Note 1 - Business Description and Significant Accounting Policies

Business Description

Oblong, Inc. (“Oblong” or “we” or “us” or the “Company”) was formed as a Delaware corporation in May 2000.

Oblong is building a robust cryptocurrency treasury focused on decentralized artificial intelligence ("AI") and the acquisition of $TAO, the native cryptocurrency of Bittensor, a decentralized blockchain network for machine learning and AI. The Company also provides innovative video collaboration and network solutions, centered around our patented Mezzanine™ product line and managed services. In conjunction with Company's June 2025 private placement (see Note 5 - Capital Stock for further detail), the Company has started to migrate its product focus from Mezzanine™ and related services to the AI and digital assets market.

Basis of Presentation

The Company’s fiscal year ends on December 31 of each calendar year. The accompanying interim Condensed Consolidated Financial Statements are unaudited and have been prepared on substantially the same basis as our annual Consolidated Financial Statements for the fiscal year ended December 31, 2024. In the opinion of the Company’s management, these interim Condensed Consolidated Financial Statements reflect all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of our financial position, results of operations, and cash flows for the periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates.

The December 31, 2024 Condensed Consolidated Balance Sheet data in this document was derived from audited consolidated financial statements. The Condensed Consolidated Financial Statements and notes included in this quarterly report on Form 10-Q do not include all disclosures required by U.S. generally accepted accounting principles and should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2024, and notes thereto included in the Company’s fiscal 2024 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 18, 2025 (the “2024 Annual Report”).

On August 23, 2024, the Company effected a 1-for-40 reverse stock split (the “Reverse Split”) for its common stock, par value $0.0001 (the "Common Stock"). All Common Stock share and per share data throughout these Condensed Consolidated Financial Statements have been retroactively adjusted to reflect the Reverse Split.

The results of operations and cash flows for the interim periods included in these Condensed Consolidated Financial Statements are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.

Principles of Consolidation

The Condensed Consolidated Financial Statements include the accounts of Oblong and our 100%-owned subsidiaries (i) GP Communications, LLC (“GP Communications”), whose business function is to provide interstate telecommunications services for regulatory purposes, and (ii) Oblong Industries, Inc. All inter-company balances and transactions have been eliminated in consolidation. The U.S. Dollar is the functional currency for all subsidiaries.

Cash and Cash Equivalents

As of June 30, 2025, our total cash balance of $10,795,000 is available. Of this balance, $500,000 was held in short-term certificates of deposit with MidFirst Bank. As of December 31, 2024, our total cash balance of $4,965,000 was available, with $500,000 held in short-term certificates of deposit with MidFirst Bank. The Company considers highly liquid investments with original maturities of three months or less to be cash equivalents.

Segments

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. The Company has included its digital asset operations in its non-segmented corporate activities.  See Note 8 - Segment Reporting for further discussion.

Use of Estimates

Preparation of the Condensed Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from the estimates made. We continually evaluate estimates used in the preparation of our consolidated financial statements for reasonableness. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. The significant areas of estimation include determining the estimated credit losses, the inputs used in the fair value of equity-based awards, and the fair value of digital assets.

Significant Accounting Policies

The significant accounting policies used in the preparation of these Condensed Consolidated Financial Statements are disclosed in our 2024 Annual Report, and, except as discussed below regarding the Company's digital assets, there have been no changes to the Company’s significant accounting policies during the six months ended June 30, 2025.

Digital Assets

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets ("ASU 2023-08"). ASU 2023-08 requires in-scope digital assets (including the Company's digital asset holdings) to be measured at fair value in the statement of financial position, with gains and losses from changes in the fair value of such digital assets recognized in net income each reporting period. ASU 2023-08 also requires certain interim and annual disclosures for crypto assets within the scope of the standard. The Company has adopted this guidance during the three months ended June 30, 2025.

Fair Value Measurement

The Company accounts for the fair value measurement of its digital assets in accordance with FASB Accounting Standards Codification ("ASC") 820, Fair Value Measurement. ASC 820 defines fair value as the price that would be received for an asset in a current sale, assuming an orderly transaction between market participants on the measurement date. Market participants are considered to be independent, knowledgeable, and willing and able to transact. It requires the Company to assume that its digital assets are sold in their principal market, or in the absence of a principal market, the most advantageous market. As a basis for considering such assumptions, there exists a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

This hierarchy requires the Company to use observable market data when available and to minimize the use of unobservable inputs when determining fair value. Due to the availability of unadjusted quoted prices in active markets, the Company has determined that its digital assets are Level 1.

