TaoWeave, Inc.

Previous wording

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.

Current wording

We are a provider of patented multi-stream collaboration products and managed services for network solutions and video collaboration. 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 network solutions and video collaboration.

Previous wording

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™.

Current wording

Our 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 interact 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™.

Previous wording

•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.

Current wording

Historically, customers have generally used Mezzanine™ products in traditional office and operating center environments such as conference rooms or other presentation spaces. As discussed below, revenue declines for our Mezzanine™ products are primarily due to lower demand, largely a consequence of the commercial reactions to the COVID-19 pandemic and its prolonged effects. We believe the COVID-19 pandemic 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. Continuation of this trend could cause further declines in our revenue for this business. Although we cannot presently quantify the future financial impacts of this trend, such impacts will likely continue to have a material adverse impact on the Company’s consolidated financial condition, results of operations, and cash flows.

Previous wording

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.

Current wording

We provide a range of managed services for video collaboration, from automated to orchestrated, to simplify the user experience in an effort to drive the 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 videoconferencing, and ii) remote service management, where we provide 24/7 support and management of customer video environments.

Previous wording

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.

Current wording

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 network solutions and video collaboration.

Previous wording

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):

Current wording

*Revenue.*Total revenue decreased 37.6% for the year ended December 31, 2024, compared to the year ended December 31, 2023. 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):

Previous wording

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):

Current wording

*Cost of Revenue (exclusive of depreciation and amortization).*Cost of revenue, exclusive of depreciation, amortization, and casualty gain, 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):

Previous wording

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.

Current wording

The year-over-year decrease in the cost of revenue is mainly due to lower costs associated with the revenue decrease during the same period and reduced personnel expenses related to cost-cutting measures. The Company’s consolidated gross profit as a percentage of revenue was 14% in 2024 compared to 24% in 2023. This decrease was primarily due to the decline in the gross profit percentage for our Collaboration Products segment.

Previous wording

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.

Current wording

Research and Development. Research and development expenses include internal and external costs related to developing features and enhancements to our existing product offerings for our Collaboration Products segment. The year-over-year increase in research and development expenses for 2024 compared to 2023 is primarily attributable to the development of features and enhancements to our Mezzanine™ product offerings. There were no research and development costs for our Managed Services segment for 2024 or 2023.

Previous wording

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.

Current wording

Sales and Marketing. The year-over-year decrease in sales and marketing expenses for our Collaboration Products segment in 2024 compared to 2023 is primarily attributable to lower personnel costs due to reduced headcount and reduced office expenses year-over-year related to leases exited during 2023. This reduction was partially offset by severance costs of $16,000 for 2024. There were no sales and marketing expenses for our Managed Services segment for 2024 or 2023.

Previous wording

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.

Current wording

General and Administrative. General and administrative expenses include primarily 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 2024 compared to 2023 is mainly attributable to decreases in personnel costs due to reduced headcount, reduced office expenses related to leases exited in 2023, and reduced stock compensation expense. These reductions were partially offset by $59,000 in severance costs in 2024.

Previous wording

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.

Current wording

Casualty Gain. In June 2022, the Company discovered that $533,000 of inventory related to our Collaboration Products segment had been stolen from its warehouse in the City of Industry, California. During 2023, we received recovery payments from our insurance policies of $400,000, resulting in a casualty gain of $400,000 in 2023. We do not expect any further recovery of the loss.

Previous wording

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.

Current wording

Depreciation and Amortization. The year-over-year decrease in depreciation and amortization expenses is attributable to the disposition and impairment of certain assets during 2023.

Previous wording

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.

Current wording

Interest and Other Income, Net. Interest and other income, net in 2024 and 2023, primarily comprised of interest income related to our cash accounts.

Previous wording

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).

Current wording

*Income Tax Expense.*We recorded an income tax expense of $10,000 in 2024, compared to $27,000 in 2023 (seeNote 11 - Income Taxes to our Consolidated Financial Statements).

Previous wording

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.

Current wording

As of December 31, 2024, we had $4,965,000 of cash and cash equivalents and $3,997,000 of working capital. For the years ended December 31, 2024, and 2023, we incurred net losses of $4,043,000 and $4,384,000, respectively, and net cash used in operating activities was $3,406,200 and $2,993,000, respectively.

Previous wording

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 Stockand Note 10 - Preferred Stockto our Consolidated Financial Statements). There was no cash flow related to financing activities for 2022.

Current wording

Net cash provided by financing activities for 2024 was $2,381,000 attributable to the exercise of warrants, and the net cash provided by financing activities for 2023 was $5,898,000 attributable to a private placement resulting in net proceeds of $5,364,000 and warrant exercises resulting in net proceeds of (seeNote 5 - Capital StockandNote 6 - Preferred Stockto our Consolidated Financial Statements).

Previous wording

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.

Current wording

We believe that our existing cash and cash equivalents will be sufficient to fund our operations and meet our working capital requirements into mid-2026. 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. During the year ended December 31, 2024, the Company received net proceeds of $2,381,000 from the exercise of common and preferred warrants. To access capital to fund operations or provide growth capital, we will need to raise capital from the exercise of outstanding common and/or preferred warrants, and/or in one or more debt and/or equity offerings. We have been able to raise capital in the past to maintain liquidity, but there can be no assurance that we will be successful in raising the 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.

Previous wording

See Note 14 - Commitments and Contingenciesto our Consolidated Financial Statements for discussion regarding certain additional factors that could impact the Company’s liquidity in the future.

Current wording

SeeNote 10 - Commitments and Contingenciesto our Consolidated Financial Statements for discussion regarding certain additional factors that could impact the Company’s liquidity in the future.

Previous wording

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.

Current wording

We prepare our Consolidated Financial Statements in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). Our significant accounting policies are described inNote 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.

Previous wording

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.

Current wording

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, 2024, or 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.

Previous wording

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.

Current wording

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, 2024, totaled $36,000 as certain performance obligations were not satisfied as of this date. During the year ended December 31, 2024, the Company recorded $132,000 of revenue that was included in deferred revenue as of December 31, 2023. 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.

Previous wording

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.

Current wording

Revenue recorded over time for the years ended December 31, 2024, and 2023 was $156,000 and $516,000, respectively. Revenue recorded at a period in time for the years ended December 31, 2024, and 2023 was $2,222,000 and $3,294,000, respectively.

Previous wording

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.

Current wording

See the sections titled “Summary of Significant Accounting Policies-Recently adopted accounting pronouncements” and “Recent accounting pronouncements not yet adopted” inNote 1 - Business Description and Significant Accounting Policies to our Consolidated Financial Statements for more information.