Index
| Item · Page |
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| PART I |
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| 1. | Business | 1 |
| 1A. | Risk Factors | 5 |
| 1B. | Unresolved Staff Comments | 19 |
| 1C. | Cybersecurity | 19 |
| 2. | Properties | 20 |
| 3. | Legal Proceedings | 20 |
| 4. | Mine Safety Disclosures | 20 |
| PART II |
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| 5. | Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities | 21 |
| 6. | Reserved | 21 |
| 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 21 |
| 7A. | Qualitative and Quantitative Disclosures About Market Risk | 28 |
| 8. | Financial Statements and Supplemental Data | 28 |
| 9 | Change in and Disagreements with Accountants on Accounting and Financial Disclosure | 28 |
| 9A. | Controls and Procedures | 29 |
| 9B. | Other Information | 29 |
| 9C. | Disclosures Regarding Foreign Jurisdictions that Prevent Inspections | 29 |
| PART III |
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| 10. | Directors, Executive Officers and Corporate Governance | 30 |
| 11. | Executive Compensation | 35 |
| 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 39 |
| 13. | Certain Relationships and Related Transactions, and Director Independence | 40 |
| 14. | Principal Accounting Fees and Services | 41 |
| PART IV |
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| 15. | Exhibits and Financial Statement Schedules | 42 |
| 16. | Signatures | 46 |
i
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K (this“Report”) contains statements that are considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and its rules and regulations (the“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, and its rules and regulations (the“Exchange Act”). These forward-looking statements include, but are not limited to, statements about the plans, objectives, expectations, and intentions of TaoWeave, Inc. (“TaoWeave”* or*“we”* or*“us”* or the*“Company”). All statements other than statements of current or historical fact contained in this Report, including statements regarding TaoWeave's future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. The words“anticipate,”* “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” and similar expressions, as they relate to TaoWeave, are intended to identify forward-looking statements. These statements are based on TaoWeave's* current plans, and TaoWeave's actual future activities and results of operations may be materially different from those set forth in the forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. Any or all of the forward-looking statements in this Report may turn out to be inaccurate. TaoWeave has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy, and financial needs. The forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks, uncertainties, and assumptions. There are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including our plans, objectives, expectations, intentions, and other factors that are discussed in“Item 1A. Risk Factors”* and/or listed below. TaoWeave undertakes no obligation to publicly revise these forward-looking statements to reflect events occurring after the date hereof. All subsequent written and oral forward-looking statements attributable to TaoWeave or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this Report. Forward-looking statements in this Report include, among other things: the Company's plans to explore partnerships within the Bittensor ecosystem, demand for our product offerings, future revenues, expenses, capital expenditures and cash flows; our ability to fund operations and continue as a going concern; our liquidity projection; expectations regarding adjustments to our cost of revenue and other operating expenses;* the future exercise of warrants; our ability to raise capital through sales of additional equity or debt securities and/or loans from financial institutions; our beliefs about the ongoing performance of our Managed Services business; statements relating to market need and evolution of the industry, our solutions and our service platforms; our beliefs about employee relations; adequacy of our internal controls; and statements regarding our information systems and ability to prevent cybersecurity incidents. For additional information regarding known material factors that could cause our actual results to differ materially from our projected results, please see“Item 1A. Risk Factors.”* Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:*
RISK FACTORS SUMMARY
The following is a summary of the principal risk factors that make an investment in our company speculative or risky, all of which are further described below in the section titled “Risk Factors” in Part I, Item 1A of this Report. This summary should be read in conjunction with the “Risk Factors” section and should not be relied upon as an exhaustive summary of the material risks facing our business.
| • | We own and may purchase additional digital assets, the prices of which have been, and will likely continue to be, highly volatile. |
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| • | If any of the digital assets 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. |
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| • | 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. |
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| • | Classification of the digital assets we hold as a commodity could subject us to additional CFTC regulation, resulting in significant compliance costs or the cessation of certain operations. |
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| • | 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 advisors. |
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| • | 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. |
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ii
| • | 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. |
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| • | Digital asset holdings are less liquid than cash and cash equivalents and may not serve as a source of liquidity for us to the same extent. |
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| • | Digital asset lending arrangements may expose us to risks of borrower default, operational failures, and cybersecurity threats. |
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| • | We may incur losses from staking, delegating, and other related services. |
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| • | Intellectual property disputes related to digital assets technology could threaten our ability to operate. |
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| • | The open-source structure of digital asset networks exposes us to risks related to software development, security vulnerabilities, and potential disruptions |
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| • | 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. |
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| • | 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. |
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| • | The irreversibility of digital asset transactions exposes us to risks of theft, loss, and human error, which could negatively impact our business. |
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| • | 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. |
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| • | We may be unable to attract and retain qualified and skilled employees or consultants. |
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| • | Our Company experienced revenue declines in recent fiscal years, and revenue may continue to decline in future periods. |
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| • | We have a history of substantial net operating losses, and we may incur future net losses. |
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| • | Our business activities may require additional financing that might not be obtainable on acceptable terms, if at all, which could have a material adverse effect on our financial condition, liquidity, and our ability to operate as a going concern in the future. |
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| • | If we were deemed to be an investment company under the Investment Company Act of 1940, as amended, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business, financial condition, and results of operations. |
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| • | Any future disposition of assets and business could have material and adverse effects on business, financial conditions, and operations if not consummated in a timely manner. |
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| • | We rely on a limited number of customers for a significant portion of our revenue, and the loss of any one of those customers, or several of our smaller customers, could materially harm our business. |
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| • | We depend on our network providers and facilities infrastructure. |
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| • | Our network depends on telecommunications carriers, and they may limit or deny us access to their network or fail to perform, which would have a material adverse effect on our business. |
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| • | We may experience material disconnections and/or reductions in the prices of our services and may not be able to replace the resulting revenue losses. |
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| • | We are exposed to the credit and other counterparty risk of our customers in the ordinary course of our business. |
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| • | Failure to retain and recruit key personnel would harm our ability to meet key objectives. |
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| • | If our actual liability for sales and use taxes and federal regulatory fees is different from our accrued liability, it could have a material impact on our financial condition. |
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| • | The terms of the Series F Preferred Stock could limit our growth and our ability to finance our operations, fund our capital needs, respond to changing conditions, and engage in other business activities that may be in our best interests. |
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| • | Cyber-attacks, data incidents, malware, or an intrusion into our physical security systems may disrupt our business operations, result in the loss of critical and confidential information, harm our operating results and financial condition, and damage our reputation; and cyber-attacks or data incidents on our customers’ networks, or in cloud-based services provided by or enabled by us, could result in claims of liability against us, damage our reputation or otherwise harm our business. |
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| • | Vulnerabilities and critical security defects, prioritization decisions regarding remedying vulnerabilities or security defects, failure of third-party providers to remedy vulnerabilities or security defects, or customers not deploying security releases or deciding not to upgrade products, services, or solutions could result in claims of liability against us, damage our reputation, or otherwise harm our business. |
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| • | Our business, operating results, and financial condition could be materially harmed by regulatory uncertainty applicable to our products and services. |
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iii
| • | Our stock price has fluctuated in the past, has recently been volatile, and may be volatile in the future, and as a result, investors in our common stock could incur substantial losses. |
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| • | Penny stock regulations may impose certain restrictions on the marketability of our securities. |
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| • | Future operating results may vary from quarter to quarter, and we may fail to meet the expectations of securities analysts and investors at any given time. |
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| • | Sales of substantial amounts of common stock in the public market, or the perception that such sales may occur, could reduce the market price of our common stock and make it more difficult for us and our stockholders to sell our equity securities in the future. |
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| • | The issuance of the securities in the 2023 Private Placement and the 2025 Private Placement significantly diluted the ownership interest of the existing holders of our Common Stock, and the market price of our Common Stock will likely decline significantly as a result of sales of such securities into the public market by the selling stockholders and subsequent investors or the perception that such sales may occur. |
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| • | Future issuances of equity or debt securities by us may adversely affect the market price of our Common Stock. |
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| • | 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. |
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| • | We may be delisted from the Nasdaq if we fail to maintain a minimum market value of $5.0 million in listed securities. |
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| • | Holders of our Series F Preferred Stock will have no rights with respect to our Common Stock until the Series F Preferred Stock is converted, but may be adversely affected by certain changes in our Common Stock. |
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| • | 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. |
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| • | Our charter documents and Delaware law could discourage takeover attempts and lead to management entrenchment. |
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| • | We incur significant accounting and administrative costs as a publicly traded corporation that impact our financial condition. |
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| • | Our cash and cash equivalents could be adversely affected if the financial institutions in which we hold them fail. |
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iv