The unrealized gains and losses resulting from remeasurement of digital assets are recorded in other income on the Condensed Consolidated Statement of Operations. The Company recorded an unrealized gain of $31,000 for the three and six months ended June 30, 2025.

BitGo secures the Company's digital assets in regulated, insured, cold storage with BitGo Trust Company, Inc., and facilitates the Company's acquisitions of $TAO through its affiliated platforms. BitGo serves as the principal market for the Company's digital assets. The fair value of digital assets is primarily determined based on pricing data obtained from BitGo.

Accounting for Digital Assets

Fair Market Value

Digital assets are measured at their fair market values using the last close price of the day in the UTC time zone at each reporting period end on the balance sheet. The Company's digital assets are presented as current assets. The majority of the Company's digital assets are staked with no lock-up period, and are considered current assets in accordance with ASC 210-10-20, Balance Sheet, due to the Company's ability to sell them in a liquid marketplace and with a reasonable expectation that they will be realized in cash during the normal operating cycle of our business to support operations if needed.

Cost Basis

The cost basis of the Company's digital assets is measured at fair value based on the spot price at the time of receipt if obtained through staking rewards, or the purchase price if obtained by cash, consistent with the applicable guidance under ASC 350-60. The Company has elected to adopt the First-In, First-Out ("FIFO") method for determining the cost basis of digital assets disposed of. The method assumes that the assets that were acquired first are disposed of first. Realized gains and losses from the disposal of digital assets are included in other income in the Condensed Consolidated Statements of Operations. The Company had no realized gains or losses from the disposal of digital assets for the three and six months ended June 30, 2025, and 2024.

Revenue Recognition - Digital Assets

The Company had staked $1,683,000 of digital assets as of June 30, 2025. The Company’s ability to sell or transfer staked digital assets is subject to restrictions related to unbonding periods, which are based on network traffic on the respective blockchains. As of June 30, 2025, all staked digital assets could be unbonded immediately. The blockchain rewards generated from proprietary staking activities for the three and six months ended June 30, 2025, were $2,000. The Company stakes its $TAO directly from qualified custody with BitGo Trust, enabling a yield generation while maintaining the highest standards of security and regulatory compliance. As of June 30, 2025, the Company's staked assets have immediate terms, meaning there is no lock-up period upon the asset being un-staked.

In exchange for staking the crypto assets on blockchain networks, the Company is entitled to a fractional share of the fixed digital asset award a third-party validator node receives for successfully validating or adding a block to the blockchain. This award is remitted in the native token of the validator node and is referred to as a staking reward. The Company’s staking reward received from delegating to a third-party validator node is proportionate to the digital assets staked by the Company compared to the total digital assets staked by all delegators to that node at that time. Token rewards earned from staking are calculated and distributed directly to Oblong's digital wallets by the blockchain networks as part of their consensus mechanisms.

The Company considers the provision of validating blockchain transactions an output of the Company’s ordinary activities, providing a service to the blockchain network, and accounts for the staking rewards under ASC 606. Each separate validation under a smart contract with a network represents a performance obligation. The satisfaction of the performance obligation for processing and validating blockchain transactions occurs at a point in time when confirmation is received from the network indicating that the validation is complete, and the awards are available for transfer. At that point, the fair value of the staking reward is recognized and recorded as revenue. Once the Company has acquired the reward, the tokens are added to our digital asset holdings, and their fair value is accounted for in accordance with ASC 820.

The following table identifies the digital assets earned from staking activities:

Cost of Revenue

The Company’s cost of revenues related to its digital asset staking are primarily advisory fees incurred for the processing of the staking transactions and fees for BitGo (our cryptocurrency exchange). These costs are directly related to the production of digital asset staking revenues. For three and six months ended June 30, 2025, the cost associated with the revenue recorded from digital asset staking is immaterial.

Recently Issued Accounting Pronouncements

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Tax Disclosures (Topic 740), to enhance the transparency and decision usefulness of income tax disclosures through changes to the rate reconciliation and income taxes paid information. This guidance is effective for fiscal years beginning after December 15, 2025, with early adoption permitted. The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses, which requires public business entities to disclose additional information about certain expenses in the notes to the financial statements. This guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements.