TaoWeave, Inc.
For the period ended Jun 30, 2026. Filed Aug 7, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Aug 7, 2026
TWAV$1.30+5.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-05-15.
0001437749-26-017382
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-07.
0001437749-26-026577
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 80 previous paragraphs and 105 current paragraphs.
46 unchanged; 27 reworded; 23 added; 7 removed; 0 previous and 9 current paragraphs rearranged.
Tables are not compared: 13 previous and 21 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (23)
Current report
Investment in Manako. Because Manako is a private company and no readily determinable fair value exists for our SAFE investment (as defined below), we account for it under the measurement alternative in ASC 321-10-35-2, at cost of $1.0 million, less impairment, if any, adjusted for any observable price changes in orderly transactions for identical or similar Manako securities. Determining whether an impairment indicator exists, and the amount of any impairment or upward adjustment, requires significant judgment, including with respect to Manako’s cash runway, the continued operation of Subnet 44, and the occurrence of any future Manako financing transactions that could serve as an observable price input. We reassess this investment for observable price changes and impairment indicators each reporting period.
Current report
Valuation of the Closing Warrant and useful life of the related intangible asset. We measured the Closing Warrant (as defined below) issued to Manako at its grant-date fair value of $60,595 using the Black-Scholes option-pricing model, which requires management to select assumptions for expected volatility, the risk-free interest rate, and the expected term. We capitalized this amount as an intangible commercialization and licensing rights asset because it represents consideration for a multi-period contractual right rather than a currently consumed good or service, and we are amortizing it on a straight-line basis over an estimated three-year useful life — the low end of the two-to-seven-year range of the underlying License Term and renewal expectations — reflecting management’s judgment that a conservative estimate is appropriate given that this is our first arrangement of this kind. A change in the estimated useful life, or a determination that the asset is impaired, would affect the timing and amount of amortization expense recognized in future periods.
Current report
Principal versus agent determination. We evaluated our role in customer agreements entered into under the TLDA and concluded we act as principal, based on our control over pricing (within Manako’s pricing floor), primary responsibility for customer fulfillment and first-level support, and discretion in setting price, in accordance with ASC 606-10-55-36 through 55-40. This conclusion required judgment, and a different conclusion would result in Net Revenue (as defined below) being presented net of the Revenue Share (as defined below) rather than gross, with a corresponding decrease in both revenue and cost of revenue but no effect on gross profit or net loss.
Current report
Manako Labs, Ltd.
Current report
On May 28, 2026, we entered into a Technology License and Distribution Agreement (the “TLDA”) with Manako Labs Ltd. (“Manako”), a company organized under the laws of England and Wales that owns and operates the Score AI computer vision platform on Bittensor Subnet 44 (the “Platform”). Under the TLDA, Manako granted us a non-exclusive, non-transferable, sublicensable license to market, demonstrate, sell, and distribute the Platform to enterprise customers in the United States and Canada (the “Territory”) during an initial one-year term that automatically renews for successive 12-month periods unless either party gives at least 60 days’ prior notice of non-renewal.
Current report
Concurrently with the TLDA, we entered into a Simple Agreement for Future Equity (the “SAFE”) pursuant to which we invested $1.0 million in Manako, and a related SAFE Side Letter Agreement providing us with certain information, key-person notice, and pro rata investment rights. The TLDA’s commercial terms, including Manako’s platform-availability obligations and our revenue-share payment obligations, did not become operative until we funded the full SAFE investment amount, which occurred on May 29, 2026 (the “Commercial Commencement Date”). In consideration of the rights granted under the TLDA, on the Commercial Commencement Date we issued Manako a warrant to purchase up to 100,000 shares of our common stock at an exercise price of $3.41 per share, exercisable through November 29, 2027 (the “Closing Warrant”). We may also become obligated to issue Manako up to an additional 200,000 warrants (100,000 at a $4.50 exercise price and 100,000 at a $5.50 exercise price) in connection with potential advisory support for a prospective Company-operated Bittensor subnet. Issuance of those warrants is contingent on execution of a statement of work not yet in place and on our discretionary decision to pursue that initiative, and no obligation to issue those warrants has been incurred as of June 30, 2026.
Current report
We believe the Manako arrangement provides us access to computer-vision platform technology that we can commercialize with our existing enterprise customer base in the Territory, in exchange for a certain percentage of revenue share (the "Revenue Share") on net revenue we generate from Platform customers ("Net Revenue").
Current report
Collaboration Products revenue was $2,000 and $93,000 for the 2026 Second Quarter and the 2025 Second Quarter, respectively, a decrease of $91,000, or 98%. This decrease was due to the December 2025 end of life announcement for Mezzanine™ products. We expect no product revenue and only minor maintenance revenue for the remainder of 2026.
Current report
Sales and Marketing Expenses. Sales and marketing expenses were $6,000 for the 2025 Second Quarter, and there were no sales and marketing expenses for the 2026 Second Quarter. The decrease is primarily attributable to reduced personnel expenses.
Current report
Results of Operations
Current report
Six Months Ended June 30, 2026**, compared to the Six Months Ended June 30, 2025**
Current report
Managed Services revenue was $836,000 and $1,005,000 for the six months ended June 30, 2026 and the six months ended June 30, 2025, respectively, a decrease of $169,000, or 17%. The decrease was primarily attributable to a:
Current report
Collaboration Products revenue was $202,000 and $207,000 for the six months ended June 30, 2026 and the six months ended June 30, 2025, respectively, a decrease of $5,000, or 2%.
Current report
The Managed Services segment recorded a cost of revenue of $462,000 and $731,000 for the six months ended June 30, 2026 and the six months ended June 30, 2025, respectively, a decrease of $269,000, or 37%. The Managed Services segment recorded a gross profit percentage of 45% and 27% for the six months ended June 30, 2026 and the six months ended June 30, 2025, respectively. The increase in gross margin was primarily due to reduced personnel expenses for the six months ended June 30, 2026.
Current report
The Collaboration Products segment recorded a cost of revenue of $11,000 and $6,000 for the six months ended June 30, 2026 and the six months ended June 30, 2025, respectively, an increase of $5,000. The Collaboration Products segment recorded a gross profit percentage of 95% and 97% for the six months ended June 30, 2026 and the six months ended June 30, 2025, respectively. The decrease in gross margin is mainly attributable to a bad debt recovery during the six months ended June 30, 2025.
Current report
*Other (Expense) Income, Net.*Other expense, net, was $192,000 for the six months ended June 30, 2026, and other income, net, was $104,000 for the six months ended June 30, 2025, a decrease of $296,000. The decrease was primarily driven by $97,000 of unrealized losses and $114,000 of realized losses on the Company’s digital assets during the six months ended June 30, 2026, and reduced interest income of $54,000 quarter over quarter. Other income for the six months ended June 30, 2025 was primarily comprised of $73,000 in interest income related to the Company’s cash accounts and an unrealized gain of $31,000 on the Company's digital assets.
Current report
During the six months ended June 30, 2026, we used $1.0 million of cash to fund our investment in Manako under the SAFE, which we have classified as an investing activity. This investment did not affect our results of operations, other than through any future impairment we may be required to recognize (see “Critical Accounting Policies and Estimates” below). The issuance of the Closing Warrant to Manako was a non-cash financing transaction; we recognized $60,000 of additional paid-in capital, offset by a corresponding increase in intangible assets, with no cash impact.
Current report
Our TLDA and SAFE-related commitments over the next twelve months include: (i) filing a resale registration statement on Form S-3 (or other available form) covering the shares underlying the Closing Warrant no later than November 24, 2026 (180 days after May 28, 2026), and using commercially reasonable efforts to cause it to become and remain effective; (ii) our ongoing obligation to pay Manako a certain percentage of Revenue Share on Net Revenue generated under Territory customer agreements, which will increase our cost of revenue as our Manako-related sales activity grows, but which is contingent on, and proportionate to, revenue we generate; and (iii) our right, but not obligation, to make an additional equity investment in Manako’s next priced equity financing round pursuant to our pro rata rights under the SAFE Side Letter. None of these commitments currently requires the use of cash beyond amounts already funded, other than usual-course legal and registration-related costs and the contingent Revenue Share described above.
Current report
We do not currently anticipate that the Manako transaction will have a material adverse effect on our short-term or long-term liquidity, although our ability to realize the expected commercial benefits of the TLDA depends on factors outside our control, including the continued availability and operation of the Bittensor Subnet 44 network on which the Platform operates. SeeNote 10 - Revenue Recognition - Manako Technology License and Distribution Agreement for a discussion of a “Subnet Disruption Event,” which, if it continues for more than 20 consecutive days, would give us the right to terminate the TLDA and would suspend both Manako’s platform-availability obligations and our Revenue Share payment obligations during its pendency.
Current report
Manako Warrants
Current report
On May 29, 2026, the Company issued warrants to purchase up to 100,000 shares of the Company’s Common Stock, to Manako Labs, Ltd., at an exercise price of $3.41 per share (the “Closing Warrants”). The Closing Warrant will expire on November 29, 2027. In connection with potential joint development of the Company’s own subnet on the Bittensor network, the Company may issue additional warrants to Manako as follows: (i) warrants to purchase up to 100,000 shares of Common Stock at an exercise price of $4.50 per share, issuable upon the satisfaction of certain conditions (“Tranche A Warrants”), and (ii) warrants to purchase up to 100,000 shares of Common Stock at an exercise price of $5.50 per share, issuable upon the achievement of certain milestones (“Tranche B Warrants” and together with the Closing Warrant and Tranche A Warrants, the “Manako Warrants”).
Current report
The exercise price of each Manako Warrant is subject to customary adjustments for stock dividends, stock splits, reclassifications, stock combinations and the like and dilutive issuances (in each case, subject to certain exceptions). There is no established public trading market for the Manako Warrants, and the Company does not intend to list the Warrants on any national securities exchange or nationally recognized trading system. Manako may not exercise any portion of such Manako Warrants to the extent that they, together with any affiliates, would beneficially own more than 9.99% of the Company’s outstanding shares of Common Stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to the Company, Manako may increase or decrease the beneficial ownership limitation, subject to a maximum of up to 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise.
Current report
In connection with the TLDA, on May 28, 2026, the Company and Manako entered into a Lock-Up Agreement (the “Lock-Up Agreement”), pursuant to which the Manako Warrants are subject to a lock-up period of six (6) months following issuance or until effective registration of the shares of Common Stock issuable upon exercise of the Manako Warrants, whichever is later, followed by twenty-four (24) months of post-lock-up trading restrictions including a daily volume cap of ten percent (10%) of average daily trading volume, a price floor of one hundred twenty percent (120%) of the relevant exercise price, and three (3) trading days’ advance notice of sales. The Lock-Up Agreement provides carve-outs from the post-lock-up trading restrictions for (i) block trades to institutional investors through a registered broker-dealer, (ii) private transfers to Manako affiliates bound by the same obligations, (iii) transfers in connection with any merger, tender offer, or similar transaction involving the Company as issuer, and (iv) sales pursuant to a Rule 10b5-1 plan established outside a blackout period.
Removed paragraphs (7)
Previous report
Digital Assets
Previous report
Managed Services
Previous report
Collaboration Products
Previous report
Collaboration Products revenue was $199,000 and $114,000 for the 2026 First Quarter and the 2025 First Quarter, respectively, an increase of $86,000, or 75%.
Previous report
Digital Assets
Previous report
Managed Services
Previous report
Collaboration Products
Reworded paragraphs (27)
Previous wording
Our critical accounting estimates have not changed materially from those described in Part II, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on March 20, 2026.
Current wording
In addition to the critical accounting estimates described in Part II, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on March 20, 2026, the transaction with Manako Labs Ltd ("Manako") introduced the following estimates during the current period:
Previous wording
We are a public company focused on the Bittensor ecosystem, a decentralized, open-source protocol that coordinates the development and deployment of artificial intelligence (“AI”) models. Our principal asset is TAO, Bittensor’s native cryptocurrency, which we accumulate and stake on the Bittensor network to generate yield in the form of additional TAO tokens. Our goal is to provide public-market investors with economic exposure to the Bittensor ecosystem. As of March 31, 2026, we held approximately 23,557 TAO tokens valued at $7.2 million, with BitGo Trust Company, Inc. (“BitGo”) and the Kraken exchange (“Kraken”, and together with BitGo, the “TAO Custodians”). All of our TAO is staked through our TAO Custodians. As of the filing of this report, we have increased our TAO token holdings to approximately 25,600.
Current wording
We are a public company focused on the Bittensor ecosystem, a decentralized, open-source protocol that coordinates the development and deployment of artificial intelligence (“AI”) models. Our principal asset is TAO, Bittensor’s native cryptocurrency, which we accumulate and stake on the Bittensor network to generate yield in the form of additional TAO tokens. Our goal is to provide public-market investors with economic exposure to the Bittensor ecosystem. As of June 30, 2026, we held approximately 23,335 TAO tokens valued at $4.7 million, with BitGo Trust Company, Inc. (“BitGo”) and the Kraken exchange (“Kraken”, and together with BitGo, the “TAO Custodians”). All of our TAO is staked through our TAO Custodians.
Previous wording
The Company is also operating legacy businesses centered around our patented Mezzanine™ product line and our managed services for video collaboration and network solutions. In conjunction with the Company's June 2025 financing, the Company began migrating its product focus from Mezzanine™ and managed services to building a digital asset treasury company.
Current wording
The Company is also operating legacy businesses including managed services for network solutions and video collaboration, and collaboration products. In conjunction with the Company's June 2025 financing, the Company began migrating its product focus from our legacy businesses to building a digital asset treasury company.
Previous wording
Our current primary activity is accumulating and staking TAO, and we allocate substantial portions of our available cash to purchase TAO with the goal of maximizing TAO holdings per outstanding common share. As of March 31, 2026, and December 31, 2025, approximately 72% and 66% of our total assets (including cash) were held in TAO, respectively. We intend to continue allocating substantial portions of our excess cash to TAO without a formal cap on the percentage of assets invested. While our strategy is to accumulate and hold TAO over the long term, we may, from time to time, sell a portion of our TAO holdings to fund operating expenses or otherwise manage the Company's cash and liquidity position. During the three months ended March 31, 2026, we sold 1,457 TAO tokens for this purpose. SeeNote 3 - Digital Assets for further details.
Current wording
Our current primary activity is accumulating and staking TAO, and we allocate substantial portions of our available cash to purchase TAO with the goal of maximizing TAO holdings per outstanding common share. As of June 30, 2026, and December 31, 2025, approximately 69% and 66% of our total assets (including cash) were held in TAO, respectively. We intend to continue allocating substantial portions of our excess cash to TAO without a formal cap on the percentage of assets invested. While our strategy is to accumulate and hold TAO over the long term, we may, from time to time, sell a portion of our TAO holdings to fund operating expenses or otherwise manage the Company's cash and liquidity position. During the three and six months ended June 30, 2026, we sold 2,502.23 and 3,959.23 TAO tokens, respectively, for this purpose. SeeNote 3 - Digital Assets for further details.
Previous wording
We do not hedge our TAO exposure and do not hold any other digital assets. All TAO is staked as soon as trade settlement permits, and we currently spread staking across both of our TAO Custodians. There are significant risks associated with our concentrated, unhedged position in a single digital asset. We have not implemented any hedging strategies to date, and there can be no assurance that any such strategies will be implemented or, if implemented, effective. See “Item 1A. Risk Factors.” We stake substantially all of our TAO through our TAO Custodians, who delegate our tokens to validators on the Bittensor network. In exchange for our staked TAO supporting a validator’s operations, we receive a proportional share of the TAO rewards earned by that validator, net of the validator’s commission (commonly referred to as the validator’s “take”). Rewards are calculated and distributed directly to our digital wallets by the network as part of its consensus mechanism.
Current wording
We do not hedge our TAO exposure and do not hold any other digital assets. All TAO is staked as soon as trade settlement permits, and we currently spread staking across both of our TAO Custodians. There are significant risks associated with our concentrated, unhedged position in a single digital asset. We have not implemented any hedging strategies to date, and there can be no assurance that any such strategies will be implemented or, if implemented, effective. We stake substantially all of our TAO through our TAO Custodians, who delegate our tokens to validators on the Bittensor network. In exchange for our staked TAO supporting a validator’s operations, we receive a proportional share of the TAO rewards earned by that validator, net of the validator’s commission (commonly referred to as the validator’s “take”). Rewards are calculated and distributed directly to our digital wallets by the network as part of its consensus mechanism.
Previous wording
We have also been evaluating opportunities to participate more directly in the Bittensor network, including potential investments in or partnerships with teams operating subnets on the platform. During 2025, and through the date of this Report, we conducted due diligence on a number of subnet projects to assess their viability, technology, and potential alignment with our strategy. As of the date of this Report, we have not entered into any binding commitments with respect to subnet investments or partnerships, and no assurance can be given that any such opportunities will be pursued or, if pursued, will be completed on terms favorable to the Company or at all.
Current wording
We have also been evaluating opportunities to participate more directly in the Bittensor network, including potential investments in or partnerships with teams operating subnets on the platform. During 2025, and through the date of this Report, we conducted due diligence on a number of subnet projects to assess their viability, technology, and potential alignment with our strategy. This diligence led to the Company's investment in Manako, discussed below.
Previous wording
Our product is called Mezzanine™, a family of turn-key products that enable dynamic and immersive visual collaboration across multi-users, multiple screens, multiple devices, and multiple locations. Mezzanine™ allows multiple people to share, control, and arrange content simultaneously, from any location, enabling all participants to see the same content in its entirety at the same time in identical formats, resulting in dramatic enhancements to both in-room and virtual videoconference presentations. Applications include video telepresence, laptop and application sharing, whiteboard sharing, and slides. Spatial input allows content to be spread across screens spanning different walls, be scalable to an arbitrary number of displays, and interact with our proprietary wand device. Mezzanine™ substantially enhances day-to-day virtual meetings with technology that accelerates decision making, improves communication, and increases productivity. Mezzanine™ scales up to support the most immersive and commanding innovation centers; across to link labs, conference spaces, and situation rooms; and down for the smallest work groups. Mezzanine’s digital collaboration platform can be sold as delivered systems in various configurations for small teams to total immersion experiences. The family includes the 200 Series (two display screens), 300 Series (three screens), and 600 Series (six screens). 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, multiple screens, multiple devices, and multiple locations.
Previous 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. We have not invested in research and development or sales and marketing for our Mezzanine™ product in recent years. Given the declines in sales, we announced the end of life for Mezzanine™ in December 2025, and we expect no product revenue from Mezzanine™ products and only minor maintenance revenue for the remainder of 2026.
Current wording
Historically, customers 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. We have not invested in research and development or sales and marketing for our Mezzanine™ product in recent years. Given the declines in sales, we announced the end of life for Mezzanine™ in December 2025, and we expect no product revenue from Mezzanine™ products and only minor maintenance revenue for the remainder of 2026.
Previous wording
Three Months Ended March 31, 2026 (the*** “2026 First Quarter”), compared to the Three Months Ended March 31, 2025*** (the**“2025 First Quarter”)
Current wording
Three Months Ended June 30, 2026 (the*** “2026 Second Quarter”), compared to the Three Months Ended June 30, 2025*** (the**“2025 Second Quarter”)
Previous wording
The following table summarizes the key income statement components that we use to evaluate our financial performance on a consolidated and reportable segment basis for the 2026 First Quarter and the 2025 First Quarter (in thousands):
Current wording
The following table summarizes the key income statement components that we use to evaluate our financial performance on a consolidated and reportable segment basis for the 2026 Second Quarter and the 2025 Second Quarter (in thousands):
Previous wording
*Revenue.*Total revenue was $707,000 and $622,000 for the 2026 First Quarter and the 2025 First Quarter, respectively, an increase of $85,000 or 14%. The increase was driven by $86,000 of Digital Asset staking revenue, a new revenue stream that commenced in the second half of fiscal year 2025 and an increase of $85,000 in Collaboration Products Revenue. This increase was partially offset by a decrease of $86,000 in Managed Services Revenue. 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 was $522,000 and $592,000 for the 2026 Second Quarter and the 2025 Second Quarter, respectively, a decrease of $70,000 or 12%. The decrease was driven by a reduction in Managed Services and Collaboration Products revenue, partially offset by an increase of $103,000 in Digital Asset staking revenue, a new revenue stream that commenced in the second half of fiscal year 2025. 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
Digital Assets revenue was $86,000 for the 2026 First Quarter. The Company did not have Digital Assets operations during the 2025 First Quarter, as the Company began its digital asset treasury strategy in June 2025. The revenue was entirely comprised of TAO staking rewards.
Current wording
Digital Assets revenue was $105,000 and $2,000 for the 2026 Second Quarter and 2025 Second Quarter, respectively. The increase resulted from the Company beginning its digital asset treasury strategy in June 2025. The revenue was entirely comprised of TAO staking rewards.
Previous wording
Managed Services revenue was $422,000 and $508,000 for the 2026 First Quarter and the 2025 First Quarter, respectively, a decrease of $86,000, or 17%. The decrease was primarily attributable to the following:
Current wording
Managed Services revenue was $415,000 and $497,000 for the 2026 Second Quarter and the 2025 Second Quarter, respectively, a decrease of $82,000, or 16%. The decrease was primarily attributable to a:
Previous wording
*Cost of Revenue.*Total cost of revenue was $237,000 and $373,000 for the 2026 First Quarter and the 2025 First Quarter, respectively, a decrease of $136,000, or 36%. Cost of revenue includes all internal and external costs related to the delivery of revenue, including taxes billed to customers. Cost of revenue by segment is presented in the following table (in thousands):
Current wording
*Cost of Revenue.*Total cost of revenue was $248,000 and $364,000 for the 2026 Second Quarter and the 2025 Second Quarter, respectively, a decrease of $116,000, or 32%. Cost of revenue includes all internal and external costs related to the delivery of revenue, including taxes billed to customers. Cost of revenue by segment is presented in the following table (in thousands):
Previous wording
The Digital Assets segment recorded a cost of revenue of $6,000 and a gross profit of $80,000, or 93%, for the 2026 First Quarter. The Company did not have Digital Assets operations during the 2025 First Quarter. Cost of revenue for digital assets consists of custodian fees and advisor fees on the Company’s staked digital assets.
Current wording
The Digital Assets segment recorded a cost of revenue of $6,000 and a gross profit of $99,000, or 94%, for the 2026 Second Quarter. The Company did not have cost of revenue related to its Digital Assets operations during the 2025 Second Quarter. Cost of revenue for digital assets consists of custodian fees and advisor fees on the Company’s staked digital assets.
Previous wording
The Managed Services segment recorded a cost of revenue of 223,000 and $371,000 for the 2026 First Quarter and the 2025 First Quarter, respectively, a decrease of $148,000, or 40%. The Managed Services segment recorded a gross profit percentage of 47% and 27% for the 2026 First Quarter and the 2025 First Quarter, respectively. The increase in gross margin was primarily due to reduced personnel expenses for the 2026 First Quarter.
Current wording
The Managed Services segment recorded a cost of revenue of $239,000 and $360,000 for the 2026 Second Quarter and the 2025 Second Quarter, respectively, a decrease of $121,000, or 34%. The Managed Services segment recorded a gross profit percentage of 42% and 28% for the 2026 Second Quarter and the 2025 Second Quarter, respectively. The increase in gross margin was primarily due to reduced personnel expenses for the 2026 Second Quarter.
Previous wording
The Collaboration Products segment recorded a cost of revenue of $8,000 and $2,000 for the 2026 First Quarter and the 2025 First Quarter, respectively, an increase of $6,000. The Collaboration Products segment recorded a gross profit percentage of 96% and 98% for the 2026 First Quarter and the 2025 First Quarter, respectively. The decrease in gross margin is mainly attributable to a bad debt recovery during the 2025 First Quarter.
Current wording
The Collaboration Products segment recorded a cost of revenue of $3,000 and $4,000 for the 2026 Second Quarter and the 2025 Second Quarter, respectively, a decrease of $1,000. The Collaboration Products segment recorded a gross profit percentage of -50% and 96% for the 2026 Second Quarter and the 2025 Second Quarter, respectively. The decrease in gross margin is mainly attributable to the reduction in revenue quarter over quarter.
Previous wording
Research and Development. Research and development expenses were $3,000 for the 2025 First Quarter, and there were no research and development expenses for the 2025 First Quarter. Research and development expenses include internal and external costs related to developing features and enhancements to existing product offerings. The 100% decrease is primarily attributable to the Company’s change in focus to digital asset treasury.
Current wording
Research and Development. Research and development expenses were $3,000 for the 2025 Second Quarter, and there were no research and development expenses for the 2026 Second Quarter. Research and development expenses include internal and external costs related to developing features and enhancements to existing product offerings. This decrease is primarily attributable to the Company’s change in focus to digital asset treasury.
Previous wording
General and Administrative Expenses. General and administrative expenses were $1,022,000 and $929,000 for the 2026 First Quarter and the 2025 First Quarter, respectively, an increase of $93,000, or 10%. 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 increase is primarily attributable to higher professional service fees, stock-based expense, and insurance expenses, driven by the transition into the digital asset space.
Current wording
General and Administrative Expenses. General and administrative expenses were $1,115,000 and $902,000 for the 2026 Second Quarter and the 2025 Second Quarter, respectively, an increase of $213,000, or 24%. 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 increase is primarily attributable to higher professional service fees, stock-based expense, and insurance expenses, driven by the transition into the digital asset space and the Manako deal.
Previous wording
*Loss from Operations.*The Company recorded an operating loss of $559,000 and $691,000 for the 2026 First Quarter and the 2025 First Quarter, respectively, a decrease in operating loss of $132,000, or 19%. The improvement was mainly attributable to an increase in gross profit of $221,000, partially offset by an increase in total operating expenses of $89,000.
Current wording
*Loss from Operations.*The Company recorded an operating loss of $841,000 and $683,000 for the 2026 Second Quarter and the 2025 Second Quarter, respectively, an increase in operating loss of $158,000, or 23%. This increase was mainly attributable to the increase in total operating expenses of $204,000, partially offset by an increase in gross profit of $46,000.
Previous wording
*Other Income, Net.*Other income, net, was $2,256,000 and $26,000 for the 2026 First Quarter and the 2025 First Quarter, respectively, an increase of $2,230,000. The increase was primarily driven by $2,250,000 of unrealized gains and $52,000 of realized gains on the Company’s digital assets during the 2026 First Quarter. Other income for the 2025 First Quarter was primarily comprised of $27,000 in interest income related to the Company’s cash accounts.
Current wording
*Other (Expense) Income, Net.*Other expense, net, was $2,448,000 for the 2026 Second Quarter and other income, net, was $78,000 for the 2025 Second Quarter, a decrease of $2,526,000. The decrease was primarily driven by $2,295,000 of unrealized losses and $166,000 of realized losses on the Company’s digital assets during the 2026 Second Quarter and a reduction of interest income of $34,000 quarter over quarter. Other income for the 2025 Second Quarter was primarily comprised of $47,000 in interest income related to the Company’s cash accounts and an unrealized gain of $31,000 on the Company's digital assets.
Previous wording
Sales and Marketing Expenses. Sales and marketing expenses were $7,000 and $8,000 for the 2026 First Quarter and the 2025 First Quarter, respectively, a decrease of $1,000, or 13%. The decrease is primarily attributable to reduced personnel expenses during the 2026 First Quarter.
Current wording
Sales and Marketing Expenses. Sales and marketing expenses were $7,000 and $14,000 for the six months ended June 30, 2026 and the six months ended June 30, 2025, respectively, a decrease of $7,000, or 50%. The decrease is primarily attributable to reduced personnel expenses during the six months ended June 30, 2026.
Previous wording
As of March 31, 2026, we had $2,130,000 in cash and cash equivalents, $7,209,000 in digital assets, and working capital of $8,723,000. For the three months ended March 31, 2026, we recorded net income of $1,697,000, and we used $650,000 of net cash in operating activities.
Current wording
As of June 30, 2026, we had $735,000 in cash and cash equivalents, $4,709,000 in digital assets, and working capital of $4,432,000. For the six months ended June 30, 2026, we recorded a net loss of $1,593,000, and we used $1,189,000 of net cash in operating activities.
Previous wording
Investing activities provided $522,000 of net cash for the three months ended March 31, 2026, consisting of proceeds from the sale of digital assets. While our long-term strategy is to accumulate and hold TAO, we expect to continue to sell portions of our TAO holdings from time to time to fund operating expenses and manage our cash and liquidity position. The amount and timing of future sales will depend on our operating cash needs, prevailing TAO market prices, and our assessment of market liquidity conditions at the time. However, our ability to convert TAO to cash in practice depends on available market liquidity on the exchanges where TAO trades, and we have not entered into any committed credit facilities or other arrangements that would provide liquidity independent of our digital asset holdings. TAO prices are highly volatile and could decline significantly from current levels, which would reduce the fair value of our holdings and potentially impair our ability to fund operations through digital asset sales without depleting our token position at unfavorable prices
Current wording
Investing activities used $334,000 of net cash for the six months ended June 30, 2026, consisting of proceeds from the sale of digital assets of $1.2 million, purchases of digital assets of $0.5 million, and the $1.0 million investment in Manako Labs, Ltd. While our long-term strategy is to accumulate and hold TAO, we expect to continue to sell portions of our TAO holdings from time to time to fund operating expenses and manage our cash and liquidity position. The amount and timing of future sales will depend on our operating cash needs, prevailing TAO market prices, and our assessment of market liquidity conditions at the time. However, in practice, our ability to convert TAO to cash depends on available market liquidity on the exchanges where TAO trades, and we have not entered into any committed credit facilities or other arrangements that would provide liquidity independent of our digital asset holdings. TAO prices are highly volatile and could decline significantly from current levels, which would reduce the fair value of our holdings and potentially impair our ability to fund operations through digital asset sales without depleting our token position at unfavorable prices
Previous wording
On June 5, 2025, the Company issued warrants to acquire up to 100,000 shares of our Common Stock (the "Advisor Warrants") to Brandon Sofer, our advisory agent (in such capacity, the "Advisory Agent"), in connection with the Advisory Agent's provision of certain treasury advisory services. The terms of the Advisor Warrants are identical to those of the Placement Agent Warrants, except that the Advisor Warrants will expire on June 5, 2028, are initially exercisable in part beginning on July 7, 2025 at a price of $3.77 per share of Common Stock, and will vest in equal installments at a rate of 1/12th (8.33%) per month, beginning on the thirty day anniversary of the issue date, for twelve month.
Current wording
On June 5, 2025, the Company issued warrants to acquire up to 100,000 shares of our Common Stock (the "Advisor Warrants") to Brandon Sofer, our advisory agent (in such capacity, the "Advisory Agent"), in connection with the Advisory Agent's provision of certain treasury advisory services. The terms of the Advisor Warrants are identical to those of the Placement Agent Warrants, except that the Advisor Warrants will expire on June 5, 2028, are initially exercisable in part beginning on July 7, 2025 at a price of $3.77 per share of Common Stock, and will vest in equal installments at a rate of 1/12th (8.33%) per month, beginning on the thirty day anniversary of the issue date, for twelve months.
Previous wording
As of March 31, 2026, there were 150 shares of Series F Preferred Stock issued and outstanding, and accrued dividends of $26,000.
Current wording
As of June 30, 2026, there were 150 shares of Series F Preferred Stock issued and outstanding, and accrued dividends of $30,000.
Previous wording
The Preferred Warrants were set to expire three years from the date of issuance, or March 31, 2026, and are exercisable for cash. On March 31, 2026, the Company and the Preferred Warrant holders agreed to extend the terms of the Preferred Warrants to expire May 15, 2026.
Current wording
The Preferred Warrants were set to expire three years from the date of issuance, or March 31, 2026, and are exercisable for cash. On March 31, 2026, the Company and the Preferred Warrant holders agreed to extend the terms of the Preferred Warrants to expire May 15, 2026. On May 15, 2026, the Company and the Preferred Warrant holders agreed to extend the terms of the Preferred Warrants to expire June 30, 2026. On June 30, 2026, the Company and the Preferred Warrant holders agreed to extend the terms of the Preferred Warrants to expire September 30, 2026.
Rearranged current paragraphs (9)
Current report — wording carried from elsewhere
The following table summarizes the key income statement components that we use to evaluate our financial performance on a consolidated and reportable segment basis for the six months ended June 30, 2026 and the six months ended June 30, 2025 (in thousands):
Current report — wording carried from elsewhere
*Revenue.*Total revenue was $1,229,000 and $1,214,000 for the six months ended June 30, 2026 and the six months ended June 30, 2025, respectively, an increase of $15,000 or 1%. The increase was driven by $191,000 of Digital Asset staking revenue, a new revenue stream that commenced in the second half of fiscal year 2025, partially offset by a decrease of $174,000 in Managed Services and Collaboration Products revenue. 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 report — wording carried from elsewhere
Digital Assets revenue was $191,000 and $2,000 for the six months ended June 30, 2026 and the six months ended June 30, 2025, respectively. The Company began its digital asset treasury strategy in June 2025. The revenue was entirely comprised of TAO staking rewards.
Current report — wording carried from elsewhere
*Cost of Revenue.*Total cost of revenue was $485,000 and $737,000 for the six months ended June 30, 2026 and the six months ended June 30, 2025, respectively, a decrease of $252,000, or 34%. Cost of revenue includes all internal and external costs related to the delivery of revenue, including taxes billed to customers. Cost of revenue by segment is presented in the following table (in thousands):
Current report — wording carried from elsewhere
The Digital Assets segment recorded a cost of revenue of $12,000 and a gross profit of $179,000, or 94%, for the six months ended June 30, 2026. The Company did not have cost of revenue related to its Digital Assets operations during the six months ended June 30, 2025. Cost of revenue for digital assets consists of custodian fees and advisor fees on the Company’s staked digital assets.
Current report — wording carried from elsewhere
Operating expenses are presented in the following table (in thousands):
Current report — wording carried from elsewhere
Research and Development. Research and development expenses were $6,000 for the six months ended June 30, 2026, and there were no research and development expenses for the six months ended June 30, 2025. Research and development expenses include internal and external costs related to developing features and enhancements to existing product offerings. This decrease is primarily attributable to the Company’s change in focus to digital asset treasury.
Current report — wording carried from elsewhere
General and Administrative Expenses. General and administrative expenses were $2,137,000 and $1,831,000 for the six months ended June 30, 2026 and the six months ended June 30, 2025, respectively, an increase of $306,000, or 17%. 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 increase is primarily attributable to higher professional service fees, stock-based expense, and insurance expenses, driven by the transition into the digital asset space.
Current report — wording carried from elsewhere
*Loss from Operations.*The Company recorded an operating loss of $1,400,000 and $1,374,000 for the six months ended June 30, 2026 and the six months ended June 30, 2025, respectively, an increase in operating loss of $26,000, or 2%. The increase was mainly attributable to the increase in total operating expenses of $293,000, partially offset by an increase in gross profit of $267,000.