TaoWeave, Inc.

Current report

Risks Related to Digital Assets

Current report

We own and may purchase additional digital assets, the prices of which have been, and will likely continue to be, highly volatile. We currently own digital assets and expect to purchase more in the future. Digital assets are generally highly volatile assets. In addition, digital assets do not pay interest or other returns, so the ability to generate a return on investment from the net proceeds of the June 2025 and future offerings will depend on whether their value appreciates following our purchases of digital assets with those proceeds. Future fluctuations in digital asset trading prices may result in our converting digital assets purchased into cash with a value substantially below the purchase price.

Current report

If any of the digital assets that we hold are classified as a security, we may be subject to extensive regulation, which could result in significant costs or force us to cease certain operations. Regulatory changes or interpretations that classify digital assets that we hold as a security under the Securities Act of 1933, as amended (the “Securities Act”), or the Investment Company Act of 1940, as amended (the “Investment Company Act”), could require us to register and comply with additional regulations. Compliance with these requirements could impose extraordinary, non-recurring expenses on our business. If the costs and regulatory burdens become too great, we may be forced to modify or cease certain operations, which could be detrimental to our investors.

Current report

The SEC has previously indicated that certain digital assets may be considered securities depending on their structure and use. Future developments could change the legal status of digital assets that we may hold, requiring us to comply with securities laws. If we fail to do so, we may be forced to discontinue some or all of our business activities, which could negatively impact investments in our securities.

Current report

If the SEC or other regulators determine that digital assets that we may hold qualify as securities, we may be required to register as an investment company under the Investment Company Act. This classification would subject us to additional periodic reporting, disclosure requirements, and regulatory compliance obligations, significantly increasing our operational costs.

Current report

Although we do not currently engage in investing, reinvesting, or trading in securities, and we do not hold ourselves out as an investment company, we could inadvertently be deemed an investment company under the Investment Company Act. If we are unable to rely on an exclusion, we would be required to register with the SEC, which could impose additional financial and regulatory burdens.

Current report

Changes in regulatory interpretations could require us to register as a money services business or money transmitter, leading to increased compliance costs or operational shutdowns. If regulatory changes or interpretations require us to register as a money services business with FinCEN under the U.S. Bank Secrecy Act, or as a money transmitter under state laws, we may be subject to extensive regulatory requirements, resulting in significant compliance costs and operational burdens. In such a case, we may incur extraordinary expenses to meet these requirements or, alternatively, may determine that continued operations are not viable. If we decide to cease certain operations in response to new regulatory obligations, such actions could occur at an unfavorable time for investors.

Current report

Multiple states have implemented or proposed regulatory frameworks for digital asset businesses. Compliance with such state-specific regulations may increase costs or impact our business operations. Furthermore, if we or our service providers are unable to comply with evolving federal or state regulations, we may be forced to dissolve or liquidate certain operations, which could materially impact our investors.

Current report

The classification of digital assets we hold as commodities could subject us to additional CFTC regulation, resulting in significant compliance costs or the cessation of certain operations. If our activities require CFTC registration, we may be required to comply with extensive regulatory obligations, which could result in significant costs and operational disruptions. Additionally, current and future legislative or regulatory developments, including new CFTC interpretations, could further impact how digital assets are classified and traded.

Current report

If the digital assets we may hold are further regulated as commodities, we may be required to register as a commodity pool operator and to register the Company as a commodity pool with the CFTC through the National Futures Association. Compliance with these additional regulatory requirements could result in substantial, non-recurring expenses, adversely affecting an investment in our securities. If we determine not to comply with such regulations, we may be forced to cease certain operations, which could negatively impact our investors.

Current report

We are not subject to legal and regulatory obligations that apply to investment companies such as mutual funds and exchange-traded funds, or to obligations applicable to investment advisers. Mutual funds, ETFs, and their directors and management are subject to extensive regulation as “investment companies” and “investment advisers” under U.S. federal and state law; this regulation is intended to benefit and protect investors. We are not subject to, and do not otherwise voluntarily comply with, these laws and regulations. This means, among other things, that the execution of our changes to our digital asset strategy, our use of leverage, our ability to engage in transactions with affiliated parties, and our operating and investment activities generally are not subject to the extensive legal and regulatory requirements and prohibitions that apply to investment companies and investment advisers.

Current report

Due to the unregulated nature and lack of transparency surrounding the operations of many digital asset trading venues, digital asset trading venues may experience greater fraud, security failures, or regulatory or operational problems than trading venues for more established asset classes, which may result in a loss of confidence in digital asset trading venues and adversely affect the value of digital assets. Digital asset trading venues are relatively new and, in many cases, unregulated. Furthermore, many digital asset trading venues do not provide the public with significant information about their ownership structures, management teams, corporate practices, and regulatory compliance. As a result, the marketplace may lose confidence in digital asset trading venues, including prominent exchanges that handle a significant volume of such trading and/or are subject to regulatory oversight, in the event one or more digital asset trading venues cease or pause for a prolonged period the trading of digital assets, or experience fraud, significant volumes of withdrawal, security failures or operational problems.

Current report

Our historical financial statements may not reflect the potential variability in earnings that we may experience in the future relating to our holdings of digital assets. Our historical financial statements reflect unrealized losses in 2025 from the price decline in TAO but may not fully reflect the potential variability in earnings we may experience from holding or selling digital assets. The prices of digital assets have historically been highly volatile, subject to dramatic fluctuations. We will need to perform an analysis each quarter to identify whether events or changes in circumstances indicate that our digital assets are impaired. As a result, volatility in our earnings may be significantly greater than we have experienced in prior periods.

Current report

Digital asset holdings are less liquid than cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent. Historically, the digital asset market has been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of market instability, we may not be able to sell our digital assets at favorable prices or at all. As a result, digital asset holdings may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents. Further, digital assets we hold with our custodians and transact with our trade execution partners do not enjoy the same protections as those available to cash or securities deposited with or transacted by institutions regulated by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. Additionally, we may be unable to enter into term loans or other capital-raising transactions collateralized by our unencumbered digital assets, or to otherwise generate funds using our digital asset holdings, including during times of market instability or when the price of digital assets has declined significantly. If we are unable to sell our digital assets, enter into additional capital raising transactions, including capital raising transactions using bitcoin as collateral, or otherwise generate funds using our bitcoin holdings, or if we are forced to sell our digital assets at a significant loss, in order to meet our working capital requirements, our business and financial condition could be negatively impacted.

Current report

Digital asset lending arrangements may expose us to risks of borrower default, operational failures, and cybersecurity threats. From time to time in the future, we may generate income through the lending of digital assets, which carries significant risks. The volatility of such digital assets increases the likelihood of borrower defaults due to market downturns, liquidity crises, fraud, or other financial distress. These lending transactions may be unsecured and therefore subordinated to the borrower's secured debt. If a borrower becomes insolvent, we may be unable to recover the loaned digital asset, leading to substantial financial losses.

Current report

We may incur losses from staking, delegating, and other related services. Crypto assets that utilize PoS consensus mechanisms enable holders to earn rewards by participating in decentralized governance, bookkeeping, and transaction confirmation activities on their underlying blockchain networks. We stake certain of our crypto assets on blockchain networks through BitGo. Most PoS networks require crypto assets to be transferred into smart contracts on the underlying blockchain networks, not under our or anyone’s control. If any third-party service providers, or smart contracts, fail to behave as expected, suffer cybersecurity attacks, experience security issues, or encounter other problems, our crypto assets may be irretrievably lost. In addition, most PoS blockchain networks dictate requirements for participation in the relevant decentralized governance activity, and may impose penalties, or “slashing,” if the relevant activities are not performed correctly, such as if the node operator acts maliciously on the network, “double-signs” any transactions, or experiences extended downtimes. Slashing penalties can apply due to prolonged inactivity on a blockchain network, inadvertent errors (such as computing or hardware issues), or more serious behavior, such as intentional malfeasance. If we are slashed by an underlying blockchain network, our crypto assets may be confiscated, withdrawn, or burnt by the network, resulting in permanent, irrecoverable losses that could materially impact our financial position. Any penalties or slashing events could damage our brand and reputation, cause financial losses, and adversely impact our business.

Current report

Intellectual property disputes related to digital asset technology could threaten our ability to operate. The legal landscape for digital assets remains uncertain, and third parties may assert intellectual property claims related to blockchain technology, digital asset transactions, or source code. Any litigation, regardless of its merit, could create uncertainty about the long-term viability of digital asset networks and reduce investor confidence in our business. If a court upholds an intellectual property claim, we and other market participants could be restricted from accessing certain digital asset networks or conducting transactions, which could materially impact our business, results of operations, and financial condition.

Current report

The open-source structure of digital asset networks exposes us to risks related to software development, security vulnerabilities, and potential disruptions. Digital asset networks are open-source projects, and although there may be an influential group of leaders within the network community, there is generally no official developer or group of developers that formally controls the network. Without guaranteed financial incentives, there may be insufficient resources to address emerging issues, enhance security, or implement necessary network improvements in a timely manner. If the digital asset network’s software is not properly maintained or developed, it could become vulnerable to security threats, operational inefficiencies, and reduced trust, all of which could negatively impact the digital assets’ long-term viability and our business.

Current report

We maintain crime insurance for our digital assets but there is still a risk of total loss in the event of theft or destruction, and if coverage is denied. We maintain third party crime insurance for coverage on digital assets. However, there is no assurance such coverage will protect us from losses if insurers were to deny coverage. If an event occurs that results in the loss of our digital assets, whether due to cyberattacks, fraud, or other malicious activities, we may have no viable legal recourse or ability to recover them. Unlike funds held in insured banking institutions, our digital assets are not protected by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. If our digital assets are lost under circumstances that render another party liable, there is no guarantee that the party responsible will have the financial resources to compensate us. As a result, we and our stockholders could face significant financial losses.

Current report

If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our digital assets, or if our private keys are lost or destroyed, or other similar circumstances or events occur, we may lose some or all of our digital assets, and our financial condition and results of operations could be materially adversely affected. The digital assets we may purchase may be held in accounts at institutional-grade digital asset custodians. Blockchain-based cryptocurrencies and the entities that provide services to the participants in the cryptocurrency ecosystem have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities. For example, in November 2022, hackers exploited weaknesses in the security architecture of the FTX Trading digital asset exchange and reportedly stole over $400 million in customer assets. A successful security breach or cyberattack could result in:

Current report

•a partial or total loss of digital assets that we may purchase in a manner that may not be covered by insurance or the liability provisions of the custody agreements with the custodians who may hold our digital assets;

Current report

•harm to our reputation and brand;

Current report

Further, any actual or perceived data security breach or cybersecurity attack directed at other companies with digital assets or companies that operate digital asset networks, regardless of whether we are directly impacted, could lead to a general loss of confidence in the broader blockchain ecosystem or in the use of digital asset networks to conduct financial transactions, which could negatively impact us.

Current report

The irreversibility of digital asset transactions exposes us to risks of theft, loss, and human error, which could negatively impact our business. Digital asset transactions are not, from an administrative perspective, reversible without the consent and active participation of the recipient of the transaction or, in theory, the control or consent of a majority of the processing power on that digital asset network. Once a transaction has been verified and recorded in a block that is added to the blockchain, an incorrect transfer of digital assets or a theft of digital assets, will generally not be reversible, and we may not be able to seek compensation for any such transfer or theft.

Current report

It is possible that, through computer or human error, theft, or criminal action, digital assets could be transferred in incorrect amounts or to unauthorized third parties. To the extent we are unable to seek a corrective transaction to identify the third party that has received our digital assets through error or theft, we will be unable to revert or otherwise recover the impacted digital assets, and any such loss could adversely affect our business, results of operations, and financial condition.

Current report

If we fail to implement our new digital asset-related strategy, or if it is ineffective, our financial performance could be materially and adversely affected. Our future financial performance and success depend in large part on the effectiveness of our new business strategy for the Bittensor ecosystem, our digital asset holdings, and on our ability to successfully implement it. Implementation of our strategy will require effective management of our operational, financial, and human resources and will place significant demands on those resources. There are risks involved in pursuing our strategy. In addition to the risks set forth elsewhere in this Report, the effectiveness of and the successful implementation of our business strategy could also be affected by a number of factors beyond our control, such as legal developments, government regulation, general economic conditions, increased operating costs or expenses, and changes in industry trends. We may decide to alter or discontinue certain aspects of our business strategy at any time. If we are unable to successfully implement our business strategy, our long-term growth and profitability may be adversely affected. Even if we successfully implement some or all of the initiatives in our business strategy, our operating results may not improve and could decline substantially.

Current report

***We may be unable to attract and retain qualified and skilled employees or consultants.***We operate in a relatively new industry that is not widely understood and requires highly skilled and technical personnel. We must be able to attract, develop, motivate, and retain highly qualified and skilled employees or consultants. Due to the nascent nature of the digital assets ecosystem, the pool of qualified talent is extremely limited, particularly for executive talent with engineering, risk management, and financial regulatory expertise. We may face intense competition for qualified individuals from numerous software and other technology companies. To attract and retain key personnel or consultants, we could incur significant costs, including salaries and benefits, and equity incentives. Even so, these measures may not be enough to attract and retain the personnel we require to operate our business effectively. A failure to attract, retain, and motivate additional highly skilled employees or consultants required for the planned expansion of our business could adversely impact our operations and impair our ability to grow.

Current report

Risks Related to Our Managed Services and Collaboration Products Business

Current report

Future issuances of equity or debt securities by us may adversely affect the market price of our Common Stock. Our authorized share capital consists of 150 million shares of Common Stock. As of the filing of this Report, we had an aggregate of approximately 146.7 million shares of Common Stock authorized but unissued, and approximately 127.7 million shares of Common Stock authorized but unissued after giving effect to the exercise or conversion, as applicable, of the 18.9 million shares reserved for the securities issued in the 2023 Private Placement, the 2025 Private Placement, and other outstanding awards, assuming all of the shares of Series F Preferred Stock are converted into 45,754 shares of Common Stock at the conversion price of $3.77, all of the Preferred Warrants are exercised in full and the underlying shares of Series F Preferred Stock are converted into 8,097,347 shares of Common Stock at the conversion price of $3.77, all of the 8,097,347 Common Warrants issued upon the exercise of the Preferred Warrants are then exercised at an exercise price of $3.77 in for 8,097,347 shares of Common Stock, all of the Common Warrants issued in the 2023 Private Placement are exercised at an exercise price of $3.41 for 1,749,527 shares of Common Stock, all of the 2023 Placement Agent Warrants issued in the 2023 Private Placement are exercised at an exercise price of $3.41 for 153,470 shares of Common Stock, all the Pre-Funded Warrants issued in 2025 Private Placement are exercised at an exercise price of $3.77 for 586,261 shares of Common Stock, all of the 2025 Placement Agent Warrants issued in the 2025 Private Placement are exercised at an exercise price of $4.71 for 99,470 share of Common Stock, and the Advisor Warrants are exercised at an exercise price of $3.77 for 100,000 shares of Common Stock. Additionally, depending on the trading price of our Common Stock, we may need to issue more or fewer shares of Common Stock upon exercise of the Preferred Warrants. If we do not have the shares of Common Stock available to issue in connection with such exercises, we will be required to provide the exercising holder a buy-in of cash.

Current report

In the future, we may attempt to obtain financing or to increase further our capital resources, or refinance existing obligations, by issuing additional shares of our Common Stock or offering debt or other equity securities, including commercial paper, medium-term notes, senior or subordinated notes, debt securities convertible into equity, or shares of preferred stock. Future acquisitions could require substantial additional capital beyond cash from operations. There can be no guarantee that these offers to exchange will be successful. In addition, we also expect to issue additional shares with the exercise of our stock options under our incentive plans.

