TaoWeave, Inc.

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 (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™.

Previous wording

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 the 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.

Current wording

Historically, customers have used Mezzanine™ products in traditional office and operating center environments such as conference rooms or other presentation spaces. Sales of our Mezzanine product have been adversely affected during the last several years by the 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.

Previous wording

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.

Current wording

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 purchasing and reselling this connectivity.

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 adoption of video collaboration throughout our customers’ enterprises. 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.

Previous wording

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.

Current wording

During the last several years, our Company has experienced 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.

Previous wording

Three Months Ended September 30, 2024 (the*** “2024 Third Quarter”) compared to the Three Months Ended September 30, 2023*** (the**“2023 Third Quarter”)

Current wording

Three Months Ended March 31, 2025 (the*** “2025 First Quarter”) compared to the Three Months Ended March 31, 2024*** (the**“2024 First Quarter”)

Previous wording

*Revenue.*Total revenue decreased 33.7% in the 2024 Third Quarter compared to the 2023 Third Quarter. The following table summarizes the changes in components of our revenue (in thousands), and the significant changes in revenue are discussed in more detail below.

Current wording

*Revenue.*Total revenue decreased 1% in the 2025 First Quarter compared to the 2024 First Quarter. The following table summarizes the changes in components of our revenue (in thousands), and the significant changes in revenue are discussed in more detail below.

Previous wording

*Cost of Revenue (exclusive of amortization).*Cost of revenue, exclusive of amortization and casualty loss, includes all internal and external costs related to the delivery of revenue. Cost of revenue also includes taxes which have been billed to customers. Cost of revenue by segment is presented in the following table (in thousands):

Current wording

*Cost of Revenue.*Cost of revenue 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 decrease in our consolidated cost of revenue is mainly attributable to lower costs associated with the decrease in revenue during the same period, and by a decrease in the expense related to our reserve for obsolescence on our inventory asset for our Collaboration Products segment, partially offset by severance costs incurred during the 2024 Third Quarter related to certain headcount reductions in September 2024. Our consolidated gross profit as a percentage of revenue was 14% in the 2024 Third Quarter compared to a consolidated gross profit as a percentage of revenue of 26% in the 2023 Third Quarter.

Current wording

The decrease in our consolidated cost of revenue is mainly attributable to lower costs related to our Collaboration Products segment. Our consolidated gross profit as a percentage of revenue was 40% in the 2025 First Quarter compared to a negative consolidated gross profit as a percentage of revenue of 0.5% in the 2024 First Quarter.

Previous wording

Our Managed Services segment recorded a 42% gross profit as a percentage of sales for the 2024 Third Quarter compared to 34% in the 2023 Third Quarter.

Current wording

Our Managed Services segment recorded a 27% gross profit as a percentage of sales for the 2025 First Quarter compared to 29% in the 2024 First Quarter. This decrease was primarily due to the reallocation of personnel expenses following our reduction in headcount in September 2024.

Previous wording

Our Collaboration Products segment recorded a negative gross profit as a percentage of sales of 200% for the 2024 Third Quarter compared to a gross profit as a percentage of sales of 7% in the 2023 Third Quarter. This decrease was mainly attributable to an increase in personnel costs as a percentage of revenue, severance costs of $30,000 incurred in the 2024 Third Quarter related to headcount reductions in September 2024, partially offset by a reduction in the expense related to our inventory obsolescence reserve of $24,000 in the 2024 Third Quarter compared to the 2023 Third Quarter.

Current wording

Our Collaboration Products segment recorded a gross profit as a percentage of sales of 98% for the 2025 First Quarter compared to a negative gross profit as a percentage of sales of 150% in the 2024 First Quarter. This increase was mainly attributable to a decrease in personnel costs in the 2025 First Quarter related to headcount reductions in September 2024 and a reduction in the expense related to our inventory obsolescence reserve of $98,000 in the 2025 First Quarter compared to the 2024 First Quarter.

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 increase in research and development expenses for the 2024 Third Quarter compared to the 2023 Third Quarter is primarily attributable to an increase 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. The decrease in research and development expenses for the 2025 First Quarter compared to the 2024 First Quarter is primarily attributable to a decrease in consulting and outsourced labor costs between these periods.

Previous wording

Sales and Marketing Expenses. The decrease in sales and marketing expenses for the 2024 Third Quarter compared to the 2023 Third Quarter is primarily attributable to reduced personnel expenses during the 2024 Third Quarter, partially offset by severance costs of $16,000 related to headcount reductions in September 2024.

Current wording

Sales and Marketing Expenses. The decrease in sales and marketing expenses for the 2025 First Quarter compared to the 2024 First Quarter is primarily attributable to reduced personnel expenses during the 2025 First Quarter related to headcount reductions in September 2024.

Previous wording

General and Administrative Expenses. General and administrative expenses include direct corporate expenses and costs of personnel in the various corporate support categories, including executive, finance and accounting, legal, human resources and information technology. The increase in general and administrative expenses for the 2024 Third Quarter compared to the 2023 Third Quarter is primarily attributable to increased professional service expenses as a result of severance costs of $60,000 related to headcount reductions in September 2024, partially offset by reduced stock compensation expense as a result of stock options being fully expensed.

Current wording

General and Administrative Expenses. General and administrative expenses include direct corporate expenses and personnel costs in the various corporate support categories, including executive, finance and accounting, legal, human resources, and information technology. The decrease in general and administrative expenses for the 2025 First Quarter compared to the 2024 First Quarter is primarily attributable to reduced personnel expenses related to headcount reductions in September 2024, and reduced stock compensation expense as a result of stock options being fully expensed.

Previous wording

*Interest Income, Net.*Interest income, net for the 2024 Third Quarter and the 2023 Third Quarter is primarily comprised of interest income related to our cash accounts.

Current wording

*Interest Income, Net.*Interest income, net for the 2025 First Quarter and the 2024 First Quarter, is primarily comprised of interest income related to our cash accounts.

Previous wording

*Loss from Operations.*The increase in the Company’s loss from operations for the 2024 Third Quarter compared to the 2023 Third Quarter is mainly attributable to the severance costs we recorded in the 2024 Third Quarter, as addressed above.

Current wording

*Loss from Operations.*The decrease in the Company’s loss from operations for the 2025 First Quarter compared to the 2024 First Quarter is mainly attributable to an increase in gross profit and a decrease in operating expenses.

Previous wording

There have been no changes to our critical accounting policies during the nine months ended September 30, 2024. Critical accounting policies and the significant estimates made in accordance with such policies are regularly discussed with our Audit Committee. Those policies are discussed under “Critical Accounting Policies” in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as in our Condensed Consolidated Financial Statements and the footnotes thereto, each included in our 2023 Annual Report.

Current wording

There have been no changes to our critical accounting policies during the 2025 First Quarter. Critical accounting policies and the significant estimates made in accordance with such policies are regularly discussed with our Audit Committee. Those policies are discussed under “Critical Accounting Policies” in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as in our Condensed Consolidated Financial Statements and the footnotes thereto, each included in our 2024 Annual Report.

Previous wording

As of September 30, 2024, we had $5,619,000 in cash and cash equivalents and working capital of $4,665,000. For the nine months ended September 30, 2024 we incurred a net loss of $3,159,000 and we used $2,521,000 of net cash in operating activities.

Current wording

As of March 31, 2025, we had $4,316,000 in cash and cash equivalents and working capital of $3,345,000. For the 2025 First Quarter, we incurred a net loss of $672,000, and we used $680,000 of net cash in operating activities.

Previous wording

Financing activities provided $2,149,000 of net cash for the nine months ended September 30, 2024, consisting of net proceeds from warrant exercises.

Current wording

Financing activities provided $31,000 of net cash for the 2025 First Quarter, consisting of net proceeds from warrant exercises.

Previous 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 our pursuit of 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 our existing cash and cash equivalents will be sufficient to fund our operations and meet our working capital requirements into the fourth quarter of 2026. In the long term, we believe additional capital will be required to fund operations and provide growth capital, including our pursuit of 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 from the exercise of outstanding common and/or preferred warrants, and/or in one or more debt and/or equity offerings. 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.