. In addition, the Company may, at its discretion, make matching contributions to the Plan. For the nine months ended September 30, 2019 and 2018, the Company made no matching contributions.

Note 5 - Convertible Preferred Stock

Convertible Preferred Stock

The convertible preferred stock described below has been classified outside of stockholders' equity to comply with Regulation S-X because the shares contain certain redemption features that are not solely within the control of the Company.

In September 2018, the Company and its investors agreed to enter into an agreement to sell and issue Series E convertible preferred stock ("Series E") with a par value of $.0001 and warrants to purchase common stock. To facilitate this sale, the Company amended and restated its certificate of incorporation to increase the authorized shares to 65,000,000 of common stock at par value of $.0001 and to decrease the authorized shares to 23,007,000 of preferred stock at par value of $.0001 designated as 19,757,000 as Series D, and 3,250,000 as Series E. The Company had authorized to sell 3,039,514 shares of Series E convertible stock, and issued 2,899,266 shares, which are outstanding as of September 30, 2019. The 2,899,266 share of Series E preferred stock were sold along with 2,899,266 common stock purchase warrants, exercisable for $0.01 per share, for cash proceeds of $9,480,952, net of issuance costs of $57,633. The $9,480,952 of net cash proceeds was allocated to the Series E preferred stock and the common stock warrants, as an increase to additional paid in capital, based on the relative fair value of the Series E preferred stock and common stock warrants. The fair value of the Series E preferred stock and common stock warrants was based on a third-party valuation. The liquidation preference on Series E is $9,538,585 as of September 30, 2019.

In September 2018, the Company and its investors approved the conversion of all of its outstanding shares of Series A convertible preferred stock, Series B convertible preferred stock, and Series C convertible preferred stock, totaling 15,380,339 preferred stock into 15,506,592 common stock (the "Conversion"). Prior to the Conversion, the Company had 6,596,516 Series A convertible preferred stock issued and outstanding, 6,114,632 Series B convertible preferred stock issued and outstanding, and 2,669,191 Series C convertible preferred stock issued and outstanding. Series A and C outstanding preferred stock were converted using a 1:1 ratio. Series B outstanding preferred stock using a 1.0206 ratio.

As of September 30, 2019, the Company had authorized 19,757,000 shares of Series D convertible preferred stock ("Series D") with a par value of $0.0001. The Company issued no shares of Series D during the nine months ended September 30, 2019. The Company had 19,756,834 shares of Series D issued and outstanding as of September 30, 2019. The liquidation preference on Series D is $64,999,984 as of September 30, 2019.

Following the Conversion, holders of Series D and Series E (collectively "Post-Conversion Series Preferred"), in preference to the holders of common stock, are entitled to receive cash dividends at the annual rate of $0.2632 per share. The dividends are payable only when and if declared by the Board of Directors and are non-cumulative. No dividends were paid in the nine months ended September 30, 2019.

Conversion Rights

Each share of Post-Conversion Series Preferred is convertible into shares of common stock at the option of the holder at any time after the date of issuance. The number of shares of common stock into which a holder of Post-Conversion Series Preferred can convert is obtained by multiplying the conversion rate that is in effect by the number of shares of Post-Conversion Series Preferred being converted. The conversion rate is determined by dividing the original issue price by the applicable conversion price (initially the original issue price, as adjusted for certain dilutive events).

15

Exhibit 99.4

Under the terms, each share of Post-Conversion Series Preferred will be automatically converted into shares of common stock (based on the then effective Post-Conversion Series Preferred conversion price) immediately upon closing of a firm underwritten public offering pursuant to an effective registration statement on Form S-1 or SB-2 under the Securities Act of 1933, as amended, covering the offer and sale of common stock for the account of the Company in which the per share price to the public is at least $6.92 and the gross cash proceeds to the Company (before underwriting discounts, commissions, and fees) are at least $30,000,000 or if there is an affirmative election of the holders of the majority of the outstanding shares of Post-Conversion Series Preferred on an as-converted basis.

Liquidation Rights

In accordance with the certificate of incorporation, upon any liquidation, dissolution, change in control, or winding up of the Company ("Liquidating Event"), the holders of Series E are entitled to be paid out of the assets of the Company legally available for distribution an amount per share of Post-Conversion Series Preferred equal to the original issue price plus all declared and unpaid dividends on the Series E, before any distribution or payment is made to the holders of any Series D or common stock.

If after the liquidation preference there are assets remaining, the assets will be distributed to the Series D before any distribution or payment is made to the holders of common stock.

If after the liquidation preference there are assets remaining, the assets will be distributed ratably amongst the common stock. Post-Conversion Series Preferred will be deemed converted to common stock upon a Liquidating Event if the holder would receive a greater amount than if they had not been converted. If the Company has insufficient assets upon the Liquidating Event to make payment in full to all holders of Post-Conversion Series Preferred their liquidation preference, then such assets (or consideration) will be distributed among the holders of Post-Conversion Series Preferred ratably in proportion to the full amounts to which they would otherwise be respectively entitled. Any transaction or series of transactions that meets the definition of a Liquidating Event may be waived as a Liquidating Event by a majority vote of the Post-Conversion Series Preferred holders.