Current report

Issuing additional shares of our Common Stock or other equity securities or securities convertible into equity for financing or in connection with our incentive plans, acquisitions, or otherwise may dilute the economic and voting rights of our existing shareholders or reduce the market price of our Common Stock or both. Upon liquidation, holders of our debt securities and preferred shares, if issued, and lenders with respect to other borrowings would receive a distribution of our available assets prior to the holders of our Common Stock. Debt securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain events may increase the number of equity securities issuable upon conversion. Preferred shares, if issued, could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could limit our ability to pay dividends to the holders of our Common Stock. Our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, which may adversely affect the amount, timing, or nature of our future offerings. Thus, holders of our Common Stock bear the risk that our future offerings may reduce the market price of our Common Stock and dilute their stockholdings in us. Additionally, we may be required to secure stockholder approval to authorize additional shares of Common Stock if we desire to issue additional shares of Common Stock or other equity securities or securities convertible into equity.

Current report

We may not be able to comply with all applicable listing requirements or standards of the Nasdaq Capital Market, and Nasdaq could delist our Common Stock. Our Common Stock is listed on the Nasdaq Capital Market. To maintain that listing, we must meet the minimum financial and other continued listing requirements and standards, including but not limited to maintaining a minimum closing bid price of $1.00 per share and at least $2.5 million of stockholders’ equity.

Current report

***We may be delisted from the Nasdaq if we fail to maintain a minimum market value of $5.0 million in listed securities.***Nasdaq has proposed amendments to its continued listing standards that would require listed companies to maintain a minimum $5.0 million market value of listed securities (“MVLS”), and in certain circumstances could result in immediate delisting for non-compliance. As of the date of this Report, the proposed rule has been submitted to the Securities and Exchange Commission for review and is not yet effective. There can be no assurance that the proposed rule will not be approved or adopted in its current or modified form.

Current report

If the rule becomes effective and our MVLS falls below the required threshold, we may not be able to maintain our Nasdaq listing. The market value of our listed securities depends largely on the trading price of our common stock and the number of publicly held shares, both of which are subject to market volatility and factors beyond our control. As of the filing of this Report, our MVLS was approximately $4.4 million.

Current report

If we are unable to satisfy Nasdaq’s continued listing requirements or regain compliance within any applicable cure period, our common stock could be delisted. Delisting would likely reduce the liquidity and market price of our common stock, limit investor interest, and impair our ability to raise additional capital. If our common stock were to trade on an over-the-counter market, trading volume and liquidity would likely be significantly lower. Any such delisting could have a material adverse effect on our business, financial condition, and stockholders.

Current report

Holders of our Series F Preferred Stock will have no rights with in our Common Stock until the Series F Preferred Stock is converted, but may be adversely affected by certain changes made with respect to our Common Stock. Holders of our Series F Preferred Stock will have no rights with respect to our Common Stock, including voting rights, rights to respond to Common Stock tender offers, if any, and rights to receive dividends or other distributions on shares of our Common Stock, if any (other than through a conversion rate adjustment), prior to the conversion date with respect to a conversion of the Series F Preferred Stock, but holders' investment in the Series F Preferred Stock may be negatively affected by these events. Upon conversion, holders will be entitled to exercise the rights of a holder of shares of our Common Stock only as to matters for which the record date occurs on or after the conversion date. For example, in the event that an amendment is proposed to our certificate of incorporation or bylaws requiring shareholder approval and the record date for determining the shareholders of record entitled to vote on the amendment occurs prior to the conversion date, Series F holders will not be entitled to vote on the amendment (unless it would adversely affect the special rights, preferences, privileges and voting powers of the Series F Preferred Stock), although they will nevertheless be subject to any changes in the powers, preferences or special rights of our Common Stock, even if your Series F Preferred Stock has been converted into shares of our Common Stock prior to the effective date of such change.

