# TaoWeave, Inc.: Form 10-K for the period ended Dec 31, 2023 - Company: [TaoWeave, Inc.](/companies/twav.md) (CIK 746210) - Form: 10-K - Filed: 2024-03-19 - Accepted by EDGAR: Mar 19, 2024, 20:03 ET - Period: 2023-12-31 - Accession: 0000746210-24-000009 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/746210/000074621024000009/glow-20231231.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/746210/000074621024000009/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2023-12-31. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Revenue | 12 months, 2023-01-01 to 2023-12-31 | $3.8m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax | | Gross profit | 12 months, 2023-01-01 to 2023-12-31 | $911.0k | us-gaap:GrossProfit | | Research and development | 12 months, 2023-01-01 to 2023-12-31 | $20.0k | us-gaap:ResearchAndDevelopmentExpense | | Operating income | 12 months, 2023-01-01 to 2023-12-31 | −$4.5m | us-gaap:OperatingIncomeLoss | | Income tax | 12 months, 2023-01-01 to 2023-12-31 | $27.0k | us-gaap:IncomeTaxExpenseBenefit | | Net income | 12 months, 2023-01-01 to 2023-12-31 | −$4.4m | us-gaap:NetIncomeLoss | | Diluted EPS | 12 months, 2023-01-01 to 2023-12-31 | −$0.98 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 12 months, 2023-01-01 to 2023-12-31 | −$0.98 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 12 months, 2023-01-01 to 2023-12-31 | 5,595,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 12 months, 2023-01-01 to 2023-12-31 | −$3.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 12 months, 2023-01-01 to 2023-12-31 | $0 | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment | | Current assets | at 2023-12-31 | $6.9m | us-gaap:AssetsCurrent | | Total assets | at 2023-12-31 | $6.9m | us-gaap:Assets | | Current liabilities | at 2023-12-31 | $1.4m | us-gaap:LiabilitiesCurrent | | Total liabilities | at 2023-12-31 | $1.4m | us-gaap:Liabilities | | Shareholders' equity | at 2023-12-31 | $5.5m | us-gaap:StockholdersEquity | ## Business As filed, 20,103 characters. ### Overview We are a provider of patented multi-stream collaboration products and managed services for video collaboration and network solutions. ### Mezzanine™ Product Offerings Our flagship product is called Mezzanine™, a family of turn-key products that enable dynamic and immersive visual collaboration across multi-users, multi-screens, multi-devices, and multi-locations. Mezzanine™ allows multiple people to share, control and arrange content simultaneously, from any location, enabling all participants to see the same content in its entirety at the same time in identical formats, resulting in dramatic enhancements to both in-room and virtual videoconference presentations. Applications include video telepresence, laptop and application sharing, whiteboard sharing and slides. Spatial input allows content to be spread across screens, spanning different walls, scalable to an arbitrary number of displays and interaction with our proprietary wand device. Mezzanine™ substantially enhances day-to-day virtual meetings with technology that accelerates decision making, improves communication, and increases productivity. Mezzanine™ scales up to support the most immersive and commanding innovation centers; across to link labs, conference spaces, and situation rooms; and down for the smallest work groups. Mezzanine’s digital collaboration platform can be sold as delivered systems in various configurations for small teams to total immersion experiences. The family includes the 200 Series (two display screen), 300 Series (three screen), and 600 Series (six screen). We also sell maintenance and support contracts related to Mezzanine™. Historically, customers have used Mezzanine™ products in traditional office and operating center environments such as conference rooms or other presentation spaces. As discussed below, sales of our Mezzanine™ products have been adversely affected by commercial response to the COVID-19 pandemic and its aftermath. Like many technology companies in recent months, we will continue to monitor and manage our costs relative to demand with the goal of growing the Company’s revenue in the future. To the extent we believe new investments in product development, marketing, or sales are warranted as a result of changes in market demand, we believe additional capital will be required to fund those efforts and our ongoing operations. Today, ideation and content collaboration are gaining growing importance in both physical and virtual meeting environments to support collective brainstorming and expedite decision making. Visualization of ideas can happen more naturally when people expand the collaborative canvas from sharing a single content stream among many participants to empowering an entire team, such as through our Mezzanine™ multi-stream solutions. While historically focused on in-room collaboration, the need for next-generation virtual collaboration solutions is on the rise, attributed to the confluence of several key trends that influence the way individuals collaborate. Key capabilities and features of Mezzanine™ include: - **Share Work With Others.** Easily present work by plugging in or sharing wirelessly with the Mezzanine™ app. Share up to 10 connected devices including laptops, in-room PCs, and digital media players. Upload images and slides to present and explore content alongside live video streams. - **Capture Ideas Instantly.** Save snapshots of on-screen content to make sure good ideas don’t get lost. Annotate content in the Mezzanine™ app and share thoughts with others. Download meeting materials to reference or share after the meeting. - **Visualize Options and Outcomes**. Mezzanine™ content spans multiple displays so the information needed is in sight and on hand. Share more content, see more detail, and improve visual storytelling. Arrange content for side-by-side comparisons and cross-referencing. - **Unite Distributed Teams.** Connect teams and get everyone on the same page. Meeting participants share the same visual workspace so they can perform like they are in the same room. Everyone in every location can add content and steer the conversation, increasing opportunity and motivation to participate. - **Connect with Ease.** Mezzanine™ works seamlessly with existing video conferencing and collaboration solutions so teams can join meetings with the tools they use every day. Integration with Cisco and Polycom systems simplify connecting rooms with voice, video, and content. - **Orchestrate Content**. Place content anywhere in the room from anywhere in the room with Mezzanine™’s award-winning wands. Gestural interaction makes it easy to move and highlight content to focus the attention of the team. We believe key drivers for demand include: - rapid growth of cloud-based unified communications (UC) services adoption and continuously increasing collaborative intensity in workplaces; - accelerating demand for low-cost video conferencing options such as USB conference room cameras and audio/video soundbars; - rising appetite among end-user organizations for content sharing as well as content collaboration capabilities including ideation, annotation, illustration, and coediting; - convergence of audio, video and content collaboration (as opposed to siloed applications and platforms) to improve employee productivity; - significant growth in the number of huddle rooms and flexible meeting spaces worldwide; - preference for Bring Your Own Device (BYOD) screen share in meeting spaces; and - growing number of distributed and remote workers. Today’s knowledge workers are seeking optimal meeting spaces both in and out of the office that foster creativity, agility, innovation, and engagement. The trend towards ad-hoc and small group meetings has led to the creation of the huddle room concept, where workers can meet in a disruption-free setting. However, it is estimated that a small percentage of these spaces are truly ‘full spectrum’ collaboration enabled. Further, the penetration of stand-alone content sharing applications is significantly less than video penetration in large and huddle-sized meeting rooms. We believe as businesses continue to reopen from the COVID-19 pandemic there will be demand for higher forms of engagement that combines robust video conferencing with enhanced content sharing as users adapt to more flexible workplace alternatives. This combination focuses on allaying customer apprehension with regards to how to cost-effectively pursue an expanded collaboration strategy without replacing their existing investments. ### Managed Services for Video Collaboration We provide a range of managed services for video collaboration, from automated to orchestrated, to simplify the user experience in an effort to drive adoption of video collaboration throughout our customers’ enterprise. We deliver our services through a hybrid service platform or as a service layer on top of our customers’ video infrastructure. We provide our customers with the following services to meet their videoconferencing needs: - *Managed Videoconferencing* is a “high-touch” concierge-based offering where we set up and manage customer videoconferences. Our managed videoconferencing services are offered to our customers on either a usage basis or on a monthly subscription. These services include call scheduling and launching, and videoconference monitoring, support and reporting. - *Remote Service Management* provides an overlay to enterprise information technology (“IT”) and channel partner support organizations and provides 24/7 support and management of customer video environments. Our services are designed to align with a globally recognized set of best practices, Information Technology Infrastructure Library (“ITIL”), to standardize processes and communicate through a consistent set of terms with our customers and partners. We offer, on a monthly subscription basis, three tiers of Remote Service Management options, ranging from remote proactive automated monitoring to end-to-end management to complement the needs of IT support organizations (including 24x7 support desk, incident/problem/change management, site certifications, and service level agreements). ### Managed Services for Network We provide our customers with network solutions that ensure reliable, high-quality and secure traffic of video, data and internet. Network services are offered to our customers on a subscription basis. Our network services business carries variable costs associated with the purchasing and reselling of this connectivity. We offer our customers the following networking solutions that can be tailored to each customer’s needs: - *Cloud Connect: Video™*: Allows our customers to outsource the management of their video traffic to us and provides the customer’s office locations with a secure, dedicated video network connection to the Oblong Cloud for video communications. - *Cloud Connect: Converge™*: Provides customized Multiprotocol Label Switching (“MPLS”) solutions for customers who require a converged network. A converged network is an efficient network solution that combines the customer’s voice, video, data, and Internet traffic over one or more common access circuits. We fully manage and prioritize traffic to ensure that video and other business critical applications run smoothly. - *Cloud Connect: Cross Connect™*: Allows the customer to leverage their existing carrier for the extension of a Layer 2 private line to our data center. ### Sales and Marketing We use a variety of marketing, sales, and support activities to generate and cultivate ongoing customer demand for our product offerings and managed services. We have limited sales and marketing resources and we currently have a small sales team. We sell globally through both direct customer sales and channel partners. ### Customers We have a diverse customer base including Fortune 1000 companies, along with small and medium enterprises across a wide range of industries including aerospace, consulting, executive search, broadcast media, legal, insurance, technology, financial services, education, healthcare, real estate, retail, construction, hospitality, and government, among others. We seek to establish and maintain long-term relationships with our customers. Many factors influence the collaboration requirements of our customers. These include the size of the organization, number and types of technology systems, geographic location, and business applications deployed throughout the customer’s network. Our customer base is not limited to any specific industry, geography, or market segment. A significant portion of our products and services are sold through our distribution channels, and the remainder is sold through direct sales. Our distribution channels include systems integrators, channel partners, other resellers, and distributors. Sales to these service providers have been characterized by large and sporadic purchases, in addition to longer sales cycles. Historically, we have seen fluctuations in our gross margins based on changes in the balance of our distribution channels. Major customers are defined as direct customers or channel partners that account for more than 10% of the Company’s total consolidated revenue. For the years ended December 31, 2023, and 2022, one major customer accounted for approximately 56% and 47% of the Company’s total consolidated revenue, respectively. ### Competition The market for communication and collaboration technology services is competitive and rapidly changing. Certain features of our current Mezzanine™ product offerings compete in the communication and collaboration technologies market with products offered by Cisco WebEx, Zoom, LogMeIn, GoToMeeting, along with bundled productivity solutions providers who offer limited content sharing capabilities such as Microsoft Teams, and Google G Suite. In the rapidly evolving “Ideation” market, certain elements of our application compete with Microsoft, Google, InFocus, Bluescape, Mersive, Barco, Nureva and Prysm. With respect to our managed services for video collaboration, we primarily compete with managed services companies, videoconferencing equipment resellers and telecommunication providers, including BT Conferencing, AT&T, Verizon, LogMeIn, Yorktel, ConvergeOne, and AVI-SPL. We also compete with companies that offer hosted videoconference bridging solutions, including, Vidyo and Zoom. Lastly, the technology and software providers, including Cisco, LifeSize, Microsoft, and Polycom, are delivering competitive cloud-based videoconferencing and calling services. With the technology advancements over the past few years, including browser-based and mobile video, the options for video collaboration solutions and services are greater than ever before. With respect to our managed services for network, we primarily compete with telecommunications carriers, including British Telecom, AT&T, Verizon and Telus. Our competitors offer services similar to ours both on a bundled and unbundled basis, creating a highly competitive environment with pressure on pricing of such services. Revenue attributable to our managed services described above has declined in recent years primarily due to loss of customers to competition. We expect this trend to continue in the future for our managed services business. ### Intellectual Property The core technology platform for Mezzanine™ is called g-speak. It enables applications to be developed that run across multiple screens and multiple devices. Our customers use the platform to solve big data problems, to collaborate more effectively, and to go from viewing pixels on a single screen to interacting with pixels on every screen. Videoconferencing has traditionally presented challenges for the user by presenting a complex maze of systems and networks that must be navigated and closely managed. Although most of the business-quality video systems today are “standards-based,” there are inherent interoperability problems between different vendors’ video equipment, resulting in communication islands. Our suite of managed services for video collaboration can be accessed and utilized by customers regardless of their technology or network. Customers who purchase a Cisco, Polycom, Avaya, or LifeSize (Logitech) system, or use certain other third-party video communications software such as Microsoft, WebEx or WebRTC, may all take advantage of our services regardless of their choice of network. Our services support all standard video signaling protocols, including SIP, H.323 and Integrated Services Digital Network (“ISDN”) using infrastructure from a variety of manufacturers. ### Research and Development The Company incurred research and development expenses during the years ended December 31, 2023 and 2022 of $0.02 million and $1.7 million, respectively, related to the development of features and enhancements to our Mezzanine™ product offerings. During late 2022, we ceased the majority of R&D activities as a cost savings measure. ### Employees As of December 31, 2023, we had 21 total employees including 17 full-time employees. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants. Our compensation program is designed to attract, retain, and motivate highly qualified employees and executives and is comprised of a mix of competitive base salary, bonus and equity compensation awards, as well as other employee benefits. Our employees are not covered by a collective bargaining agreement, and we consider our relations with our employees to be good. We are committed to diversity and inclusion as well as equitable pay within our workforce. In addition, the health and safety of our employees, customers and communities are of primary concern to us. ### Strategy In recent years, our Company has faced significant challenges, leading to declining revenues for both our Mezzanine™ product offerings and our Managed Services. These setbacks have prompted us to undertake a comprehensive review of our strategic direction with the aim of enhancing shareholder value through various means. Our exploration of strategic alternatives is diverse, encompassing the consideration of a range of transformative actions. These include the possibility of a business combination, where we might merge with or be acquired by another company; a reverse merger, where a private company merges with us to become public without going through the traditional initial public offering process; or outright sale of the company. Each option is being carefully evaluated to ensure it aligns with our overarching goal of sustainable growth and value creation. Our strategy for growth is twofold: (i) we aim to grow organically by expanding our market presence and increasing adoption of our products and services, and (ii) we are actively seeking inorganic growth opportunities through strategic partnerships or acquisitions. Specifically, we are interested in early-stage technology companies that are not just innovating but have also developed minimum viable products (MVPs) that have gained some measure of market acceptance. These companies may complement our existing offerings but, could also open new avenues for expansion by tapping into significant market opportunities. In our quest to find the right partners or acquisition targets, we are particularly focused on ventures that have demonstrated their ability to innovate and capture early-stage interest of their target markets, indicating a clear path to scalability and a substantial market presence. However, it's important to note that while we are committed to this strategic review process, there is no guaranteed outcome. The process of identifying and executing on the right strategic alternative, whether it be a merger, sale, or business combination, is complex and uncertain. We want our shareholders to understand that, despite our best efforts, there is no assurance that this strategic review will culminate in a definitive transaction involving the Company. Our priority remains clear: to explore every avenue that could potentially enhance the value we deliver to our shareholders and ensure the long-term success of our Company. ### Corporate History Oblong, Inc. was formed as a Delaware corporation in May 2000. Prior to March 6, 2020, Oblong, Inc. was named Glowpoint, Inc. (“Glowpoint”). On October 1, 2019, the Company closed an acquisition of all of the outstanding equity interests of Oblong Industries, Inc., a privately held Delaware corporation founded in 2006 (“Oblong Industries”), pursuant to the terms of an Agreement and Plan of Merger (as amended, the “Merger Agreement”). Pursuant to the Merger Agreement, among other things, Oblong Industries became a wholly owned subsidiary of the Company (the “Merger”). On March 6, 2020, Glowpoint changed its name to Oblong, Inc. ### Available Information We are subject to the reporting requirements of the Exchange Act. The Exchange Act requires us to file periodic reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). The SEC maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements and other information that we file electronically with the SEC. In addition, we make available, free of charge, on our Internet website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file this material with, or furnish it to, the SEC. You may review these documents on our website at www.oblong.com by accessing the investor relations section. Our website and the information contained on or connected to our website is not incorporated by reference herein, and our web address is included as an inactive textual reference only. ## Risk factors As filed, 99,810 characters. Our business faces numerous risks, including those set forth below and those described elsewhere in this Report or in our other filings with the SEC. The risks described below are not the only risks that we face, nor are they necessarily listed in order of significance. Other risks and uncertainties may also affect our business. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cash flow. When making an investment decision with respect to our common stock, you should also refer to the other information contained or incorporated by reference in this Report, including our Consolidated Financial Statements and the related notes. ### Risks Related to Our Business ***Our Company experienced declines in revenue in recent fiscal years and may continue to experience further revenue decline in future periods.*** In recent fiscal years, our Company has faced a troubling trend of decreasing revenue, a situation that may not only persist but potentially worsen in the future. Specifically, our Managed Services revenue has suffered due to a significant loss of customers and a decrease in demand for our offerings. This downturn can be attributed to the fiercely competitive landscape of our industry, where we face intense pressure to lower prices to remain competitive. Similarly, our Mezzanine™ product offerings, designed for use in conventional settings like conference rooms and operational centers, have also experienced a marked decrease in revenue. This decline is largely a consequence of the commercial reactions to the COVID-19 pandemic and its prolonged effects. We believe the pandemic has fundamentally altered the way businesses consider the use of physical office spaces and, consequently, the demand for technologies that enable in-person collaboration within these spaces. Our analysis indicates that the reduced demand for our Mezzanine™ products, particularly in the aftermath of COVID-19, reflects a broader reassessment among our customers regarding the necessity and investment in collaboration solutions tailored for traditional office environments. Should this trend of reevaluation and reduced demand continue, it poses a significant risk of further revenue decline for our Company. This situation highlights the critical need for our Company to adapt strategically, recognizing the shifting dynamics of workplace configurations and the evolving needs of our customers in the post-pandemic era. ***Revenue growth and increase in the market share of our current product offerings depends on successful adoption of our Mezzanine™ product offerings with our channel partners, which requires sufficient sales, marketing, and product development funding.*** Our goal is to grow revenue from an increase in adoption of our product offerings. If we cannot successfully gain adoption of our Mezzanine™ product offerings through direct sales or our channel partners, we may not be able to grow revenue and/or increase the market share of our products. We cannot assure you that we will have sufficient funds available to invest in sales and marketing and continued product development in order to achieve revenue growth. ***We have a history of substantial net operating losses and we may incur future net losses.*** We reported substantial net losses in recent years. We may not be able to achieve revenue growth or profitability or generate positive cash flow on a quarterly or annual basis in the future. If we do not achieve profitability in the future, the value of our common stock may be adversely impacted, and we could have difficulty obtaining capital to continue our operations. ***Our business activities will require additional financing that might not be obtainable on acceptable terms, if at all, which could have a material adverse effect on our financial condition, liquidity and our ability to operate as a going concern in the future.*** The Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2023 have been prepared assuming that the Company will continue as a going concern. We have experienced declines in revenue in recent fiscal years and we have incurred net losses. Our capital requirements in the future will continue to depend on numerous factors, including the timing and amount of revenue, customer renewal rates and the timing of collection of outstanding accounts receivable, in each case particularly as it relates to our major customers, the expense to deliver services, expense for sales and marketing, expense for research and development, capital expenditures, and the cost involved in protecting intellectual property rights. We believe that our existing cash and cash equivalents will be sufficient to fund our operations and meet our working capital requirements for at least the next 12 months from the filing date of this Report with the SEC. We believe additional capital will be required, in the long-term, to fund operations and provide growth capital including potential strategic alternatives and investments in technology, product development and sales and marketing. To access capital to fund operations or provide growth capital, we will need to raise capital in one or more debt and/or equity offerings. There can be no assurance that we will be successful in raising necessary capital or that any such offering will be on terms acceptable to the Company. If we are unable to raise additional capital that may be needed on terms acceptable to us, it could have a material adverse effect on the Company. ***If we fail to achieve broad market acceptance on a timely basis, we will not be able to compete effectively, and we will likely experience continued declines in revenue and lower gross margins.*** We operate in a highly competitive, quickly changing environment, and our future success depends on our ability to develop or acquire, and introduce, new products that achieve broad market acceptance. Our future success will depend in large part upon our ability to identify demand trends in the markets in which we operate, and to quickly develop or acquire, and build and sell products that satisfy these demands in a cost-effective manner. In order to differentiate our products from our competitors’ products, we must increase our focus and capital investment in research and development. If our products do not achieve widespread market acceptance, or if we are unsuccessful in capitalizing on market opportunities, our future growth may be slowed and our financial results could be harmed. Also, as the mix of our business increasingly includes new products and services that require additional investment, this shift may adversely impact our margins, at least in the near-term. Successfully predicting demand trends is difficult, and it is very difficult to predict the effect that introducing a new product will have on existing product sales. We will also need to respond effectively to new product announcements by our competitors by quickly introducing competitive products. In addition, we may not be able to successfully manage integration of any new product lines with our existing products. Selling new product lines in new markets will require our management to explore different strategies in order to be successful. We may be unsuccessful in launching a new product line in new markets that requires management of new suppliers, potential new customers and new business models. Our management may not have the experience of selling in these new markets and we may not be able to grow our business as planned. If we are unable to effectively and successfully further develop these new product lines, we may not be able to achieve our desired sales targets and our gross margins may be adversely affected. We may experience delays and quality issues in releasing new products, which could result in lower quarterly revenue than expected. In addition, we may experience product introductions that fall short of our projected rates of market adoption. Any future delays in product development and introduction, or product introductions that do not meet broad market acceptance, or unsuccessful launches of new product lines could result in: - loss of or delay in revenue and loss of market share; - negative publicity and damage to our reputation and brand; - a decline in the average selling price of our products; and - adverse reactions in our sales channels. Additionally, our level of product gross margins could decline in future periods due to adverse impacts from other factors including: - Changes in customer, geographic or product mix, including mix of configurations within each product group; - Introduction of new products, including products with price-performance advantages, and new business models including the transformation of our business to deliver more software and subscription offerings; - Our ability to reduce production costs; - Entry into new markets or growth in lower margin markets, including markets with different pricing and cost structures, through acquisitions or internal development; - Sales discounts; - Increases in material, labor or other manufacturing-related costs, which could be significant especially during periods of supply constraints such as those impacting the market for memory components; - Excess inventory, inventory holding charges and obsolescence charges; - Changes in shipment volume; - The timing of revenue recognition and revenue deferrals; - Increased cost (including those caused by tariffs), loss of cost savings or dilution of savings due to changes in component pricing or charges incurred due to inventory holding periods if parts ordering does not correctly anticipate product demand or if the financial health of either contract manufacturers or suppliers deteriorates; - Lower than expected benefits from value engineering; - Increased price competition; - Changes in distribution channels; - Increased warranty or royalty costs; - Increased amortization of purchased intangible assets; and - Our success in executing on our strategy and operating plans. If we cannot successfully introduce new product lines, either through rapid innovation or acquisition of new products or product lines, we may not be able to maintain or increase the market share of our products. In addition, if we are unable to successfully introduce or acquire new products with higher gross margins, or if we are unable to improve the margins on our existing product lines, our revenue and overall gross margin will likely decline. ***Product quality problems could lead to reduced revenue, gross margins and higher net losses.*** We produce highly complex products that incorporate leading-edge technology, including both hardware and software. Software typically contains bugs that can unexpectedly interfere with expected operations. There can be no assurance that our pre-shipment testing programs will be adequate to detect all defects, either ones in individual products or ones that could affect numerous shipments, which might interfere with customer satisfaction, reduce sales opportunities or affect gross margins. From time to time, we have had to replace certain components and provide remediation in response to the discovery of defects or bugs in products that we had shipped. There can be no assurance that such remediation, depending on the product involved, would not have a material impact. An inability to cure a product defect could result in the failure of a product line, temporary or permanent withdrawal from a product or market, damage to our reputation, inventory costs or product reengineering expenses, any of which could have a material impact on our revenue, margins and net loss. ***We depend upon the development of new products and services, and enhancements to existing products and services, and if we fail to predict and respond to emerging technological trends and customer’s changing needs, our operating results may suffer.*** The markets for our products and services are characterized by rapidly changing technology, evolving industry standards and new product and service introductions. Our operating results depend on our ability to develop and introduce new products and services into existing and emerging markets and to reduce the production costs of existing products. If customers do not purchase and/or renew our offerings, our business could be harmed. The process of developing new technology related to market transitions—such as collaboration, digital transformation, and cloud—is complex and uncertain, and if we fail to accurately predict customers’ changing needs and emerging technological trends our business could be harmed. We must commit significant resources to developing new products and services before knowing whether our investments will result in products and services the market will accept. Our business could be harmed if we fail to develop, or fail to develop in a timely fashion, offerings to address other market transitions, or if the offerings addressing these other transitions that ultimately succeed are based on technology, or an approach to technology, different from ours. In addition, our business could be adversely affected in periods surrounding our new product introductions if customers delay purchasing decisions to qualify or otherwise evaluate new product offerings. Furthermore, we may not execute successfully on our vision or strategy because of challenges with regard to product planning and timing, technical hurdles that we fail to overcome in a timely fashion, or a lack of appropriate resources, such as those that led to us ceasing the majority of research and development activities during late 2022 as a cost savings measure, and significant capital could be required to resume research and development activities. This could result in competitors, some of which may also be our partners, providing those solutions before we do and loss of market share, revenue and earnings. In addition, the growth in demand for technology delivered as a service enables new competitors to enter the market. The success of new products and services depends on several factors, including proper new product and service definition, component costs, timely completion and introduction of these products and services, differentiation of new products and services from those of our competitors, and market acceptance of these products and services. There can be no assurance that we will successfully identify new product and services opportunities, develop and bring new products and services to market in a timely manner, or achieve market acceptance of our products and services or that products, services and technologies developed by others will not render our products, services or technologies obsolete or noncompetitive. ***Our success depends on our ability to recruit and retain adequate engineering talent.*** The market for our products and services are characterized by rapidly changing technology. The pressure to innovate and stay ahead of our competitors requires an investment in talent. Specifically, competing successfully in this market depends on our ability to recruit and retain adequate engineering talent. Because of the competitive nature of this industry, this can prove a challenge. Failure to recruit and retain adequate talent could negatively impact our ability to keep up with the rapidly changing technology. ***Our success is highly dependent on the evolution of our overall market and on general economic conditions.*** The market for collaboration technology and services is evolving rapidly. Although certain industry analysts project significant growth for this market, their projections may not be realized. Our future growth depends on broad acceptance and adoption of collaboration technologies and services. In addition, in the event we develop new solutions designed to address new market demands, such as our Mezzanine™ product offerings, sales of our solutions will in part depend on capturing new spending in these markets. There can be no assurance that this market will grow, that our offerings will be adopted or that businesses will purchase our collaboration technologies and services. If we are unable to react quickly to changes in the market, if the market fails to develop or develops more slowly than expected, or if our services do not achieve market acceptance, then we are unlikely to achieve profitability. Additionally, adverse economic conditions may cause a decline in business and consumer spending which could adversely affect our business and financial performance. ***Changes in industry structure and market conditions could lead to charges related to discontinuances of certain of our products or businesses, asset impairments, and workforce reductions or restructurings.*** In response to changes in industry and market conditions, we may be required to strategically realign our resources and to consider restructuring, disposing of or otherwise exiting businesses. Any resource realignment, or decision to limit investment in or dispose of or otherwise exit businesses, may result in the recording of special charges, such as inventory and technology-related write-offs, workforce reduction or restructuring costs, charges relating to consolidation of excess facilities, or claims from third parties who were resellers or users of discontinued products. Our estimates with respect to the useful life or ultimate recoverability of our carrying basis of assets, could change as a result of such assessments and decisions. Although in certain instances our supply agreements allow us the option to cancel, reschedule and adjust our requirements based on our business needs prior to firm orders being placed, our loss contingencies may include liabilities for contracts that we cannot cancel with contract manufacturers and suppliers. ***We may be unable to realize intended efficiencies and benefits from our ongoing cost-savings initiatives, and which may adversely affect our results of operations, financial condition, or our business.*** To operate more efficiently and control costs, we have undertaken cost-savings initiatives, which have included a cessation of R&D activities, workforce reductions and other cost reduction initiatives. If we do not successfully manage our current cost-savings activities, our expected efficiencies, benefits and cost savings might be delayed or not realized, and our operations and business could be disrupted. Furthermore, a disruption to our operations or business may cause employee morale and productivity to suffer and may result in unwanted employee attrition. Such disruptions require substantial management time and attention and may divert management from other important work or result in a failure to meet operational targets. Moreover, we could make changes to, or experience delays in executing, any cost-savings initiatives, any of which could cause further disruption and additional unanticipated expense. ***If we were deemed to be an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business, financial condition, and results of operations.*** Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if (1) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (2) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We do not currently believe that we are an “investment company,” as such term is defined in either of those sections of the 1940 Act. Although we are exploring strategic alternatives, we intend to conduct our operations so that we will not be deemed an investment company. However, if we were to be deemed an investment company, restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to transact with affiliates, could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business, financial condition and results of operations. ***Any future disposition of assets and business could have material and adverse effect on business, financial conditions, and operations, if not consummated in a timely manner.*** As part of our corporate strategy, our management considers and evaluates opportunities involving dispositions of assets and business. Such transactions may expose us to unknown or unforeseeable challenges resulting in disruption of business operations, loss of key personnel and ongoing tax benefits treatment, failure to obtain necessary statutory and regulatory approvals, provide ongoing indemnity, and compliance with post-closing obligations, which may affect or prevent us from consummating the transactions, and have a material and adverse effect on our business, financial conditions, and operations. ***The markets in which we compete are intensely competitive, which could adversely affect our achievement of revenue growth.*** The markets in which we compete are characterized by rapid change, converging technologies and a migration to collaboration solutions that offer relative advantages. These market factors represent a competitive threat to us. We compete with numerous vendors in each product category. The overall number of our competitors providing niche product solutions may increase. Also, the identity and composition of competitors may change as we increase our activity in newer product areas, and in key priority and growth areas. In addition, the growth in demand for technology delivered as a service enables new competitors to enter the market. The collaboration industry is highly competitive and includes large, well-financed participants. Some of our competitors compete across many of our product lines, while others are primarily focused in a specific product area. In addition, many of our competitor organizations have substantially greater financial and other resources, including technical and engineering resources, than we do, furnish some of the same services provided by us, and have established relationships with major corporate customers that have policies of purchasing directly from them. Our competitors offer services similar both on a bundled and unbundled basis, creating a highly competitive environment with pressure on pricing of such services. Barriers to entry are relatively low, and new ventures to create products that do or could compete with our products are regularly formed. We believe that as the demand for collaboration technologies continues to increase, additional competitors, many of which may have greater resources than us, will continue to enter this market. The principal competitive factors in the markets in which we presently compete and may compete in the future include the ability to sell successful business outcomes; product performance; price; the ability to introduce new products, including providing continuous new customer value and products with price-performance advantages; the ability to reduce production costs; the ability to provide value-added features such as security, reliability and investment protection; conformance to standards; market presence; the ability to provide financing; and disruptive technology shifts and new business models. ***Industry consolidation may lead to increased competition and may harm our operating results.*** There is a continuing trend toward industry consolidation in our markets. We expect this trend to continue as companies attempt to strengthen or hold their market positions in an evolving industry and as companies are acquired or are unable to continue operations. Companies that are strategic alliance partners in some areas of our business may acquire or form alliances with our competitors, thereby reducing their business with us. We believe that industry consolidation may result in stronger competitors that are better able to compete as sole-source vendors for customers. This could lead to more variability in our operating results and could have a material adverse effect on our business, operating results and financial condition. Furthermore, particularly in the service provider market, rapid consolidation will lead to fewer customers, with the effect that loss of a major customer could have a material impact on results. ***We rely on a limited number of customers for a significant portion of our revenue, and the loss of any one of those customers, or several of our smaller customers, could materially harm our business.*** A significant portion of our revenue is generated from a limited number of customers. For the year ended December 31, 2023, one major customer accounted for 56% of the Company’s total consolidated revenue. The composition of our significant customers will vary from period-to-period, and we expect that most of our revenue will continue, for the foreseeable future, to come from a relatively small number of customers. Consequently, our financial results may fluctuate significantly from period-to-period based on the actions of one or more significant customers. A customer may take actions that affect the Company for reasons that we cannot anticipate or control, such as reasons related to the customer’s financial condition, changes in the customer’s business strategy or operations, changes in technology and the introduction of alternative competing products, or as the result of the perceived quality or cost-effectiveness of our products. Our agreements with these customers may be canceled if we materially breach the agreement or for other reasons outside of our control such as insolvency or financial hardship that may result in a customer filing for bankruptcy court protection against unsecured creditors. If our customers were to experience losses due to a failure of a depository institution to return their deposits, it could expose us to an increased risk of nonpayment under our contracts with them. In addition, our customers may seek to renegotiate the terms of current agreements or renewals. The loss of or a reduction in sales or anticipated sales to our most significant or several of our smaller customers could have a material adverse effect on our business, financial condition, and results of operations. ***Any system failures or interruptions may cause loss of customers.*** Our success depends, in part, on the seamless, uninterrupted operation of our managed service offerings. As the complexity and volume continue to increase, we will face increasing demands and challenges in managing them. Any prolonged failure of these services or other systems or hardware that cause significant interruptions to our operations could seriously damage our reputation and result in customer attrition and financial loss. ***There is limited market awareness of our services.*** Our future success will be dependent in significant part on our ability to generate demand for our collaboration technologies and services. To this end, our direct marketing and indirect sales operations must increase market awareness of our service offerings to generate increased revenue. We have limited sales and marketing resources. Our products and services require a sophisticated sales effort targeted at the senior management of our prospective customers. If we were to hire new employees in sales and marketing, those employees will require training and take time to achieve full productivity. We cannot be certain that our new hires will become as productive as necessary or that we will be able to hire enough qualified individuals or retain existing employees in the future. We cannot be certain that we will be successful in our efforts to market and sell our products and services, and, if we are not successful in building market awareness and generating increased sales, future results of operations will be adversely affected. ***If we do not effectively compose, structure, and compensate our sales force to focus on the end customers and activities that will primarily drive our growth strategy, our business will be adversely affected.*** As indicated above, our growth is dependent in large part on the success of our sales team and in particular our ability to structure our sales organization and sales compensation in a way that aligns with our growth strategy. As part of our efforts to appropriately structure and compensate our sales team such that their incentives are properly aligned with our growth strategy, we have made changes to our sales processes, sales segmentation and leadership structures for our sales teams and may need to make additional changes in the future. Such changes may take longer than anticipated to successfully implement, and we may not be able to realize the full benefits thereof, which may have a material adverse impact on our sales productivity as well as our business and operational results generally. In particular, as indicated above, our growth continues to be substantially dependent on our ability to increase our sales to large enterprises, particularly when those sales result in large orders for our solutions. Competition for sales employees who have the knowledge and experience necessary to effectively penetrate major enterprise accounts is fierce, and we may not be successful in hiring such employees, or hiring them on the timelines we anticipate, which will negatively impact our ability to target and penetrate major enterprise accounts. In addition, we anticipate that the sales cycles associated with major accounts will be longer than our traditional sales cycles, which will increase the time it will take our sales managers to become fully productive. In addition, as our organization continues to focus on major accounts and large deals, the productivity of our traditional sales teams may be impacted. ***Our ability to sell our solutions is dependent in part on ease of use and the quality of our technical support, and any failure to offer high-quality technical support would harm our business, operating results, and financial condition.*** Once our solutions are deployed, our end customers depend on our support organization to resolve any technical issues relating to our solutions. Furthermore, because of the emerging nature of our solutions, our support organization often provides support for and troubleshoots issues for products of other vendors running on our solutions, even if the issue is unrelated to our solutions. There is no assurance that we can solve issues unrelated to our solutions, or that vendors whose products run on our solutions will not challenge our provision of technical assistance to their products. Our ability to provide effective support is largely dependent on our ability to attract, train and retain personnel who are not only qualified to support our solutions, but also well versed in some of the primary applications and hypervisors that our end customers run on our solutions. Furthermore, in the event we expand our operations internationally, our support organization will face additional challenges, including those associated with delivering support, training, and documentation in languages other than English. In addition, in the event we expand our product portfolio to include additional solutions our ability to provide high-quality support will become more difficult and will involve more complexity. Any failure to maintain high-quality installation and technical support, or a market perception that we do not maintain high-quality support, could harm our reputation and brand, adversely affect our ability to sell our solutions to existing and prospective end customers, and could harm our business, operating results, and financial condition. ***We rely on third-party software that may be difficult to replace or may not perform adequately.*** We integrate third-party licensed software components into our technology infrastructure in order to provide our services. This software may not continue to be available on commercially reasonable terms or pricing or may fail to continue to be updated to remain competitive. The loss of the right to use this third-party software may increase our expenses or impact the provisioning of our services. The failure of this third-party software could materially impact the performance of our services and may cause material harm to our business or results of operations. ***We depend upon our network providers and facilities infrastructure.*** Our success depends upon our ability to implement, expand, and adapt our network infrastructure and support services to accommodate an increasing amount of video traffic and evolving customer requirements at an acceptable cost. This has required and will continue to require that we enter into agreements with providers of infrastructure capacity, equipment, facilities, and support services on an ongoing basis. We cannot ensure that any of these agreements can be obtained on satisfactory terms and conditions. We also anticipate that future expansions and adaptations of our network infrastructure facilities may be necessary in order to respond to growth in the number of customers served. ***A significant portion of our sales are through distribution channels including both system integrators and channel partners (collectively the “Service Providers”) which have been difficult to project and, particularly volatile during the pandemic. Weakness in orders from our distribution channels may harm our operating results and financial condition.*** Sales to the Service Providers have been characterized by large and sporadic purchases, in addition to longer sales cycles. Product orders by the Service Providers decreased during 2022 and 2023 and at various times in the past we have experienced significant weakness in product orders from Service Providers. Product orders from the Service Providers could continue to decline and, as has been the case in the past, such weakness could persist over extended periods of time given fluctuating market conditions. Sales activity in this industry depends upon the stage of completion of expanding network infrastructures; the availability of funding; and the extent to which service providers are affected by regulatory, economic, and business conditions in the country of operations. Weakness in orders from this industry, including as a result of any slowdown in capital expenditures by service providers (which may be more prevalent during a global economic downturn, or periods of economic, political or regulatory uncertainty), could have a material adverse effect on our business, operating results, and financial condition. Such slowdowns may continue or recur in future periods. Orders from this industry could decline for many reasons other than the competitiveness of our products and services within their respective markets. For example, in the past, many of our Service Providers’ customers have been materially and adversely affected by slowdowns in the general economy, by overcapacity, by changes in the Service Providers’ market, by regulatory developments, and by constraints on capital availability, resulting in business failures and substantial reductions in spending and expansion plans. These conditions have materially harmed our business and operating results in the past and could affect our business and operating results in any future period. Finally, our Service Providers’ customers typically have longer implementation cycles; require a broader range of services, including design services; demand that vendors take on a larger share of risks; often require acceptance provisions, which can lead to a delay in revenue recognition; and expect financing from vendors. All these factors can add further risk to business conducted with Service Providers. ***Disruption of or changes in our distribution model could harm our sales and margins.*** If we fail to manage distribution of our products and services properly, or if our Service Providers’ financial condition or operations weaken, our revenue and gross margins could be adversely affected. A significant portion of our products and services are sold through our distribution channels, and the remainder is sold through direct sales. Our distribution channels include systems integrators, channel partners, other resellers, and distributors. Systems integrators and channel partners typically sell directly to end users and often provide system installation, technical support, professional services, and other support services in addition to network equipment sales. Systems integrators also typically integrate our products into an overall solution, and a number of service providers are also systems integrators. Distributors stock inventory and typically sell to systems integrators, channel partners, and other resellers. We refer to sales through distributors as two-tier system of sales to the end customer. If sales through indirect channels increase, this may lead to greater difficulty in forecasting the mix of our products and, to a degree, the timing of orders from our customers. Historically, we have seen fluctuations in our gross margins based on changes in the balance of our distribution channels. There can be no assurance that changes in the balance of our distribution model in future periods would not have an adverse effect on our gross margins and profitability. Some factors could result in disruption of or changes in our distribution model, which could harm our sales and margins, including the following: competition with some of our Service Providers, including through our direct sales, which may lead these channel partners to use other suppliers that do not directly sell their own products or otherwise compete with them; some of our Service Providers may demand that we absorb a greater share of the risks that their customers may ask them to bear; some of our Service Providers may have insufficient financial resources and may not be able to withstand changes and challenges in business conditions; and revenue from indirect sales could suffer if our distributors’ financial condition or operations weaken. In addition, we depend on our Service Providers globally to comply with applicable regulatory requirements. To the extent that they fail to do so, that could have a material adverse effect on our business, operating results, and financial condition. ***Inventory management relating to our sales to our two-tier distribution channel is complex, and excess inventory may harm our gross margins.*** We must manage inventory relating to sales to our distributors effectively, because inventory held by them could affect our results of operations. Our distributors may increase orders during periods of product shortages, cancel orders if their inventory is too high, or delay orders in anticipation of new products. They also may adjust their orders in response to the supply of our products and the products of our competitors that are available to them, and in response to seasonal fluctuations in end-user demand. Inventory management remains an area of focus as we balance the need to maintain strategic inventory levels to ensure competitive lead times against the risk of inventory obsolescence because of rapidly changing technology and customer requirements. When facing component supply-related challenges, we have increased our efforts in procuring components in order to meet customer expectations. If we ultimately determine that we have excess inventory, we may have to reduce our prices and write down inventory, which in turn could result in lower gross margins. ***We may experience material disconnections and/or reductions in the prices of our services and may not be able to replace the loss of revenues.*** Historically, we have experienced both significant disconnections of services and also reductions in the prices of our services. We endeavor to obtain long-term commitments from new customers, as well as expand our relationships with current customers. The disconnection of services by our significant customers or by several of our smaller customers could have a material adverse effect on our business, financial condition, and results of operations. Service contract durations and termination liabilities are defined within the terms and conditions of the Company’s agreements with our customers. Termination of services in our existing agreements typically require a minimum of 30 days’ notice and are subject to early termination penalties equal to the amount of accrued and unpaid charges including the remaining term length multiplied by any fixed monthly fees. The standard form of service agreement with us includes an auto-renewal clause at the end of each term if the customer does not choose to terminate service at that time. Certain customers and partners negotiate master agreements with custom termination liabilities that differ from our standard form of service agreement. ***We are exposed to the credit and other counterparty risk of our customers in the ordinary course of our business.*** Our customers have varying degrees of creditworthiness, and we may not always be able to fully anticipate or detect deterioration in their creditworthiness and overall financial condition, which could expose us to an increased risk of nonpayment under our contracts with them. In the event that a material customer or customers default on their payment obligations to us, discontinue buying services from us or use their buying power with us to reduce its revenue, this could materially adversely affect our financial condition, results of operations or cash flows. ***Failure to retain and recruit key personnel would harm our ability to meet key objectives.*** We have attracted a highly skilled management team and specialized workforce. Our future success is dependent in part on our ability to attract and retain highly skilled technical, managerial, sales and marketing personnel. Competition for these personnel is intense. Our inability to hire qualified personnel on a timely basis, or the departure of key employees (including Peter Holst, the Company’s President and CEO) without a suitable replacement could materially and adversely affect our business development and therefore, our business, prospects, results of operations and financial condition. Stock incentive plans are designed to reward employees for their long-term contributions and provide incentives for them to remain with us. Volatility or lack of positive performance in our stock price or equity incentive awards, or changes to our overall compensation program, including our stock incentive program, resulting from the management of share dilution and share-based compensation expense or otherwise, may also adversely affect our ability to retain key employees. As a result of one or more of these factors, we may increase our hiring in geographic areas outside the United States, which could subject us to additional geopolitical and exchange rate risk. The loss of services of any of our key personnel; the inability to retain and attract qualified personnel in the future; or delays in hiring required personnel, particularly engineering and sales personnel, could make it difficult to meet key objectives, such as timely and effective product introductions. In addition, companies in our industry whose employees accept positions with competitors frequently claim that competitors have engaged in improper hiring practices. We have received these claims in the past and may receive additional claims to this effect in the future. ***Supply chain issues, including financial problems of contract manufacturers or component suppliers, or a shortage of adequate component supply or manufacturing capacity that increase our costs or cause a delay in our ability to fulfill orders, could have an adverse impact on our business and operating results, and our failure to estimate customer demand properly may result in excess or obsolete component supply, which could adversely affect our gross margins.*** We rely on other companies to supply some components of our Mezzanine™ products and of our network infrastructure and the means to access our network. Certain products and services that we resell and certain components that we require are available only from limited sources. We could be adversely affected if such sources were to become unavailable to us on commercially reasonable terms. We cannot ensure that, on an ongoing basis, we will be able to obtain third-party services cost-effectively and on the scale and within the time frames that we require, if at all. Failure to obtain or to continue to make use of such third-party services would have a material adverse effect on our business, financial condition, and results of operations. The fact that we do not own or operate manufacturing facilities and that we are reliant on our supply chain could have an adverse impact on the supply of our products and on our business and operating results. Financial problems of either contract manufacturers or component suppliers, reservation of manufacturing capacity at our contract manufacturers by other companies, and industry consolidation occurring within one or more component supplier markets, such as the semiconductor market, in each case, could either limit supply or increase costs. A reduction or interruption in supply; a significant increase in the price of one or more components; a failure to adequately authorize procurement of inventory by our contract manufacturers; a failure to appropriately cancel, reschedule or adjust our requirements based on our business needs; or a decrease in demand for our products could materially adversely affect our business, operating results and financial condition and could materially damage customer relationships. Furthermore, as a result of binding price or purchase commitments with suppliers, we may be obligated to purchase components at prices that are higher than those available in the current market. In the event that we become committed to purchase components at prices in excess of the current market price when the components are actually used, our gross margins could decrease. We have experienced longer than normal lead times in the past 12 months. In addition, vendors may be under pressure to allocate product to certain customers for business, regulatory or political reasons, and/or demand changes in agreed pricing as a condition of supply. Although we have generally secured additional supply or taken other mitigation actions when significant disruptions have occurred, if similar situations occur in the future or if we are unsuccessful in our mitigation efforts, they could have a material adverse effect on our business, results of operations, and financial condition. Our growth and ability to meet customer demands depend in part on our ability to obtain timely deliveries of parts from our suppliers and contract manufacturers. We have experienced component shortages in the past, including shortages caused by manufacturing process issues, that have affected our operations. We may in the future experience a shortage of certain component parts as a result of our own manufacturing issues, manufacturing issues at our suppliers or contract manufacturers, capacity problems experienced by our suppliers or contract manufacturers including capacity or cost problems resulting from industry consolidation, or strong demand for those parts. Growth in the economy is likely to create greater pressures on us and our suppliers to accurately project overall component demand and component demands within specific product categories and to establish optimal component levels and manufacturing capacity, especially for labor-intensive components, components for which we purchase a substantial portion of the supply, or the re-ramping of manufacturing capacity for highly complex products. During periods of shortages or delays the price of components may increase, or the components may not be available at all, and we may also encounter shortages if we do not accurately anticipate our needs. We may not be able to secure enough components at reasonable prices or of acceptable quality to build new products in a timely manner in the quantities or configurations needed. Accordingly, our revenue and gross margins could suffer until other sources can be developed. Our operating results would also be adversely affected if, anticipating greater demand than actually develops, we commit to the purchase of more components than we need, which is more likely to occur in a period of demand uncertainties such as we are currently experiencing. There can be no assurance that we will not encounter these problems in the future. Although in many cases we use standard parts and components for our products, certain components are presently available only from a single source or limited sources, and a global economic downturn and related market uncertainty could negatively impact the availability of components from one or more of these sources, especially during times such as we have recently seen when there are supplier constraints based on labor and other actions taken during economic downturns. We may not be able to diversify sources in a timely manner, which could harm our ability to deliver products to customers and seriously impact present and future sales. ***We have made and may continue to make acquisitions that could disrupt our operations and harm our operating results.*** Our growth depends upon market growth, our ability to enhance our existing products, and our ability to introduce new products on a timely basis. We may address the need to develop new products and enhance existing products through acquisitions of other companies, product lines, technologies, and personnel. Acquisitions involve numerous risks, including the following: - Difficulties in integrating the operations, systems, technologies, products and personnel of the acquired companies, particularly companies with large and widespread operations and/or complex products; - Diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from acquisitions; - Potential difficulties in completing projects associated with in-process research and development intangibles; - Difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions; - Initial dependence on unfamiliar supply chains or relatively small supply partners; - Insufficient revenue to offset increased expenses associated with acquisitions; and - The potential loss of key employees, customers, distributors, vendors and other business partners of the companies we acquire following and continuing after announcement of acquisition plans. Acquisitions may also cause us to: - Issue common stock that would dilute our current shareholders’ percentage ownership; - Use a substantial portion of our cash resources, or incur debt; - Significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition; - Assume liabilities; - Record goodwill and intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges’ - Incur amortization expenses related to certain intangible assets; - Incur tax expenses related to the effect of acquisitions on our legal structure; - Reduce the utilization of, and the timing of utilization, of the federal and state net operating loss carryforwards; - Incur large write-offs and restructuring and other related expenses; or - Become subject to intellectual property or other litigation. Mergers and acquisitions of high-technology companies are inherently risky and subject to many factors outside of our control, and no assurance can be given that our previous or future acquisitions will be successful and will not materially adversely affect our business, operating results, or financial condition. Failure to manage and successfully integrate acquisitions could materially harm our business and operating results. Prior acquisitions have resulted in a wide range of outcomes, from successful introduction of new products and technologies to a failure to do so. Even when an acquired company has already developed and marketed products, there can be no assurance that product enhancements will be made in a timely fashion or that pre-acquisition due diligence will have identified all possible issues that might arise with respect to such products. In addition, our effective tax rate for future periods is uncertain and could be impacted by mergers and acquisitions. Risks related to new product development also apply to acquisitions. ***If our actual liability for sales and use taxes and federal regulatory fees is different from our accrued liability, it could have a material impact on our financial condition.*** Each state has different rules and regulations governing sales and use taxes, and these rules and regulations are subject to varying interpretations that may change over time. We review these rules and regulations periodically and, when we believe our services are subject to sales and use taxes in a particular state, we voluntarily engage state tax authorities in order to determine how to comply with their rules and regulations. Vendors of services, like us, are typically held responsible by taxing authorities for the collection and payment of any applicable sales taxes and federal fees. If one or more taxing authorities determines that taxes should have, but have not, been paid with respect to our services, we may be liable for past taxes in addition to taxes going forward. Liability for past taxes may also include very substantial interest and penalty charges. Our customer contracts provide that our customers must pay all applicable sales taxes and fees. Nevertheless, customers may be reluctant to pay back taxes and may refuse responsibility for interest or penalties associated with those taxes. If we are required to collect and pay back taxes and the associated interest and penalties, and if our customers fail or refuse to reimburse us for all or a portion of these amounts, we will have incurred unplanned expenses that may be substantial. Moreover, imposition of such taxes on our services going forward will effectively increase the cost of such services to our customers and may adversely affect our ability to retain existing customers or to gain new customers in the areas in which such taxes are imposed. We may also become subject to tax audits or similar procedures in states where we already pay sales and use taxes. The assessment of taxes, interest, and penalties as a result of audits, litigation, or otherwise could be materially adverse to our current and future results of operations and financial condition. ***The terms of the Series F Preferred Stock could limit our growth and our ability to finance our operations, fund our capital needs, respond to changing conditions and engage in other business activities that may be in our best interests.*** The Certificate of Designations for the Series F Preferred Stock contains a number of affirmative and negative covenants regarding matters such as the payment of dividends, maintenance of our properties and assets, transactions with affiliates, and our ability to issue other indebtedness. No assurances can be given that we will be able to comply with the financial or other covenants contained in the Certificate of Designations. If we are unable to comply with certain terms in the Certificate of Designations: - dividends will accrue on the Series F Preferred Stock at 20% per annum; - the holders of the Series F Preferred Stock could foreclose against our assets; and/or - we could be forced into bankruptcy or liquidation. Our ability to comply with these covenants may be adversely affected by events beyond our control, and we cannot assure you that we can maintain compliance with these covenants. The financial covenants could limit our ability to make needed expenditures or otherwise conduct necessary or desirable business activities. ### Risks Related to Cybersecurity and Regulations ***Cyber-attacks, data incidents, malware, or an intrusion into our physical security systems may disrupt our business operations, result in the loss of critical and confidential information, harm our operating results and financial condition, and damage our reputation; and cyber-attacks or data incidents on our customers’ networks, or in cloud-based services provided by or enabled by us, could result in claims of liability against us, damage our reputation or otherwise harm our business.*** In the ordinary course of providing video communications services, we transmit sensitive and proprietary information of our customers. We are dependent on the proper function, availability and security of our information systems, including without limitation those systems utilized in our operations. We have undertaken measures to protect the safety and security of our inventory and our information systems and the data maintained within those systems, and on an annual basis, we test the adequacy of our security measures. Despite our implementation of security measures, there can be no assurance our safety and security measures will detect and prevent security incidents in a timely manner or otherwise prevent damage or interruption of our systems and operations or inventory theft. The products and services we sell to customers, and our servers, data centers and the cloud-based solutions on which our data, and data of our customers, suppliers and business partners are stored, are vulnerable to improper functioning, cyber-attacks, data incidents, malware, and similar disruptions from unauthorized access or tampering by malicious actors or inadvertent error. Any such event could compromise our products, services and networks or those of our customers, and the proprietary information stored on our systems or those of our customers could be improperly accessed, processed, disclosed, lost or stolen, which could subject us to liability to our customers, suppliers, business partners and others, give rise to legal/regulatory action, and could have a material adverse effect on our business, operating results, and financial condition and may cause damage to our reputation. A security incident at any one of our physical facilities, such as that which occurred during 2022, could result in a significant loss of inventory, or increase expenses relating to the resolution and future prevention of similar thefts, any of which could have an adverse effect on our business, financial condition, and results of operations. Efforts to limit the ability of malicious actors to disrupt the operations of the Internet or undermine our own security efforts may be costly to implement and meet with resistance, and may not be successful. Cybersecurity incidents in our customers’ networks, or in cloud-based services provided by or enabled by us, regardless of whether the incident is attributable to a vulnerability in our products or services, could result in claims of liability against us, damage our reputation, or otherwise harm our business. ***Vulnerabilities and critical security defects, prioritization decisions regarding remedying vulnerabilities or security defects, failure of third-party providers to remedy vulnerabilities or security defects, or customers not deploying security releases or deciding not to upgrade products, services or solutions could result in claims of liability against us, damage our reputation or otherwise harm our business.*** The products and services we sell to customers inevitably contain vulnerabilities or critical security defects which have not been remedied and cannot be disclosed without compromising security. We may also make prioritization decisions in determining which vulnerabilities or security defects to fix, and the timing of these fixes, which could result in an exploit that compromises security. Customers also need to test security releases before they can be deployed which can delay implementation. In addition, we rely on third-party providers of software and cloud-based service, and we cannot control the rate at which they remedy vulnerabilities. Customers may also not deploy a security release or decide not to upgrade to the latest versions of our products, services or cloud-based solutions containing the release, leaving them vulnerable. Vulnerabilities and critical security defects, prioritization errors in remedying vulnerabilities or security defects, failure of third-party providers to remedy vulnerabilities or security defects, or customers not deploying security releases or deciding not to upgrade products, services or solutions could result in claims of liability against us, damage our reputation or otherwise harm our business. ***Our business, operating results and financial condition could be materially harmed by regulatory uncertainty applicable to our products and services.*** Changes in regulatory requirements applicable to the industries in which we operate, in the United States and in other countries, could materially affect the sales of our products and services. In particular, changes in telecommunications regulations could impact our service provider customers’ purchase of our products and offers, and they could also impact sales of our own regulated offers. In addition, evolving legal requirements restricting or controlling the collection, processing, or cross-border transmission of data, including regulation of cloud-based services, could materially affect our customers’ ability to use, and our ability to sell, our products and offers. Additional areas of uncertainty that could impact sales of our products and offers include laws and regulations related to encryption technology, environmental sustainability, export control, product certification and national security controls applicable to our supply chain. Changes in regulatory requirements in these areas could have a material adverse effect on our business, operating results, and financial condition. ***Our network could fail, which could negatively impact our revenues.*** Our success depends upon our ability to deliver reliable, high-speed access to our channels’ and customers’ data centers and upon the ability and willingness of our telecommunications providers to deliver reliable, high-speed telecommunications service through their networks. Our network and facilities, and other networks and facilities providing services to us, are vulnerable to damage, unauthorized access, or cessation of operations from human error and tampering, breaches of security, fires, earthquakes, severe storms, power losses, telecommunications failures, software defects, intentional acts of vandalism including computer viruses, and similar events. The occurrence of a natural disaster or other unanticipated problems at the network operations center, key sites at which we locate routers, switches and other computer equipment that make up the backbone of our service offering and hosted infrastructure, or at one or more of our partners’ data centers, could substantially and adversely impact our business. We cannot ensure that we will not experience failures or shutdowns relating to individual facilities or even catastrophic failure of the entire network or hosted infrastructure. Any damage to, or failure of, our systems or service providers could result in reductions in, or terminations of, services supplied to our customers, which could have a material adverse effect on our business and results of operations. ***Our network depends upon telecommunications carriers who could limit or deny us access to their network or fail to perform, which would have a material adverse effect on our business.*** We rely upon the ability and willingness of certain telecommunications carriers and other corporations to provide us with reliable high-speed telecommunications service through their networks. If these telecommunications carriers and other corporations decide not to continue to provide service to us through their networks on substantially the same terms and conditions (including, without limitation, price, early termination liability, and installation interval), if at all, it would have a material adverse effect on our business, financial condition, and results of operations. Additionally, many of our service level objectives are dependent upon satisfactory performance by our telecommunications carriers. If they fail to so perform, it may have a material adverse effect on our business. ### Risks Related to Intellectual Property ***Our failure to obtain or maintain the right to use certain intellectual property may negatively affect our business.*** Our future success and competitive position depend in part upon our ability to obtain and maintain certain proprietary intellectual property to be used in connection with our services. While we are not currently engaged in any intellectual property litigation, we could become subject to lawsuits in which it is alleged that we have infringed the intellectual property rights of others, or we could commence lawsuits against others who we believe are infringing upon our rights. Third parties, including customers, may in the future assert claims or initiate litigation related to exclusive patent, copyright, trademark, and other intellectual property rights to technologies and related standards that are relevant to us. Because of the existence of a large number of patents in the networking field, the secrecy of some pending patents, and the rapid rate of issuance of new patents, it is not economically practical or even possible to determine in advance whether a product or any of its components infringes or will infringe on the patent rights of others. The asserted claims and/or initiated litigation can include claims against us or our manufacturers, suppliers, or customers, alleging infringement of their proprietary rights with respect to our existing or future products or components of those products. Regardless of the merit of these claims, they can be time-consuming, result in costly litigation, and where claims are made by customers, resistance even to unmeritorious claims could damage customer relationships. An adverse outcome as a defendant in any such litigation may result in impacts to the Company including, but not limited to: - Payment of substantial damages; - Diversion of technical and management personnel; - Cessation of the use, development, or sale of services that infringe upon patented intellectual property; - Entrance into license agreements; and - Expending significant resources to develop or acquire a non-infringing technology. There can be no assurance that that we would be successful in such litigation, that development or licenses will be available on acceptable terms and conditions, if at all, or that our indemnification by our suppliers will be adequate to cover our costs if a claim were brought directly against us or our customers. Furthermore, because of the potential for high court awards that are not necessarily predictable, it is not unusual to find even arguably unmeritorious claims settled for significant amounts. If any infringement or other intellectual property claim made against us by any third party is successful, if we are required to indemnify a customer with respect to a claim against the customer, or if we fail to develop non-infringing technology or license the proprietary rights on commercially reasonable terms and conditions, our business, operating results, and financial condition could be materially and adversely affected. Our exposure to risks associated with the use of intellectual property may be increased as a result of acquisitions, as we have a lower level of visibility into the development process with respect to such technology or the care taken to safeguard against infringement risks. An adverse outcome as plaintiff in any such litigation, in addition to the costs involved, may, among other things, result in the loss of the intellectual property (such as a patent) that was the subject of the lawsuit by a determination of invalidity or unenforceability, significantly increase competition as a result of such determination, and require the payment of penalties resulting from counterclaims by the defendant. ***We may not be able to protect the rights to, or enforce, our intellectual property.*** We generally rely on patents, copyrights, trademarks, and trade secret laws to establish and maintain proprietary rights in our technology and products. We have been issued numerous patents, other patent applications are currently pending, and some of our intellectual property is not covered by any patent. If we further develop our services and related intellectual property, we expect to seek additional patent protection. Our patent position is subject to complex factual and legal issues that may give rise to uncertainty as to the validity, scope and enforceability of a particular patent. Accordingly, we cannot assure that any of the patents owned by us or other patents that other parties license to us in the future will not be invalidated, circumvented, challenged, rendered unenforceable or licensed to others; any of our pending or future patent applications will be issued with the breadth of claim coverage sought by it, if issued at all; or any patents owned by or licensed to us, although valid, will not be dominated by a patent or patents to others having broader claims. Furthermore, many key aspects of networking technology are governed by industry-wide standards, which are usable by all market entrants, and there can be no assurance that patents will be issued from pending applications or that claims allowed on any patents will be sufficiently broad to protect our technology. Additionally, the laws of some foreign countries may not protect our proprietary rights to the same extent as do the laws of the United States. The outcome of any actions taken in these foreign countries may be different than if such actions were determined under the laws of the United States. Although we are not dependent on any individual patent or group of patents for particular segments of the business for which we compete, if we are unable to protect our proprietary rights to the totality of the features (including aspects of products protected other than by patent rights) in a market, we may find ourselves at a competitive disadvantage to others who need not incur the substantial expense, time and effort required to create innovative products that have enabled us to be successful. Failure to protect our existing intellectual property rights may result in the loss of our exclusivity or the right to use our technologies. If we do not adequately ensure our freedom to use certain technology, we may have to pay others for rights to use their intellectual property, pay damages for infringement or misappropriation and/or be enjoined from using such intellectual property. We also seek to protect our proprietary intellectual property, including intellectual property that may not be patented or patentable, in part by confidentiality agreements. We cannot ensure that these agreements will not be breached, that we will have adequate remedies for any breach or that such persons will not assert rights to intellectual property arising out of these relationships. ***A number of our solutions incorporate software provided under open-source licenses which may restrict or impose certain obligations on how we use or distribute our solutions or subject us to various risks and challenges, which could result in increased development expenses, delays or disruptions to the release or distribution of those solutions, inability to protect our intellectual property rights and increased competition.*** Certain significant components of our solutions incorporate or are based upon open-source software, and we may incorporate open-source software into other solutions in the future. Such open-source software is generally licensed under open-source licenses, including, for example, the GNU General Public License, the GNU Lesser General Public License, "Apache-style" licenses, "BSD-style" licenses and other open-source licenses. The use of open-source software subjects us to a number of risks and challenges, including, but not limited to: - If open-source software programmers, most of whom we do not employ, do not continue to develop and enhance open source technologies, our development expenses could increase and our product release and upgrade schedules could be delayed. - Open-source software is open to further development or modification by anyone. As a result, others may develop such software to be competitive with our platform and may make such competitive software available as open source. It is also possible for competitors to develop their own solutions using open-source software, potentially reducing the demand for, and putting price pressure on, our solutions. - The licenses under which we license certain types of open-source software may require that, if we modify the open source software we receive, we are required to make such modified software and other related proprietary software of ours publicly available without cost and on the same terms. In addition, some open-source licenses appear to be permissive in that internal use of the open source software is allowed, but prohibit commercial uses, or treat provision of cloud services as triggering the requirement to make proprietary software publicly available. Accordingly, we monitor our use of open-source software in an effort to avoid subjecting our proprietary software to such conditions and others we do not intend. Although we believe that we have complied with our obligations under the various applicable licenses for open-source software that we use, our processes used to monitor how open-source software is used could be subject to error. In addition, there is little or no legal precedent governing the interpretation of terms in most of these licenses and licensors sometimes change their license terms. Therefore, any improper usage of open-source, including a failure to identify changes in license terms, could result in unanticipated obligations regarding our solutions and technologies, which could have an adverse impact on our intellectual property rights and our ability to derive revenue from solutions incorporating the open source software. - If an author or other third party that distributes such open-source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur legal expenses defending against such allegations, or engineering expenses in developing a substitute solution. If we are unable to successfully address the challenges of integrating offerings based upon open-source technology into our business, our business and operating results may be adversely affected and our development costs may increase. ### Risks to Owning Our Common Stock ***Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future, and as a result, investors in our common stock could incur substantial losses.*** Historically, our common stock has experienced substantial price volatility, particularly as a result of variations between our actual financial results and the published expectations of analysts and as a result of announcements by our competitors and us. Furthermore, speculation in the press or investment community about our strategic position, financial condition, results of operations, business, and security of our products or significant transactions can cause changes in our stock price. In addition, the stock market has experienced extreme price and volume fluctuations that have affected the market price of many technology companies, in particular, and that have often been unrelated to the operating performance of these companies. These factors, as well as general economic and political conditions and the announcement of proposed and completed acquisitions or other significant transactions, or any difficulties associated with such transactions, by us or our current or potential competitors, may materially adversely affect the market price of our common stock in the future. The market price for our common stock may be influenced by many factors, including the following: - conversions of Series F Preferred Stock into common stock and the subsequent sales of common stock; - investor reaction to our business strategy; - the success of competitive products or technologies; - our ability to comply with the continued listing standards of the Nasdaq Capital Market; - regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our products; - variations in our financial results or those of companies that are perceived to be similar to us; - our ability or inability to raise additional capital and the terms on which we raise it; - declines in the market prices of stocks generally; - trading volume of our common stock; - conversions of Series F Preferred Stock into common stock and the subsequent sales of common stock; - sales of our common stock by us or our stockholders; - general economic, industry and market conditions; - the transformation of our business to deliver more software and subscriptions offerings where revenue is recognized over time; - fluctuations in demand for our products and services, especially with respect to distributors and partners, in part due to changes in the global economic environment; - the introduction and market acceptance of new technologies and products, and our success in new evolving markets, and in emerging technologies, as well as the adoption of new standards; - the ability of our customers, channel partners, contract manufacturers and suppliers to obtain financing or to fund capital expenditures, especially during a period of global credit market disruption or in the event of customer, channel partner, contract manufacturer or supplier financial problem; - the overall movement toward industry consolidation among both our competitors and our customers; - changes in sales and implementation cycles for our products and reduced visibility into our customers’ spending plans and associated revenue; - the timing, size and mix of orders from customers; - manufacturing and customer lead times; - how well we execute on our strategy and operating plans and the impact of changes in our business model that could result in significant restructuring charges; - our ability to achieve targeted cost reductions; - benefits anticipated from our investments; - changes in tax law or accounting rules, or interpretations thereof; - actual events, circumstances, outcomes and amounts differing from judgments, assumptions and estimates used in determining the values of certain assets (including the amounts of related valuation allowances), liabilities, and other items reflected in our Consolidated Financial Statements; - other events or factors, including those resulting from such events, or the prospect of such events, including war, terrorism and other international conflicts, public health issues including health epidemics or pandemics, such as the outbreak of COVID-19, and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States or elsewhere, could disrupt our operations, disrupt the operations of our suppliers or result in political or economic instability; and - the failure of any bank and the resulting economic uncertainty caused by such failures. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. Since the stock price of our common stock has fluctuated in the past, has been recently volatile and may be volatile in the future, investors in our common stock could incur substantial losses. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, results of operations and growth prospects. There can be no guarantee that our stock price will remain at current prices or that future sales of our common stock will not be at prices lower than those sold to investors. Throughout much of our corporate history, our common stock has been thinly traded, and therefore has therefore been susceptible to wide price swings. While our common stock has recently experienced increased trading volume, we cannot ensure that this level of trading volume will continue, or that the increased trading volumes will lessen the historic volatility in the price for our common stock. Thinly traded stocks are more susceptible to significant and sudden price changes and the liquidity of our common stock depends upon the presence in the marketplace of willing buyers and sellers. At any time, the liquidity of our common stock may decrease to the thinly traded levels it has experienced in the past, and we cannot ensure that any holder of our securities will be able to find a buyer for its shares. Further, we cannot ensure that an organized public market for our securities will continue or that there will be any private demand for our common stock. Additionally, recently, securities of certain companies have experienced significant and extreme volatility in stock price due short sellers of shares of common stock, known as a “short squeeze.” These short squeezes have caused extreme volatility in those companies and in the market and have led to the price per share of those companies to trade at a significantly inflated rate that is disconnected from the underlying value of the company. Many investors who have purchased shares in those companies at an inflated rate face the risk of losing a significant portion of their original investment as the price per share has declined steadily as interest in those stocks have abated. While we have no reason to believe our shares would be the target of a short squeeze, there can be no assurance that we will not be in the future, and you may lose a significant portion or all of your investment if you purchase our shares at a rate that is significantly disconnected from our underlying value. ***Penny stock regulations may impose certain restrictions on the marketability of our securities.*** The SEC has adopted regulations which generally define a “penny stock” to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Our common stock is presently subject to these regulations, which impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with a net worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a “penny stock,” unless exempt, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the SEC relating to the “penny stock” market. The broker-dealer must also disclose the commission payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the “penny stock” held in the account and information on the limited market in “penny stocks.” Consequently, the “penny stock” rules may restrict the ability of broker-dealers to sell our securities and may negatively affect the ability of purchasers of our shares of common stock to sell such securities. ***Future operating results may vary from quarter to quarter, and we may fail to meet the expectations of securities analysts and investors at any given time.*** We have experienced, and may continue to experience, significant quarterly fluctuations in operating results. Factors that cause fluctuation in our results of operations include lack of revenue growth or declines in revenue and declines in gross margins and increases in operating expenses. Accordingly, it is possible that in one or more future quarters our operating results will be adversely affected and fall below the expectations of securities analysts and investors. If this happens, the trading price of our common stock may decline. ***Sales of substantial amounts of common stock in the public market, or the perception that such sales may occur, could reduce the market price of our common stock and make it more difficult for us and our stockholders to sell our equity securities in the future.*** The sale into the public market of a significant number of shares of common stock by our existing shareholders, or the resale into the public market of shares issued in prior or future financings, could depress the trading price of our common stock and make it more difficult for us or our stockholders to sell equity securities in the future. Such transactions may include, but are not limited to (i) conversions of Series F Preferred Stock into common stock and the subsequent sales of such common stock, (ii) any future issuances by us of additional shares of our common stock or of other securities that are convertible or exchangeable for shares of common stock; and (iii) the resale of any previously issued but restricted shares of our common stock that become freely available for re- sale, whether through an effective registration statement or under Rule 144 of the Securities Act. While the sale of shares to the public might increase the trading volume of our common stock and thus the liquidity of our stockholders’ investments, the resulting increase in the number of shares available for public sale could drive the price of our common stock down, thus reducing the value of our stockholders’ investment and perhaps hindering our ability to raise additional funds in the future. ***The issuance of the securities in the March 2023 private placement significantly diluted the ownership interest of the existing holders of our common stock, and the market price of our common stock has declined significantly as a result of sales of such securities into the public market by the private placement investors and subsequent investors or the perception that such sales may occur.*** Our existing holders of common stock have been significantly diluted by the issuance of the securities in the March 31, 2023 private placement. Our public float was significantly increased and the market price of our common stock has declined significantly as a result of subsequent sales of the shares of common stock obtained from conversions of Series F Preferred Stock issued in the private placement. In addition, the exercise price or conversion price of these securities may be at prices below the current and/or then trading prices of shares of our common stock or at prices below the price at which our existing shareholders purchased our common stock. The private placement investors may potentially make a significant profit with the resale of the securities depending on the trading price of our securities at the time of a sale and the purchase price of such securities by them. While the private placement investors may experience a positive rate of return based on the trading price of our securities, the existing holders of our common stock may not experience a similar rate of return on the shares of common stock they purchased due to differences in the applicable purchase price and trading price. ***We might need to raise additional capital by issuing securities or debt, which may cause significant dilution to our stockholders and restrict our operations.*** We believe that our existing cash and cash equivalents will be sufficient to fund our operations and meet our working capital requirements for at least the next 12 months from the filing date of this Report with the SEC. However, we believe additional capital will be required in the long-term, to fund operations and provide growth capital including potential strategic alternatives and investments in technology, product development, and sales and marketing. Additional financing may not be available when we need it or may not be available on favorable terms. To the extent that we raise additional capital by issuing equity securities, the terms of such an issuance may cause more significant dilution to our stockholders’ ownership, and the terms of any new equity securities may have preferences over the combined organization’s common stock. Any debt financing we enter into may involve covenants that restrict our operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of our assets, as well as prohibitions on our ability to create liens, pay dividends, redeem stock or make investments. ***Our charter documents and Delaware law could discourage takeover attempts and lead to management entrenchment.*** The Company’s certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent a change in control of the company. These provisions could also make it difficult for stockholders to elect directors that are not nominated by the current members of the board of directors or take other corporate actions, including effecting changes in the Company’s management. These provisions include: - no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; - the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; - the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on its board of directors; - the requirement that a special meeting of stockholders may be called only by the chairman of our board of directors or a majority of our board of directors, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; - the ability of our board of directors, by majority vote, to amend the Company’s amended and restated bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the amended and restated bylaws to facilitate an unsolicited takeover attempt; and - advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company. ***We could fail to satisfy the standards to maintain our listing on a stock exchange.*** Our Common Stock is listed on The Nasdaq Capital Market. In order to maintain that listing, we must satisfy minimum financial and other continued listing requirements and standards. Previously, on September 21, 2023, we received a letter from the listing qualifications staff of Nasdaq providing notification that the bid price for our Common Stock had closed below $1.00 per share for the previous 30 consecutive business days and our Common Stock no longer met the minimum bid price requirement for continued listing under Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided an initial period of 180 calendar days, until March 19, 2024, in which to regain compliance. To regain compliance, the closing bid price of our Common Stock must meet or exceed $1.00 per share for a minimum of 10 consecutive business days at any time before the expiration of the initial compliance period. In the event that we are unable to regain compliance with Rule 5550(a)(2) during the initial compliance period, Nasdaq rules provide that we may be eligible for an additional 180 calendar day compliance period. To qualify, we need to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the minimum bid price requirement, and to provide written notice of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. The Company believes that we will receive the extension, though there can be no assurances. In the event that we are unable to establish compliance, or again become non-compliant, with Rule 5550(a)(2) or other continued listing requirements of Nasdaq and cannot re-establish compliance within the required timeframe, our Common Stock could be delisted from The Nasdaq Capital Market, which could have a material adverse effect on our financial condition and which may cause the value of our Common Stock to decline. If our Common Stock is not eligible for listing or quotation on another market or exchange, trading of our Common Stock could be conducted in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such event, it would become more difficult to dispose of, or obtain accurate price quotations for, our Common Stock, and there would likely be a reduction in our coverage by security analysts and the news media, which could cause the price of our Common Stock to decline further. In addition, it may be difficult for us to raise additional capital if we are not listed on a national securities exchange. While Nasdaq rules do not impose a specific limit on the number of times a listed company may effect a reverse stock split to maintain or regain compliance with Listing Rule 5810(c)(3)(A), Nasdaq has stated that a series of reverse stock splits may undermine investor confidence in securities listed on Nasdaq. Accordingly, Nasdaq may determine that it is not in the public interest to maintain our listing, even if we regain compliance with Listing Rule 5810(c)(3)(A) as a result of any reverse stock split. In addition, Nasdaq Listing Rule 5810(c)(3)(A)(iv) states that any listed company that fails to meet Listing Rule 5810(c)(3)(A) after effecting one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one, then the company will not be eligible for an automatic 180-day grace compliance period and the Nasdaq Listing Qualifications Department is obligated to immediately issue a delisting determination. ***Our authorized reverse stock split may decrease the liquidity of the shares of our Common Stock.*** On December 4, 2023, the Company’s stockholders approved a proposal to amend Article FOURTH of the Company’s certificate of incorporation to effect a reverse stock split of the Company’s issued and outstanding shares of Common Stock by a ratio ranging from 1-for-10 to 1-for-45. Our Board of Directors now has the authority to determine whether to implement a reverse stock split and to select the reverse stock split ratio from the range approved by the Company’s stockholders. The Board expects to authorize the consummation of the reverse stock split only if and to the extent necessary to meet the listing requirements of the Nasdaq Capital Market. The liquidity of the shares of our Common Stock may be affected adversely by the reverse stock split given the reduced number of shares that are outstanding following the reverse stock splits. In addition, the reverse stock split may increase the number of stockholders who own odd lots (less than 100 shares) of our Common Stock, creating the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty effecting such sales. ### General Risks ***We incur significant accounting and administrative costs as a publicly traded corporation that impact our financial condition.*** As a publicly traded corporation, we incur certain costs to comply with regulatory requirements. If regulatory requirements were to become more stringent or if controls thought to be effective later fail, we may be forced to make additional expenditures, the amounts of which could be material. Some of our competitors are privately owned so their comparatively lower accounting and administrative costs can be a competitive disadvantage for us. Should our sales continue to decline or if we are unsuccessful at increasing prices to cover higher expenditures for internal controls and audits, our costs associated with regulatory compliance will rise as a percentage of sales. ***Our cash and cash equivalents could be adversely affected if the financial institutions in which we hold our cash and cash equivalents fail.*** Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. If we were unable to access all or a significant portion of the amounts we have deposited at financial institutions for any extended period of time, we may not be able to pay our operational expenses or make other payments until we are able to move our funds to accounts at one or more other financial institutions, which process could cause a temporary delay in making payments to our vendors and employees and cause other operational challenges. ## Cybersecurity As filed, 3,470 characters. ### Cybersecurity Risk Management and Strategy We have a multilayered framework for detecting, and responding to reasonably foreseeable cybersecurity risks and threats. To protect our information technology (“IT”), systems from cybersecurity threats, we use various tools that help prevent, detect, escalate, investigate, resolve, and recover from identified vulnerabilities and security incidents in a timely manner. In the event of a material change to our systems or operations, we would assess the internal and external threats to the security, confidentiality, integrity, and availability of our data and systems, along with other material risks to our operations. We leverage technical safeguards intended to protect the Company’s information systems from cybersecurity threats, including firewalls, threat monitoring, intrusion prevention and detection systems, anti-malware, access controls, privilege management, network segmentation, asset and end point management, and ongoing system security assessments. We oversee third-party service providers by conducting vendor diligence and reviews on a regular basis. We monitor and evaluate our cybersecurity posture and performance on an ongoing basis through regular network scans, system audits, and assessing intelligence feeds. The results of these assessments are used to improve our security posture through remediation efforts. We have developed an incident management process designed to coordinate the activities to prepare to respond and recover from cybersecurity incidents, which include processes to triage, assess severity, investigate, escalate, contain, and remediate an incident, as well as to comply with potentially applicable legal obligations and mitigate any reputational damage. Our business strategy, results of operations, and financial condition have not been materially affected as a result of previously identified cybersecurity incidents, but we cannot provide assurance that they will not be materially affected in the future by such risks or any future material incidents. For more information on our cybersecurity-related risks, see “*Item 1A, Risk Factors”* in this Annual Report. ### Governance Oblong’s IT team is responsible for assessing and managing cybersecurity risks and has a depth of experience focused on increasing the organization's resilience to security threats and stays current on new developments through monitoring of the cybersecurity landscape. Oblong’s IT environment is monitored for potential security threats and security events are investigated and acted on to minimize potential risk to the environment. Oblong’s Audit Committee engages in oversight of Oblong's cybersecurity risks and receives regular updates from management on technology and security updates and Oblong’s assessment of cybersecurity threats and mitigation plans. The Audit Committee oversees the processes over internal controls and financial reporting that includes controls and procedures that are designed to ensure that significant cybersecurity incidents are communicated to both senior management and the Audit Committee. In the event of a material cybersecurity incident affecting our IT systems or data management, the Audit Committee would promptly work to formulate a mitigation plan and review compliance with such plan, as well as to ensure compliance with any external regulatory or disclosure requirements, including any disclosures of material cybersecurity incidents. ## Properties As filed, 883 characters. As of December 31, 2023, we leased a facility in City of Industry, California, providing warehouse space. This lease expired in February 2024. During 2023, and through the date of this filing, we exited the City of Industry, CA lease as well as leases in Austin, TX and Los Angeles, CA. We are currently in the process of securing a warehouse facility in, or around, Denver, CO. During the interim, our inventory is being stored in a secured third party location. With the exception of warehouse space described above, we currently operate out of remote employment sites with a remote office located at 110 16th Street, Suite 1400-1024, Denver, CO 80202. For additional information regarding our obligations under leases, see **Note 8 - Operating Lease Liabilities and Right-of-Use Assets** to the Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report. ## Legal proceedings As filed, 366 characters. From time to time, we are subject to various legal proceedings arising in the ordinary course of business, including proceedings for which we have insurance coverage. As of the date hereof, we are not party to any legal proceedings that we currently believe will have a material adverse effect on our business, financial position, results of operations or liquidity. ## Management's discussion and analysis As filed, 25,143 characters. The following discussion should be read in conjunction with our consolidated balance sheets as of December 31, 2023 and 2022, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years ended December 31, 2023 and 2022, and the related notes attached thereto. All statements contained herein that are not historical facts, including, but not limited to, statements regarding anticipated future capital requirements, our future development plans, our ability to obtain debt, equity or other financing, and our ability to generate cash from operations, are based on current expectations. The discussion of results, causes and trends should not be construed to imply any conclusion that such results or trends will necessarily continue in the future. ### Business We are a provider of patented multi-stream collaboration products and managed services for video collaboration and network solutions. The Company currently operates in two segments: (1) “Collaboration Products,” which represents the business surrounding our Mezzanine™ product offerings, and (2) “Managed Services,” which represents the business surrounding managed services for video collaboration and network solutions. ### Mezzanine™ Product Offerings Our flagship product is called Mezzanine™, a family of turn-key products that enable dynamic and immersive visual collaboration across multi-users, multi-screens, multi-devices, and multi-locations (see further description of Mezzanine™ in Part I, Item 1). Mezzanine™ allows multiple people to share, control and arrange content simultaneously, from any location, enabling all participants to see the same content in its entirety at the same time in identical formats, resulting in dramatic enhancements to both in-room and virtual videoconference presentations. Applications include video telepresence, laptop and application sharing, whiteboard sharing and slides. Spatial input allows content to be spread across screens, spanning different walls, scalable to an arbitrary number of displays and interaction with our proprietary wand device. Mezzanine™ substantially enhances day-to-day virtual meetings with technology that accelerates decision making, improves communication, and increases productivity. Mezzanine™ scales up to support the most immersive and commanding innovation centers; across to link labs, conference spaces, and situation rooms; and down for the smallest work groups. Mezzanine’s digital collaboration platform can be sold as delivered systems in various configurations for small teams to total immersion experiences. The family includes the 200 Series (two display screen), 300 Series (three screen), and 600 Series (six screen). We also sell maintenance and support contracts related to Mezzanine™. Historically, customers have used Mezzanine™ products in traditional office and operating center environments such as conference rooms or other presentation spaces. As discussed below, sales of our Mezzanine product have been adversely affected by commercial response to the COVID-19 pandemic and its aftermath. Like many technology companies in recent months, we will continue to monitor and manage our costs relative to demand with the goal of growing the Company’s revenue in the future. To the extent we believe new investments in product development, marketing, or sales are warranted as a result of changes in market demand, we believe additional capital will be required to fund those efforts and our ongoing operations. ### Managed Services for Video Collaboration We provide a range of managed services for video collaboration, from automated to orchestrated, to simplify the user experience in an effort to drive adoption of video collaboration throughout our customers’ enterprise. We deliver our services through a hybrid service platform or as a service layer on top of our customers’ video infrastructure. We provide our customers with i) managed videoconferencing, where we set up and manage customer videoconferences and ii) remote service management, where we provide 24/7 support and management of customer video environments. ### Managed Services for Network We provide our customers with network solutions that ensure reliable, high-quality and secure traffic of video, data and internet. Network services are offered to our customers on a subscription basis. Our network services business carries variable costs associated with the purchasing and reselling of this connectivity. ### Results of Operations ### Year Ended December 31, 2023 (“2023”) versus Year Ended December 31, 2022 (“2022”) ### Segment Reporting The Company currently operates in two segments for purposes of segment reporting: (1) “Collaboration Products,” which represents the Oblong Industries business surrounding our Mezzanine™ product offerings and (2) “Managed Services,” which represents the Oblong (formerly Glowpoint) business surrounding managed services for video collaboration and network solutions. Certain information concerning the Company’s segments for the years ended December 31, 2023 and 2022, is presented in the following table (in thousands): | | Year Ended December 31, 2023 Managed Services | Collaboration Products | Corporate | Total | | --- | ---: | ---: | ---: | ---: | | Revenue | $2,518 | $1,292 | $— | $3,810 | | Cost of revenues | 1,671 | 1,228 | — | 2,899 | | Gross profit | $847 | $64 | $— | $911 | | Gross profit % | 34% | 5% | —% | 24% | | Allocated operating expenses | $3 | $481 | $— | $484 | | Unallocated operating expenses | — | — | 4,922 | 4,922 | | Total operating expenses | $3 | $481 | $4,922 | $5,406 | | Income (loss) from operations | $844 | $(417) | $(4,922) | $(4,495) | | Interest and other income, net | — | — | (138) | (138) | | Income (loss) before income taxes | $844 | $(417) | $(4,784) | $(4,357) | | Income tax expense | $11 | $16 | $— | $27 | | Net income (loss) | $833 | $(433) | $(4,784) | $(4,384) | | | Year Ended December 31, 2023 | | | | | Total assets | $367 | $568 | $5,990 | $6,925 | -27- | | Year Ended December 31, 2022 Managed Services | Collaboration Products | Corporate | Total | | --- | ---: | ---: | ---: | ---: | | Revenue | $3,348 | $2,128 | $— | $5,476 | | Cost of revenues | 2,273 | 1,657 | — | 3,930 | | Gross profit | $1,075 | $471 | $— | $1,546 | | Gross profit % | 32% | 22% | —% | 28% | | Allocated operating expenses | $19 | $18,355 | $— | $18,374 | | Unallocated operating expenses | — | — | 5,160 | 5,160 | | Total operating expenses | $19 | $18,355 | $5,160 | $23,534 | | Income (loss) from operations | $1,056 | $(17,884) | $(5,160) | $(21,988) | | Interest and other (income) expense, net | 12 | (52) | — | (40) | | Income (loss) before income taxes | $1,044 | $(17,832) | $(5,160) | $(21,948) | | Income tax benefit | $(4) | $(3) | | $(7) | | Net income (loss) | $1,048 | $(17,829) | $(5,160) | $(21,941) | | | Year Ended December 31, 2022 | | | | | Total assets | $752 | $1,824 | $3,085 | $5,661 | Unallocated operating expenses in Corporate include costs that are not specific to a particular segment but are general to the group; included are expenses incurred for administrative and accounting staff, general liability and other insurance, professional fees and other similar corporate expenses. Unallocated assets consist of unrestricted cash. *Revenue.* Total revenue decreased 30.4% for the year ended December 31, 2023 compared to the year ended December 31, 2022. The following table summarizes the changes in components of our revenue, and the significant changes in revenue are discussed in more detail below (in thousands): | Revenue: Managed Services | Year Ended December 31, 2023 | % of Revenue | 2022 | % of Revenue | | --- | ---: | ---: | ---: | ---: | | Video collaboration services | $183 | 5% | $334 | 6% | | Network services | 2,301 | 60% | 2,954 | 54% | | Professional and other services | 34 | 1% | 60 | 1% | | Total Managed Services revenue | $2,518 | 66% | $3,348 | 61% | | Revenue: Collaboration Products | | | | | | Visual collaboration product offerings | $1,291 | 34% | $2,114 | 39% | | Licensing | 1 | —% | $14 | —% | | Total Collaboration Products revenue | $1,292 | 34% | $2,128 | 39% | | Total consolidated revenue | $3,810 | 100% | $5,476 | 100% | #### Managed Services - The year over year decrease in revenue for video collaboration services is mainly attributable to lower revenue from existing customers (either from reductions in price or level of services) and loss of customers to competition. - The year over year decrease in revenue for network services is mainly attributable to net attrition of customers and lower demand for our services given the competitive environment and pressure on pricing that exists in the network services business. - We expect revenue declines in our Managed Services segment will continue in the future. #### Collaboration Products - Customers generally use our Mezzanine™ products in traditional office and operating center environments such as conference rooms or other presentation spaces. The year over year decrease in revenue for our Collaboration Products business is due to lower demand, largely a consequence of the work-place reactions to the COVID-19 pandemic and its prolonged effects. We believe the pandemic has fundamentally altered the way businesses consider the use of physical office spaces and, consequently, the demand for technologies that enable in-person collaboration within these spaces. Our analysis indicates that the reduced demand for our Mezzanine™ products, particularly in the aftermath of COVID-19, reflects a broader reassessment among our customers regarding the necessity and investment in collaboration solutions tailored for traditional office environments. *Cost of Revenue (exclusive of depreciation and amortization).* Cost of revenue, exclusive of depreciation and amortization and casualty (gain)/loss, includes all internal and external costs related to the delivery of revenue. Cost of revenue also includes taxes which have been billed to customers. Cost of revenue by segment is presented in the following table (in thousands): | Cost of Revenue | Year Ended December 31, 2023 | 2022 | | --- | ---: | ---: | | Managed Services | $1,671 | $2,273 | | Collaboration Products | 1,228 | 1,657 | | Total cost of revenue | $2,899 | $3,930 | The year over year decrease in cost of revenue is mainly attributable to lower costs associated with the decrease in revenue during the same period. The Company’s gross profit as a percentage of revenue was 24% in 2023 compared to 28% in 2022. This decrease in gross profit was primarily due to the decline in gross profit percentage for our Collaboration Products segment. The gross profit as a percentage of revenue for our Collaboration Products segment was 5% in 2023 compared to 22% in 2022. This decrease was mainly attributable to an increase in our inventory obsolescence reserve as a percentage of sales in 2023 vs. 2022. Operating expenses are presented in the following table (in thousands): | Operating expenses (gains): | Year Ended December 31, 2023 | 2022 | $ Change | % Change | | --- | ---: | ---: | ---: | ---: | | Research and development | $20 | $1,699 | $(1,679) | (99)% | | Sales and marketing | 309 | 1,431 | (1,122) | (78)% | | General and administrative | 4,870 | 5,278 | (408) | (8)% | | Impairment charges | 262 | 12,740 | (12,478) | (98)% | | Casualty (gain) loss, net | (400) | 483 | (883) | 100% | | Depreciation and amortization | 345 | 1,903 | (1,558) | (82)% | | Total operating expenses | $5,406 | $23,534 | $(18,128) | (77)% | *Research and Development*. Research and development expenses include internal and external costs related to developing features and enhancements to our existing product offerings. The year over year decrease in research and development expenses for 2023 compared to 2022 is primarily attributable to the ceasing of the majority of R&D activities during late 2022, which resulted in lower personnel costs due to reduced headcount and a reduction in consulting and outsourced labor costs between these periods. *Sales and Marketing*. The year over year decrease in sales and marketing expenses for 2023 compared to 2022 is primarily attributable to lower personnel costs due to reduced headcount and reduced marketing expenses year over year. *General and Administrative*. General and administrative expenses include direct corporate expenses related to costs of personnel in the various corporate support categories, including executive, legal, finance and accounting, human resources and information technology. The year over year decrease in general and administrative expenses in 2023 compared to 2022 is mainly attributable to decreases of $344,000 in software license expense, and a $170,000 reduction to bad debt expense. *Impairment Charges*. The impairment charges in 2023 are primarily attributable to impairment charges of $259,000 related to intangible assets. The impairment charges in 2022 are attributable to impairment charges of $7,367,000 related to goodwill, impairment charges of $5,133,000 related to intangible assets, impairment charges of $59,000 related to property and equipment, and impairment charges of $179,000 related to right-of-use assets associated with two of our Los Angeles, CA leases. *Casualty Loss (Gain), net.* In June 2022, the Company discovered that $533,000 of inventory was stolen from the Company’s warehouse in City of Industry, California. During 2022 and 2023, we received recovery payments from our insurance policies of $50,000 and $400,000, respectively, resulting in a net casualty loss of $483,000 in 2022 and a casualty gain of $400,000 in 2023. We do not expect any further recovery of the loss. *Depreciation and Amortization*. The year over year decrease in depreciation and amortization expenses in 2023 compared to 2022 is attributable to the disposition and impairment of certain assets during 2022 and 2023. *Loss from Operations.* The year over year decrease in the Company’s loss from operations is mainly attributable to the reduction in impairment charges and other operating expenses as addressed above. *Interest and Other Income, Net*. Interest and other income, net in 2023 and 2022 was primarily comprised of interest income related to our cash accounts, partially offset by interest expense. *Income Tax Benefit.* We recorded income tax expense of $27,000 in 2023 and income tax benefit of $7,000 in 2022 (see **Note 15 - Income Taxes** to our Consolidated Financial Statements). ### Liquidity and Capital Resources As of December 31, 2023, we had $5,990,000 of cash and cash equivalents, and $5,498,000 of working capital. For the years ended December 31, 2023 and 2022, we incurred net losses of $4,384,000 and $21,941,000, respectively, and net cash used in operating activities was $2,993,000 and $5,934,000, respectively. Net cash provided by investing activities for 2022 was $19,000, primarily related to the sale of property and equipment. There was no cash flow activity related to investing activities for 2023. Net cash provided by financing activities for 2023 was attributable to a private placement resulting in net proceeds of $5,364,000 and warrant exercises resulting in net proceeds of $534,000 (see **Note 9 - Capital Stock** and **Note 10 - Preferred Stock** to our Consolidated Financial Statements). There was no cash flow related to financing activities for 2022. #### Future Capital Requirements We believe that our existing cash and cash equivalents will be sufficient to fund our operations and meet our working capital requirements for at least the next 12 months from the filing date of this Report with the SEC. We believe additional capital will be required, in the long-term, to fund operations and provide growth capital including potential strategic alternatives and investments in technology, product development and sales and marketing. To access capital to fund operations or provide growth capital, we will need to raise capital in one or more debt and/or equity offerings. There can be no assurance that we will be successful in raising necessary capital or that any such offering will be on terms acceptable to the Company. If we are unable to raise additional capital that may be needed on terms acceptable to us, it could have a material adverse effect on the Company. See **Note 14 - Commitments and Contingencies** to our Consolidated Financial Statements for discussion regarding certain additional factors that could impact the Company’s liquidity in the future. ### Critical Accounting Policies We prepare our Consolidated Financial Statements in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). Our significant accounting policies are described in **Note 1 - Business Description and Significant Accounting Policies** to our Consolidated Financial Statements attached hereto. We believe the following critical accounting policies involve the most significant judgments and estimates used in the preparation of our Consolidated Financial Statements. ### Revenue Recognition The Company accounts for revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606. The Company recognizes revenue using the five-step model as prescribed by Topic 606: - Identification of the contract, or contracts, with a customer; - Identification of the distinct performance obligations in the contract; - Determination of the transaction price; - Allocation of the transaction price to the performance obligations in the contract; and - Recognition of revenue when or as the Company satisfies a performance obligation. The Company’s managed videoconferencing services are offered to our customers on either a usage basis or on a subscription basis. Our network services are offered to our customers on a subscription basis. Revenue for these services is generally recognized on a monthly basis as services are performed. Revenue related to professional services is recognized at the time the services are performed. The costs associated with obtaining a customer contract are deferred on our consolidated balance sheet and amortized over the expected life of the customer contract. There was no deferred revenue related to Managed Services as of December 31, 2023. During the year ended December 31, 2023, the Company recorded $1,000 of revenue that was included in deferred revenue as of December 31, 2022. During the year ended December 31, 2022, the Company recorded $7,000 of revenue that was included in deferred revenue as of December 31, 2021. The Company’s visual collaboration products are composed of hardware and embedded software sold as a complete package, and generally include installation and maintenance services. Revenue for hardware and software is recognized upon shipment to the customer. Installation revenue is recognized upon completion of installation, which also triggers the beginning of recognition of revenue for maintenance services which range from one to three years. Revenue is recognized over time for maintenance services. Licensing agreements are for the Company’s core technology platform, g-speak, and are generally one year in length. Revenue for these services is recognized ratably over the service period. Deferred revenue, as of December 31, 2023, totaled $158,000 as certain performance obligations were not satisfied as of this date. During the year ended December 31, 2023, the Company recorded $435,000 of revenue that was included in deferred revenue as of December 31, 2022. During the year ended December 31, 2022, the Company recorded $776,000 of revenue that was included in deferred revenue as of December 31, 2021. Revenue recorded over time for the years ended December 31, 2023 and 2022 was $516,000 and $970,000, respectively. Revenue recorded at a period in time for the years ended December 31, 2023 and 2022 was $3,294,000 and $4,506,000, respectively. ### Long-Lived Assets and Intangible Assets #### Intangible Assets Intangible assets are accounted for in accordance with ASC Topic 350 “*Intangibles - Goodwill and Other” (“*ASC Topic 350”), and intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the assets, which initially ranged from five to twelve years. Intangible assets, net of accumulated amortization totaled zero and $604,000 as of December 31, 2023 and 2022, respectively. #### Operating Lease Right-of-use-assets Right-of-use Assets are accounted for in accordance with ASC Topic 842 “*Leases” (“*ASC Topic 842”), and are amortized using a straight-line method over the estimated life of the lease. Right-of-use assets, net totaled $17,000 and $142,000, as of December 31, 2023 and 2022, respectively. During 2022 and 2023, the Company leased facilities for office space and a warehouse under non-cancellable operating leases for its U.S. locations, and accounts for these leases in accordance with ASC-842. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Since our lease arrangements do not provide an implicit rate, we use our estimated incremental borrowing rate for the expected remaining lease term at commencement date in determining the present value of future lease payments. #### Impairment The Company assesses the impairment of our long-lived assets subject to amortization when events and circumstances indicate that the carrying value of the assets might not be recoverable. The determination of related estimated useful lives and whether or not these assets are impaired involves significant judgments, related primarily to the future profitability and/or future value of the assets. Changes in the Company’s strategic plan and/or other-than-temporary changes in market conditions could significantly impact these judgments and could require adjustments to recorded asset balances. Long-lived assets are evaluated for impairment whenever an event or change in circumstances has occurred that could have a significant adverse effect on the fair value of long-lived assets. During the year ended December 31, 2023, we considered the declines in revenue for the Collaboration Products reporting segment and the decline in the Company’s market capitalization to be triggering events for an impairment test of our long-lived and intangible assets for this reporting unit. Based on the corresponding recoverability tests of the asset group for this reporting unit, it was determined that the carrying value exceeded the gross cash flows of the asset group. The recoverability tests consisted of comparing the estimated undiscounted cash flows expected to be generated by those assets to the respective carrying amounts, and involves significant judgements and assumptions, related primarily to the future revenue and profitability of the assets. During the year ended December 31, 2022, the Company recorded impairment charges of $61,000 on property and equipment assets. For the year ended December 31, 2023, the Company recorded impairment charges of $259,000 on purchased intangible assets. See **Note 6 - Intangible Assets and Goodwill** for further discussion. The Company recorded impairment Charges of $5,133,000 to purchased intangible assets for the year ended December 31, 2022. We tested goodwill for impairment on an annual basis, on September 30th of each year, unless events occurred or circumstances changed indicating that the fair value of the goodwill may be below its carrying amount. During the year ended December 31, 2022, we considered the sustained decline in our stock price to be a triggering event for an interim goodwill impairment test, as of both March 31, 2022 and June 30, 2022. To determine the fair value of the reporting unit for the goodwill impairment test, we used a weighted average of the discounted cash flow method and market-based method. During the year ended December 31, 2022, we recorded impairment charges of $7,367,000 against goodwill, reducing the goodwill on our Consolidated Balance Sheets to zero. Right-of-use assets are tested for impairment using guidance from ASC Topic 360. For the year ended December 31, 2023, did not record any impairment charges on right-of-use-assets. The Company recorded aggregate impairment charges of $179,000 on two right-of-use assets for the year ended December 31, 2022. ### Off-Balance Sheet Arrangements As of December 31, 2023 and 2022, we had no off-balance sheet arrangements. ### Recent Accounting Pronouncements See the sections titled “Summary of Significant Accounting Policies-Recently adopted accounting pronouncements” and “Recent accounting pronouncements not yet adopted” in **Note 1 - Business Description and Significant Accounting Policies** to our Consolidated Financial Statements for more information. ## Controls and procedures As filed, 3,329 characters. #### Disclosure Controls and Procedures The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2023. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2023, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms and are designed to ensure that information required to be disclosed by the Company in the reports we file or submit under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. #### Changes in Internal Control Over Financial Reporting The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated changes in internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2023 and have concluded that no change has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. #### Management’s Annual Report on Internal Control Over Financial Reporting The Company’s management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Consolidated Financial Statements for external purposes, in accordance with U.S. GAAP. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate. The Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2023 based on the 2013 framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Based on this evaluation, the Company’s management concluded that our internal control over financial reporting was effective as of December 31, 2023. Filed Mar 19, 2024. Source: SEC EDGAR, the filing index for accession 0000746210-24-000009. Last ingested by Listed: Oct 24, 2026, 14:54 ET. No prices; not investment advice.