Voting Rights

Post-Conversion Series Preferred holders are entitled to the number of votes equal to the number of common shares the preferred shares is convertible into. So long as at least 2,500,000 shares of Post-Conversion Series Preferred remain outstanding, the vote or written consent of the holders of a majority of the outstanding Post-Conversion Series Preferred, respectively, shall be necessary for defined significant events.

Note 6 - Stockholders' Equity

Common Stock

As of September 30, 2019, the Company had authorized 65,000,000 shares of common stock with a par value of $0.0001. During the nine-month ended September 30, 2019, the Company issued 35,219 shares of common stock, through the exercise of stock options. The Company had 27,339,698 of common stock shares issued and outstanding as of September 30, 2019.

Stock Options

On January 22, 2007, the Company adopted the 2007 Stock Plan (the "Plan") under which the Company is authorized to grant incentive and non-qualified stock option awards to employees, directors, consultants, and affiliates of the Company. The Plan provides both for the direct award or sale of shares and for the grant of options to purchase shares. The Company is authorized to grant up to 5,405,376 shares of stock awards. The option price and vesting terms are determined by the Board of Directors of the Company and evidenced in the award agreement extended to the employee. The options granted generally vest over a period of one to four years and terminate ten years from the grant date.

16

Exhibit 99.4

During the nine months ended September 30, 2019, the Company recognized $237,952 in stock-based compensation expense.

The following presents the activity for options outstanding:

	Incentive		Non-Qualified			Weighted Average
	Stock Options		Stock Options			Exercise Price
December 31, 2018	3,576,198		155,000		$	0.82
Granted	930,300		62,500			0.74
Exercised	(35,219	)				0.21
Forfeited/canceled	(347,901	)	(5,000	)		0.97
September 30, 2019	4,123,378		212,500		$	0.79

The fair value of each option grant was estimated on the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions:

Nine months ended September 30,	2019
Approximate risk-free rate	2.56 - 2.96	%
Average expected life	6.25	years
Dividend yield	0	%
Volatility	55 - 62	%
Fair value of common stock	$0.78 - $0.98
Estimated fair value of options granted	$0.43 - $0.58
Estimated forfeiture rate	10	%

Note 7 - Operating Lease Commitments

The Company leases its facilities under non-cancelable operating lease agreements that expire on various dates through May 2023. In addition, the Company has facility leases that provide for rent adjustment increases. The accompanying consolidated statements of operations and comprehensive loss reflect rent expense on a straight-line basis over the term of the leases.

The differences between rent expense recorded and the amount paid are credited or charged to deferred rent, which were included in the accompanying consolidated balance sheets. Under these agreements, net rent expense for the nine months ended September 30, 2019 and 2018 was $1,089,371 and $1,264,788 respectively. Total deferred rent as of September 30, 2019 and 2018 was $201,417 and 226,410, respectively.

The approximate aggregate future minimum lease commitments for these leases are as follows:

17

Exhibit 99.4

Year Ending		Straight-Line
December 31,	Cash Payments	Rent Expense	Deferred Rent
2019	366,449	357,870	8,579
2020	1,290,795	1,218,375	72,420
2021	1,095,442	1,027,216	68,226
2022	508,064	463,756	44,308
Thereafter	115,672	107,788	7,884
	3,376,422	3,175,005	201,417

Note 8 - Debt

Term Loan

The Company is party to a loan and security agreement with a financial institution consisting of a term loan (the "Term Loan") and revolving line of credit (the "Revolver"). The loan and security agreement is collateralized by substantially all of the Company’s assets, not including the intellectual property consisting of copyrights, trademarks and patents. The outstanding balance on the Term Loan was $5,247,000 as of September 30, 2019. There was no outstanding balance on the Revolver as of September 30, 2019. As further discussed in Note 8, on October 1, 2019, in connection with the closing of the merger transaction on such date, Glowpoint and Oblong, as borrowers, and Silicon Valley Bank ("SVB"), as lender, executed a Second Amended and Restated Loan and Security Agreement (the "Loan Agreement"), which amended and restated, in its entirety, the Amended and Restated Loan and Security Agreement by and between Oblong and SVB.

Promissory Notes

During the nine months ended September 30, 2019, the Company received net proceeds of $3,000,000 from the issuance of promissory notes to certain existing shareholders of the Company. The promissory notes carried an annual interest rate of 2.13%, and principal and interest were due and payable 12 months from the issuance date of the promissory notes. Although the terms of these promissory notes were not originally convertible into stock, on October 1, 2019, in connection with the merger with Glowpoint, Inc., the full amount of these promissory notes were converted to preferred stock of Oblong and then converted to Glowpoint Merger Preferred Stock (see further discussion in Note 9).

Note 9 - Subsequent Events

The Company has evaluated subsequent events that have occurred from September 30, 2019 through December 17, 2019, which is the date that the consolidated financial statements were available to be issued, and determined that there were no subsequent events or transactions that required recognition or disclosure in the consolidated financial statements, except as disclosed below.

On October 1, 2019, the Company completed a merger with Glowpoint, Inc. (NYSE American: GLOW), a managed service provider of video collaboration and network applications. In connection with the merger:

• Glowpoint’s board of directors will consist of five members after completion of the Merger, of which four members will be appointed by the members of Glowpoint’s board existing prior to closing and one member will be appointed by the members of Oblong’s board existing prior to closing; 

• i) the common and preferred stock of Oblong issued and outstanding immediately prior to the Effective Time (as defined in the Merger Agreement) of the Merger were converted into the right to receive an aggregate of

18

Exhibit 99.4

approximately 1.68 million shares of Glowpoint’s 6.0% Series D Convertible Preferred Stock, par value $0.0001 per share ("Merger Preferred Stock"); ii) at the Effective Time, Glowpoint will assume all then-outstanding options to purchase shares of Oblong’s common stock ("Oblong Options") held by previously terminated employees of Oblong, which Oblong Options will be deemed to constitute options to acquire shares of Glowpoint’s Common Stock, par value $0.0001 per share ("Common Stock"); and (iii) any Oblong Options held by current employees of Oblong will be canceled in exchange for restricted shares.

SVB Loan Agreement and Warrant

On October 1, 2019, in connection with the Closing of the Merger on such date, Glowpoint and Oblong, as borrowers, and Silicon Valley Bank ("SVB"), as lender, executed a Second Amended and Restated Loan and Security Agreement (the "Loan Agreement"), which amended and restated, in its entirety, the Amended and Restated Loan and Security Agreement by and between Oblong and SVB. The Loan Agreement provides for a term loan facility of approximately $5.2 million (the "Loan"), all of which is currently outstanding. The Loan Agreement provides that interest-only payments will be due through March 31, 2020, after which equal monthly principal and interest payments will be made to fully repay the loan by September 1, 2021. The Loan accrues interest at a rate equal to the Prime Rate (as defined in the Loan Agreement) plus 200 basis points (for a total of 7.00% as of October 1, 2019).

19

EX-99.5

Exhibit 99.5

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

On October 1, 2019 (the "Closing Date"), Glowpoint, Inc., a Delaware corporation (the "Company" or "Glowpoint"), closed its previously announced acquisition of Oblong Industries, Inc., a Delaware corporation ("Oblong" and, such transaction, the "Acquisition"). The Acquisition was consummated through the merger of Glowpoint Merger Sub II, Inc., a Delaware corporation and wholly-owned subsidiary of Glowpoint (the "Merger Sub"), with and into Oblong on the Closing Date, with Oblong continuing as the surviving corporation and as a wholly-owned subsidiary of Glowpoint. On the Closing Date, (i) the shares of common and preferred stock of Oblong issued and outstanding immediately prior to the effective time of the Acquisition were converted into an aggregate of 1,686,659 shares of Glowpoint’s 6.0% Series D Convertible Preferred Stock, par value $0.0001 per share (the "Series D Preferred Stock"); (ii) all options to purchase shares of Oblong’s common stock held by previously terminated employees of Oblong were assumed by Glowpoint and deemed, in the aggregate, to constitute options to acquire a total of 107,845 shares of Glowpoint’s common stock, par value $0.0001 per share ("common stock"), at a volume weighted average exercise price of $4.92 per Glowpoint share and a remaining exercise period of one year; and (iii) all options to purchase shares of Oblong’s common stock held by current employees of Oblong were cancelled and exchanged for an aggregate of 49,967 restricted shares of Series D Preferred Stock ("Restricted Series D Preferred Stock"), which are subject to vesting over a two-year period following the Closing Date. The Series D Preferred Stock (including shares of Restricted Series D Preferred Stock) will automatically convert into an aggregate of 17,366,260 shares of Glowpoint’s common stock upon approval of such conversion by Glowpoint’s stockholders and receipt of NYSE American approval of the listing of the combined company’s common stock on such exchange. Following their conversion to common stock, shares of Restricted Series D Preferred Stock will remain subject to their vesting conditions.

On October 1, 2019, Glowpoint entered into a Series E Preferred Stock Purchase Agreement (the "Purchase Agreement") with the investors party thereto, who, prior to the closing of the Acquisition, were stockholders of Oblong (the "Purchasers"), relating to the offer and sale by Glowpoint in a private placement (the "Offering") of up to 131,579 shares of its 6.0% Series E Convertible Preferred Stock, par value $0.0001 per share (the "Series E Preferred Stock"), at a price of $28.50 per share. At an initial closing on October 1, 2019, Glowpoint sold, and the Purchasers purchased, 88,070 shares of Series E Preferred Stock for gross proceeds of approximately $2.51 million (the "Series E Financing"). Glowpoint did not pay any commissions or discounts in connection with the Offering. The Series E Preferred Stock will automatically convert into shares of Glowpoint’s common stock, on a one-for-10 basis, upon approval of such conversion by Glowpoint’s stockholders and receipt of NYSE American approval of the listing of the combined company’s common stock on such exchange.

The terms of the Acquisition, Series D Preferred Stock and Series E Preferred Stock have been previously disclosed in the Company's Current Reports on Form 8-K filed with the Securities and Exchange Commission ("SEC") on September 16, 2019 and October 7, 2019. The Company had no prior material relationship with any of the parties to the transaction.

The following unaudited pro forma condensed combined consolidated financial statements have been developed by applying pro forma adjustments to the historical condensed consolidated financial statements of Glowpoint and Oblong. The unaudited pro forma condensed combined consolidated statements of operations for the year ended December 31, 2018 and the nine months ended September 30, 2019 give effect to the Acquisition and the Series E Financing as if they had occurred on January 1, 2018.

Exhibit 99.5

The unaudited pro forma condensed combined consolidated balance sheet as of September 30, 2019 gives effect to the Acquisition and the Series E Financing as if they occurred on September 30, 2019. All pro forma adjustments and underlying assumptions are described more fully in the notes to the unaudited pro forma condensed combined consolidated financial statements.

The pro forma information presented is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the Acquisition and the Series E Financing were completed on the dates indicated, nor is it indicative of future operating results or financial position. The pro forma adjustments are based upon available information and certain assumptions that the management of Glowpoint believes to be reasonable. Since the Acquisition has only recently been completed, the estimates and assumptions regarding the Acquisition are preliminary. The final purchase price allocation will be based on a formal valuation analysis of the assets acquired and liabilities assumed at closing and may result in differences in the estimates used in these pro forma condensed combined consolidated financial statements, and those differences could be material. Furthermore, the ability of Glowpoint to integrate Oblong and realize the benefits of the Acquisition remains subject to a number of risks and uncertainties.

The unaudited pro forma condensed combined consolidated financial statements do not include the effects of:

• non-recurring income statement impacts arising directly as a result of the Acquisition;

• any operating efficiencies or cost savings;

• other post-Acquisition selling, general and administrative costs;

• savings as a result of planned restructuring actions to be taken; or

• acquisition and integration expenses;

You should read this information in conjunction with the:

• accompanying notes to the unaudited pro forma condensed combined consolidated financial statements;

• audited historical consolidated financial statements of Glowpoint as of and for the year ended December 31, 2018, included in the Company's Form 10-K filed with the SEC on March 8, 2019;

• unaudited historical condensed consolidated financial statements of Glowpoint as of and for the nine months ended September 30, 2019, included in the Company's Form 10-Q filed with the SEC on November 14, 2019;

• audited historical financial statements of Oblong as of and for the year ended December 31, 2018 and unaudited historical financial statements of Oblong as of and for the nine months ended September 30, 2019, included as Exhibits 99.2 and 99.4 to this Current Report on Form 8-K.

Exhibit 99.5

Glowpoint, Inc.

Unaudited Pro Forma Condensed Combined Consolidated Balance Sheet

September 30, 2019

(in thousands)

		Historical					Pro Forma			Pro Forma
		Glowpoint		Oblong			Adjustments			Combined
ASSETS							(Note 3)
Current assets:
	Cash and cash equivalents	$	1,271	$	2,194		$	2,510		$	5,975
	Accounts receivable, net	1,089		1,962			—			3,051
	Inventory	—		1,618			—			1,618
	Prepaid expenses and other current assets	376		572			848			1,796
TOTAL CURRENT ASSETS		2,736		6,346			3,358			12,440
Property and equipment, net		359		1,221			—			1,580
Goodwill		2,342		—			3,149			5,491
Intangible assets, net		404		3,595			9,791			13,790
Other assets		37		216			4,333			4,586
TOTAL ASSETS		$	5,878	$	11,378		$	20,631		$	37,887
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable	$	424	$	296		$	300		$	1,020
	Accrued expenses and other liabilities	744		1,177			1,554			3,475
	Deferred revenue	—		2,952			(1,650		)	1,302
	Current portion of long-term debt	—		2,627			(72		)	2,555
	Promissory notes payable	—		3,000			(3,000		)	—
TOTAL CURRENT LIABILITIES		1,168		10,052			(2,868		)	8,352
Long-term debt, net of current portion		—		2,620			—			2,620
Other long-term liabilities		—		233			2,779			3,012
TOTAL NONCURRENT LIABILITIES		—		2,853			2,779			5,632
CONVERTIBLE PREFERRED STOCK		—		71,755			(71,755		)	—
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		4,710		(73,282		)	92,476			23,904
TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY		$	5,878	$	(11,378	)	$	20,631		$	37,887

See accompanying notes to unaudited pro forma condensed combined consolidated financial statements

Exhibit 99.5

Glowpoint, Inc.

Unaudited Pro Forma Condensed Combined Consolidated Statement of Operations

Year Ended December 31, 2018

(in thousands, except per share amounts)

	Historical						Pro Forma				Pro Forma
	Glowpoint			Oblong			Adjustments				Combined
Revenue	$	12,557		$	17,249		$	—			$	29,806
Operating expenses:
Expenses	13,449			33,329			250			(a)	47,028
Impairment charges	5,093			331			—				5,424
Depreciation and amortization	755			1,330			1,958			(c)	4,043
Total operating expenses	19,297			34,990			2,208				56,495
Loss from operations	(6,740		)	(17,741		)	(2,208		)		(26,689		)
Interest and other expense, net	(415		)	(113		)	(97		)	(d)	(625		)
Loss before income taxes	(7,155		)	(17,854		)	(2,305		)		(27,314		)
Income tax expense	(13		)	—			—				(13		)
Net Loss	$	(7,168	)		(17,854	)	$	(2,305	)		$	(27,327	)
Preferred stock dividends		(12	)		—			—				(12	)
Net loss attributable to common stockholders	$	(7,180	)	$	(17,854	)	$	(2,305	)		$	(27,339	)
Net Loss per share:
Basic and diluted net loss per share	$	(1.50	)							(f)	$	(5.70	)
Weighted average number of common shares:
Basic and diluted	4,795										4,795

See accompanying notes to unaudited pro forma condensed combined consolidated financial statements

Exhibit 99.5

Glowpoint, Inc.

Unaudited Pro Forma Condensed Combined Consolidated Statement of Operations

Nine Months Ended September 30, 2019

(in thousands, except per share amounts)

	Historical								Pro Forma					Pro Forma
	Glowpoint				Oblong				Adjustments					Combined
Revenue	$	7,403			$	12,757			$	0				$	20,160
Operating expenses:
Expenses	8,581				22,248				187				(b)
									(465		)		(b)	30,551
Impairment charges	473				427				0					900
Depreciation and amortization	461				852				1,469				(c)	2,782
Total operating expenses	9,515				23,527				1,191					34,233
Loss from operations	(2,112		)		(10,770		)		(1,191		)			(14,073		)
Interest and other expense, net	(1		)		(272		)		(73		)		(d)	(346		)
Net Loss	$	(2,113		)	$	(11,042		)	$	(1,264		)		$	(14,419		)
Preferred stock dividends		(23	)			0				(2,276	)		(e)		(2,299	)
Net loss attributable to common stockholders	$	(2,136	)		$	(11,042	)		$	(3,540	)			$	(16,718	)
Net Loss per share attributable to common stockholders:
Basic and diluted net loss per share	$	(0.41	)										(f)	$	(3.22	)
Weighted average number of common shares:
Basic and diluted	5,184													5,184

See accompanying notes to unaudited pro forma condensed combined consolidated financial statements

Exhibit 99.5

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

NOTE 1: BASIS OF PRESENTATION

As more fully discussed in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission ("SEC") on October 7, 2019, on October 1, 2019 (the "Closing Date"), Glowpoint, Inc., a Delaware corporation (the "Company" or "Glowpoint"), closed its previously announced acquisition of Oblong Industries, Inc., a Delaware corporation ("Oblong" and, such transaction, the "Acquisition"). The Acquisition was consummated through the merger of Glowpoint Merger Sub II, Inc., a Delaware corporation and wholly-owned subsidiary of Glowpoint (the "Merger Sub"), with and into Oblong on the Closing Date, with Oblong continuing as the surviving corporation and as a wholly-owned subsidiary of Glowpoint. On the Closing Date, (i) the common and preferred stock of Oblong issued and outstanding immediately prior to the effective time of the Acquisition were converted into an aggregate of 1,686,659 shares of Glowpoint’s 6.0% Series D Convertible Preferred Stock, par value $0.0001 per share (the "Series D Preferred Stock"); (ii) all options to purchase shares of Oblong’s common stock held by previously terminated employees of Oblong were assumed by Glowpoint and deemed, in the aggregate, to constitute options to acquire a total of 107,845 shares of Glowpoint’s common stock, par value $0.0001 per share ("common stock"), at a volume weighted average exercise price of $4.92 per share and a remaining exercise period of one year; and (iii) all options to purchase shares of Oblong’s common stock held by current employees of Oblong were canceled and exchanged for an aggregate of 49,967 restricted shares of Series D Preferred Stock ("Restricted Series D Preferred Stock"), which are subject to vesting over a two-year period following the Closing Date. The Series D Preferred Stock (including shares of Restricted Series D Preferred Stock) will automatically convert into an aggregate of 17,366,260 shares of Glowpoint’s common stock upon approval of such conversion by Glowpoint’s stockholders and receipt of NYSE American approval of the listing of the combined company’s common stock on such exchange. Following their conversion to common stock, shares of Restricted Series D Preferred Stock will remain subject to their vesting conditions.

The Acquisition will be accounted for in accordance with FASB Accounting Standards Codification Topic 805 "Business Combinations" ("ASC 805"), which requires an allocation of the purchase price of an acquired entity to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The final purchase price allocation will be based on a formal valuation analysis of Oblong's assets and liabilities as of the date the Acquisition was consummated.

On October 1, 2019, Glowpoint entered into a Series E Preferred Stock Purchase Agreement (the "Purchase Agreement") with the investors party thereto, who, prior to the closing of the Acquisition, were stockholders of Oblong (the "Purchasers"), relating to the offer and sale by Glowpoint in a private placement (the "Offering") of up to 131,579 shares of its 6.0% Series E Convertible Preferred Stock, par value $0.0001 per share (the "Series E Preferred Stock"), at a price of $28.50 per share. At an initial closing on October 1, 2019, Glowpoint sold, and the Purchasers purchased, 88,070 shares of Series E Preferred Stock for gross proceeds of approximately $2.51 million (the "Series E Financing"). Glowpoint did not pay any commissions or discounts in connection with the Offering. The Series E Preferred Stock will automatically convert into shares of Glowpoint’s common stock, on a one-for-10 basis, upon approval of such conversion by Glowpoint’s stockholders and receipt of NYSE American approval of the listing of the combined company’s common stock on such exchange.

The unaudited pro forma condensed combined financial statements have been developed by applying pro forma adjustments to the historical condensed consolidated financial statements of Glowpoint and Oblong. The unaudited pro forma condensed combined

Exhibit 99.5

statement of operations for the year ended December 31, 2018 and nine months ended September 30, 2019 gives effect to the Acquisition and the Series E Financing as if they had occurred on January 1, 2018. The unaudited pro forma condensed combined balance sheet as of September 30, 2019 gives effect to the Acquisition and the Series E Financing as if they occurred on September 30, 2019.

NOTE 2: PRELIMINARY PURCHASE PRICE AND ALLOCATION OF THE ACQUISITION

Since the Acquisition has only recently been completed, the estimates and assumptions regarding the Acquisition are preliminary. The final purchase price allocation will be based on a formal valuation analysis of the assets acquired and liabilities assumed at closing and may result in differences in the estimates used in these pro forma condensed combined financial statements, and those differences could be material.

Pursuant to ASC 805, the purchase price of $16,912,000 was measured as the fair value of the consideration exchanged in the Acquisition as follows:

Series D Preferred Stock	$	16,867,000
Value of stock options issued		45,000
Total	$	16,912,000

• Since the Series D Preferred Stock has no active market, the value of the Series D Preferred Stock was estimated based on the number of shares of common stock into which the Series D Preferred Stock will automatically convert (or approximately 16,867,000) upon approval of such conversion by Glowpoint’s stockholders and receipt of NYSE American approval of the listing of the combined company’s common stock on such exchange, multiplied by $1.00 per share, which was the closing price of Glowpoint's common stock as traded on the NYSE American on the Closing Date.

• The value of common stock options issued was equal to the Black Scholes value of 107,845 common stock options issued to former employees of Oblong, and was included in consideration as no future service was required.

The purchase price was allocated to Oblong's net tangible and intangible assets based on their estimated fair values as of the Closing Date, October 1, 2019. The pro forma allocation of the purchase price to the assets acquired, the liabilities assumed and goodwill recognized is as follows ($ in thousands):

Exhibit 99.5

Cash and cash equivalents	$	2,194
Accounts receivable	1,962
Inventory	1,618
Prepaid expenses and other current assets	1,420
Property, plant, and equipment	1,221
Intangible assets	13,386
Other assets	4,549
Term loan, net	(5,247		)
Accounts payable	(296		)
Accrued expenses and other liabilities	(2,731		)
Deferred revenue	(1,302		)
Other long-term liabilities	(3,012		)
Net assets acquired	13,762
Goodwill	3,149
Purchase price	$	16,912

In accordance with ASC 805, goodwill, if any, is recognized as the excess of the purchase price over the estimated fair value of net assets acquired. Based on the Company's preliminary estimates, the $16,912,000 purchase price exceeded the estimated fair value of the net assets acquired, resulting in goodwill of $3,149,000.

Due to the nature and limitations of these preliminary calculations differences between the estimated fair values used in these pro forma calculations and those estimated under a formal valuation are expected to occur and those differences could be material.

NOTE 3: PRO FORMA ADJUSTMENTS

The unaudited pro forma condensed combined financial statements reflect the pro forma adjustments of the Acquisition and the Series E Financing as described in Note 3. Pursuant to the acquisition method of accounting, the total purchase price, as measured in Note 2, has been preliminarily allocated to the assets acquired and liabilities assumed based on their respective estimated fair values. There were no payable or receivable balances or revenue transactions between Glowpoint and Oblong as of and for the nine months ended September 30, 2019.

A reasonable allocation of fees paid to attorneys and accountants that are involved with completing the Acquisition and has been made to acquisition-related costs. Based on this allocation and information specific to each aspect of the Acquisition, $465,000 of costs incurred before the Closing Date associated with legal and other third-party costs in connection with the Acquisition were expensed as acquisition-related costs. An adjustment has been made to the unaudited pro forma condensed combined consolidated statement of operations for the nine months ended September 30, 2019 to eliminate such costs as they are non-recurring.

The unaudited pro forma condensed combined statement of operations does not include costs that may result from integration activities. Glowpoint has not identified any Acquisition contingencies where the related asset, liability, or impairment is probable and the amount of the asset, liability or impairment can be reasonably estimated. Prior to the end of the purchase price allocation period, not to exceed one year from the acquisition date, if information becomes available that would indicate it is probable that such events have occurred and the amounts can be reasonably estimated, such items will be included in the purchase price allocation.

Exhibit 99.5

The pro forma condensed combined provision for income taxes does not necessarily reflect the amounts that would have resulted had Glowpoint and Oblong filed consolidated income tax returns for the periods presented.

Exhibit 99.5

ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET

The pro forma adjustments included in the unaudited pro forma condensed combined balance sheet related to the Acquisition and Series E Financing as of October 1, 2019 are as follows (in thousands):

Increase / (Decrease) In:	Series E Financing (1)		Adjustment to Fair Value (2)			SVB Warrant (3)			Acquisition-related costs (4)			Promissory Notes Payable (5)	Convertible Preferred Stock (6)	Net Adjustment
Cash and Cash Equivalents	$	2,510												$	2,510
Customer Relationships			$	9,791										$	9,791
Goodwill			$	3,149										$	3,149
Prepaid expenses and other current assets			$	848										$	848
Other assets			$	4,333										$	4,333
Accounts payable									$	300				$	300
Accrued expenses and other liabilities			$	(1,554	)									$	(1,554	)
Deferred Revenue			$	1,650										$	1,650
Other long-term liabilities			$	(2,779	)									$	(2,779	)
Term Loan						$	(72	)						$	(0.072	)
Promissory Notes Payable												$ (3,000)		$	(3	)
Convertible preferred stock													$ (71,755)	$ (71,755)
Stockholders' Equity	$	2,510	$	15,439		$	72		$	(300	)	$ 3,000	$ 71,755	$ 92,476

(1) Series E Financing - See Note 1. The proceeds of the Series E Financing were received on the Closing Date and are reflected as an adjustment to the pro forma condensed combined balance sheet as of September 30, 2019.

(2) Adjustments to fair value - The assets acquired and liabilities assumed of Oblong have been adjusted to their estimated fair values as of the acquisition date. Those adjustments are as follows:

Intangible assets - The historical value of Oblong’s identifiable intangible assets was $3,595,000 and had an estimated fair value of $13,386,000 at the acquisition date. Accordingly, a pro forma adjustment to gross assets of $9,791,000 has been provided. Identifiable intangible assets acquired included primarily customer relationships and patents. The estimated useful lives for the intangible assets are determined based on the expected benefit period of the Oblong assets and historical experience with similar assets. The Company expects to amortize the estimated fair value of these assets based on the straight-line method. Valuations of the Company’s intangible assets are expected to be finalized no later than one year from the date of acquisition. Any value assigned to these assets will represent a reclassification from the goodwill asset recorded in our preliminary purchase price allocation as outlined in the table in Note 2. Any reclassification recorded could result in further adjustments to pro forma combined financial statements, including but not limited to adjustments to amortization expense, deferred tax liabilities and income tax expense. The preliminary estimated fair value and related amortization periods for the intangible assets is as follows ($ in thousands):

Exhibit 99.5

	Estimated Value of Intangible Asset Acquired		Estimated Average Useful Lives
Customer relationships	$	9,791	5 years
Patents and other intangibles	$	3,595	3 - 5 years
Total intangible assets	$	13,386

Goodwill - $3,149,000 of goodwill as calculated in Note 2 has been provided for purposes of the combined pro forma financial statements, resulting in a net increase in goodwill for this amount.

Prepaid expenses and other current assets - This pro forma adjustment reflects the recording of $848,000 related to the capitalization of sales commissions upon Oblong’s adoption of ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)".

Other assets - This pro forma adjustment reflects the recording of: a) right-of-use assets of $4,333,000 upon Oblong’s adoption of ASU 2016-02, "Leases (Topic 842)" Topic 842.

Accrued expenses and other liabilities - This pro forma adjustment reflects the recording of short-term lease liabilities of $1,554,000 upon Oblong’s adoption of Topic 842.

Deferred revenue - This pro forma adjustment reflects a reduction of $1,650,000 to reflect the fair value of deferred revenue as of the acquisition date.

Other long-term liabilities - This pro forma adjustment reflects the recording of long-term lease liabilities of $2,779,000 upon Oblong’s adoption of Topic 842.

Oblong equity - Oblong's historical stockholders’ deficit balance of ($73,282,000) was eliminated as a result of the Acquisition.

(3) SVB Warrant - On the Closing Date, Glowpoint and Oblong, as borrowers, and Silicon Valley Bank ("SVB"), as lender, executed a Second Amended and Restated Loan and Security Agreement (the "Loan Agreement"), which amended and restated, in its entirety, the Amended and Restated Loan and Security Agreement by and between Oblong and SVB. The Loan Agreement provides for a term loan facility of approximately $5.2 million (the "Loan"), all of which was outstanding as of September 30, 2019. In connection with its execution of the Loan Agreement, Glowpoint also issued a warrant to SVB that entitles SVB to purchase 72,394 shares of Glowpoint’s Common Stock at an exercise price of $0.01 per share (the "SVB Warrant"). The SVB Warrant has a ten (10) year term. The fair value of the SVB Warrant ($72,000) has been reflected as an adjustment to the unaudited pro forma condensed consolidated balance sheet as of September 30, 2019 to record a discount to the Loan.

(4) Acquisition-related costs - In connection with the Acquisition, the Company and Oblong incurred approximately $300,000 of legal and other third party cash acquisition-related costs subsequent to the Closing Date. Such costs are

Exhibit 99.5

reflected as an adjustment to the unaudited pro forma condensed consolidated balance sheet as of September 30, 2019 to record such costs in accounts payable and decrease stockholders’ equity.

(5) Promissory notes payable - This pro forma adjustment reflects the settlement of Oblong’s promissory notes payable that were recorded on the historical Oblong balance sheet as of September 30, 2019. On the Closing Date, these notes payable were converted to shares of Oblong preferred stock; which were then converted into the Series D Preferred Stock. Therefore, these promissory notes payable were not an assumed liability by Glowpoint as of the Closing Date. Since the promissory notes were issued during the three months ended September 30, 2019, interest expense on the promissory notes was $0 for the year ended December 31, 2018 and not material for the nine months ended September 30, 2019, and therefore no pro forma adjustments were warranted.

(6) Convertible preferred stock- This pro forma adjustment reflects the elimination of Oblong's convertible preferred stock recorded on the historical Oblong balance sheet as of September 30, 2019 as the common and preferred stock of Oblong issued and outstanding immediately prior to the effective time of the Acquisition were converted into an aggregate of 1,686,659 shares of Glowpoint's 6.0% Series D Convertible Preferred Stock.

Exhibit 99.5

ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS

The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations related to the Acquisition and Series E Financing for the year ended December 31, 2018 and nine months ended September 30, 2019 are as follows:

(a) Stock-based compensation expense - all Oblong Options (whether or not vested) held by current employees of Oblong were canceled and exchanged for an aggregate of approximately 49,967 restricted shares of Series D Preferred Stock ("Restricted Series D Preferred Stock"). Such shares of Restricted Series D Preferred Stock are subject to vesting over a two-year period following Closing, with twenty-five percent (25%) of such shares (the "Cliff Vesting Shares") vesting on the first anniversary of the Closing (the "Cliff Vesting Date") and the remaining seventy-five percent (75%) of such shares vesting in ratable monthly installments thereafter, subject to the holder’s continued employment through each such vesting date; provided, however, that in the event such holder’s employment is terminated prior to the Cliff Vesting Date without Cause (as defined in the Amendment), such holder shall remain eligible to vest in the Cliff Vesting Shares on the Cliff Vesting Date. The Restricted Series D Preferred Stock will automatically convert into 499,670 shares of Glowpoint’s restricted common stock upon approval of such conversion by Glowpoint’s stockholders and receipt of NYSE American approval of the listing of the combined company’s common stock on such exchange. The pro forma stock-based compensation expense adjustments related to the Restricted Series D Preferred Stock were $250,000 and $187,000 for the year ended December 31, 2018 and for the nine months ended September 30, 2019, respectively.

(b) Acquisition-related costs - A reasonable allocation of fees paid to attorneys and accountants that are involved with completing the Acquisition and has been made to acquisition-related costs. Based on this allocation and information specific to each aspect of the Acquisition, $465,000 of costs incurred before the Closing Date associated with legal and other third-party costs in connection with the Acquisition were expensed as acquisition-related costs. An adjustment has been made to the unaudited pro forma condensed consolidated income statement for the nine months ended September 30, 2019 to eliminate such costs as they are non-recurring.

(c) Amortization of intangible assets - Pro forma adjustments of $1,958,000 and $1,469,000 have been provided for the incremental amortization of intangible assets for the year ended December 31, 2018 and nine months ended September 30, 2019, respectively, associated with the stepped-up value of intangible assets and the stated useful lives of the assets as of January 1, 2018. This incremental amortization expense is in addition to amortization expense recorded in Oblong’s statement of operations of $437,000 and $345,000 for the year ended December 31, 2018 and the nine months ended September 30, 2019, respectively.

(d) Interest costs - Pro forma adjustments of $97,000 and $73,000 for the year ended December 31, 2018 and nine months ended September 30, 2019, respectively, have been provided for additional interest expense related to: a) the incremental accretion of interest costs related to the value of the SVB Warrant ($38,000 and $28,000) and b) the increase in the interest rate of the SVB term loan that became effective October 1, 2019 ($59,000 and $45,000).

Exhibit 99.5

(e) Preferred stock dividends - A pro forma adjustment of $2,276,000 for the nine months ended September 30, 2019 has been provided for the 6.0% dividends on the total accrued value of the Series D and Series E Preferred Stock. No pro forma adjustment has been recorded for the year ended December 31, 2018 as no dividends accrued prior to the first anniversary of the issuance of the Series D and Series E Preferred Stock.

(f) Net Loss Per Share is calculated by dividing net loss per share by the weighted average number of shares of common shares outstanding during the period.  On April 17, 2019, Glowpoint filed an amendment to its certificate of incorporation that effected a one-for-ten reverse stock split of Glowpoint's issued and outstanding shares of common stock. All shares of common stock, as well as the per share exercise or conversion price and the number of shares issuable upon the exercise or conversion of all outstanding options and other convertible or exchangeable securities, including issued and outstanding shares of the Company’s convertible preferred stock, presented herein have been retroactively adjusted to give effect to this reverse stock split. Diluted net loss per share is computed by giving effect to all potential shares of common stock, including stock options, restricted stock and preferred stock (including the Series D Preferred Stock and the Series E Preferred Stock) to the extent they are dilutive. For the periods presented all such common stock equivalents have been excluded from diluted net loss per share as the effect to net loss per share would be anti-dilutive (due to the net loss). Pro forma earnings per share has been determined as if the Acquisition had occurred on January 1, 2018 by applying the effect of the pro forma adjustments to historical operating results and the historic basic and diluted shares outstanding of Glowpoint.