Current report

Holders of our Series F Preferred Stock may have to pay taxes if we adjust the conversion ratio of the Series F Preferred Stock in certain circumstances, even though the holders would not receive any cash. Upon certain adjustments to (or certain failures to make adjustments to) the conversion ratio of the Series F Preferred Stock, holders may be deemed to have received a dividend distribution from us, resulting in taxable income to them for U.S. federal income tax purposes, even though holders would not receive any cash in connection with such adjustment to (or failure to adjust) the conversion ratio. If a holder is a non-U.S. holder of the Series F Preferred Stock, any deemed dividend distribution may be subject to U.S. federal withholding tax at a 30% rate, or such lower rate as may be specified by an applicable treaty. Please consult your tax advisor regarding the U.S. federal income tax consequences of an adjustment to the conversion ratio of the Series F Preferred Stock.

Previous report

Risks Related to Our Business

Previous report

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.

Previous report

Should this trend of reevaluation and reduced demand continue, our company faces a significant risk of further revenue decline. 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.

Previous report

Revenue growth and an increase in the market share of our current product offerings depend on the 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 have significantly reduced investments in product development and sales and marketing in recent years. We cannot assure you that we will have sufficient funds available to invest in sales and marketing and product development in order to achieve revenue growth.

Previous report

***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, 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, acquire, 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. As a cost savings measure, we have reduced investments in product development and sales and marketing in recent years. 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. 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.

Previous report

In addition, we may not be able to successfully manage the 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.

Previous report

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, product introductions that do not meet broad market acceptance, or unsuccessful launches of new product lines could result in:

Previous report

Additionally, our level of product gross margins could decline in future periods due to adverse impacts from other factors, including:

Previous report

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.

Previous report

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.

Previous report

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. 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. As a cost-saving measure, we have reduced investments in product development in recent years. 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.

Previous report

Furthermore, we may not execute successfully on our vision or strategy successfully 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 service 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.

Previous report

***Our success depends on our ability to recruit and retain adequate engineering talent.***The market for our products and services is 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.

Previous report

***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 the 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.

Previous report

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 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.

Previous report

We may be unable to realize intended efficiencies and benefits from our ongoing cost-saving initiatives, which may adversely affect our results of operations, financial condition, or our business. To operate more efficiently and control costs, we have undertaken cost-saving 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-saving activities, our expected efficiencies, benefits, and cost savings might be delayed or not realized, and our operations and business could be disrupted. Furthermore, 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-saving initiatives, any of which could cause further disruption and additional unanticipated expenses.

Previous report

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.

Previous report

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 on 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 similar services on a bundled and unbundled basis, creating a highly competitive environment with pressure on the 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.

Previous report

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, and price and 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.

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***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 the loss of a major customer could have a material impact on results.

Previous report

***Any system failures or interruptions may cause a 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 causes significant interruptions to our operations could seriously damage our reputation and result in customer attrition and financial loss.

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***There is limited market awareness of our products and services.***Our future success will be dependent in significant part on our ability to increase market awareness of our products and services and generate demand for our collaboration technologies and services. We have limited our investment in sales and marketing resources in recent years as a cost-saving measure. 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 would 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.

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***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.

Previous report

***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 the results of operations.

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A 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 2024 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, overcapacity, changes in the Service Providers’ market, regulatory developments, and 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, and 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.

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***Disruption of or changes in our distribution model could harm our sales and margins.***If we fail to manage the 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 a 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.

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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 will 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.

Previous report

Inventory management relating to our sales to our two-tier distribution channel is complex. 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.

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***Supply chain issues, including financial problems of contract manufacturers or component suppliers or a shortage of adequate component supply or manufacturing capacity that increases our costs or causes 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 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.

Previous report

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 purchasing 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, and there is no assurance this will not occur in the future. In addition, vendors may be under pressure to allocate products 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.

Previous report

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.

Previous report

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.

Previous report

***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:

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Acquisitions may also cause us to:

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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 the 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.

Previous report

***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.

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Risks Related to Intellectual Property

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***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.

Previous report

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 and result in costly litigation, and where claims are made by customers, resistance even to unmeritorious claims could damage customer relationships.

Previous report

An adverse outcome as a defendant in any such litigation may result in impacts to the Company including, but not limited to: