Filed 2026-03-20 · Period ending 2025-12-31 · 54,233 words · SEC EDGAR
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# TaoWeave, Inc. (TWAV) — 10-K
**Filed:** 2026-03-20
**Period ending:** 2025-12-31
**Accession:** 0001437749-26-009237
**Source:** [SEC EDGAR](https://www.sec.gov/Archives/edgar/data/746210/000143774926009237/)
**Origin leaf:** 9e1ef09029ae9d8df791dedaa82eb59c3a732e70c5da83b8d972cf1acb6bf320
**Words:** 54,233
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Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION**
**WASHINGTON, D.C. 20549**
**FORM 10-K**
(Mark One)
| | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE | |
| | ACT OF 1934 | |
**For the fiscal year endedDecember 31, 2025**
**OR**
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES | |
| | EXCHANGE ACT OF 1934 | |
**For the transition period from ________ to __________**
**Commission file number: 001-35376**
**TAOWEAVE, INC.**
(Exact name of registrant as specified in its charter)
| Delaware | | 77-0312442 | |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) | |
| | | | |
| 110 16th Street, Suite 1400-1024 | | | |
| Denver, CO | | 80202 | |
| (Address of principal executive offices) | | (Zip Code) | |
| | | | |
| Registrants telephone number, including area code:(213) 683-8863 ext. 5 | |
| | |
| Securities registered pursuant to Section12(b) of the Exchange Act: | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |
| Common Stock, $0.0001 par value | TWAV | Nasdaq Capital Market | |
**Securities registered pursuant to Section****12(g) of the Exchange Act:** None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes No
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule12b-2 of the Exchange Act.
[Table of Contents](#toc)
| Large accelerated filer | | Accelerated filer | | |
| Non-accelerated filer | | Smaller reporting company | | |
| | Emerging growth company | | |
Indicate by checkmark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes No
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).
Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Act). Yes No
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant computed by reference to the price at which the common equity was last sold on June30, 2025, the last business day of the Registrants most recently completed second fiscal quarter, was $5,128,910.
The number of shares of the Registrants common stock outstanding as ofMarch 19, 2026,was 3,327,210.
[Table of Contents](#toc)
**TAOWEAVE, INC.**
**Index**
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PART I |
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1. |
Business |
1 |
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1A. |
Risk Factors |
5 |
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1B. |
Unresolved Staff Comments |
19 |
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1C. |
Cybersecurity |
19 |
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2. |
Properties |
20 |
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3. |
Legal Proceedings |
20 |
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4. |
Mine Safety Disclosures |
20 |
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PART II |
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5. |
Market for Registrants Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities |
21 |
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6. |
Reserved |
21 |
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7. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
21 |
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7A. |
Qualitative and Quantitative Disclosures About Market Risk |
28 |
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8. |
Financial Statements and Supplemental Data |
28 |
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9 |
Change in and Disagreements with Accountants on Accounting and Financial Disclosure |
28 |
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9A. |
Controls and Procedures |
29 |
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9B. |
Other Information |
29 |
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9C. |
Disclosures Regarding Foreign Jurisdictions that Prevent Inspections |
29 |
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PART III |
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10. |
Directors, Executive Officers and Corporate Governance |
30 |
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11. |
Executive Compensation |
35 |
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12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
39 |
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13. |
Certain Relationships and Related Transactions, and Director Independence |
40 |
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14. |
Principal Accounting Fees and Services |
41 |
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PART IV |
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15. |
Exhibits and Financial Statement Schedules |
42 |
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16. |
Signatures |
46 |
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i
[Table of Contents](#toc)
**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.
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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 assetswe 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
[Table of Contents](#toc)
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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
[Table of Contents](#toc)
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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 likelydeclinesignificantly 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
[Table of Contents](#toc)
**PART I**
**Item 1.****Business**
**Overview**
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, Bittensors 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.
During the year ended December 31, 2025, we deployed approximately$8.7 million to acquire approximately24,128TAO tokens through purchases executed via BitGo Trust Company, Inc. (BitGo) and the Kraken exchange (Kraken, and together with BitGo, the TAO Custodians). As of December 31, 2025, we held approximately24,665TAO tokens, inclusive of approximately544TAO earned through staking rewards during the period. All of our TAO is staked.
Since our private placement financing in June 2025 (the 2025 Private Placement), 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, 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.
We also operate legacy businesses centered around our patented Mezzanine product line and managed services for video collaboration and network solutions. In conjunction with our 2025 Private Placement, we began transitioning our focus from these legacy operations to the Bittensor ecosystem.
**Background on Bittensor and TAO**
Bittensor is a decentralized network, built on a dedicated Layer 1 blockchain called Subtensor using the Substrate framework, that creates an open marketplace for AI. The network is organized into independent sub-networks called subnets, each focused on a specific type of AI task such as text generation, image recognition, or data analysis. Within each subnet, independent contributors (commonly referred to as miners) produce AI outputs, and other participants (commonly referred to as validators) evaluate the quality of that work. An on-chain algorithm called Yuma Consensus aggregates validator evaluations across the network and allocates newly minted TAO rewards accordinglya process commonly referred to as Proof-of-Intelligence. Contributors who produce higher-quality outputs earn more TAO; validators who evaluate accurately also earn more TAO.
TAO serves three functions within the network: it is the unit of value used to reward participants, the staking asset that determines a participants influence and share of rewards, and the token used to pay transaction fees on the Subtensor blockchain.
TAO has a fixed supply cap of 21,000,000 tokens. New TAO is emitted as rewards to network participants at a rate that declines over time through periodic halving events, similar in structure to Bitcoins supply schedule. The first halving occurred in December 2025, reducing daily emissions from approximately 7,200 TAO to approximately 3,600 TAO. As of the filing of this Report, TAOs circulating supply was approximately 10.8 million tokens with a market capitalization of approximately $3.0 billion, according to publicly available sources. Circulating supply is dynamic: daily emissions are partially offset by tokens consumed through subnet registration and other protocol mechanisms.
**Our Cryptocurrency Asset Strategy**
Our current primary activity is accumulating and staking TAO. We have adopted a long-only TAO accumulation policy under which we allocate substantial portions of our available cash to purchase TAO with the goal of maximizing TAO holdings per outstanding common share. As of December 31, 2025, approximately 66% of our total assets (including cash) were held in TAO. We intend to continue allocating substantial portions of our excess cash to TAO without a formal cap on the percentage of assets invested.
We do not hedge our TAO exposure and do not hold any other digital assets. We have not sold any TAO since inception of our digital asset strategy. 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.
1
[Table of Contents](#toc)
**Our Staking Program**
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 validators operations, we receive a proportional share of the TAO rewards earned by that validator, net of the validators commission (commonly referred to as the validators take). Rewards are calculated and distributed directly to our digital wallets by the network as part of its consensus mechanism.
During the year ended December 31, 2025, we earned approximately544 TAO through staking, representing approximately$186,000 in revenue. Staking yields are variable and depend on several factors, including validator performance, total network stake, and the dynamics of the specific subnets to which our TAO is delegated. The Bittensor protocol does not impose lock-up periods or unbonding delays; as of December 31, 2025, all of our staked TAO could be unstaked and transferred without protocol-enforced waiting periods. We do not currently engage in direct subnet mining or validation but may explore such activities in the future.
In February 2025, the Bittensor network implemented an upgrade known as Dynamic TAO (dTAO), which changed how staking rewards flow through the network. Prior to dTAO, stakers received a share of rewards based on their overall network delegation. Under dTAO, staking is directed into specific subnets, where TAO is exchanged for that subnets internal token (alpha). Rewards flow to stakers within each subnet based on their alpha holdings, and exiting a subnet position converts alpha back to TAO at prevailing market rates. This means our staking returns are now influenced by which subnets we stake into and how those subnets perform relative to the broader network, adding a layer of variability that did not exist before the upgrade. See Item 1A. Risk Factors for further discussion of risks related to dTAO.
**Mezzanine****Product Offerings**
Ourproduct 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 screensspanning different walls, be scalable to an arbitrary number of displays, and interactwith 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. Mezzanines 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.
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 end-of-life for Mezzanine in 2025, and we expect to end the sale of Mezzanine products and maintenance after the first quarter of 2026.
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[Table of Contents](#toc)
**Managed Services for Network**
We provide our customers with network solutions that ensure reliable, high-quality, and secure traffic of video, data, and internet. Network services are offered to our customers on a subscription basis. Our network services business incurs variable costs associated with purchasing and reselling this connectivity.
**Managed Services for Video Collaboration**
We provide a range of managed services for video collaboration, from automated to orchestrated, to simplify the user experience and drive adoption across our customers enterprises. We deliver our services through a hybrid service platform or as a service layer on top of our customers video infrastructure. We provide our customers with i) managed videoconferencing, where we set up and manage customer videoconferences, and ii) remote service management, where we provide 24/7 support and management of customer video environments.
**Sales and Marketing****Mezzanine****and Managed Services**
We sell globally through direct customer sales and channel partners. To preserve capital, the Company significantly reduced its investments in sales and marketing during the last several years. For the yearsended December 31, 2025, and 2024,sales and marketing expenses were$21,000 and $181,000, respectively.
**Customers****Mezzanine****and Managed Services**
The majority of our revenue for the years ended December 31, 2025, and 2024, was generated from direct sales,with the remainder sold through distribution channels. These channels include systems integrators, channel partners, other resellers, and distributors. Sales to these service providers have been characterized by large and sporadic purchases and longer sales cycles. Historically, we have seen fluctuations in our gross margins based on changes in the balance of our distribution channels.
A significant portion of our revenue is generated from a limited number of customers. For the years ended December 31, 2025, and 2024, one major customer accounted for79% and 85% of the Companys total consolidated revenue, respectively. The composition of our significant customers will vary from period to period, and we expect that most of our revenue will continue, for the foreseeable future, to come from a relatively small number of customers. Consequently, our financial results may fluctuate significantly from period to period based on the actions of one or more significant customers.
**Competition****Mezzanine****and Managed Services**
The market for communication and collaboration technology services is competitive and rapidly changing. Certain features of our current Mezzanine product offerings compete in the communication and collaboration technologies market with products offered from Cisco WebEx, Zoom, LogMeIn, and GoToMeeting, as well as withbundled productivity solutions providers that offer limited content-sharing capabilities, such as Microsoft Teams and Google G Suite. In the rapidly evolving Ideation market, certain elements of our application compete with Microsoft, Google, InFocus, Bluescape, Mersive, Barco, Nureva, and Prysm.
With respect to our managed services for video collaboration, we primarily compete with managed services companies, videoconferencing equipment resellers, and telecommunication providers, including BT Conferencing, AT&T, Verizon, LogMeIn, Yorktel, ConvergeOne, and AVI-SPL. We also compete with companies that offer hosted videoconference bridging solutions, including Vidyo and Zoom. Lastly, the technology and software providers, including Cisco, LifeSize, Microsoft, and Polycom, are delivering competitive cloud-based videoconferencing and calling services. With the technology advancements over the past few years, including browser-based and mobile video, the options for video collaboration solutions and services are greater than ever before. Regarding our network managed services, we primarily compete with telecommunications carriers, including British Telecom, AT&T, Verizon, and Telus. Our competitors offer services similar to ours both bundled and unbundled, creating a highly competitive environment that putspressure on the pricing of these services. Revenue attributable to our managed services described above has declined in recent years, primarily due to customer losses to competition. We expect this trend to continuefor our managed services business.
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**Intellectual Property****Mezzanine****and Managed Services**
G-speak is the core technology platform for Mezzanine. It enables the development of applications that run across multiple screens and devices. Our customers use the platform to solve big data problems, collaborate more effectively, and go from viewing pixels on a single screen to interacting with pixels on every screen.
Videoconferencing has traditionally posed challenges for users, requiring a complex maze of systems and networks to navigate and closely manage. Although most of the business-quality video systems today are standards-based, there are inherent interoperability problems between different vendors video equipment, resulting in communication islands. Our suite of managed services for video collaboration can be accessed and utilized by customers regardless of their technology or network. Customers who purchase a Cisco, Polycom, Avaya, or LifeSize (Logitech) system, or use certain other third-party video communications software, such as Microsoft, WebEx, or WebRTC, may all take advantage of our services regardless of their network choice. Our services support all standard video signaling protocols, including SIP, H.323, and Integrated Services Digital Network (ISDN), using infrastructure from variousmanufacturers.
**Research and Development**
During the years ended December 31, 2025, and 2024, the Company incurred research and development expenses of$10,000 and $155,000, respectively, related to developing features and enhancements to our Mezzanine product offerings.
**Employees**
As of December 31, 2025, we had 7 total full-time employees. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing, and integrating our existing and new employees, advisors, and consultants. Our compensation program is designed to attract, retain, and motivate highly qualified employees and executives and comprisesa mix of competitive base salaries, bonuses, equity compensation awards, andother employee benefits. Our employees are not covered by a collective bargaining agreement, and we consider our relations with our employees to be good. We are committed to diversity and inclusion as well as equitable pay within our workforce. In addition, the health and safety of our employees, customers, and communities are of primary concern to us.
**Corporate History**
TaoWeave, Inc. was formed as a Delaware corporation in May 2000. Prior to March 6, 2020, TaoWeave, Inc. was named Glowpoint, Inc. (Glowpoint). On October 1, 2019, the Company closed an acquisition of all of the outstanding equity interests of Oblong Industries, Inc., a privately held Delaware corporation founded in 2006 (Oblong Industries), pursuant to the terms of an Agreement and Plan of Merger (as amended, the Merger Agreement). Pursuant to the Merger Agreement, among other things, Oblong Industries became a wholly owned subsidiary of the Company (the Merger). On March 6, 2020, Glowpoint changed its name to Oblong, Inc. Oblong, Inc. changed its name to TaoWeave, Inc. on December 8, 2025, reflecting its evolution into a digital asset treasury company designed for public market investors.
**Available Information**
We are subject to the Exchange Act's reporting requirements. The Act requires us to file periodic reports, proxy statements, and other information with the Securities and Exchange Commission (SEC). The SEC maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements, and other information that we file electronically with the SEC.
In addition, we make available, free of charge, on our Internet website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file this material with, or furnish it to, the SEC. You may review these documents on our website at www.taoweave.ai by accessing the investor relations section. Our website and the information contained on or connected to our website are not incorporated by reference herein, and our web address is included as an inactive textual reference only.
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**Item 1A.****Risk Factors**
Our business faces numerous risks, including those set forth below and those described elsewhere in this Report or in our other filings with the SEC. The risks described below are not the only risks that we face, nor are they necessarily listed in order of significance. Other risks and uncertainties may also affect our business. Any of these risks may have a material adverse effect on our business, financial condition, results of operations, and cash flow. When making an investment decision with respect to our common stock, you should also refer to the other information contained or incorporated by reference in this Report, including our Consolidated Financial Statements and the related notes.
**Risks Related to Digital Assets**
**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 purchasedinto cash with a value substantially below the purchase price.
**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 theSecurities Act of 1933, as amended (the Securities Act), orthe 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.
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.
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 theInvestment Company Act. This classification would subject us to additional periodic reporting, disclosure requirements, and regulatory compliance obligations, significantly increasing our operational costs.
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 theInvestment 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.
Furthermore, state regulators may conclude that the digital assets we hold are securities under state laws, requiring us to comply with state-specific securities regulations. States like California have stricter definitions of investment contracts than the SEC, increasing the risk of additional regulatory scrutiny.
**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.
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.
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**The classification of digital assetswe hold as commoditiescould 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.
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.
**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 tobenefit and protectinvestors. 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.
**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.
Negative perception, a lack of stability in the broader digital asset markets and the closure, temporary shutdown or operational disruption of digital asset trading venues, lending institutions, institutional investors, institutional miners, custodians, or other major participants in the digital asset ecosystem, due to fraud, business failure, cybersecurity events, government-mandated regulation, bankruptcy, or for any other reason, may result in a decline in confidence in digital assets and the broader digital asset ecosystem and greater volatility in the price of digital assets. The price of our listed securities may be affected by the value of our future digital asset holdings, and the failure of a major participant in the ecosystem could have a material adverse effect on the market price of our listed securities.
**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 in2025 from the price decline in TAObut may not fully reflect the potential variability in earningswe may experiencefrom 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 thanwe have experienced in prior periods.
**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.
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**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 unsecuredand thereforesubordinated 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.
Additionally, digital asset lending platforms are vulnerable to operational and cybersecurity risks. Technical failures, software bugs, or system outages could disrupt lending activities, delay transactions, or result in inaccurate record-keeping. Cybersecurity threats, including hacking, phishing, and other malicious attacks, pose further risks, potentially leading to the loss, theft, or misappropriation of our loaned bitcoin. A successful cyberattack or security breach could materially and adversely impact our financial position, reputation, and ability to conduct future lending activities.
**We may incur losses from staking, delegating, and other related services.**Crypto assets that utilize PoS consensus mechanisms enable holders to earn rewards byparticipating 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 anyones control. Ifany 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.
**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.
**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, andalthough 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 networks 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.
**We maintain crime insurance for our digital assets but there is still arisk 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.
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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.**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 customerassets. A successful security breach or cyberattack could result in:
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;
harm to our reputation and brand;
improper disclosure of data and violations of applicable data privacy and other laws; or
significant regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory, contractual, and financial exposure.
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.
**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 assetsor a theft of digital assets, will generally not be reversible, and we may not be able to seekcompensation for any such transfer or theft.
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.
**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, ourdigital 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.
**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.
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**Risks Related to Our Managed Services and Collaboration Products Business**
**Our Company experienced revenue declines in recent fiscal years, and revenue may continue to declinein future periods.**In recent fiscal years, our Company has faced a troubling trend of decreasing revenue, a situation that may not only persist but potentially worsen in the future. Specifically, our Mezzanine and Managed Services revenue has suffered due tosignificant customer lossesand a declinein demand for our offerings. This downturn can be attributed to the fiercely competitive landscape of our industry, where we face intense pressure to lower prices to remain competitive. We expect further declines in the future for these businesses.
***We have a history of substantial net operating losses and may incur future losses.***We reported substantial net losses in recent years. In the future, we may not be able to achieve revenue growth, profitability, or generate positive cash flow on a quarterly or annual basis. If we do not achieve profitability in the future, the value of our common stock may be adversely impacted, and we could have difficulty obtaining capital to continue our operations.
***Our business activities will require additional financing that might not be obtainable on acceptable terms, if at all. This could have a material adverse effect on our financial condition, liquidity,******and ability to operate as a going concern in the future.***The Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2025, have been prepared on the assumption that the Company will continue as a going concern. We have experienced revenue declines in recent fiscal years and incurred net losses.
We believe our existing cash, cash equivalents, and the fair value of our TAO tokens (if converted to cash)will be sufficient to fund our operations and meet our working capital requirements for at leastthe next twelve months from the filing of this Report. This assessment is based on current market conditions, regulatory environment, and the Company's operational plans, all of which are subject to change.In the long term, we believe additional capital will be required to fund operations and provide growth capital, including expanding our cryptocurrency treasury.To access capital to fund operations or provide growth capital, we will need to raise capital from the exercise of outstanding common and/or preferred warrants, and/or in one or more debt and/or equity offerings. There can be no assurance that we will be successful in raising the necessary capital or that any such offering will be on terms acceptable to the Company. If we are unable to raise additional capitalon terms acceptable to us, it could have a material adverse effect on the Company.
**If we were deemed to be an investment company under the Investment Company Act of 1940, as amended (the****1940 Act****), 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.**Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an investment company for purposes of the 1940 Act if (1) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (2) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We do not currently believe that we are an investment company, as such term is defined in either of those sections of the 1940 Act. Although we are exploring strategic alternatives, we intend to conduct our operations so asnot to be deemed an investment company. However, if we were to be deemed an investment company, restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to transact with affiliates, 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.
**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.**As part of our corporate strategy, our management considers and evaluates opportunities involving dispositions of assets and businesses. Such transactions may expose us to unknown or unforeseeable challenges resulting in disruption of business operations, loss of key personnel and ongoing tax benefits treatment, failure to obtain necessary statutory and regulatory approvals, provide ongoing indemnity, and compliance with post-closing obligations, which may affect or prevent us from consummating the transactions, and have a material and adverse effect on our business, financial conditions, and operations.
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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.**A significant portion of our revenue is generated from a limited number of customers. For the year ended December 31, 2025, one major customer accounted for79% of the Companys total consolidated revenue. The composition of our significant customers will vary from period to period, and we expect that most of our revenue will continue, for the foreseeable future, to come from a relatively small number of customers. Consequently, our financial results may fluctuate significantly from period to period based on the actions of one or more significant customers. A customer may take actions that affect the Company for reasons that we cannot anticipate or control, such as reasons related to the customers financial condition, changes in the customers business strategy or operations, changes in technology, and the introduction of alternative competing products, or as a result of the perceived quality or cost-effectiveness of our products or services. Our agreements with these customers may be canceled if we materially breach the agreement or for other reasons outside of our control, such as insolvency or financial hardship that may result in a customer filing for bankruptcy court protection against unsecured creditors. If our customers were to experience losses due to a depository institution's failureto return their deposits, it could expose us to an increased risk of nonpayment under our contracts with them. In addition, our customers may seek to renegotiate the terms of current agreements or renewals, and/or choose not to renew our services. Aloss of, or a reduction in, sales or anticipated sales to our most significant or several of our smaller customers, could have a material adverse effect on our business, financial condition, and results of operations.
**We depend on our network providers and facilities infrastructure.**Our success depends on our ability to implement, expand, and adapt our network infrastructure and support services to accommodate increasing video traffic and evolving customer requirements at an acceptable cost. This has required and will continue to require that we enter into agreements with providers of infrastructure capacity, equipment, facilities, and support services on an ongoing basis. We cannot ensure that any of these agreements can be obtained on satisfactory terms and conditions. We also anticipate that future expansions and adaptations of our network infrastructure facilities may be necessary to accommodate growth in the number of customers we serve. In addition, we utilize third-party vendors of network connectivity related to our network services business. We cannot ensure that these vendors will perform to our customers' satisfaction, which could result in lost revenue.
**Our network depends on telecommunications carriers, and they maylimit or deny us access to their network or fail to perform, which would have a material adverse effect on our business.**We rely upon the ability and willingness of certain telecommunications carriers and other corporations to provide us with reliable high-speed telecommunications service through their networks. If these telecommunications carriers and other corporations decide not to continue to provide service to us through their networks on substantially the same terms and conditions (including, without limitation, price, early termination liability, and installation interval), if at all, it would have a material adverse effect on our business, financial condition, and results of operations. Additionally, many of our service-level objectives depend on satisfactory performance by our telecommunications carriers. If they fail to so perform, it may have a material adverse effect on our business.
**We may experience material disconnections and/or reductions in the prices of our servicesand may not be able to replace the resulting revenue losses.**Historically, we have experienced both significant service disruptionsand reductions in the prices of our services. We endeavor to securelong-term commitments from new customers andexpand our relationships with current customers. The disconnection of services by our significant customers or by several of our smaller customers could have a material adverse effect on our business, financial condition, and results of operations. Service contract durations and termination liabilities are defined within the terms and conditions of the Companys agreements with our customers. Termination of services in our existing agreements typically requires a minimum of 30 days notice and is subject to early termination penalties equal to the amount of accrued and unpaid charges, including the remaining term length multiplied by any fixed monthly fees. The standardservice agreement with us includes an auto-renewal clause at the end of each term, unlessthe customer chooses to terminate service at that time. Certain customers and partners negotiate master agreements with custom termination liabilities that differ from our standard form of service agreement.
**We are exposed to the credit and other counterparty risk of our customers in the ordinary course of our business.**Our customers have varying degrees of creditworthiness, and we may not always be able to fully anticipate or detect deterioration in their creditworthiness and overall financial condition, which could expose us to an increased risk of nonpayment under our contracts with them. In the event that a material customer or customers default on their payment obligations to us, discontinue buying services from us, or use their buying power with us to reduce their revenue, this could materially adversely affect our financial condition, results of operations, or cash flows.
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**Failure to retain and recruit key personnel would harm our ability to meet key objectives.** We have attracted a highly skilled management team and specialized workforce. Our future success is dependent in part on our ability to attract and retain highly skilled technical, managerial, sales and marketing personnel. Competition for these personnel is intense. Our inability to hire qualified personnel on a timely basis, or the departure of key employees (including Peter Holst, the Companys President and CEO) without a suitable replacement, could materially and adversely affect our business development and, therefore, our business, prospects, results of operations, and financial condition. Stock incentive plans are designed to reward employees for their long-term contributions and provide incentives for them to remain with us. Volatility, or lack of positive performance in our stock price or equity incentive awards, or changes to our overall compensation program, including our stock incentive program, resulting from the management of share dilution and share-based compensation expense or otherwise, may also adversely affect our ability to retain key employees. As a result of one or more of these factors, we may increasehiring in geographic areas outside the United States, which could subject us to additional geopolitical and exchange-rate risk. The loss of services of any of our key personnel, the inability to retain and attract qualified personnel in the future, or delays in hiring required personnel, particularly engineering and sales personnel, could make it difficult to meet key objectives, such as timely and effective product introductions. In addition, companies in our industry whose employees accept positions with competitors frequently claim that competitors have engaged in improper hiring practices. We have received these claims in the past and may receive additional claims to this effect in the future.
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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.**Each state has different rules and regulations governing sales and use taxes, which are subject to varying interpretations that may change over time. We review these rules and regulations periodically, and when we believe our services are subject to sales and use taxes in a particular state, we voluntarily engage state tax authorities in order to determine how to comply with their rules and regulations. Vendors of services, like us, are typically held responsible by taxing authorities for the collection and payment of any applicable sales taxes and federal fees. If one or more taxing authorities determine that taxes should have been paid but were not with respect to our services, we may be liable for past taxes in addition to taxes going forward. Liability for past taxes may also include very substantial interest and penalty charges. Our customer contracts require our customers topay all applicable sales taxes and fees. Nevertheless, customers may be reluctant to pay back taxes and may refuse to assume responsibility for any interest or penalties associated with those taxes. If we are required to collect and pay back taxes, includingassociated interest and penalties, and our customers fail or refuse to reimburse us for all or a portion of these amounts, we will incur unplanned expenses that may be substantial. Moreover, the imposition of such taxes on our services going forward will effectively increase the cost of thoseservices to our customers and may adversely affect our ability to retain existing customers or attractnew customers in the areas in where such taxes are imposed. We may also become subject to tax audits or similar procedures in states where we already pay sales and use taxes. The assessment of taxes, interest, and penalties arising from audits, litigation, or other sources, could be materially adverse to our current and future results of operations and financial condition.
**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.**The Certificate of Designations for the Series F Preferred Stock contains a number of affirmative and negative covenants regarding matters such as the payment of dividends, maintenance of our properties and assets, transactions with affiliates, and our ability to issue other indebtedness. No assurances can be given that we will be able to comply with the financial or other covenants contained in the Certificate of Designations. If we are unable to comply with certain terms in the Certificate of Designations:
dividends will accrue on the Series F Preferred Stock at 20% per annum;
the holders of the Series F Preferred Stock could foreclose against our assets; and/or
we could be forced into bankruptcy or liquidation.
Our ability to comply with these covenants may be adversely affected by events beyond our control, and we cannot assure you that we be able tomaintain compliance. The financial covenants could limit our ability to make needed expenditures or otherwise conduct necessary or desirable business activities.
**Risks Related to Cybersecurity and Regulations**
**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.** In the ordinary course of providing video communications services, we transmit sensitive and proprietary customer information. We depend on the proper functioning, availability, and security of our information systems, including, without limitation, those systems used in our operations. We have undertaken measures to protect the safety and security of our inventory and information systems, as well as the data maintained within them. On an annual basis, we test the adequacy of our security measures. Despite our implementation of security measures, there can be no assurance that they will detect and prevent security incidents in a timely manner or prevent damage or interruption to our systems and operations, or inventory theft. The products and services we sell to customers, and our servers, data centers, and the cloud-based solutions on which our data, and the data of our customers, suppliers, and business partners are stored, are vulnerable to improper functioning, cyber-attacks, data incidents, malware, and similar disruptions from unauthorized access or tampering by malicious actors or inadvertent error. Any such event could compromise our products, services, and networks or those of our customers, and the proprietary information stored on our systems or those of our customers could be improperly accessed, processed, disclosed, lost, or stolen, which could subject us to liability to our customers, suppliers, business partners, and others, give rise to legal/regulatory action, and could have a material adverse effect on our business, operating results, and financial condition and may cause damage to our reputation. A security incident at any one of our physical facilities, such as that which occurred during 2022, could result in a significant loss of inventory or increase expenses relating to the resolution and future prevention of similar thefts, any of which could have an adverse effect on our business, financial condition, and results of operations. Efforts to limit malicious actors'ability disrupt the operations of the Internet or undermine our security may be costly to implement, meet resistance, and fail. Cybersecurity incidents in our customers networks or in cloud-based services provided by or enabled by us, whether attributable to a vulnerability in our products or services, 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.** The products and services we sell to customers inevitably contain vulnerabilities or critical security defects that have not been remedied and cannot be disclosed without compromising security. We may also make prioritization decisions about which vulnerabilities or security defects to fix and the timing of those fixes, which could result in an exploit that compromises security. Customers also need to test security releases before deployment, which can delay implementation. In addition, we rely on third-party software and cloud-based service providers, and we cannot control the pace at which they remediate vulnerabilities. Customers may also choose not to deploy a security release or to upgrade to the latest versions of our products, services, or cloud-based solutions that include it, leaving them vulnerable. Vulnerabilities and critical security defects, prioritization errors in 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.
**Our business, operating results, and financial condition could be materially harmed by regulatory uncertainty applicable to our products and services.** Changes in regulatory requirements applicable to the industries in which we operate, in the United States and in other countries, could materially affect the sales of our products and services. In particular, changes in telecommunications regulations could affect our service provider customers purchase of our products and offers, as well as sales of our own regulated offers. In addition, evolving legal requirements restricting or controlling the collection, processing, or cross-border transmission of data, including regulations governing cloud-based services, could materially affect our customers ability to use our products and our ability to sell them. Additional areas of uncertainty that could impact sales of our products and offers include laws and regulations related to encryption technology, environmental sustainability, export control, product certification, and national security controls applicable to our supply chain. Changes in regulatory requirements in these areas could have a material adverse effect on our business, operating results, and financial condition.
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**Risks to Owning Our Common Stock**
**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.**Historically, our common stock has experienced substantial price volatility, particularly due to differences between our actual financial results and analysts' published expectations, as well as announcements by us and our competitors. Furthermore, speculation in the press or investment community about our strategic position, financial condition, results of operations, business, and security of our products or significant transactions can cause changes in our stock price. In addition, the stock market has experienced extreme price and volume fluctuations that have affected the market prices of many technology companies, in particular, and that have often been unrelated to their operating performance. These factors, as well as general economic and political conditions and the announcement of proposed and completed acquisitions or other significant transactions, or any difficulties associated with such transactions, by our current or potential competitors or us, may materially adversely affect the market price of our common stock in the future. The market price for our common stock may be influenced by many factors, including the following:
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investor reaction to our business strategy; |
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the success of competitive products or technologies; |
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our ability to comply with the continued listing standards of the Nasdaq Capital Market; |
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regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our products; |
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variations in our financial results or those of companies that are perceived to be similar to us; |
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our ability or inability to raise additional capital and the terms on which we raise it; |
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declines in the market prices of stocks generally; |
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the trading volume of our common stock; |
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conversions of Series F Preferred Stock into common stock and the subsequent sales of common stock; |
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sales of our common stock by us or our stockholders; |
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general economic, industry, and market conditions; |
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fluctuations in demand for our servicesin part due to changes in the global economic environment; |
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the overall movement toward industry consolidation among both our competitors and our customers; |
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changes in sales and implementation cycles for our services and reduced visibility into our customers spending plans and associated revenue; |
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the timing, size, and mix of orders from customers; |
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how well we execute our strategy and operating plans, and the impact of changes in our business model that could result in significant restructuring charges; |
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our ability to achieve targeted cost reductions; |
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benefits anticipated from our investments; |
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changes in tax law or accounting rules, or interpretations thereof; |
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actual events, circumstances, outcomes, and amounts differing from judgments, assumptions, and estimates used in determining the values of certain assets, liabilities, and other items reflected in our Consolidated Financial Statements; |
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other events or factors, including those resulting from such events, or the prospect of such events, including war, terrorism and other international conflicts, public health issues including health epidemics or pandemics, such as the outbreak of COVID-19, and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States or elsewhere, could disrupt our operations, disrupt the operations of our suppliers or result in political or economic instability; and |
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the failure of any bank and the resulting economic uncertainty it causes. |
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These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. Since the stock price of our common stock has fluctuated in the past, has been recently volatile, and may be volatile in the future, investors in our common stock could incur substantial losses. Following periods of market volatility, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of managements attention and resources, which could materially and adversely affect our business, financial condition, results of operations, and growth prospects. There can be no guarantee that our stock price will remain at current levels or that future sales of our common stock will not be at prices lower than those at which we sold to investors.
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Throughout much of our corporate history, our common stock has been thinly tradedand therefore susceptible to wide price swings. While our common stock has recently experienced increased trading volume, we cannot ensure that this level of trading volume will continue or that the increased trading volumes will lessen the historical volatility in the price of our common stock. Thinly traded stocks are more susceptible to significant and sudden price changes, and the liquidity of our common stock depends upon the presence in the marketplace of willing buyers and sellers. At any time, the liquidity of our common stock may decrease to the thinly traded levels it has experienced in the past, and we cannot ensure that any holder of our securities will be able to find a buyer for its shares. Further, we cannot ensure that an organized public market for our securities will continue or that there will be any private demand for our common stock.
Additionally, in recent years, the stock prices of certain companies have experienced significant volatility due to short sellers of common stock, known as a short squeeze. These short squeezes have caused extreme volatility in those companies and the market, leading to their prices trading at significantly inflated levels disconnected from the companies' underlying value. Many investors who have purchased shares in those companies at an inflated rate face the risk of losing a significant portion of their original investment as the price per share has declined steadily, as interest in those stocks has abated. While we have no reason to believe our shares would be the target of a short squeeze, there can be no assurance that we will not be in the future, and you may lose a significant portion or all of your investment if you purchase our shares at a rate that is significantly disconnected from our underlying value.
**Penny stock regulations may impose certain restrictions on the marketability of our securities.**The SEC has adopted regulations that generally define a penny stock as any equity security with a market price of less than $5.00 per share, subject to certain exceptions.Our common stock is presently subject to these regulations, which impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with a net worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchasers written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the SEC relating to the penny stock market. The broker-dealer must also disclose the commission payable to both the broker-dealer and the registered representative, current quotations for the securities, and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealers presumed control over the market. Finally, monthly statements must disclose recent price information for the penny stock held in the account and information on the limited market for penny stocks. Consequently, the penny stock rules may restrict the ability of broker-dealers to sell our securities and may negatively affect the ability of purchasers of our shares of common stock to sell such securities.
**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.**We have experienced, and may continue to experience, significant quarterly fluctuations in operating results. Factors that cause fluctuations in our results of operations include a lack of revenue growth, declines in revenue, declines in gross margins, and increases in operating expenses. Accordingly, it is possible that, in one or more future quarters, our operating results will be adversely affected and fall short of the expectations of securities analysts and investors. If this happens, the trading price of our common stock may decline.
**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.**The sale into the public market of a significant number of shares of common stock by our existing shareholders, or the resale into the public market of shares issued in prior or future financings, could depress the trading price of our common stock and make it more difficult for us or our stockholders to sell equity securities in the future. Such transactions may include but are not limited to (i) conversions of Series F Preferred Stock into common stock and the subsequent sales of such common stock, (ii) any future issuances by us of additional shares of our common stock or of other securities that are convertible or exchangeable for shares of common stock; and (iii) the resale of any previously issued but restricted shares of our common stock that become freely available for re-sale, whether through an effective registration statement or under Rule 144 of the Securities Act.
While the sale of shares to the public might increase the trading volume of our common stock and, thus, the liquidity of our stockholders investments, the resulting increase in the number of shares available for public sale could drive the price of our common stock down, reducing the value of our stockholders investments and perhaps hindering our ability to raise additional funds 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.**Our existing holders of Common Stock have been significantly diluted by the issuance of the securities in the 2023 Private Placementand would be subject to additional dilution as a result of the conversion of those securities and the securities issued in the 2025 Private Placement into shares of Common Stock. Our public float was significantly increased, and the market price of our Common Stock could decline significantly as a result of subsequent sales of the shares of Common Stock issued, or underlying the securities issuedin the 2023 Private Placement and the 2025 Private Placement, which could occur at any time, or the perception that such sales may occur.
In addition, the exercise price or conversion price of these securities may be at prices below the current and/or then trading prices of shares of our Common Stock or at prices below the price at which our existing shareholders purchased our Common Stock. The selling stockholders may make a significant profit from the resale of the securities, depending on the trading price of our securities at the time of sale and the purchase price they paid for them. While the selling stockholders may realize a positive rate of return based on the trading price of our securities, the existing holders of our Common Stock may not realize a similar rate of return on the shares of Common Stock they purchased due to differences between the purchase price and the trading price.
**Future issuances of equity or debt securities by us may adversely affect the market price of our Common Stock.**Our authorized share capital consists of150 million shares of Common Stock. As of the filing of this Report, we had an aggregate of approximately146.7 million shares of Common Stock authorized but unissued, and approximately127.7 million shares of Common Stock authorized but unissued after giving effect to the exercise or conversion, as applicable, of the18.9million 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, allof 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 8,097,347shares of Common Stock,all of the Common Warrants issued in the 2023 Private Placement are exercised at an exercise price of$3.41 for1,749,527 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 for153,470 shares of Common Stock, all thePre-Funded Warrants issued in2025 Private Placementare exercised at an exercise price of$3.77 for586,261 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 for99,470 share of Common Stock, and the AdvisorWarrants are exercised at an exercise price of$3.77 for100,000 shares of Common Stock. Additionally, depending on the trading priceof our Common Stock, we may need to issue more or fewer shares of Common Stock uponexercise 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.
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 shareswith the exercise of our stock options under our incentive plans.
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.
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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.**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 tomaintaining a minimum closing bid price of $1.00 per share and at least $2.5 million of stockholders equity.
In the event that we are unable to maintain compliance with the continued listing requirements and cannot re-establish compliance within the required timeframe, our Common Stock could be delisted from The Nasdaq Capital Market, which could have a material adverse effect on our financial condition, and which would cause the value of our Common Stock to decline. If our Common Stock is not eligible for listing or quotation on another market or exchange, trading of our Common Stock could be conducted in the over-the-counter market or on an electronic bulletin board established for unlisted securities, such as the Pink Sheets or the OTC Bulletin Board. In such an event, it would become more difficult to dispose of or obtain accurate price quotations for our Common Stock, and there would likely be a reduction in our coverage by security analysts and the news media, which could cause the price of our Common Stock to decline further. In addition, it may be difficult for us to raise additional capital if we are not listed on a national securities exchange.
**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.
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 $4.4million.
If we are unable to satisfy Nasdaqs 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.
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**Holders of our Series F Preferred Stock****will have no rights with inour 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.
**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. Ifa 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.
**Our charter documents and Delaware law could discourage takeover attempts and lead to management entrenchment.**The Companys certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent a change in control of the company. These provisions could also make it difficult for stockholders to elect directors who are not nominated by the current members of the board of directors or take other corporate actions, including effecting changes in the Companys management. These provisions include:
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no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; |
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the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; |
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the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on ourboard of directors; |
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the requirement that a special meeting of stockholders may be called only by the chairman of our board of directors or a majority of our board of directors, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; |
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the ability of our board of directors, by majority vote, to amend the Companys amended and restated bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the amended and restated bylaws to facilitate an unsolicited takeover attempt; and |
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advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirers own slate of directors or otherwise attempting to obtain control of the Company. |
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**General Risks**
**We incur significant accounting and administrative costs as a publicly traded corporation that impact our financial condition.**As a publicly traded corporation, we incur certain costs to comply with regulatory requirements. If regulatory requirements become more stringent or if controls previously deemedeffective later fail, we may be forced to incur additional expenditures, the amounts of which could be material. Some of our competitors are privately owned, so their comparatively lower accounting and administrative costs can be a competitive disadvantage for us. Should our sales continue to decline, or if we are unsuccessful at increasing prices to cover higher expenditures for internal controls and audits, our costs associated with regulatory compliance will rise as a percentage of sales.
**Our cash and cash equivalents could be adversely affected if the financial institutions in which we hold them fail.**Actual events involving limited liquidity, defaults, non-performance, or other adverse developments that affect financial institutions, transactional counterparties, or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. If we are unable to access all or a significant portion of the amounts we have deposited at financial institutions for any extended period of time, we may not be able to pay our operational expenses or make other payments until we are able to move our funds to accounts at one or more other financial institutions, which process could cause a temporary delay in making payments to our vendors and employees and cause other operational challenges.
**Item 1B.****Unresolved Staff Comments**
None.
**Item 1C. Cybersecurity**
**Cybersecurity Risk Management and Strategy**
We have a multilayered framework for detecting and responding to reasonably foreseeable cybersecurity risks and threats. To protect our information technology (IT) systems from cybersecurity threats, we use various tools to prevent, detect, escalate, investigate, resolve, and recover from identified vulnerabilities and security incidents in a timely manner. In the event of a material change to our systems or operations, we would assess the internal and external threats to the security, confidentiality, integrity, and availability of our data and systems, as well as other material risks to our operations. We leverage technical safeguards intended to protect the Companys information systems from cybersecurity threats, including firewalls, threat monitoring, intrusion prevention and detection systems, anti-malware, access controls, privilege management, asset and endpoint management, and ongoing system security assessments. We oversee third-party service providers through regular vendor diligence and reviews. We monitor and evaluate our cybersecurity posture and performance on an ongoing basis through regular network scans, system audits, and intelligence feeds. The results of these assessments are used to improve our security posture through remediation efforts.
We have developed an incident management process to coordinate activities for preparing to respond to and recover from cybersecurity incidents, including triage, severity assessment, investigation, escalation, containment, and remediation, as well as compliance with applicable legal obligations and mitigation of reputational damage.
Our business strategy, results of operations, and financial condition have not been materially affected by previously identified cybersecurity incidents, but we cannot provide assurance that they will not be materially affected in the future by such risks or by any future material incidents. For more information on our cybersecurity-related risks, see Item 1A, Risk Factors in this Annual Report.
**Governance**
TaoWeave's Director of IT is responsible for assessing and managing cybersecurity risks. It has extensive experience focused on increasing the organization's resilience to security threats and staying current on new developments by monitoring the cybersecurity landscape. The team monitors TaoWeave's IT environment for potential security threats, investigating and responding to security events to minimize risk.
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TaoWeave's Audit Committee oversees TaoWeave's cybersecurity risks and receives regular updates from management on technology and security developments, as well as TaoWeave's assessment of cybersecurity threats and mitigation plans. The Audit Committee oversees internal controls and financial reporting, including controls and procedures that are designed to ensure that significant cybersecurity incidents are communicated to both senior management and the Audit Committee. In the event of a material cybersecurity incident affecting our IT systems or data management, the Audit Committee would promptly work to formulate a mitigation plan and review compliance with such plan, as well as to ensure compliance with any external regulatory or disclosure requirements, including any disclosures of material cybersecurity incidents.
**Item 2.****Properties**
We currently lease warehouse space in a facility in Denver, CO, to store our inventory. With the exception of the warehouse space just described, we currently operate fromremote employment sites and have a remote office at 110 16th Street, Suite 1400-1024, Denver, CO 80202.
**Item 3.****Legal Proceedings**
From time to time, we are subject to various legal proceedings arising in the ordinary course of business, including those covered byinsurance. As of the date hereof, we are not a party to any legal proceedings that we currently believe will have a material adverse effect on our business, financial position, results of operations, or liquidity.
**Item 4.****Mine Safety Disclosures**
Not applicable.
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**PART II**
**Item 5.****Market for Registrant****s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.**
**Market Information**
The Companys common stock trades on the Nasdaq Capital Market under the symbol TWAV.
As reported on the Nasdaq Capital Market, the closing sale price of our common stock was $1.33per share on March 19, 2026.As of March 19, 2026,3,327,210shares of our common stock were issued and outstanding. As ofMarch 19, 2026,there were185holders of record of our common stock. Equiniti is the transfer agent and registrar of our common stock.
**Dividends**
Our board of directors has never declared or paid cash dividends on our common stock and does not expect to do so for the foreseeable future. We intend to retain any earnings to finance the growth and development of our business. Our board of directors will make any future determination regarding thepayment of dividends based on conditions then existing, including our earnings, financial condition, and capital requirements, as well as such economic and other conditions as our board of directors may deem relevant.
**Recent Sales of Unregistered Securities**
Except as previously reported by us on our Current Reports on Form 8-K, we did not sell any securities during the period covered by this Annual Report that were not registered under the Securities Act.
**Purchases of Equity Securities by the Issuer**
On April 17, 2025, the Companys Board of Directors authorized a stock repurchase program (the Stock Repurchase Program) granting the Company authority to repurchase up to$500,000of the Companys common stock. The Company did not repurchase any shares of its common stock during the quarter ended December 31, 2025. As of December 31, 2025, $500,000 remained available for repurchase under the Stock Repurchase Program.
**Item 6.****Reserved**
**Item 7.****Management****s Discussion and Analysis of Financial Condition and Results of Operations**
The following discussion should be read in conjunction with our consolidated balance sheets as of December 31, 2025, and 2024, and the related consolidated statements of operations, stockholders equity, and cash flows for each of the years ended December 31, 2025, and 2024, and the related notes attached thereto. All statements contained herein that are not historical facts, including, but not limited to, statements regarding anticipated future capital requirements, our future development plans, our ability to obtain debt, equity, or other financing, and our ability to generate cash from operations, are based on current expectations. The discussion of results, causes, and trends should not be construed to imply any conclusion that such results or trends will necessarily continue in the future.
**Business**
We area digital asset treasury company dedicated exclusively to Bittensor, a decentralized blockchain network for artificial intelligence ("AI") development and machine learning. Bittensor allows individuals and organizations to contribute computational power to train, validate, and improve AI models while earning rewards through TAO, Bittensors native cryptocurrency. In 2025, the Company invested$8,736,000 to acquire24,128 TAO tokens. As of December 31, 2025, the Company holds24,665 TAO tokens. The Companys TAO holdings are all fully staked in the Bittensor network, enabling the Company to generate revenue and yield through earning staking rewards in the form of TAO tokens.
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.
The Company currently operates in three segments: (1) "Digital Assets", which represents the business surrounding our treasury activity with Bittensor, (2) Managed Services, which represents the business surrounding managed services for video collaboration and network solutions, and (3) Collaboration Products, which represents the business surrounding our Mezzanine product offerings.
21
[Table of Contents](#toc)
**Digital Assets**
As a digital asset treasury company dedicated exclusively to Bittensor, a decentralized blockchain network for AIdevelopment and machine learning, the Company generates revenue and yield through earning staking rewards.Bittensor allows individuals and organizations to contribute computational power to train, validate, and improve AI models while earning rewards through TAO, Bittensors native cryptocurrency.We generally stake all our TAO token holdings, subject tovarious liquidity and operational considerations, and we review this allocation periodically.All staking services are provided through the TAO Custodians, enabling yield generationwhile maintaining the highest standards of security and regulatory compliance.Through their staking services, our TAO Custodians hold and stake our TAO through their selected validators.
**Mezzanine****Product Offerings**
Ourproduct 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 screensspanning different walls, be scalable to an arbitrary number of displays, and interactwith 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. Mezzanines 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.
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 end-of-life for Mezzanine in December 2025, and we expect to end the sale of Mezzanine products and maintenance after the first quarter of 2026.
**Managed Services for Network**
We provide our customers with network solutions that ensure reliable, high-quality, and secure traffic of video, data, and internet. Network services are offered to our customers on a subscription basis. Our network services business incurs variable costs for purchasing and reselling this connectivity.
**Managed Services for Video Collaboration**
We provide a range of managed services for video collaboration, from automated to orchestrated, to simplify the user experience and drive adoption across our customers enterprises. We deliver our services through a hybrid service platform or as a service layer on top of our customers video infrastructure. We provide our customers with i) managed videoconferencing, where we set up and manage customer videoconferences, and ii) remote service management, where we provide 24/7 support and management of customer video environments.
22
[Table of Contents](#toc)
**Results of Operations**
**Year Ended December 31, 2025 (****2025****) versus Year EndedDecember 31, 2024****(****2024****)**
**Segment Reporting**
The Company currently operates in three segments: (1) "Digital Assets", which represents the business surrounding our treasury activity with Bittensor, (2) Managed Services, which represents the business surrounding managed services for video collaboration and network solutions, and (3) Collaboration Products, which represents the business surrounding our Mezzanine product offerings.
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 years endedDecember 31, 2025, and 2024 (in thousands):
|
|
|
For the Years Ended December 31, |
|
|
|
|
|
2025 |
|
|
2024 |
|
|
% Change |
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital Assets |
|
$ |
186 |
|
|
$ |
|
|
|
|
100 |
% |
|
|
Managed Services |
|
|
1,957 |
|
|
|
2,062 |
|
|
|
(5 |
)% |
|
|
Collaboration Products |
|
|
294 |
|
|
|
316 |
|
|
|
(7 |
)% |
|
|
Consolidated |
|
$ |
2,437 |
|
|
$ |
2,378 |
|
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital Assets |
|
$ |
24 |
|
|
$ |
|
|
|
|
100 |
% |
|
|
Managed Services |
|
|
1,384 |
|
|
|
1,337 |
|
|
|
4 |
% |
|
|
Collaboration Products |
|
|
15 |
|
|
|
710 |
|
|
|
(98 |
)% |
|
|
Consolidated |
|
$ |
1,423 |
|
|
$ |
2,047 |
|
|
|
(30 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital Assets |
|
$ |
162 |
|
|
$ |
|
|
|
|
100 |
% |
|
|
Managed Services |
|
|
573 |
|
|
|
725 |
|
|
|
(21 |
)% |
|
|
Collaboration Products |
|
|
279 |
|
|
|
(394 |
) |
|
|
(171 |
)% |
|
|
Consolidated |
|
$ |
1,014 |
|
|
$ |
331 |
|
|
|
206 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital Assets (1) |
|
$ |
209 |
|
|
$ |
|
|
|
|
100 |
% |
|
|
Managed Services (2) |
|
|
|
|
|
|
|
|
|
|
0 |
% |
|
|
Collaboration Products (3) |
|
|
11 |
|
|
|
341 |
|
|
|
(97 |
)% |
|
|
Corporate (4) |
|
|
3,756 |
|
|
|
4,192 |
|
|
|
(10 |
)% |
|
|
Consolidated |
|
$ |
3,976 |
|
|
$ |
4,533 |
|
|
|
(12 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital Assets (5) |
|
$ |
(3,519 |
) |
|
$ |
|
|
|
|
(100 |
)% |
|
|
Managed Services (6) |
|
|
|
|
|
|
(1 |
) |
|
|
(100 |
)% |
|
|
Collaboration Products (6) |
|
|
|
|
|
|
16 |
|
|
|
100 |
% |
|
|
Corporate (7) |
|
|
128 |
|
|
|
154 |
|
|
|
(17 |
)% |
|
|
Consolidated |
|
|
(3,391 |
) |
|
|
169 |
|
|
|
(2107 |
)% |
|
|
Net loss before taxes |
|
|
(6,353 |
) |
|
|
(4,033 |
) |
|
|
58 |
% |
|
|
Income tax expense |
|
|
2 |
|
|
|
10 |
|
|
|
(80 |
)% |
|
|
Net loss |
|
$ |
(6,355 |
) |
|
$ |
(4,043 |
) |
|
|
57 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
|
Total assets |
|
2025 |
|
|
2024 |
|
|
% Change |
|
|
|
Digital Assets (8) |
|
$ |
5,562 |
|
|
$ |
|
|
|
|
100 |
% |
|
|
Managed Services (9) |
|
|
401 |
|
|
|
422 |
|
|
|
(5 |
)% |
|
|
Collaboration Products (10) |
|
|
258 |
|
|
|
285 |
|
|
|
(9 |
)% |
|
|
Corporate (11) |
|
|
1,998 |
|
|
|
4,568 |
|
|
|
(56 |
)% |
|
|
Consolidated |
|
$ |
8,219 |
|
|
$ |
5,275 |
|
|
|
56 |
% |
|
23
[Table of Contents](#toc)
|
(1) |
Operating expenses related to our Digital Assets segment include cash and stock-based advisory fees. |
|
|
(2) |
There were no operating expenses related to our Managed Service segment in2025 and 2024. |
|
|
(3) |
Operating expenses related to our Collaboration Products segment include non-capitalized software costs and commission expenses. During 2025, and 2024, $18,000 bad debt recovery and $2,000 bad debt expense were recorded, respectively. |
|
|
(4) |
Corporate operating expenses include costs that are not specific to a particular segment but are general to the group. These include expenses for administrative, information technology, and accounting staff; general liability and other insurance; professional fees; and similar corporate expenses. |
|
|
(5) |
Other expense for our Digital Assets segment includes unrealized losses from revaluations of our digital assets. |
|
|
(6) |
Other income (expense) for Managed Services and Collaboration Products segments includes interest expense and non-operating income. |
|
|
(7) |
Unallocated other income in Corporate is primarily related to interest income. |
|
|
(8) |
Digital Asset assets include the fair value of the Company's digital asset holdings as of the end of the period and unamortized stock-based compensation expense. |
|
|
(9) |
Managed Services assets include cash equivalents, accounts receivable, and prepaid expenses. |
|
|
(10) |
Collaboration Products' assets include cash equivalents and prepaid expenses. |
|
|
(11) |
Unallocated assets in Corporate include cash and prepaid expenses that are corporate in nature and don't apply to a single segment. |
|
*Revenue.*Total revenue increased2.5% for the year ended December 31, 2025, compared to the year ended December 31, 2024. The following table summarizes the changes in components of our revenue, and the significant changes in revenue are discussed in more detail below (in thousands):
|
|
|
Year Ended December 31, |
|
|
|
|
|
2025 |
|
|
% of Revenue |
|
|
2024 |
|
|
% of Revenue |
|
|
|
Revenue: Digital Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Staking rewards |
|
$ |
186 |
|
|
|
8 |
% |
|
$ |
|
|
|
|
0 |
% |
|
|
Total Digital Assets revenue |
|
$ |
186 |
|
|
|
8 |
% |
|
$ |
|
|
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue: Managed Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network services |
|
$ |
1,898 |
|
|
|
78 |
% |
|
$ |
1,990 |
|
|
|
84 |
% |
|
|
Video collaboration |
|
|
44 |
|
|
|
2 |
% |
|
|
56 |
|
|
|
2 |
% |
|
|
Professional and other services |
|
|
15 |
|
|
|
1 |
% |
|
|
16 |
|
|
|
1 |
% |
|
|
Total Managed Services revenue |
|
$ |
1,957 |
|
|
|
80 |
% |
|
$ |
2,062 |
|
|
|
87 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue: Collaboration Products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Visual collaboration product offerings |
|
$ |
294 |
|
|
|
12 |
% |
|
$ |
316 |
|
|
|
13 |
% |
|
|
Total Collaboration Products revenue |
|
$ |
294 |
|
|
|
12 |
% |
|
$ |
316 |
|
|
|
13 |
% |
|
|
Total consolidated revenue |
|
$ |
2,437 |
|
|
|
100 |
% |
|
$ |
2,378 |
|
|
|
100 |
% |
|
*Digital Assets*
|
|
|
During the year ended December 31, 2025, we earned544TAO tokens through staking, or$186,000 in revenue. |
|
|
|
|
In exchange for staking TAO on the Bittensor blockchain network, the Company is entitled toa fractional share of the fixed digital asset award a third-party validator node receivesfor successfully validating or adding a block to the blockchain. This award is remitted in the validator node's native token (TAO) and is referred to as a staking reward. The Companys staking rewardreceived from delegating to a third-party validator node is proportional to the Company's staked digital assets relative to the total staked by all delegators to that node at that time. TAO token rewardsearned from staking are calculated and distributed directly to the Companys digital wallets by the blockchain networks as part of their consensus mechanisms. |
|
24
[Table of Contents](#toc)
*Managed Services*
|
|
|
The decrease in revenue for network services is mainly attributable to disconnects at certain customer locations. |
|
|
|
|
The decrease in revenue from video collaboration services is mainly attributable to lower revenue from existing customers (due to price or service level reductions) and to customer losses to competitors. |
|
|
|
|
For the year ended December 31, 2025, one customer accounted for98%of Managed Services revenue and79% of consolidated revenue. For the year ended December 31, 2024, this same customer made up98%of Managed Services revenue and85%of consolidated revenue. |
|
*Collaboration Products*
|
|
|
Customers generally use our Mezzanine products in traditional office and operating center environments such as conference rooms or other presentation spaces. The year-over-year decrease in revenue for our Collaboration Products business is mainly attributable to lowersalesofour Mezzanine products, driven bylower demand. |
|
*Cost of Revenue (exclusive of depreciation and amortization).*Cost of revenue, exclusive of depreciation, amortization, and casualty gain, includes all internal and external costs related to the delivery of revenue. Cost of revenue also includes taxes, which have been billed to customers. Cost of revenue by segment is presented in the following table (in thousands):
|
|
|
Year Ended December 31, |
|
|
|
|
|
2025 |
|
|
2024 |
|
|
|
Cost of Revenue |
|
|
|
|
|
|
|
|
|
|
Digital Assets |
|
$ |
24 |
|
|
$ |
|
|
|
|
Managed Services |
|
|
1,384 |
|
|
|
1,337 |
|
|
|
Collaboration Products |
|
|
15 |
|
|
|
710 |
|
|
|
Total cost of revenue |
|
$ |
1,423 |
|
|
$ |
2,047 |
|
|
Digital Assets
Our Digital Assets segment recorded a gross profit percentage of87%in 2025. Our cost of revenue for digital assets consists of custodianfeesand advisor fees on our staked digital assets.
*Managed Services*
Our Managed Services segment recorded a gross profit percentageof29% and35% for2025 and 2024, respectively. The year-over-year decrease was primarily due to the reallocation of personnel following our September 2024 headcount reduction.
*Collaboration Products*
Our Collaboration Products segment recorded a gross profit percentageof95% for 2025, compared to a negative gross profit percentageof125% for 2024. The year-over-year decrease in cost of revenue for our Collaborations Products segment is mainly attributable to lower personnel costs in 2025, driven by headcount reductions in September 2024, and a reduction in inventory-related expenses. As of December 31, 2024, the Company recorded a full reserve against our inventory on hand, resulting in zero net inventory.
25
[Table of Contents](#toc)
*Consolidated*
The year-over-year decrease in the cost of revenueis mainly attributable to lower costs in our Collaboration Products segment. The Companys consolidated gross profit percentagewas42% in2025 compared to14%in 2024.
Operating expenses are presented in the following table (in thousands):
|
|
|
Year Ended December 31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
2025 |
|
|
2024 |
|
|
$ Change |
|
|
% Change |
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
$ |
10 |
|
|
$ |
155 |
|
|
$ |
(145 |
) |
|
|
(94 |
)% |
|
|
Sales and marketing |
|
|
21 |
|
|
|
181 |
|
|
|
(160 |
) |
|
|
(88 |
)% |
|
|
General and administrative |
|
|
3,945 |
|
|
|
4,197 |
|
|
|
(252 |
) |
|
|
(6 |
)% |
|
|
Total operating expenses |
|
$ |
3,976 |
|
|
$ |
4,533 |
|
|
$ |
(557 |
) |
|
|
(12 |
)% |
|
*Research and Development*. Research and development expenses include internal and external costs related to developing features and enhancements to our existing product offerings for our Collaboration Products segment. The year-over-year decrease in research and development expenses in2025 relative to 2024is primarily attributable to lower consulting and outsourced labor costs. There were no research and development costs for our Managed Services segment in2025 or 2024, and there were none for our Digital Assets segment in 2025.
*Sales and Marketing*. The year-over-year decrease in sales and marketing expenses for our Collaboration Products segment in2025 compared to2024 is primarily attributable to lower personnel costs, driven by our headcount reduction in September 2024. There were no sales and marketing expenses for our Managed Services segment in2025 or 2024, and there were none for our Digital Assets segment in 2025.
*General and Administrative*. General and administrative expenses primarily include direct corporate expenses for personnel across the following corporate support categories:executive, legal, finance and accounting, human resources, and information technology. The year-over-year decrease in general and administrative expenses in2025 compared to2024 is mainly attributable to decreases in personnel costs resulting from our headcount reduction in September 2024and a recovery inbad debt, partially offset by increases in professional service, stock-based expense, and insurance expense.
*Loss from Operations.*The year-over-year decrease in the Companys loss from operations is mainly attributable to the reduction in operating expenses, as addressed above, and the introduction of our Digital Assets segment.
*Other (Expense) Income, Net*. Other expense, net for 2025, is primarily comprised of unrealized losses on the revaluation of our digital assets, slightly offset by interest income related to our cash accounts. Other income, net for 2024, is primarily comprised of interest income related to our cash accounts.
*Income Tax Expense.*We recorded income tax expense of$2,000 in 2025, compared to$10,000 in 2024(see**Note 11- Income Taxes**to our Consolidated Financial Statements).
26
[Table of Contents](#toc)
**Liquidity and Capital Resources**
As of December 31, 2025, wehad$2,258,000 in cash and cash equivalents,$5,395,000 in digital asset balances, and$7,029,000 in working capital. For the yearended December 31, 2025, we incurred a net loss of $6,355,000, and weused$3,015,000 of net cash in operating activities.
Cash used in investing activities for2025 was $8,736,000, consisting of new investments in digital assets. No cash was used in investing activities in 2024.
Net cash provided by financing activities for2025 was $9,043,000, consisting of net proceeds from the 2025 Private Placement and warrant exercises.Net cash provided by financing activities for2024 was $2,381,000, consisting of net proceeds from warrant exercises(see **Note 5****- Capital Stock**and **Note 6****- Preferred Stock**to our Consolidated Financial Statements).
*Future Capital Requirements*
We believe our existing cash, cash equivalents, and the fair value of our TAO tokens (if converted to cash)will be sufficient to fund our operations and meet our working capital requirements for at leastthe next twelve months from the filing of this Report. This assessment is based on current market conditions, regulatory environment, and the Company's operational plans, all of which are subject to change.In the long term, we believe additional capital will be required to fund operations and provide growth capital, including expanding our cryptocurrency treasury.To access capital to fund operations or provide growth capital, we will need to raise capital from the exercise of outstanding common and/or preferred warrants, and/or in one or more debt and/or equity offerings. There can be no assurance that we will be successful in raising the necessary capital or that any such offering will be on terms acceptable to the Company. If we are unable to raise additional capitalon terms acceptable to us, it could have a material adverse effect on the Company.
See **Note 10- Commitments and Contingencies**to our Consolidated Financial Statements for discussion regarding certain additional factors that could impact the Companys liquidity in the future.
**Critical Accounting Policies**
We prepare our Consolidated Financial Statements in accordance with U.S. Generally Accepted Accounting Principles (GAAP). Our significant accounting policies are described in **Note 1 - Business Description and Significant Accounting Policies** to our Consolidated Financial Statements attached hereto. We believe the following critical accounting policies involve the most significant judgments and estimates used in the preparation of our Consolidated Financial Statements.
**Revenue Recognition**
The Company accounts for revenue in accordance with Accounting Standards Codification (ASC) Topic 606.
The Company recognizes revenue using the five-step model as prescribed by Topic 606:
|
|
|
Identification of the contract, or contracts, with a customer; |
|
|
|
|
Identification of the distinct performance obligations in the contract; |
|
|
|
|
Determination of the transaction price; |
|
|
|
|
Allocation of the transaction price to the performance obligations in the contract; and |
|
|
|
|
Recognition of revenue when or as the Company satisfies a performance obligation. |
|
27
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The Company had staked$5,395,000 of digital assets as of December 31, 2025. The Companys ability to sell or transfer staked digital assets is subject to restrictions related to unbonding periods, which are based on network traffic on the respective blockchains. As of December 31, 2025, all staked digital assetscould be unbonded immediately. The$186,000 in rewards generated from proprietary staking activities for the year ended December 31, 2025, was recorded as point-in-timerevenue. The Company stakes its TAOdirectly from BitGoand Kraken custody, qualified custodians, enabling yield generationwhile maintaining the highest standards of security and regulatory compliance.
The Companys managed videoconferencing services are offered to our customers on either a usage- or subscription-based model. Our network services are offered to our customers on a subscription basis. Revenue for these services is generally recognized on a monthly basis as services are performed. Revenue from professional services is recognized when the services are performed. The costs associated with obtaining a customer contract are deferred on our consolidated balance sheet and amortized over the expected life of the customer contract. There was no deferred revenue recorded or recognized to Managed Services as of December 31, 2025, or December 31, 2024.
The Companys visual collaboration products are composed of hardware and embedded software sold as a complete package and generally include installation and maintenance services. Revenue for hardware and software is recognized upon shipment to the customer. Installation revenue is recognized upon completion of the installation, triggering recognition of revenue for maintenance services, rangingfrom one to three years. Revenue from maintenance services is recognized over time.Deferred revenue, as of December 31, 2025, totaled$13,000 as certain performance obligations were not satisfied as of this date. During the year ended December 31, 2025, the Company recorded$36,000 of revenue that was included in deferred revenue as of December 31, 2024. During the year ended December 31, 2024, the Company recorded$132,000 of revenue that was included in deferred revenue as of December 31, 2023.
Revenue recorded over time for the years ended December 31, 2025, and 2024, was $63,000and $156,000, respectively. Revenue recorded at a period in time for the years ended December 31, 2025, and 2024, was $2,374,000and $2,222,000, respectively.
**Off-Balance Sheet Arrangements**
As of December 31, 2025, and 2024, we had no off-balance sheet arrangements.
**Recent Accounting Pronouncements**
See the sections titled Summary of Significant Accounting Policies-Recently adopted accounting pronouncements and Recent accounting pronouncements not yet adopted in **Note 1 - Business Description and Significant Accounting Policies** to our Consolidated Financial Statements for more information.
**Item 7A.****Quantitative and Qualitative Disclosures About Market Risk**
Not applicable.
**Item 8.****Financial Statements and Supplementary Data**
The information required by Item 8 is incorporated by reference herein from Item 15, Part IV of this Report.
**Item 9.****Changes in and Disagreements with Accountants on Accounting and Financial Disclosure**
None.
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**Item 9A.****Controls and Procedures**
*Disclosure Controls and Procedures*
The Companys management, with the participation of the Companys Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Companys disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2025. Based on such evaluation, the Companys Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2025, the Companys disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SECs rules and forms and are designed to ensure that information required to be disclosed by the Company in the reports we file or submit under the Exchange Act is accumulated and communicated to the Companys management, including the Companys Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
*Changes in Internal Control Over Financial Reporting*
The Companys management, with the participation of the Companys Chief Executive Officer and Chief Financial Officer, has evaluated changes in internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2025, and have concluded that no change has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
*Management**s Annual Report on Internal Control Over Financial Reporting*
The Companys management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Consolidated Financial Statements for external purposes in accordance with U.S. GAAP. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness in future periods are subject to the risk that controls may become inadequate due to changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.
The Companys management, including the Companys Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2025, based on the 2013 framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The COSO framework summarizes each of the components of a companys internal control system, including (i)the control environment, (ii)risk assessment, (iii)control activities, (iv)information and communication, and (v)monitoring.Based on this evaluation, the Companys management concluded that our internal control over financial reporting was effective as of December 31, 2025.
**Item 9B.****Other Information**
None.
**Item 9C. Disclosures Regarding Foreign Jurisdictions that Prevent Inspections**
Not applicable.
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**PART III**
**Item 10.****Directors, Executive Officers, and Corporate Governance**
**Board of Directors**
Our Board of Directors currently consists of four directors. The current Board members include three independent directors and our chief executive officer. The core responsibility of our Board of Directors is to exercise its business judgment to act in what it reasonably believes to be in the best interests of the Company and its stockholders. Further, members of the Board fulfill their responsibilities in accordance with their fiduciary dutiesto the stockholdersand in compliance with all applicable laws and regulations. The primary responsibilities of the Board include:
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Oversight of management performance and assurance that stockholder interests are served; |
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Oversight of the Companys business affairs and long-term strategy; and |
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Monitoring adherence to the Companys standards and policies, including, among other things, policies governing internal controls over financial reporting. |
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Our Board of Directors conducts its business through Board meetings and through activities of the standing committees, as further described below. The Board and each of the standing committees meet throughout the year and also hold special meetings and actby written consent from time to time, as appropriate. Board agendas include regularly scheduled executive sessions forindependent directors to meet without management present. The Board has delegated various responsibilities and authority to different committees of the Board, as described below. Members of the Board have access to all members of management outside of Board meetings.
Our Board of Directors met and/or acted by written consentnine times during the year ended December 31, 2025. During this period, each director attended 75% or more of the aggregate of (i) the total number of meetings of the Board of Directors held during the period for which he/she was a director and (ii) the total number of meetings of committees of the Board of Directors on which he served, held during the period for which he/she served. The Company does not have a policy regarding directors attendance at our annual meetings of stockholders.
The following table sets forth information with respect to our Board of Directors as of the date of this Report.
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Name |
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Age |
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Position with Company |
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Jason Adelman (1)(2)(3) |
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56 |
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Director, Chair of the Audit Committee |
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Jonathan Schechter (1)(2)(3)(4) |
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52 |
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Director, Chairman of the Board, Chair of the Compensation Committee |
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Peter Holst |
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57 |
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Director, President, and Chief Executive Officer |
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Deborah Meredith (1)(2)(3) |
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66 |
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Director, Chair of the Nominating Committee |
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(1) Member of the Audit Committee |
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(2) Member of the Compensation Committee |
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(3) Member of the Nominating Committee |
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(4) Appointed pursuant to that certain Securities Purchase Agreement, dated March 30, 2023, by and among the Company and the investors named therein. |
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**Biographies for Board of Directors**
**Jason Adelman, Director.**Mr. Adelman joined our Board of Directors in July 2019. Mr. Adelman is the Founder and Managing Member of****Burnham Hill Capital Group, LLC, a privately held financial advisory firm, and serves as Managing Member of Cipher Capital Partners LLC, a private investment fund. Mr. Adelman also serves on the board of directors of Trio-Tech International (Nasdaq Capital Market: TRT). Prior to founding Burnham Hill Capital Group, LLC in 2003, Mr. Adelman served as Managing Director of Investment Banking at H.C. Wainwright and Co., Inc. Mr. Adelman graduated from the University of Pennsylvania with a B.A. in Economics, cum laude, and from Cornell Law School with a J.D.
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In considering Mr. Adelman as a director of the Company, the Board reviewed, among other qualifications, his experience and expertise in finance, accounting, banking, and management. Based on his experience with Burnham Hill Capital Group LLC, Cipher Capital Partners LLC, and H. C. Wainwright & Co., Mr. Adelman qualifies as an "audit committee financial expert" under the applicable SEC rules and accordingly contributes to the Board of Directors his understanding of generally accepted accounting principles and his skills in auditing, as well as in analyzing and evaluating financial statements.
**Jonathan Schechter, Director.**Mr. Schechter joined our Board of Directors in May 2023. Mr. Schechter has served as Chairman of the Board since December 18, 2024. Mr. Schechter is apartner of The****Special Equities Group, a division of Dawson James Securities, Inc., a full-service investment bank specializing in healthcare, biotechnology, technology, and clean-tech sectors, since April 2021. Mr. Schechter is one of the founding partners of The Special Equities Opportunity Fund, a long-only fund that makes direct investments in micro-cap companies and has served in this capacity since August 2019. Mr. Schechter currently serves onthe Board of Directors of PharmaCyte Biotech, Inc. (Nasdaq: PMCB), a biotechnology company developing pharmaceutical products. He previously served as a director of TAO Synergies Inc. (Nasdaq: TAOX) and DropCar, Inc. He has extensive experience analyzing and evaluating the financial statements of public companies. Mr. Schechter earned his A.B. in Public Policy/Political Science from Duke University and his J.D. from Fordham University School of Law.
In considering Mr. Schechter as a director of the Company, the Board reviewed, among other qualifications, his experience and expertise in finance and banking. Based on his experience with The Special Equities Group, Mr. Schechter qualifies as an audit committee financial expert under the applicable SEC rules and accordingly contributes to the Board of Directors his understanding of capital markets, as well as his analysisand evaluation offinancial statements.
**Peter Holst, Chairman, President, and Chief Executive Officer****.******Prior to being named President and CEO in January 2013, Mr. Holst served****as the Companys Senior Vice President for Business Development since October 1, 2012. Mr. Holst has served as a director of the Company since January 2013 and as Chairman of the Board from July 2019 to December 15, 2021, and from May 28, 2023to December 18, 2024. Mr. Holst has more than 28 years of experience in the collaboration industry. Prior to joining the Company, Mr. Holst served as the Chief Executive Officer of Affinity VideoNet, Inc., and as the President and Chief Operating Officer of Raindance Communications. Mr. Holst holds a degree in Business Administration from the University of Ottawa.
In considering Mr. Holst as a director of the Company, the Board reviewed his extensive knowledge and expertise in the communication services industry, as well as the leadership he has demonstrated in his positions with our Company and prior companies.
**Deborah Meredith, Director.**Ms. Meredith joined our Board of Directors in August 2021. Ms. Meredith currently serves as a board****member, advisor, and consultant to several high-tech companies, with extensive experience in strategic roles with privately-held start-up companies such as Proofpoint, Aviatrix, Qventus, Alation, and Kinsa Health. Ms. Meredith has more than three decades of experience working hands-on with company founders to assemble world-class teams, architect software products and establish a roadmap for operational success. Ms. Meredith earned a master's degree in computer science from Stanford University and an undergraduate degree in both computer science and mathematics from the University of Michigan.
In considering Ms. Meredith as a director of the Company, the Board reviewed her experience and expertise in the technology industry and the leadership she has demonstratedin her prior positions.
**Director Independence**
Our Board of Directors has determined that each of our current directors, other than Mr. Holst, qualifies as independent in accordance with the rules of the Nasdaq Capital Market (Nasdaq). Because Mr. Holst is an employee of the Company, he does not qualify as independent.
The Nasdaq independence definition includes a series of objective tests, such as that the director is neither an executive officer nor an employee of the Company and has not engaged in various types of business dealings with the Company. In addition,required by the Nasdaq rules, the Board has made a subjective determination foreach independent director that no relationship exists which, in the Board's opinion, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, the directors reviewed and discussed information provided by the directors and the Company with regard to each directors business and personal activities as they may relate to the Company and the Companys management, including each of the matters set forth under Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence. below.
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**Board Committees**
The Board has an audit committee, a compensation committee, and a nominating committee, and may form special committees as required from time to time. Each committeeregularly reports on its activities and actions to the full Board. The charters for the audit committee, the compensation committee, and the nominating committee are available on the Companys website at www.taoweave.ai. The contents of our website are not incorporated by reference into this document for any purpose.
*Audit Committee*
The audit committee currently consists of Jason Adelman (chair),Jonathan Schechter, and Deborah Meredith. Our Board of Directors has determined that all members of the audit committee are independent within the meaning of the corporate governance standards of the Nasdaq Capital Market and the SEC rules governing audit committees and financially literate for purposes of applicable Nasdaq Capital Market listing standards. In addition, our Board of Directors has determined that each of Messrs. Adelmanand Schechter has the accounting and related financial management expertise to satisfy the requirements of an audit committee financial expert, as defined underthe SEC's rules and regulations. The audit committee consults with and meets with our independent registered public accounting firm, the Chief Financial Officer, and accounting personnel;reviews potential conflict of interest situations where appropriate;and reports and makes recommendations to the full Board of Directors regarding such matters. The audit committee metfourtimes during the year ended December 31, 2025.
*Compensation Committee*
Our compensation committee currently consists of Jonathan Schechter (chair), Jason Adelman, and Deborah Meredith. Each member meets the applicable independence requirements of the Nasdaq Capital Market. The committee met and/or acted by written consenttwo times during the year ending December 31, 2025.
The compensation committee is responsible for establishing and administering our executive compensation policies. The role of the compensation committee is to (i)formulate, evaluate, and approve the compensation of the Companys directors, executive officers, and key employees, (ii)oversee all compensation programs involving the use of the Companys stock, and (iii)produce, if required under applicable securities laws, a report on executive compensation for inclusion in the Companys proxy statement for its annual meeting of stockholders. The duties and responsibilities of the compensation committee under its charter include:
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annually reviewing and making recommendations to the Board with respect to the compensation of directors, executive officers, and key employees of the Company; |
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annually reviewing and approving corporate goals and objectives relevant to the Chief Executive Officer's compensation, evaluating the Chief Executive Officers performance in light of those goals and objectives, and recommending to the Board the Chief Executive Officers compensation levels based on this evaluation; |
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reviewing competitive practices and trends to determine the adequacy of the executive compensation program; |
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approving and overseeing compensation programs for executive officers involving the use of the Companys stock; |
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approving and administering cash incentives for executives, including oversight of achievement of performance objectives and funding for executive incentive plans; |
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annually performing a self-evaluation on the performance of the compensation committee; and |
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making regular reports to the Board concerning the activities of the compensation committee. |
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When appropriate, the compensation committee may, in carrying out its responsibilities, form and delegate authority to subcommittees. The Chief Executive Officer plays a role in determining the compensation of our other executive officers by evaluating their performance. The Chief Executive Officers evaluations are then reviewed by the compensation committee. This process leads to recommendations for any changes tosalary, bonus terms, andequity awards, if any, based on performance, which recommendations are then reviewed and approved by the compensation committee.
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*Nominating Committee*
Our nominating committee currently consists of Deborah Meredith (chair), Jason Adelman, and Jonathan Schechter. Each member meets the independence requirements of the Nasdaq Capital Market. The committee is responsible for assessing the performance of our Board of Directors and making recommendations to the Board regarding nominees. The committee met and/or acted by written consenttwo times during the year ended December 31, 2025.
The nominating committee considers qualified candidates suggested by our stockholdersto serve on our Board of Directors. Nominees recommended by stockholders will be given appropriate consideration and evaluated in the same manner as other nominees. Stockholders can suggest qualified candidates for the board of directors by writing to our Corporate Secretary at 110 16th Street, Suite 1400-1024, Denver, CO 80202. Stockholder submissions that are received in accordance with our bylaws and that meet the criteria outlined in the nominating committee charter are forwarded to the members of the nominating committee for review. Stockholder submissions must include the following information:
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a statement that the writer is our stockholder and is proposing a candidate for our Board of Directors for consideration by the nominating committee; |
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the name of and contact information for the candidate; |
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a statement of the candidates business and educational experience; |
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information regarding each of the factors set forth in the nominating committee charter sufficient to enable the nominating committee to evaluate the candidate; |
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a statement detailing any relationship between the candidate and any of our customers, suppliers, or competitors; |
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detailed information about any relationship or understanding between the proposing stockholder and the candidate; and |
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a statement that the candidate is willing to be considered and willing to serve as our director if nominated and elected. |
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In considering potential new directors, the nominating committee will review individuals from various disciplines and backgrounds. Among the qualifications to be considered in selecting candidates are broad experience in business, finance, or administration; familiarity with national and international business matters; familiarity with our industry; and prominence and reputation. While there is no formal policy regarding the consideration of diversity in identifying director nominees, the nominating committee will consider diversity in business experience, professional expertise, gender, ethnic background, and other factors when evaluating director nominees. The nominating committee will also consider whether the individual has the time available to devote to the work of our Board of Directors and one or more of its committees.
The nominating committee will also review each candidate's activities and associations to ensure that there is no legal impediment, conflict of interest, or other consideration that might hinder or prevent service on our Board of Directors. In making its selection, the nominating committee will keep in mind that the foremost responsibility of a corporation's director is to represent the interests of the stockholders as a whole. The nominating committee will periodically review and reassess the adequacy of its charter and propose any changes to the Board of Directors for approval.
**Contacting the Board of Directors**
Any stockholder who desires to contact our Board of Directors, committees of the Board of Directors, and individual directors may do so by writing to TaoWeave, Inc., 110 16th Street, Suite 1400-1024, Denver, CO 80202, Attention: David Clark, Corporate Secretary. Mr. Clark will direct such communication to the appropriate persons.
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**Board Leadership Structure and Role in Risk Oversight**
Mr. Schechter has served as the Chairman of the Company's Board of Directors sinceDecember 2024, succeeding Mr. Holst. Mr. Holst served as the Chairman of the Company's Board of Directors from May 2023 to December 2024and from July 2019 to December 2021.Mr. Holst hasserved as the Companys President and Chief Executive Officer since January 2013.
To ensure a strong and independent Board, as discussed herein, the Board has affirmatively determined that all directors of the Company, other than Mr. Holst, are independent within the meaning of the Nasdaq Capital Market listing standards currently in effect. Our Corporate Governance Guidelines provide that non-management directors shall meet in regular executive sessions without management present.
The Board plays anactive role, directly and through its committees, in overseeingthe Companys risk management efforts. The Board carries out this oversight role through several levels of review. The Board regularly reviews and discusses withmanagement information regarding the management of risks inherent in the Companys business operations and the implementation of the Companys strategic plan, including the Companys risk mitigation efforts.
Each of the Boards committees also oversees the management of the Companys risks within its areaof responsibility. For example, the audit committee oversees the management of accounting, auditing, external reporting, internal controls, and cash investment risks. The nominating committee oversees and assesses the Board's performanceand, from time to time, makes recommendationsregarding nominees to the Board. The compensation committee oversees risks arising from compensation practices and policies. While each committee has specific responsibilities for oversight of risk, the Board is regularly informed by each committee about the risks it oversees. In this manner, the Board can coordinate its risk oversight.
We have adopted a code of conduct and ethics, as amended effective October 12, 2015, that applies to all of our employees, directors, and officers, including our Chief Executive Officer, Chief Financial Officer, and our finance team. The full text of our code of conduct and ethics (as amended) is posted on our website at www.taoweave.aiand will be made available to stockholders without charge, upon request, in writing to the Corporate Secretary at 110 16th Street, Suite 1400 - 1024, Denver, CO 80202. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to our principal executive officer, principal financial officer, principal accounting officer or controller or person performing similar functions will be included in a Current Report on Form 8-K within four business days following the date of the amendment or waiver, unless website posting of such amendments or waivers is then permitted by the rules of the national securities exchange on which the Company trades.
We have adopted insider trading policies and procedures governing the purchase, sale, and other dispositions of securities of TWAV by directors, officers, and employees, whichwe believe are reasonably designed to promote compliance with insider trading laws, rules, and regulations, as well as applicable Nasdaq listing standards. Our insider trading policy states, among other things, that our directors, officers, and employees are prohibited from disclosing material non-public information and from trading in such securities while in possession of it. The foregoing summary of our insider trading policies and procedures does *not* purport to be complete and is qualified by reference to our TaoWeave, Inc. Insider Trading Policy filed as an exhibit to this Annual Report on Form 10-K.
**Biographies for Executive Officers**
**Peter Holst, President and Chief Executive Officer (CEO).** See Biographies for Board of Directors above for Mr. Holsts biography.
**David Clark, Chief Financial Officer.** Mr. Clark, 57, joined the Company in March 2013 as Chief Financial Officer (CFO). Mr. Clark has more than 30 years of experience in finance and accounting. Prior to joining the Company, Mr. Clark served as Vice President of Finance, Treasurer, and acting CFO for Allos Therapeutics, a publicly traded biopharmaceutical company, and as CFO of Seurat Company (formerly XOR, Inc.), an e-commerce managed services company. Mr. Clark began his career with seven years in the audit practice of PricewaterhouseCoopers LLP. Mr. Clark is an active Certified Public Accountant and received a Master of Accountancy and a B.S. in Accounting from the University of Denver.
**Family Relationships**
There are no family relationships between the officers and directors of the Company.
**Legal Proceedings**
None of our directors or executive officers was involved in any legal proceedings described in subparagraph (f) of Item 401 of Regulation S-K during the past ten years.
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**Item 11.****Executive Compensation**
**Director Compensation**
For the yearended *December 31, 2025*,the Companys director compensation plan provided that non-employee directors were generally entitled to receive annually: (i) a grant of restricted stock or restricted stock units ("RSUs") (pro-rated as necessary for the period of service from the directors date of appointment to the Board of Directors until the next annual meeting of stockholders); and (ii) a retainer fee of *$50,000.* The annual fee is payable in equal quarterly installments on the *first* business day following the end of the calendar quarter, in cash or shares of Restricted Stock, as chosen by the director, on an annual basis on or before *December 31*of the applicable fiscal year. The annual equity grants to directors are normally made as of the date of the annual meeting of the Companys stockholders. Grants of Restricted Stock or RSUs vest on the *first* anniversary of the grant date or earlier upon the occurrence of certain termination events or upon a change in control of the Company. Vested RSUs are settled in shares of Common Stock on a *1*-for-*1* basis upon the earliest of (i) the *tenth* anniversary of the grant date of the RSUs, (ii) a change in control (as defined in the award agreement) of the Company, and (iii) the date of a directors separation from service. Additionally, the Company also paid the chairman of its Board of Directors an additional cash payment of *$30,000* per year, the Chairperson of its audit committee an additional cash payment of *$15,000* per year,the Chairpersonof its compensation committee an additional cash payment of *$10,000* per year, the Chairpersonof its nominating committee an additional cash payment of *$7,500* per year, and each non-chair member of any standing committee an additional cash payment of *$5,000* per year, in each case payable in equal quarterly installments in arrears. In addition, the Company *may,*from time to time, establish special committees of the Boardand provide additional retainers in connection therewith.
The following table represents compensation for the Companys non-employee directors during the year ended *December 31, 2025*. All compensation for Peter Holst, the Companys President and CEO, during the year ended *December 31, 2025*, is included in the Summary Compensation Table under Executive Compensation below.
| Name | | Cash Fees Earned ($) | | | Stock Awards($) | | | Total($) | | |
| Jason Adelman (1) | | | 68,000 | | | None | | | | 68,000 | | |
| Deborah Meredith | | | 64,000 | | | None | | | | 64,000 | | |
| Jonathan Schechter | | | 100,000 | | | None | | | | 100,000 | | |
| Robert Weinstein (2) | | | 99,000 | | | None | | | | 99,000 | | |
| (1) Mr. Adelman was appointed Chair of the Audit Committee, effective September 10, 2025, upon the resignation of Mr. Weinstein. | |
| (2) Mr. Weinstein resigned as a director of the Company, effective September 10, 2025. | |
*No* equity awards were outstanding as of *December 31, 2025*, for any director.
**Executive Compensation**
*Summary Compensation Table*
The following table sets forth the compensation awarded to, paid to, or earned by Peter Holst, President, and CEO, and David Clark, CFO, Treasurer, and Secretary, for the years ended *December 31, 2025,*and *2024*. *No* other executive officer earned more than *$100,000* during these years, so the Company only has *two* named executive officers.
| | | | Salary | | | Bonus | | | Stock Awards | | | All Other Compensation | | | Total | | |
| Name and Principal Positions | Year | | ($) | | | ($) | | | ($) | | | ($) (1) | | | ($) | | |
| Peter Holst | 2025 | | | 295,000 | | | | 442,500 | | | | | | | | 11,000 | | | | 748,500 | | |
| Director, President, and CEO | 2024 | | | 295,000 | | | | 197,000 | | | | | | | | 11,000 | | | | 503,000 | | |
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| David Clark | 2025 | | | 260,000 | | | | 195,000 | | | | | | | | 11,000 | | | | 466,000 | | |
| CFO, Treasurer, and Secretary | 2024 | | | 260,000 | | | | 87,000 | | | | | | | | 11,000 | | | | 358,000 | | |
| (1) Other compensationrepresents i) matching contributions under the Companys 401(k) Plan of $10,000 for2025 and 2024; and ii) company-paid lifeinsurance premiums of $1,000 for2025 and 2024, for both Mr. Holst and Mr. Clark. | |
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**Outstanding Equity Awards at 2025 Fiscal Year-End**
*No* equity awards were outstanding for our named executive officers as of*December 31, 2025*.
**401(k) Plan**
The Company maintains a tax-qualified *401*(k) plan for its eligible employees, including its named executive officers. Pursuant to the plan's terms, for fiscal years*2025* and *2024*, eligible employees *may*defer up to *80%* of their salary each year. The company matches *50%* of an employees contributions on the *first* *6%* of the employees salary. This matching contribution vests over *four* years.
**Agreements with Named Executive Officers**
We have entered into employment agreements with our current named executive officers. All named executive officers, whether or *not* subject to an employment agreement, are at will employees of the Company.
**Peter Holst Employment Agreement.**
On *January 13, 2013,*the Board appointed Peter Holst as the Companys President and Chief Executive Officer and as a member of the Board. In connection with his appointment, the Company entered into an employment agreement with Mr. Holst, which was subsequently amended and restated as of *January 28, 2016,*and *July 19, 2019 (*as amended and restated, the Holst Employment Agreement). Pursuant to the Holst Employment Agreement, Mr. Holst receives an annual base salary of *$295,000* and is eligible to receive an annual incentive bonus equal to *100%* of his base salary at the discretion of the compensation committee of the Board based on meeting certain financial and non-financial goals.
Under the terms of the Holst Employment Agreement, if Mr. Holsts employment is terminated outside of a change in control (as defined in the Holst Employment Agreement) (i) by the Company without cause or by Mr. Holst for good reason (as such terms are defined therein) or (ii) as a result of the expiration of the term of the Holst Employment Agreement caused by the Companys election *not* to renew such agreement, then he will be entitled to receive the following payments and benefits, subject to his execution and non-revocation of an effective general release of claims in favor of the Company:
| | | 12 months base salary, payable in equal monthly installments in accordance with the Companys normal payroll practices; | |
| | | 100% of his maximum annual target bonus payable for the calendar year in which such termination occurs; | |
| | | 100% accelerated vesting of Mr. Holsts then-unvested shares of restricted stock and RSUs (if any); and | |
| | | payment (or reimbursement) of the COBRA premiums for the continuation of coverage for Mr. Holst and his eligible dependents under the Companys then-existing medical, dental, and prescription insurance plans for a period of 12 months. | |
In addition to the above payments and benefits, in the event that Mr. Holsts employment is terminated during the *18*-month period following a change in control (i) by the Company without cause or by Mr. Holst for good reason or (ii) as a result of the expiration of the term of the Holst Employment Agreement caused by the Companys election *not* to renew such agreement, then he will be entitled to receive the following payments and benefits, subject to his execution and non-revocation of an effective general release of claims in favor of the Company:
| | | 24 months base salary, payable in equal monthly installments in accordance with the Companys normal payroll practices; | |
| | | 100% of his maximum annual target bonus payable for the calendar year in which such termination occurs; | |
| | | a pro-rated portion of his maximum annual target bonus for the calendar year in which the effective date of termination occurs; | |
| | | 80% accelerated vesting of Mr. Holsts then-unvested shares of restricted stock and RSUs (if any); and | |
| | | payment (or reimbursement) of the COBRA premiums for the continuation of coverage for Mr. Holst and his eligible dependents under the Companys then-existing medical, dental, and prescription insurance plans for a period of 12 months. | |
In consideration of the payments and benefits under the Holst Employment Agreement, Mr. Holst is restricted from engaging in competitive activities for *12* months after the termination of his employment, as well as prohibited from soliciting the Companys clients and employees and from disclosing the Companys confidential information.
*36*
[Table of Contents](#toc)
The Holst Employment Agreement contains a best after-tax benefit provision, which provides that, to the extent that any amounts payable under the Holst Employment Agreement would be subject to the federal tax levied on certain excess parachute payments under Section *4999* of the Code, the Company will either pay Mr. Holst the full amount due under the Holst Employment Agreement or, alternatively, reduce his payments to the extent that *no* Section *4999* excise tax would be due, whichever provides the highest net after-tax benefit to Mr. Holst.
**David Clark Employment Agreement.**
On *March 25, 2013,*the Company entered into an employment agreement with David Clark in connection with his appointment as Chief Financial Officer of the Company, which was subsequently amended and restated on *July 19, 2019 (*as amended and restated, the Clark Employment Agreement). Pursuant to the Clark Employment Agreement, Mr. Clark receives an annual base salary of *$260,000* and is eligible to receive an annual incentive bonus equal to *50%* of his base salary at the discretion of the compensation committee of the Board, based on meeting certain financial and non-financial goals.
Under the terms of the Clark Employment Agreement, if Mr. Clarks employment is terminated outside of a change in control (as defined in the Clark Employment Agreement) (i) by the Company without cause or by Mr. Clark with or without good reason (as such terms are defined therein) or (ii) as a result of the expiration of the term of the Clark Employment Agreement caused by the Companys election *not* to renew such agreement, then he will be entitled to receive the following payments and benefits, subject to his execution and non-revocation of an effective general release of claims in favor of the Company:
| | | Six months base salary, payable in equal monthly installments in accordance with the Companys normal payroll practices; | |
| | | 50% of his maximum annual target bonus payable for the calendar year in which such termination occurs; | |
| | | a pro-rated portion of his maximum annual target bonus for the calendar year in which the effective date of termination occurs; | |
| | | 100% accelerated vesting of Mr. Clarks then-unvested shares of restricted stock and RSUs (if any); and | |
| | | payment (or reimbursement) of the COBRA premiums for the continuation of coverage for Mr. Clark and his eligible dependents under the Companys then-existing medical, dental, and prescription insurance plans for a period of six months. | |
In addition to the above payments and benefits, in the event that Mr. Clarks employment is terminated during the *18*-month period following a change in control by the Company without cause or by Mr. Clark for good reason, then he will also be entitled to receive (i) increased severance equal to *18* months base salary, (ii) *100%* of his maximum annual target bonus payable for the calendar year in which such termination occurs, and (iii) extended payment (or reimbursement) of the COBRA premiums for *12* months. In such an event, Mr. Clark will be entitled to receive *80%* accelerated vesting of his then-unvested shares of restricted stock and RSUs (if any).
In consideration of the payments and benefits under the Clark Employment Agreement, Mr. Clark is restricted from engaging in competitive activities for *six* months after the termination of his employment, as well as prohibited from soliciting the Companys clients and employees and from disclosing the Companys confidential information.
**Potential Payments to Named Executive Officers upon Termination or Change-in-Control**
*No* named executive officer holds outstanding equity incentive awards, and *no* named executive officer is entitled to accelerated vesting upon termination for cause. In accordance with the terms of the Companys Amended and Restated *2019* Equity Incentive Plan, the Company is given authority to accelerate the timing of the exercise/vesting provisions of awards under such plan in the event of certain changes in control or other corporate transactions.
See Agreements with Named Executive Officers above for a discussion of certain payments the Company could be required to make upon the termination of a Named Executive Officer.
*37*
[Table of Contents](#toc)
**Pay Versus Performance**
In *August 2022,*the SEC adopted final rules requiringcompanies to disclose information about the relationship between executive compensation actually paid and the Company'sfinancial performance. The information below is provided pursuant to Item *402*(v) of SEC Regulation S-K with respect to "smaller reporting companies," as that term is defined in Item *10*(f)(*1*) of SEC Regulation S-K.
| | | | | | | | | | | | | | | | | | | (f) Value of Initial Fixed | | | | | | |
| | | (b) Summary Comp | | | | | | | (d) Average Summary | | | (e) Average Comp. | | | $100 Investment Based | | | | | | |
| | | Table Total for PEO | | | (c) Comp. Actually | | | Comp. Table for | | | Actually Paid to | | | On Total Shareholder | | | (g) Net Income | | |
| (a) Year | | ($)(1) | | | Paid to PEO ($)(2) | | | Non-PEO NEOs ($)(3) | | | Non-PEO NEOs ($)(4) | | | Return ($)(5) | | | ($)(6) | | |
| 2023 | | $ | 699,000 | | | $ | 699,000 | | | $ | 443,000 | | | $ | 443,000 | | | $ | 11.11 | | | $ | (4,384,000 | ) | |
| 2024 | | $ | 503,000 | | | $ | 503,000 | | | $ | 358,000 | | | $ | 358,000 | | | $ | 5.39 | | | $ | (4,043,000 | ) | |
| 2025 | | $ | 748,500 | | | $ | 748,500 | | | $ | 466,000 | | | $ | 466,000 | | | $ | 2.51 | | | $ | (6,355,000 | ) | |
| (1) | The dollar amounts reported in column (b) are the amounts of total compensation reported for Mr. Holst (Chief Executive Officer) for each corresponding year in the "Total" column of the Summary Compensation Table. See "Executive Compensation - Summary Compensation Table." | |
| (2) | The dollar amounts reported in column (c) represent the amount of "compensation actually paid" to Mr. Holst as computed in accordance with Item 402(v)(2)(iii) of SEC Regulation S-K, which prescribes certain specified additions and subtractions from the amount in column (b). In accordance with the requirements of Item 402(v)(2)(iii) of Regulation S-K, there were no adjustments required to be made to Mr. Holst's total compensation for each year to determine the compensation actually paid. | |
| (3) | The dollar amounts reported in column (d) represent the amount of compensationreported for Mr. Clark (Chief Financial Officer) foreach correspondingyear in the "Total" column of the Summary Compensation Table. See "Executive Compensation - Summary Compensation Table." | |
| (4) | The dollar amounts reported in column (e) represent theamount of "compensation actually paid" to Mr. Clark as computed in accordance with Item 402(v)(2)(iii) of SEC Regulation S-K, which prescribes certain specified additions and subtractions from the amount in column (d). | |
| (5) | Total Shareholder Return is determined based on the value of an initial fixed investment in the Company's common stock of $100 on December 31, 2022, and calculated in accordance with Item 201(e) of SEC Regulation S-K. | |
| (6) | The dollar amounts reported in column (g) represent the amount of net income reflected in our consolidated audited financial statements for the applicable year. | |
*Analysis of the Information Presented in the Pay Versus Performance Table*
The Compensation Committee of the Board of Directors of the Company does *not* have a policy or practice regarding evaluating Total Shareholder Return as part of its determination of compensation decisions for the named executive officers. The Compensation Committee considers various factors in determining the competitiveness of its executive compensation. Over the past *three* fiscal years, the Compensation Committee has recognized the significant time and effort required by the executive officers and others to manage the Companys liquidity by raising capital while reducing operating expenses and cash used in operations, secure and maintain the Companys listing on the Nasdaq Capital Market, and to source and evaluate merger and acquisition opportunities. To retain qualified executive management, the Compensation Committee: i)increased the salaries of named executive officers in *July 2021 (*the salaries of the named executive officers were last increased in *2014*), ii) in *2024*paid bonuses that were earned during *May*through *December*offiscal year *2023,*and iii) in *2025*paid bonuses that were earned during *January*through *December*of fiscal year *2024* and during *January*through *June*of fiscal year *2025.* The current named executive officers last received equity awards in *2019.*
All information provided above under the Pay Versus Performance Information heading will not be deemed to be incorporated by reference in any filing of our company under the Securities Act of *1933,* as amended, whether made before or after the date hereof, and irrespective of any general incorporation language in any such filing.
38
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**Item 12.****Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters**
The following table sets forth information regarding the beneficial ownership of our capital stock as ofMarch 19, 2026,by each of the following:
|
|
|
each person (or group within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the Exchange Act)known by us to own beneficially more than 5% of any class of our voting securities; |
|
|
|
|
the named executive officers set forth in the Summary Compensation Table under Executive Compensation above; |
|
|
|
|
each of our directors and director nominees; and |
|
|
|
|
all of our directors and executive officers as a group. |
|
The amounts and percentages in the table below are based on 3,327,210shares of Common Stock issued and outstanding as of March 19, 2026.As used in this table, beneficial ownership means the sole or shared power to vote or direct the voting, or to dispose of or direct the disposition of, any security. A person is considered the beneficial owner of securities that can be acquired within 60 days of such date through the exercise or conversion of any option, warrant, or other derivative security. Shares of Common Stock subject to options, restricted stock units (RSUs), warrants, or other derivative securities that are currently exercisable or convertible or are exercisable or convertible within such 60 days are considered outstanding for computing the ownership percentage of the person holding such options, RSUs, warrants or other derivative security, but are not considered outstanding for computing the ownership percentage of any other person.
|
|
|
Common Stock |
|
|
|
Name and Address of Beneficial Owners (1) |
|
Amount and Nature of Beneficial Ownership (2) |
|
|
|
Percent of Class |
|
|
|
Named Executive Officers and Directors: |
|
|
|
|
|
|
|
|
|
|
|
Peter Holst |
|
|
15,544 |
(3 |
) |
|
|
0.5 |
% |
|
|
David Clark |
|
|
82 |
(4 |
) |
|
|
0.0 |
% |
|
|
Jason Adelman |
|
|
10,000 |
(5 |
) |
|
|
0.3 |
% |
|
|
Jonathan Schechter |
|
|
86,351 |
(6 |
) |
|
|
2.6 |
% |
|
|
Deborah Meredith |
|
|
|
(7 |
) |
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All directors and executive officers as a group (5 people) |
|
|
111,977 |
|
|
|
|
3.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greater than 5% Owners: |
|
|
|
|
|
|
|
|
|
|
|
Jon Matthew Hall |
|
|
233,415 |
(8 |
) |
|
|
7.0 |
% |
|
|
(1) Unless otherwise noted, the address of each person listed is c/o TaoWeave, Inc., 110 16th Street, Suite 1400-1024, Denver, CO, 80202 |
|
|
(2) Unless otherwise indicated by footnote, the named persons have sole voting and investment power with respect to the shares of Common Stock beneficially owned. |
|
|
(3) Includes 15,544 shares of Common Stock held. |
|
|
(4) Includes 82 shares of Common Stock held. |
|
|
(5) Based on ownership information from the Form 4 filed by Mr. Adelman with the SEC on September 9, 2025. |
|
|
(6) Based on ownership information from the Form 4filed by Mr. Schechter with the SEC on November 17, 2025. Represents 25,000 shares of Common Stock and 61,351 warrantsto purchase common stock of the issuer with an exercise price of $3.41per share. The warrants expire on September 30, 2028. |
|
|
(7) Based on ownership information from the Form 4filed by Ms. Meredithwith the SEC on June 20, 2023. |
|
|
(8) Based on ownership information from Schedule 13G/A filed by Jon Matthew Hall on August 7, 2025. The Address of Jon Matthew Hall is 6722 Hensley Ct. Newburgh, IN 47630. |
|
39
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**Equity Compensation Plan Information**
The following table sets forth, as of December 31, 2025, information regarding our common stock that may be issued under the Companys equity compensation plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities |
|
|
Remaining Available |
|
|
|
|
|
Number of Securities |
|
|
|
|
|
|
to be Issued Upon |
|
|
for Future Issuance |
|
|
|
|
|
to be Issued Upon |
|
|
Weighted Average |
|
|
Vesting of |
|
|
Under Equity |
|
|
|
|
|
Exercise of |
|
|
Exercise Price of |
|
|
Outstanding |
|
|
Compensation Plans |
|
|
|
|
|
Outstanding |
|
|
Outstanding |
|
|
Restricted |
|
|
(Excluding Securities |
|
|
|
|
|
Stock Options |
|
|
Stock Options |
|
|
Stock Units |
|
|
Reflected in Columns |
|
|
|
Plan Category |
|
(a) |
|
|
(b) |
|
|
(c) |
|
|
(a) & (c)) (1) |
|
|
|
Equity compensation plans approved by security holders |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
2,000,000 |
|
|
|
(1) On January 1, 2026, the number of shares available under the Company's Amended and Restated 2019 Equity Incentive Plan automatically increased to 2,166,360 under the terms of the plan. |
|
**Item 13.****Certain Relationships and Related Transactions, and Director Independence**
Other than compensation arrangements for our directors and named executive officers, which are described elsewhere in this Annual Report, and as described below, there have been no transactions since January1, 2024, to which we were a party or will be a party, in which:
|
|
|
the amounts involved exceeded or will exceed the lesser of (1) $120,000 or (2) one percent of the average of our total assets at year-end for the last two completed fiscal years; and |
|
|
|
|
any of our directors, executive officers, or holders of more than 5% of our capital stock, or any member of the immediate family of, or person sharing the household with, the foregoing persons, had or will have a direct or indirect material interest. |
|
One of our directors, Jonathan Schechter, is currently a partner at The Special Equities Group ("SEG"), a division of Dawson James Securities, Inc. ("Dawson James"). In March 2023, prior to Mr. Schechter's appointment to our board, Dawson James acted as placement agent in connection with our private placement of shares of Series F Preferred Stock, Series F Preferred warrants, and Common Warrants.Pursuant to the terms of the 2023 Placement Agent Agreement, we paid the placement agent a cash fee of approximately$511,000 (equal to 8% of the aggregate gross proceeds raised)and granted theplacement agent warrants to purchase153,470 shares of Common Stock (with a currentexercise price of $3.41)(the "2023 Placement Agent Warrants"). Mr. Schechter received61,351 of the 2023 Placement Agent Warrants and did not receive any of the fees.
Subsequently, through December 31, 2025,2,223 Series F PreferredWarrants and804,039 Common Warrants were exercised.Pursuant to the terms of the 2023 Placement Agent Agreement, we paid Dawson Jamesfees ofapproximately$393,000 (or 8% of the aggregate gross proceeds raised from the exercises). Mr. Schechter did not receive any of the fees paid.
On June 6, 2025, Dawson James acted as placement agent in connection with our private placement of Pre-Funded Common Stock Warrants.Pursuant to the terms of the 2025Placement Agent Agreement, we paid Dawson James a cash fee equal to$375,000 (or 5% of the aggregate gross proceeds raised from the 2025 Private Placement),$50,000 in expenses, and issued99,470placement agent warrants (the "2025 Placement Agent Warrants").Mr. Schechter did not receive any of the fees paid, norwereany of the 2025 Placement Agent Warrants issued to him.
**Policy on Future Related Party Transactions**
Transactions with related parties, including the transactions referred to above, are reviewed and approved by independent members of the Board of Directors of the Company in accordance with the Companys written Code of Business Conduct and Ethics.
40
[Table of Contents](#toc)
**Director Independence**
For information about the independence of our directors, see Item 10, Director Independence, and Item 10, Board Leadership Structure and Role in Risk Oversight.
**Item 14.****Principal Accounting Fees and Services**
The audit committee, composed entirely of independent, non-employee members of the Board of Directors, appointed the firm of EisnerAmper LLP, Iselin, New Jersey (EisnerAmper), PCAOB identification number 274, as the independent registered public accounting firm for the audit of the Consolidated Financial Statements of the Company and its subsidiaries for the fiscal years ending December 31, 2025, and 2024. As our independent registered public accounting firm, EisnerAmper audited our Consolidated Financial Statements for the fiscal year ending December 31, 2025, reviewed the related interim quarters, and performed audit-related services and consultation on various accounting and financial reporting matters. EisnerAmper may also perform certain non-audit services for our Company. The audit committee has determined that the provision of the services provided by EisnerAmper as set forth herein are compatible with maintaining EisnerAmpers independence and the prohibitions on performing non-audit services set forth in the Sarbanes-Oxley Act and relevant SEC rules.
**Audit Fees**
EisnerAmper, our principal accountant, billed the Company approximately$239,000 for professional services related to the audit of our annual Consolidated Financial Statements for the 2025 fiscal year and the reviews of the Consolidated Financial Statements included in our quarterly reports on Form10-Q for the 2025 fiscal year. EisnerAmper billed us$251,000 for professional services for the audit of our annual Consolidated Financial Statements for the 2024 fiscal year, and the reviews of the Consolidated Financial Statements included in our quarterly reports on Form10-Q for the 2024 fiscal year.
**Audit-Related Fees**
EisnerAmper did not bill the Company for any audit-related feesin the 2025and2024 fiscal years.
**Tax Fees**
EisnerAmper did not bill the Company for any professional services rendered for tax compliance, tax advice, or tax planning in the2025and2024 fiscal years.
**All Other Fees**
EisnerAmper did not bill the Company for anyproducts and servicesother than the audit described aboveduring the 2025 and 2024 fiscal years.
**Audit Committee Pre-Approval Policy**
The audit committee is required to pre-approve the EisnerAmper engagement to perform audit and other services for the Company. Our procedures for the audit committee's pre-approval of all services provided by EisnerAmper comply with SEC regulations regarding pre-approval of services. Services subject to these SEC requirements include audit services, audit-related services, tax services, and other services. The audit engagement is specifically approved, and the auditors are retained by the audit committee. The audit committee has also adopted policies and procedures for pre-approving all non-audit work performed by EisnerAmper. In accordance with audit committee policy and the requirements of law, all services provided by EisnerAmper in the 2025 and 2024 fiscal years were pre-approved by the audit committee, and all services to be provided by EisnerAmper will be pre-approved. Pre-approval includes audit services, audit-related services, tax services, and other services. To avoid certain potential conflicts of interest, the law prohibits a publicly traded company from obtaining certain non-audit services from its auditing firm. We obtain these services from other service providers as needed.
41
[Table of Contents](#toc)
**PART IV**
**Item 15. Exhibits, Financial Statement Schedules**
A. The following documents are filed as part of this Report:
1. Consolidated Financial Statements:
|
|
Page |
|
|
Report of Independent Registered Public Accounting FirmPCAOB ID # 274 |
F-1 |
|
|
Consolidated Balance Sheets at December31, 2025, and 2024 |
F-3 |
|
|
Consolidated Statements of Operations for the years ended December 31, 2025, and 2024 |
F-4 |
|
|
Consolidated Statements of StockholdersEquity for the years ended December31, 2025, and 2024 |
F-5 |
|
|
Consolidated Statements of Cash Flows for the years ended December31, 2025, and 2024 |
F-6 |
|
|
Notes to Consolidated Financial Statements |
F-7 |
|
2. Financial Statement Schedules have been omitted since they are either not required, not applicable, or the information is otherwise included.
3. Exhibits:
A list of exhibits required to be filed as part of this Report is set forth in the Exhibit Index on page [46](#exhibitindex)of this Form 10-K, which immediately precedes such exhibits and is incorporated by reference.
**Item 16.****Form 10-K Summary**
None.
42
[Table of Contents](#toc)
**EXHIBIT INDEX**
|
Exhibit Number |
Description |
|
|
2.1 |
Agreement and Plan of Merger, dated September 12, 2019, by and among the Registrant, Oblong Industries, Inc., and Glowpoint Merger Sub II, Inc. (filed as Exhibit 2.1 to the Registrants Current Report on Form 8-K filed with the SEC on September 16, 2019, and incorporated herein by reference). |
|
|
2.2 |
Amendment to Agreement and Plan of Merger, dated October 1, 2019, by and among the Registrant, Oblong Industries, Inc., and Glowpoint Merger Sub II, Inc. (filed as Exhibit 2.2 to the Registrants Current Report on Form 8-K filed with the SEC on October 7, 2019, and incorporated herein by reference). |
|
|
3.1* |
Amended and Restated Certificate of Incorporation, as amended. |
|
|
3.2 |
Second Amended and Restated By-Laws(filed as Exhibit 3.2to the Registrant's CurrentReport on Form 8-K filed with the SEC on December 8, 2025, and incorporated herein by reference). |
|
|
4.1 |
Specimen Common Stock Certificate (filed as Exhibit 4.1 to the Registrants Annual Report on Form10-K filed with the SEC on June 6, 2007, and incorporated herein by reference). |
|
|
4.2 |
Certificate of Designations, Preferences, and Rights of SeriesD Preferred Stock (filed as Exhibit 4.6 to the Registrants Current Report on Form8-K filed with the SEC on September24, 2007, and incorporated herein by reference). |
|
|
4.3 |
Certificate of Designations, Preferences, and Rights of Series A-2 Preferred Stock of the Registrant (filed as Exhibit 4.1 to the Registrants Current Report on Form 8-K filed with the SEC on August 11, 2009, and incorporated herein by reference). |
|
|
4.4 |
Certificate of Designations, Preferences, and Rights of Perpetual Series B Preferred Stock of the Registrant (filed as Exhibit 4.1 to the Registrants Current Report on Form 8-K filed with the SEC on March 30, 2010, and incorporated herein by reference). |
|
|
4.5 |
Certificate of Designations, Preferences, and Rights of Perpetual Series B-1 Preferred Stock of the Registrant (filed as Exhibit 3.1 to the Registrants Current Report on Form 8-K filed with the SEC on August9, 2011, and incorporated herein by reference). |
|
|
4.6 |
Certificate of Designations of Rights, Powers, Preferences, Privileges, and Restrictions of the 0% Series B Convertible Preferred Stock (filed as Exhibit 3.1 to the Registrants Current Report on Form8-K filed with the SEC on November 14, 2017, and incorporated herein by reference). |
|
|
4.7 |
Certificate of Designations of Rights, Powers, Preferences, Privileges, and Restrictions of the 0% Series C Convertible Preferred Stock (filed as Exhibit 3.1 to the Registrants Current Report on Form8-K filed with the SEC on January 25, 2018, and incorporated herein by reference). |
|
|
4.8 |
Certificate of Designations of the 6.0% Series D Convertible Preferred Stock (filed as Exhibit 3.1 to the Registrants Current Report on Form8-K filed with the SEC on October 7, 2019, and incorporated herein by reference). |
|
|
4.9 |
Certificate of Designations of the 6.0% Series E Convertible Preferred Stock (filed as Exhibit 3.2 to the Registrants Current Report on Form8-K filed with the SEC on October 7, 2019, and incorporated herein by reference). |
|
|
4.10 |
Certificate of Designations of the 9.0% Series F Convertible Preferred Stock (filed as Exhibit 3.1 to the Registrants Current Report on Form8-K filed with the SEC on April 3, 2023, and incorporated herein by reference). |
|
|
4.11 |
Form of Common Stock Purchase Warrant (filed as Exhibit 4.1 to the Registrants Quarterly Report on Form 10-Q filed with the SEC on November 16, 2020, and incorporated herein by reference). |
|
|
4.12 |
Form of Series A Common Stock Purchase Warrant (filed as Exhibit 4.1 to the Registrants Current Report on Form 8-K filed with the SEC on June 28, 2021, and incorporated herein by reference). |
|
|
4.13 |
Form of Series B Common Stock Purchase Warrant (filed as Exhibit 4.2 to the Registrants Current Report on Form 8-K filed with the SEC on June 28, 2021, and incorporated herein by reference). |
|
|
4.14 |
Form of Amendment to Series A Warrants (filed as Exhibit 4.1 to the Registrants Current Report on Form 8-K filed with the SEC on January 3, 2022, and incorporated herein by reference). |
|
|
4.15 |
Form of Amendment to Series A Warrants (filed as Exhibit 4.1 to the Registrants Current Report of Form 8-K filed with the SEC on January 3, 2023, and incorporated herein by reference). |
|
|
4.16 |
Form of Common Warrant (filed as Exhibit 4.1 to the Registrants Current Report on Form 8-K filed with the SEC on April 3, 2023, and incorporated herein by reference). |
|
|
4.17 |
Form of Preferred Warrant (filed as Exhibit 4.2 to the Registrants Current Report on Form 8-K filed with the SEC on April 3, 2023, and incorporated herein by reference). |
|
|
4.18 |
Form of Exchange Warrant (filed as Exhibit 4.1 to the Registrants Current Report on Form 8-K filed with the SEC on July 5, 2023, and incorporated herein by reference. |
|
|
4.19 |
Description of Common Securities(filed as Exhibit 4.19 to the Registrant's Annual Report on Form 10-K filed with the SEC on March 19, 2024, and incorporated herein by reference). |
|
|
4.20 |
Form of Pre-Funded Warrant (filed as Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed with the SEC on June 6, 2025, and incorporated herein by reference). |
|
|
4.21 |
Form of 2025 Placement Agent Warrant (filed as Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed with the SEC on June 6, 2025, and incorporated herein by reference). |
|
|
4.22 |
Form of Advisor Warrant (filed as Exhibit 4.5 to the Registrant's Registration Statement on Form S-3 filed with the SEC on June 20, 2025, and incorporated herein by reference). |
|
43
[Table of Contents](#toc)
|
10.1# |
Form of Stock Option Award Agreement (filed as Exhibit 99.1 to the Registrants Current Report on Form 8-K filed with the SEC on March 15, 2012, and incorporated herein by reference). |
|
|
10.2# |
Form of Restricted Stock Award Agreement (filed as Exhibit 99.2 to the Registrants Current Report on Form 8-K filed with the SEC on March 15, 2012, and incorporated herein by reference). |
|
|
10.3# |
Glowpoint, Inc. 2014 Equity Incentive Plan (filed as Exhibit 10.2 to the Registrants Current Report on Form 8-K filed with the SEC on June 2, 2014, and incorporated herein by reference). |
|
|
10.4# |
2015 Form of Performance-Vested Restricted Stock Unit Agreement (Executive Officers) (filed as Exhibit 10.6 to the Registrants Annual Report on Form 10-K filed with the SEC on March 5, 2015, and incorporated herein by reference). |
|
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10.5# |
2015 Form of Performance-Vested Restricted Stock Unit Agreement (Employees) (filed as Exhibit 10.7 to the Registrants Annual Report on Form 10-K filed with the SEC on March 5, 2015, and incorporated herein by reference). |
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10.6# |
2016 Form of Performance-Vested Restricted Stock Unit Agreement (Executive Officers) (filed as Exhibit 10.8 to the Registrants Annual Report on Form 10-K filed with the SEC on March 31, 2017, and incorporated herein by reference). |
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10.7# |
2016 Form of Performance-Vested Restricted Stock Unit Agreement (Employees) (filed as Exhibit 10.9 to the Registrants Annual Report on Form 10-K filed with the SEC on March 31, 2017, and incorporated herein by reference). |
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10.8# |
Form of Time-Vested Restricted Stock Unit Agreement (Executive Officers) (filed as Exhibit 10.8 to the Registrants Annual Report on Form 10-K filed with the SEC on March 5, 2015, and incorporated herein by reference). |
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10.9# |
Form of Time-Vested Restricted Stock Unit Agreement (Employees) (filed as Exhibit 10.9 to the Registrants Annual Report on Form 10-K filed with the SEC on March 5, 2015, and incorporated herein by reference). |
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10.10# |
Form of Restricted Stock Grant Agreement (filed as Exhibit 10.12 to the Registrants Annual Report on Form 10-K filed with the SEC on March 31, 2017, and incorporated herein by reference). |
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10.11# |
Form of Director Restricted Stock Unit Agreement (filed as Exhibit 10.10 to the Registrants Annual Report on Form 10-K filed with the SEC on March 5, 2015, and incorporated herein by reference). |
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10.12# |
Form of Indemnification Agreement for directors and officers (filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on June 2, 2014, and incorporated herein by reference). |
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10.13 |
Form of Securities Purchase Agreement, dated October 23, 2017 (filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on October 23, 2017, and incorporated herein by reference). |
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10.14 |
Form of Securities Purchase Agreement, dated January 22, 2018 (filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on January 22, 2018, and incorporated herein by reference). |
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10.15# |
First Amendment to the Glowpoint, Inc. 2014 Equity Incentive Plan (filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on June 1, 2018, and incorporated herein by reference). |
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10.16 |
Representation Agreement, dated July 19, 2019, by and among the Registrant and the Stockholders named therein (filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on July 25, 2019, and incorporated herein by reference). |
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10.17# |
Second Amended and Restated Employment Agreement, by and between the Registrant and Peter Holst, dated July 19, 2019 (filed as Exhibit 10.2 to the Registrants Current Report on Form 8-K filed with the SEC on July 25, 2019, and incorporated herein by reference). |
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10.18# |
Amended and Restated Employment Agreement, by and between the Registrant and David Clark, dated July 19, 2019 (filed as Exhibit 10.3 to the Registrants Current Report on Form 8-K filed with the SEC on July 25, 2019, and incorporated herein by reference). |
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10.19 |
Series E Preferred Stock Purchase Agreement, dated October 1, 2019, by and among the Registrant and the Purchasers party thereto (filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on October 7, 2019, and incorporated herein by reference). |
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10.20 |
Registration Rights Agreement, dated October 1, 2019, by and among the Registrant and the Purchasers party thereto (filed as Exhibit 10.2 to the Registrants Current Report on Form 8-K filed with the SEC on October 7, 2019, and incorporated herein by reference). |
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10.21#* |
TaoWeave, Inc. Amended and Restated 2019 Equity Incentive Plan (as amended by the Board of Directors on October 20, 2025 and approved by stockholders on December 17, 2025). |
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10.22 |
Form of Securities Purchase Agreement (filed as Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q filed with the SEC on November 16, 2020, and incorporated herein by reference). |
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10.23 |
Form of Securities Purchase Agreement (filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on June 28, 2021, and incorporated herein by reference). |
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10.24 |
Separation Agreement dated March 4, 2022, between the Company and Pete Hawkes (filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on March 8, 2022. and incorporated herein by reference) |
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[Table of Contents](#toc)
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10.25 |
Securities Purchase Agreement, dated March 31, 2023 (filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on April 3, 2023, and incorporated herein by reference). |
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10.26 |
Registration Rights Agreement, dated March 31, 2023 (filed as Exhibit 10.2 to the Registrants Current Report on Form 8-K filed with the SEC on April 3, 2023, and incorporated herein by reference). |
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10.27 |
Engagement Letter, dated March 30, 2023 (filed as Exhibit 10.3 to the Registrants Current Report on Form 8-K filed with the SEC on April 3, 2023, and incorporated herein by reference). |
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10.28 |
Form of Warrant Repricing Letter, dated April 18, 2023 (filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on April 24, 2023, and incorporated herein by reference). |
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10.29 |
Exchange Agreement, dated as of June 30, 2023, between Oblong, Inc. and Foundry Venture Capital 2007, L.P. and Foundry Group Select Fund, L.P. (filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on July 5, 2023, and incorporated herein by reference). |
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10.30 |
Waiver, dated as of October 6, 2023, between Oblong, Inc. and certain Investors (filed as exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on October 10, 2023, and incorporated herein by reference). |
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10.31 |
Amendment to Waiver, dated as of September 13, 2024, by and among Oblong, Inc. and the investors named therein (filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the SEC on September 13, 2024, and incorporated by reference). |
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10.32 |
Securities Purchase Agreement dated June 5, 2025 (filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the SEC on June 6, 2025, and incorporated herein by reference). |
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19.1* |
Oblong, Inc. Insider Trading Policy |
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21.1* |
Subsidiaries of the Registrant |
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23.1* |
Consent of Independent Registered Public Accounting Firm-EisnerAmper LLP. |
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24.1 |
Power of Attorney (included in the signature page hereto) |
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31.1* |
Rule13a-14(a)/15d-14(a) Certification of the Chief Executive Officer. |
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31.2* |
Rule13a-14(a)/15d-14(a) Certification of the Chief Financial Officer. |
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32.1** |
Section1350 Certification of the Chief Executive Officer and Chief Financial Officer. |
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97.1# |
Compensation Clawback Policy(filed as Exhibit 97.1 to the Registrant's Annual Report on Form 10-K filed with the SEC on March 19, 2024, and incorporated herein by reference). |
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101.INS |
Inline XBRL Instance Document |
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101.SCH |
Inline XBRL Taxonomy Extension Schema |
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101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase |
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101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase |
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101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase |
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101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase |
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104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document. |
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# Constitutes a management contract, compensatory plan, or arrangement.
* Filed herewith.
** Furnished herewith.
Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant hereby undertakes to furnish supplemental copies of any of the omitted schedules upon request by the SEC.
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**SIGNATURES**
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
March 20, 2026
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TAOWEAVE, INC. |
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By: |
/s/ Peter Holst |
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Peter Holst |
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Chief Executive Officer and President |
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**POWER OF ATTORNEY**
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Peter Holst and David Clark jointly and severally, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form10-K, and file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant as of this 20th day of March 2026in the capacities indicated.
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/s/ Peter Holst |
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Director, President, and Chief Executive Officer |
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Peter Holst |
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/s/ David Clark |
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Chief Financial Officer (Principal Financial and Accounting Officer) |
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David Clark |
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/s/ Jonathan Schechter |
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Chairman of the Board |
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Jonathan Schechter |
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/s/ Jason Adelman |
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Director |
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Jason Adelman |
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/s/ Deborah Meredith |
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Director |
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Deborah Meredith |
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46
[Table of Contents](#toc)
[](#)REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
TaoWeave, Inc. (formerly Oblong, Inc.)
**Opinion on the Financial Statements**
We have audited the accompanying consolidated balance sheets of TaoWeave, Inc. (formerly Oblong, Inc.) and Subsidiaries (the Company) as of December 31, 2025 and 2024, and the related consolidated statements of operations, stockholders equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2025 and 2024, and the consolidated results of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
**Basis for Opinion**
These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
**Critical Audit Matter**
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
*Evaluation of audit evidence pertaining to the existence of and rights to digital assets*
As discussed in Note 3 to the consolidated financial statements, the Company held a material balance of digital assets acquired as part of a newly implemented digital asset treasury strategy. These digital assets are held by third-party custodians and are measured at fair value in the statement of financial position, with gains and losses from changes in the fair value of such digital assets recognized in net income each reporting period. These assets are held through custodial arrangements with qualified third-party custodians and include assets staked on the Bittensor blockchain. As of December 31, 2025, the carrying amount of the Companys digital assets was approximately $5,395,000. Management exercised significant judgment in determining whether the Company controls the digital assets for financial reporting purposes and the appropriate accounting and presentation through evaluating the terms of the custodial agreement, assessing the Companys contractual rights to the assets and interpreting and applying the authoritative accounting guidance.
We identified the evaluation of the existence of and the Companys rights to digital assets as a critical audit matter due to the significant judgement exercised by Management in regards to custodial rights. A high degree of auditor judgment was involved in determining the nature and extent of the procedures performed and audit evidence obtained to assess the existence of and rights to the digital assets.
Addressing the critical audit matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. Our audit procedures related to this matter included:
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We evaluated the design and implementation of key internal controls over the existence of and the Companys rights to its digital assets, including those staked on the Bittensor blockchain. |
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We obtained and evaluated the terms of the contractual arrangements between the Company and its custodians, to assess the Companys ownership rights to its digital assets as of December 31, 2025. |
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We obtained confirmation of the Companys digital assets held in custody and staked as of December 31, 2025, the Companys rights to those digital assets, digital assets transactions during the year, and digital wallets owned by the Company, and reconciled the confirmed information to the Companys record of its digital assets. |
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We compared the Companys record of digital assets held in custody and for a sample of staked digital assets, as well as digital assets transactions, to the records on the public blockchain using software audit tools. We also evaluated the reliability of audit evidence obtained from public blockchains. |
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/s/ EisnerAmper LLP
We have served as the Companys auditor since 2010.
EISNERAMPER LLP
Iselin, New Jersey
March 20, 2026
-F-1-
[Table of Contents](#toc)
**TAOWEAVE, INC.**
**CONSOLIDATED BALANCE SHEETS**
**(In thousands, except par value, stated value, and shares)**
| | | December 31, | | | December 31, | | |
| | | 2025 | | | 2024 | | |
| ASSETS | | | | | | | | | |
| Current assets: | | | | | | | | | |
| Cash and cash equivalents | | $ | 2,258 | | | $ | 4,965 | | |
| Digital assets | | | 5,395 | | | | | | |
| Accounts receivable, net | | | 138 | | | | 186 | | |
| Prepaid expenses and other current assets | | | 424 | | | | 118 | | |
| Total current assets | | | 8,215 | | | | 5,269 | | |
| Other assets | | | 4 | | | | 6 | | |
| Total assets | | $ | 8,219 | | | $ | 5,275 | | |
| LIABILITIES AND STOCKHOLDERS EQUITY | | | | | | | | | |
| Current liabilities: | | | | | | | | | |
| Accounts payable | | | 112 | | | | 105 | | |
| Accrued expenses and other current liabilities | | | 1,061 | | | | 1,131 | | |
| Current portion deferred revenue | | | 13 | | | | 36 | | |
| Total current liabilities | | | 1,186 | | | | 1,272 | | |
| Total liabilities | | | 1,186 | | | | 1,272 | | |
| Commitments and contingencies (see Note 10) | | | | | | | | | |
| Stockholders equity: | | | | | | | | | |
| Preferred stock Series F, convertible; $.0001 par value; $172,490 stated value; 42,000 shares authorized, 150 and 545 shares issued and outstanding on December 31, 2025, and December 31, 2024, respectively | | | | | | | | | |
| Common stock, $.0001 par value; 150,000,000 shares authorized; 3,327,399 shares issued and 3,327,210 shares outstanding on December 31, 2025, respectively, and 1,144,926 shares issued and 1,144,737 outstanding on December 31, 2024, respectively | | | | | | | | | |
| Treasury stock, 189 common shares on December 31, 2025, and 2024 | | | (181 | ) | | | (181 | ) | |
| Additional paid-in capital | | | 245,843 | | | | 236,458 | | |
| Accumulated deficit | | | (238,629 | ) | | | (232,274 | ) | |
| Total stockholders equity | | | 7,033 | | | | 4,003 | | |
| Total liabilities and stockholders equity | | $ | 8,219 | | | $ | 5,275 | | |
See accompanying notes to consolidated financial statements
-F-2-
[Table of Contents](#toc)
**TAOWEAVE, INC.**
**CONSOLIDATED STATEMENTS OF OPERATIONS**
**(In thousands, except per share data)**
| | | Year Ended December 31, | | |
| | | 2025 | | | 2024 | | |
| Revenue | | $ | 2,437 | | | $ | 2,378 | | |
| Cost of revenue | | | 1,423 | | | | 2,047 | | |
| Gross profit | | | 1,014 | | | | 331 | | |
| Operating expenses: | | | | | | | | | |
| Research and development | | | 10 | | | | 155 | | |
| Sales and marketing | | | 21 | | | | 181 | | |
| General and administrative | | | 3,945 | | | | 4,197 | | |
| Total operating expenses | | | 3,976 | | | | 4,533 | | |
| Loss from operations | | | (2,962 | ) | | | (4,202 | ) | |
| Other (expense) income, net | | | | | | | | | |
| Interest income, net | | | 128 | | | | 169 | | |
| Unrealized loss on digital assets | | | (3,519 | ) | | | | | |
| Total interest and other (expense) income, net | | | (3,391 | ) | | | 169 | | |
| Loss before income taxes | | | (6,353 | ) | | | (4,033 | ) | |
| Income tax expense | | | 2 | | | | 10 | | |
| Net loss | | $ | (6,355 | ) | | $ | (4,043 | ) | |
| Preferred stock dividends | | | 32 | | | | 89 | | |
| Deemed dividend | | | | | | | 8,974 | | |
| Net loss attributable to common stockholders | | $ | (6,387 | ) | | $ | (13,106 | ) | |
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| Net loss attributable to common stockholders per share: | | | | | | | | | |
| Basic and diluted net loss per share | | $ | (2.76 | ) | | $ | (15.71 | ) | |
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| Weighted-average number of shares of common stock: | | | | | | | | | |
| Basic and diluted | | | 2,316 | | | | 834 | | |
See accompanying notes to consolidated financial statements
-F-3-
[Table of Contents](#toc)
**TAOWEAVE, INC.**
**CONSOLIDATED STATEMENTS OF STOCKHOLDERS****EQUITY**
**(In thousands, except share data)**
| | | Series F Preferred Stock | | | Common Stock | | | Treasury Stock | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Additional | | | Accumulated | | | | | | |
| | | Shares | | | Amount | | | Shares | | | Amount | | | Shares | | | Amount | | | Paid-In Capital | | | Deficit | | | Total | | |
| Balance on December 31, 2023 | | | 1,930 | | | $ | | | | | 573,644 | | | $ | | | | | 189 | | | $ | (181 | ) | | $ | 233,913 | | | $ | (228,231 | ) | | $ | 5,501 | | |
| Net loss | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (4,043 | ) | | | (4,043 | ) | |
| Stock-based compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | 62 | | | | | | | | 62 | | |
| Proceeds from common warrant exercise, net of fees | | | | | | | | | | | 282,314 | | | | | | | | | | | | | | | | 903 | | | | | | | | 903 | | |
| Proceeds from preferred warrant exercise, net of fees | | | 1,648 | | | | | | | | | | | | | | | | | | | | | | | | 1,478 | | | | | | | | 1,478 | | |
| Conversions of Series F Preferred Stock and accrued dividends | | | (3,033 | ) | | | | | | | 288,968 | | | | | | | | | | | | | | | | 191 | | | | | | | | 191 | | |
| Series F Preferred Stock dividends | | | | | | | | | | | | | | | | | | | | | | | | | | | (89 | ) | | | | | | | (89 | ) | |
| Balance on December 31, 2024 | | | 545 | | | $ | | | | | 1,144,926 | | | $ | | | | | 189 | | | $ | (181 | ) | | $ | 236,458 | | | $ | (232,274 | ) | | $ | 4,003 | | |
| Net loss | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (6,355 | ) | | | (6,355 | ) | |
| Proceeds from Private Placement, net of fees | | | | | | | | | | | | | | | | | | | | | | | | | | | 6,888 | | | | | | | | 6,888 | | |
| Advisor warrant issuance | | | | | | | | | | | | | | | | | | | | | | | | | | | 335 | | | | | | | | 335 | | |
| Common warrant exercise, net of fees | | | | | | | | | | | 521,725 | | | | | | | | | | | | | | | | 1,639 | | | | | | | | 1,639 | | |
| Pre-funded warrant exercise, net of fees | | | | | | | | | | | 1,403,131 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Series F Preferred Stock warrants exercised, net of fees | | | 575 | | | | | | | | | | | | | | | | | | | | | | | | 516 | | | | | | | | 516 | | |
| Series F Preferred Stock conversions | | | (970 | ) | | | | | | | 257,617 | | | | | | | | | | | | | | | | 39 | | | | | | | | 39 | | |
| Series F Preferred Stock dividends | | | | | | | | | | | | | | | | | | | | | | | | | | | (32 | ) | | | | | | | (32 | ) | |
| Balance on December 31, 2025 | | | 150 | | | $ | | | | | 3,327,399 | | | $ | | | | | 189 | | | $ | (181 | ) | | $ | 245,843 | | | $ | (238,629 | ) | | $ | 7,033 | | |
See accompanying notes to consolidated financial statements
-F-4-
[Table of Contents](#toc)
**TAOWEAVE, INC.**
**CONSOLIDATED STATEMENTS OF CASH FLOWS**
**(In thousands)**
| | | Year Ended December 31, | | |
| | | 2025 | | | 2024 | | |
| Cash flows from Operating Activities: | | | | | | | | | |
| Net loss | | $ | (6,355 | ) | | $ | (4,043 | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | | |
| Bad debt (recovery) expense | | | (18 | ) | | | 2 | | |
| Non-cash lease expense from right-of-use assets | | | | | | | 17 | | |
| Stock-based compensation | | | 169 | | | | 62 | | |
| Non-cash revenue from digital assets | | | (186 | ) | | | | | |
| Non-cash expenses from digital assets | | | 8 | | | | | | |
| Unrealized loss on digital assets | | | 3,519 | | | | | | |
| Changes in assets and liabilities: | | | | | | | | | |
| Accounts receivable | | | 66 | | | | 236 | | |
| Prepaid expenses and other current assets | | | (140 | ) | | | 125 | | |
| Inventory | | | | | | | 239 | | |
| Other assets | | | 2 | | | | 6 | | |
| Accounts payable | | | 7 | | | | (107 | ) | |
| Accrued expenses and other current liabilities | | | (64 | ) | | | 195 | | |
| Deferred revenue | | | (23 | ) | | | (121 | ) | |
| Lease liabilities | | | | | | | (17 | ) | |
| Net cash used in operating activities | | | (3,015 | ) | | | (3,406 | ) | |
| Cash flows from Investing Activities: | | | | | | | | | |
| Purchases of digital assets | | | (8,736 | ) | | | | | |
| Net cash used in investing activities | | | (8,736 | ) | | | | | |
| Cash flows from Financing Activities: | | | | | | | | | |
| Proceeds from private placement, net of issuance costs | | | 6,888 | | | | | | |
| Proceeds from exercise of common stock warrants, net of costs | | | 1,639 | | | | 903 | | |
| Proceeds from exercise of preferred stock warrants, net of costs | | | 516 | | | | 1,478 | | |
| Net cash provided by financing activities | | | 9,043 | | | | 2,381 | | |
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| Net decrease in cash and cash equivalents | | | (2,708 | ) | | | (1,025 | ) | |
| Cash and restricted cash at beginning of year | | | 4,965 | | | | 5,990 | | |
| Cash and cash equivalents at end of year | | $ | 2,257 | | | $ | 4,965 | | |
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| Supplemental disclosures of cash flow information: | | | | | | | | | |
| | | | | | | | | | |
| Reconciliation of cash and cash equivalents | | | | | | | | | |
| Cash | | $ | 1,758 | | | $ | 4,465 | | |
| Current certificates of deposit | | | 500 | | | | 500 | | |
| Total cash and cash equivalents | | $ | 2,258 | | | $ | 4,965 | | |
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| Non-cash investing and financing activities: | | | | | | | | | |
| Common warrant issuance | | $ | 335 | | | $ | | | |
| Series F Preferred Stock conversion | | $ | 39 | | | $ | 191 | | |
| Series F Preferred Stock dividends | | $ | 32 | | | $ | 89 | | |
| Deemed dividend | | $ | | | | $ | 8,974 | | |
See accompanying notes to consolidated financial statements
-F-5-
[Table of Contents](#toc)
**TAOWEAVE, INC.**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
**Note 1 - Business Description and Significant Accounting Policies**
**Business Description**
TaoWeave, Inc. (TaoWeave or we or us or the Company) was formed as a Delaware corporation in *May 2000,*and we are a digital asset treasury company dedicated exclusively to Bittensor, a decentralizedblockchain network for artificial intelligence ("AI") development and machine learning. 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. Prior to *December 11, 2025,*TaoWeave, Inc. was named Oblong, Inc.
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**Principles of Consolidation**
The Consolidated Financial Statements include the accounts of TaoWeave and our 100%-owned subsidiaries (i) GP Communications, LLC (GP Communications), whose business function is to provide interstate telecommunications services for regulatory purposes, and (ii) Oblong Industries, Inc. All inter-company balances and transactions have been eliminated in consolidation. The U.S. Dollar is the functional currency for all subsidiaries.
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**Segments**
The Company currently operates in three segments: (*1*) "Digital Assets", which represents the business surrounding our treasury activity with Bittensor, (*2*) Collaboration Products, which represents the business surrounding our Mezzanine product offerings, and (*3*) Managed Services, which represents the business surrounding managed services for video collaboration and network solutions.See **Note 9- Segment Reporting** for further discussion.
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**Use of Estimates**
Preparation of the Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts *may*differ from the estimates. We continually evaluate estimates used in the preparation of our Consolidated Financial Statements for reasonableness. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. The significant areas of estimation include determining estimated credit losses and the inputs used to measurethe fair value of equity-based awards.
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**Cash and Cash Equivalents**
As of *December 31, 2025,*and *2024*, our total cash balances were$2,258,000 and $4,965,000, respectively;however, of this balance,$500,000 was held in short-term certificates of deposit with MidFirst Bank in both years. The Company considers highly liquid investments with original maturities of *three* months or less to be cash equivalents.
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**Digital Assets**
In *December 2023,*theFinancial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") *2023*-*08,* *Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets*("ASU *2023*-*08"*). ASU *2023*-*08* requires in-scope digital assets (including the Company's digital asset holdings) to be measuredat fair value in the statement of financial position, with gains and losses from changes in the fair value of such digital assets recognized innet income each reporting period. ASU *2023*-*08* also requires certain interim and annual disclosures for crypto assets within its scope. The Company adopted this guidance during the yearended *December 31, 2025*.
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The Company's TAO tokens are held with two custodians, BitGo Trust Company, Inc. ("BitGo")and Kraken (together the "TAO Custodians"). The TAOCustodianssecurethe Company's digital assets in regulated, insured, cold storage, and facilitatetheCompany'sacquisitions of TAO. BitGo serves as the Company's principal market for its digital assets.The fair value of digital assets is primarily determined usingpricing data from BitGo.
Digital assets are measured at their fair market values using the last close price of the day in the UTC time zone at each reporting period end, as reflectedon the balance sheet. The Company's digital assets are presented as current assets. The majority of the Company's digital assets are staked with *no* lock-up period, and are considered current assets in accordance with ASC *210*-*10*-*20,* *Balance Sheet*, due to the Company's ability to sell them in a liquid marketplace and with a reasonable expectation that they will be realized in cash during the normal operating cycle of our business to support operations if needed.
Due to the availability of unadjusted quoted prices in active markets, the Company has determined that its digital assets are measured using Level *1* input. The unrealized gains and losses resulting from remeasurement of digital assets arerecorded in other income on the Consolidated Statement of Operations. The Company recorded an unrealized lossof$3,519,000 for the yearended *December 31, 2025*.As of *December 31, 2025*, the fair value of our digital assets was $5,395,000.
The cost basis of the Company's digital assets ismeasured at fair value based on the spot price at the time of receipt if obtained through staking rewards, or the purchase price if obtained by cash, consistent with the applicable guidance under ASC *350*-*60.* The Companyhas elected to adopt the First-In, First-Out ("FIFO") method for determining the cost basis of digital assets disposed of. The method assumes that the assets that were acquired *first* are disposed of first. Realized gains and losses from the disposal of digital assets are included in other income in the Consolidated Statements of Operations. The Company had no realized gains or losses from the disposal of digital assets for the year ended *December 31, 2025*.
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**Accounts Receivable and Provision for Estimated Credit Losses**
Accounts receivable are customer obligations due under normal trade terms. The Company sells its Managed Services to end-users and its Collaboration Products to both resell partners and end-users. The Company extends credit to its customers based on their creditworthiness and historical data and performs ongoing credit evaluations of their financial condition. The Company maintains an allowance for estimated credit losses on accounts receivable for future expected bad debt resulting from customers' inability or unwillingnessto make required payments. We estimate our allowance for estimated credit losses based on relevant information, including historical experience, current economic conditions, and future expectations for specifically identified customer balances. This allowance is adjusted as appropriate to reflect current conditions. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. We do *not* obtain collateral from our customers to secure accounts receivable.
As of *December 31, 2025*, the Company'saccounts receivable balance of $138,000 related to our Managed Services segment. As of *December 31, 2024*, the Company had accounts receivable balances of $161,000 and $25,000 for our Managed Services and Collaboration Products segments, respectively.
The company recorded a recovery of bad debt of$18,000 for our Collaboration Products segment during the year ended *December 31, 2025*, and abad debt expense of$2,000for our Collaboration Products segment during the year ended *December 31, 2024*. As of *December 31, 2025*, the Company's analysis resulted in *no*credit loss reserveremaining on the Consolidated Balance Sheet.
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**Inventory**
Inventory consists of finished goods for our Mezzanine products in our Collaboration Products segment,andis determined using average costs and stated at the lower of cost or net realizable value. The Company periodically performs analyses to identify obsolete or slow-moving inventory. Due to declining sales of our Mezzanine products, management has determined that there is *no* guarantee our inventory on hand will be sold, and as a result, has recorded a full reserve, resulting in zero net inventory as of both *December 31, 2025*, and *December 31, 2024*. The following is a summary of the changes in inventory and the reserve for inventory for the years ended *December 31, 2025*, and *2024*:
| | | Inventory | | | Reserve | | |
| Balance as of December 31, 2023 | | $ | 930 | | | | (691 | ) | |
| Purchases | | | 163 | | | | | | |
| Sales | | | (211 | ) | | | | | |
| Reserve adjustments | | | | | | | (191 | ) | |
| Balance as of December 31, 2024 | | | 882 | | | | (882 | ) | |
| Purchases | | | 50 | | | | | | |
| Sales | | | (82 | ) | | | 33 | | |
| Reserve adjustments | | | | | | | (1 | ) | |
| Balance as of December 31, 2025 | | $ | 850 | | | $ | (850 | ) | |
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**Prepaid Expenses**
As of *December 31, 2025,*and *2024*, consolidated prepaid expenses and other current assets were$424,000 and $118,000, respectively. Of the balances as of*December 31, 2025*i) $168,000 was attributable to our Digital Assets segment and consisted of unamortized stock-based advisor expense;ii) $15,000 was attributable to our Managed Services segment and primarily consisted of licensing fees, iii) $7,000 was attributable to our Collaboration Products segment and primarily consisted of software licenses; and iv) $234,000 was allocated to corporate and attributable toinsurance,software licenses, and personnel expenses due to the timing of payroll.The259% year-over-year increase was primarily due to higher stock-based expense, insurance expense, and the timing of cash outflows for the final payroll of the year. Of the balance as of*December 31, 2024*i) $8,000 was attributable to our Managed Services segment primarily consisting of licensing fees, ii) $7,000 was attributable to our Collaboration Products Segment primarily consisting of software licenses, and $103,000 was allocated to Corporate.The following is a summary of our prepaid expense balances as of *December 31, 2025*, and *2024*:
| | | December 31, | | |
| | | 2025 | | | 2024 | | |
| Prepaid expenses | | $ | 204 | | | $ | 20 | | |
| Prepaid insurance | | | 121 | | | | 51 | | |
| Other current assets | | | 58 | | | | 12 | | |
| Prepaid software licenses | | | 41 | | | | 35 | | |
| Prepaid expenses and other current assets | | $ | 424 | | | $ | 118 | | |
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**Fair Value Measurements**
The Company considers its cash and cash equivalents, digital assets, accounts receivable, and accounts payableto meet the definition of financial instruments. The carrying amount of cash and cash equivalents, accounts receivable, and accounts payable approximated their fair value due to the short maturities of these instruments. Due to the availability of unadjusted quoted prices in active markets, the Company has determined that its digital assets are measured using Level *1* input.
The Company measures fair value as required by Accounting Standards Codification (ASC) Topic *820**Fair Value Measurements and Disclosures* (ASC Topic *820*).ASC Topic *820* defines fair value, establishes a framework, provides guidance on the methods used tomeasurefair value, and expands disclosures about fair value measurements. ASC Topic *820* clarifies that fair value is an exit price, representing the amount that would be received upon the sale ofan asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined usingassumptions that market participants would use to pricean asset or liability. As a basis for considering such assumptions, there exists a *three*-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
| | | Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date. | |
| | | Level 2 - inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability, or indirectly observable through corroboration with observable market data. | |
| | | Level 3 - unobservable inputs for the asset or liability are only used when there is little, if any, market activity for the asset or liability at the measurement date. | |
This hierarchy requires the Company to use observable market data when available and to minimize the use of unobservable inputs when determining fair value.
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**Revenue Recognition**
The Company accounts for revenue in accordance with ASCTopic *606.*
The Company recognizes revenue using the *five*-step model as prescribed by Topic *606:*
| | | Identification of the contract, or contracts, with a customer; | |
| | | Identification of the distinct performance obligations in the contract; | |
| | | Determination of the transaction price; | |
| | | Allocation of the transaction price to the performance obligations in the contract; and | |
| | | Recognition of revenue when or as the Company satisfies a performance obligation. | |
*Digital Assets*
The Company had staked$5,395,000 of digital assets as of *December 31, 2025*. The Companys ability to sell or transfer staked digital assets is subject to restrictions related to unbonding periods, which are based on network traffic on the respective blockchains. As of *December 31, 2025*, all staked digital assetscould be unbonded immediately. The $186,000 in rewards generated from proprietary staking activities for the year ended *December 31, 2025*, was recorded as point-in-timerevenue. The Company stakes its TAOdirectly from BitGoand Kraken custody, qualified custodians, enabling yield generationwhile maintaining the highest standards of security and regulatory compliance. As of *December 31, 2025*, the Company's staked assets have immediate terms, meaning there is *no* lock-up period upon unstaking.
In exchange for staking the crypto assetson blockchain networks, the Company is entitled toa fractional share of the fixed digital asset award a *third*-party validator node receivesfor successfully validating or adding a block to the blockchain. This award is remitted in the validator node's native token and is referred to as a staking reward. The Companys staking rewardreceived from delegating to a *third*-party validator node is proportional to the Company's staked digital assets relative to the total staked by all delegators to that node at that time. Token rewardsearned from staking are calculated and distributed directly to TaoWeave'sdigital wallets by the blockchain networks as part of their consensus mechanisms.
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The Company considers theprovision of validating blockchain transactions an output of the Companys ordinary activities, providing a service to the blockchain network, and accounts for the staking rewards under ASC *606.* Each separate validation under a smart contract with a network represents a performance obligation. The satisfaction of the performance obligation for processing and validating blockchain transactions occurs at a point in time when confirmation is received from the network indicating that the validation is complete, and the awards are available for transfer. At that point, the fair value of the staking reward is recognized and recorded as revenue. Once the Company has acquired the reward, the tokens are added to our digital asset holdings, and their fair value is accounted for in accordance with ASC *820.*
*Managed Services*
The Companys managed videoconferencing services are offered to our customers on either a usage or subscription-based model. Our network services are offered to our customers on a subscription basis. Revenue for these services is generally recognized on a monthly basis as services are performed. Revenue fromprofessional services is recognized when the services are performed. The costs associated with obtaining a customer contract, under Topic *606,* are deferred on our consolidated balance sheets and amortized over the expected life of the customer contract. During the year ended *December 31, 2025*, the Company recorded$1,957,000 as point-in-time revenue. As of *December 31, 2025*, and *2024*, there was no deferred revenue related to Managed Services.
*Collaboration Products*
The Companys visual collaboration products are composed of hardware and embedded software sold as a complete package and generally include installation and maintenance services. Revenue for hardware and software is recognized upon shipment to the customer. Installation revenue is recognized upon completion of the installation, triggeringthe commencementof revenue recognition for maintenance services, rangingfrom one to three years. Revenue from maintenance services is recognized over time. During the year ended *December 31, 2025*, the Company recorded$231,000 ofpoint-in-time revenue and$63,000 ofover time revenue. Deferred revenue for Collaboration Products, as of *December 31, 2025*and*2024*, totaled$13,000and $36,000,respectively, as certain performance obligations were *not* satisfied as of this date. During the year ended *December 31, 2025*, the Company recorded$36,000 of revenue that was included in deferred revenue as of *December 31, 2024*. During the year ended *December 31, 2024*, the Company recorded$132,000 of revenue that was included in deferred revenue as of *December 31, 2023*.
Consolidated revenue recorded over time for the years ended *December 31, 2025,*and *2024* was $63,000and $156,000, respectively. Revenue recorded at a point in time for the years ended *December 31, 2025,*and *2024* was$2,374,000 and $2,222,000, respectively.
The Company disaggregates its revenue by geographic region. See **Note 9- Segment Reporting** for more information.
**Taxes Billed to Customers and Remitted to Taxing Authorities**
We recognize taxes billed to customers in revenue and taxes remitted to taxing authorities in our cost of revenue. For the years ended *December 31, 2025,*and *2024*, we included taxes of$62,000 and $68,000, respectively, in revenue and$70,000 and $74,000, respectively, in cost of revenue.
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**Concentration of Credit Risk**
Financial instruments that*may*subject us to significant concentrations of credit risk consist principally of cash and trade accounts receivable. We place our cash needed for operations in commercial checking accounts, and the majority of our cash is held in a money market fund. Commercial bank balances *may,*from time to time, exceed federal insurance limits. Deposits are insured by the Federal Deposit Insurance Corporation (FDIC) in an amount up to *$250,000* for any depositor; any deposit in excess of this insured amount could be lost.
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**Income Taxes**
On *July 4, 2025,*the U.S. *H.R.1,* an act to provide for reconciliation pursuant to title II of H. Con. Res. *14.* (the OBBBA) was enacted. The OBBBA introduces multiple tax law and other legislative changes, including modifications to income tax provisions such as existing *21%* corporate income tax rate made permanent, domestic research and development expenses, the restoration of *100%* bonus depreciation, changes to Section *163*(j) interest limitations, and U.S. taxation of international earnings; the repeal or acceleration of the sunset of certain tax credits under the *2022* Inflation Reduction Act and elimination of certain penalties for violations of certain regulatory credit programs. We have recognized the effects of the OBBBA provisions in our financial results to the extent they are applicable to the year ended *December 31, 2025*.
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**Stock-based Compensation**
Stock-based awards have been accounted for as required by ASC Topic *718* *Compensation**Stock Compensation* (ASC Topic *718*). Under ASC Topic *718,* stock-based awards are valued at fair value on the date of grant, and that fair value is recognized over the requisite service period. The Company accounts for forfeitures when they occur. The Company recorded $62,000 in stock compensation for the year ended *December 31, 2024*. As of *December 31, 2025*, there are no stock compensation awards outstanding. **See Note 7 - Stock-Based Compensation for further details**.
**Stock-based Expense**
In *June 2025,*the Company granted warrants to an advisor related to digital assets. **See Note 5- Capital Stock for further information.** The total stock-based cost of these warrants is $335,000, which will be expensedratablyover the twelve-month original life of the contractandvesting period of the warrants. During the year ended *December 31, 2025*, $169,000 was recorded as stock-based advisory fees in general and administrative expense, as such expense was *not* directly related to staking revenue. As of *December 31, 2025*, $168,000of expense remains to be recognized through *June 2026.*
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**Research and Development**
Research and development expenses include internal and external costs related to developing new service offerings, features, and enhancements to our existing product offerings.
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**Treasury Stock**
Purchases and sales of treasury stock are recorded under the cost method. Under this method, shares acquired are recorded at the acquisition price directly to the treasury stock account. Upon sale, the treasury stock account is reduced by the original acquisition price of the shares, and any excess is recorded in additional paid-in capital on a *first*-in, *first*-out basis. The Company does *not* recognize a gain or loss to income from the purchase and sale of treasury stock.
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**Recent Accounting Pronouncements**
*Recently Issued Accounting Pronouncements*
In *December 2023,*the FASBissued ASU*No.* *202309,* Income Taxes (Topic *740*): Improvements to Income Tax Disclosures, which enhances the transparency of income tax disclosures by requiring additional disaggregation in the effective tax rate reconciliation and disclosures of income taxes paid by jurisdiction. The guidance does *not* change the recognition or measurement of income taxes. The Company adopted ASU *202309* effective *January 1, 2025,*on a prospective basis. The adoption impacted the Companys income tax disclosures but did *not* have a material impact on its consolidated financial statements.
In *November 2024,*the FASB issued ASU *No.* *2024*-*03,**Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures*(Subtopic *220*-*40*) Disaggregation of Income Statement Expenses, which requires public business entities to disclose additional information about certain expenses in the notes to the financial statements. This guidance is effective for annual reporting periods beginning after *December 15, 2026,*and interim reporting periods beginning after *December 15, 2027.*Early adoption is permitted. The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements.
**Note 2 - Liquidity**
As of *December 31, 2025*, wehad$2,258,000 in cash and cash equivalents, $5,395,000in digital assets,and working capital of $7,029,000. For the yearended *December 31, 2025*, we incurred a net loss of $6,355,000, and weused$3,015,000 of net cash in operating activities.
Cash used in investing activities for the year ended *December 31, 2025*, was$8,736,000, consisting of new investments in digital assets. There was no cash used in investing activities for the year ended *December 31, 2024*.
Net cash provided by financing activities during the year ended *December 31, 2025*,was$9,043,000, consisting of net proceeds from the *2025* Private Placement and warrant exercises.Net cash provided by financing activities during the yearended *December 31, 2024*,was$2,381,000, consisting of net proceeds from warrant exercises(see **Note 5- Capital Stock**and **Note 6- Preferred Stock**to our Consolidated Financial Statements).
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*Future Capital Requirements*
We believe our existing cash, cash equivalents, and the fair value of our TAO tokens (if converted to cash)will be sufficient to fund our operations and meet our working capital requirements for at leastthe next *twelve* months from the filing of this Report. This assessment is based on current market conditions, regulatory environment, and the Company's operational plans, all of which are subject to change.In the long term, we believe additional capital will be required to fund operations and provide growth capital, including expanding our cryptocurrency treasury.To access capital to fund operations or provide growth capital, we will need to raise capital from the exercise of outstanding common and/or preferred warrants, and/or in *one* or more debt and/or equity offerings. There can be *no* assurance that we will be successful in raising the necessary capital or that any such offering will be on terms acceptable to the Company. If we are unable to raise additional capitalon terms acceptable to us, it could have a material adverse effect on the Company.
**Note 3 - Digital Assets**
**Our Cryptocurrency Asset Strategy**
In connection with the Companys financing in *June**2025,* we adopted a differentiated cryptocurrency treasury strategy focused on TAO, the native cryptocurrency of Bittensor. **See Note 5 - Capital Stock for further details of the financing**. We seek to stake TAO for revenue generation and capital appreciation, a strategy that underscores our mission to create significant value for shareholders.The Company accounts for its digital assets, comprised solely of TAO tokens, as indefinite-lived intangible assets in accordance with ASC *350.* The Companys digital assets are initially recorded at cost andmeasured at fair value ateach reporting period. TAO tokens are available as partial tokens. The Company shows its token holdings rounded to the nearest *one*-hundredth of a token.
The Company has adopted a long-only TAO accumulation policy under which we allocate substantial portions of our excess cash to purchase TAO to maximizetokens per share. As of *December 31, 2025*, approximately70% of our treasury holdings were invested in TAO, and our current plan is to continue allocating substantial portions of our excess cash to TAO without a formal cap on the percentage of our treasury holdingsinvested in TAO. We do *not* currently hedge our TAO exposure and have *no* diversification strategy into other crypto assets; we are a long-only TAO holder. The Companys TAO tokens are stored with the TAO Custodians. There are significant risks associated with digital asset price volatility. 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.
Although a liquid market for TAO exists, we have *not* monetized (i.e., sold) any TAO to date. All TAO is staked as soon as trade settlement permits, and we currently spread staking between the Companys TAO Custodians.
The following table summarizesthe Company's digital asset activity for the year ended *December 31, 2025*, and the fair value is presented as of*December 31, 2025* (in thousands except for tokens):
| | | TAO Tokens | | | $USD Fair Value (1) | | |
| Digital asset balance on January 1, 2025 | | | | | | $ | | | |
| TAO Token Purchases | | | 24,127.62 | | | | 8,736 | | |
| TAO Staking Rewards | | | 543.96 | | | | 186 | | |
| Non-Cash Fees (1) | | | (6.14 | ) | | | (8 | ) | |
| Unrealized Loss on Fair Value Remeasurement | | | | | | | (3,519 | ) | |
| Digital asset balance on December 31, 2025 | | | 24,665.43 | | | $ | 5,395 | | |
| (1) | Non-cash fees are related to custodian fees paid in tokens and a one-time setup and transfer fee for Kraken. | |
As holders of TAO tokens, we canstakeany amount of the liquidity we hold to a validator. Also known asdelegation, staking supports validatorsbecause their total stake in the subnet, including stake delegated to them by others, determines their consensus power and their share of emissions. After the validator extracts theirtake,the remaining emissions are credited back to us in proportion to our stake with that validator.
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In exchange for staking TAO on the Bittensor blockchain network, the Company is entitled toa fractional share of the fixed digital asset award a *third*-party validator node receivesfor successfully validating or adding a block to the blockchain. This award is remitted in the validator node's native token (TAO)and is referred to as a staking reward. The Companys staking rewardreceived from delegating to a *third*-party validator node is proportionalto the Company's staked digital assets relative to the total staked by all delegators to that node at that time. TAO token rewardsearned from staking are calculated and distributed directly to the Companys digital wallets by the blockchain networks as part of their consensus mechanisms.
As of *December 31, 2025*,all of our TAO token holdings were staked. All staking services are provided through the Companys TAO Custodians, enabling yield generationwhile maintaining the highest standards of security and regulatory compliance. We rely on these custodians to facilitate our TAO token staking activities. Through their staking services, our TAO Custodians hold and stake our TAO through their selected validators. The Bittensor blockchain does *not* impose protocol-enforced delays or unbonding periods. As of *December 31, 2025*, the Company's staked TAO tokens have immediate terms, meaning there is*no*lock-up period upon the asset being unstaked.
The following table summarizes the Company's Staking Rewards as of*December 31, 2025* (in thousands except for tokens):
| | | | | | | | | | |
| | | As of December 31, 2025 | | |
| Asset | | Token Rewards | | | Revenue ($USD) | | |
| TAO | | | 543.96 | | | $ | 186 | | |
Our cost of revenue for digital assets consists of custodianfeesand advisor fees on our staked digital assets. For the year ended *December 31, 2025*, the Company recorded a cost of revenue of $24,000related to digital asset staking, resulting ina gross profit of $162,000, or87%.
Digital assets are measured at their fair market values using the last close price of the day in the UTC time zone at each reporting period end.The unrealized gains and losses resulting from remeasurement of digital assets arerecorded in other income on the Consolidated Statement of Operations.The following table summarizes the Company's digital asset holdings as of*December 31, 2025* (in thousands except for tokens):
| | | As of December 31, 2025 | | |
| Asset | | Tokens | | | Cost | | | Fair Market Value | | | Unrealized Loss | | |
| Staked TAO | | | 24,665.43 | | | $ | 8,914 | | | $ | 5,395 | | | $ | 3,519 | | |
| Un-staked TAO | | | | | | | | | | | | | | | | | |
| | | | 24,665.43 | | | $ | 8,914 | | | $ | 5,395 | | | $ | 3,519 | | |
The Company recorded an unrealized lossof$3,519,000 for the yearended *December 31, 2025*.As of *December 31, 2025*, the fair value of our digital assets was $5,395,000.
**Note 4- Accrued Expenses and Other Current Liabilities**
Consolidated accrued expenses and other current liabilities were$1,061,000 and$1,131,000 as of *December 31, 2025,*and *2024*, respectively, consistingprimarily of compensation, taxes and fees, and rent expenses. The 6%year-over-year decrease was primarily due to a decreasein accrued compensation, partially offset by an increasein taxes and fees.
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Our consolidated balances for the years ended *December 31, 2025,*and *2024*consisted ofthe following (in thousands):
| | | December 31, | | |
| | | 2025 | | | 2024 | | |
| Compensation costs | | $ | 324 | | | $ | 560 | | |
| Customer deposits | | | 95 | | | | 77 | | |
| Professional fees | | | 79 | | | | 86 | | |
| Taxes and regulatory fees | | | 367 | | | | 201 | | |
| Accrued rent | | | 170 | | | | 170 | | |
| Accrued dividends on Series F Preferred Stock | | | 22 | | | | 29 | | |
| Other accrued expenses and liabilities | | | 4 | | | | 8 | | |
| | | $ | 1,061 | | | $ | 1,131 | | |
As of *December 31, 2025,*and *2024*, our Managed Services segment had accrued expenses and other current liabilities of$5,000 and $18,000, respectively. These expenses consisted primarily of taxes and regulatory fees. The72% year-over-year decrease was primarily related to a reduction in these taxes and regulatory fees.
As of *December 31, 2025,*and *2024*, accrued expenses and other current liabilities for our Collaboration Products segment were$269,000 and $252,000, respectively. These amounts primarily consist of rent expenses and customer deposits. The7% year-over-year increase was driven by highercustomer deposits.
Unallocated accrued expenses were$787,000 and$861,000 as of *December 31, 2025,*and *2024*, respectively.For both*2024* and*2025*, unallocated accrued expenses consisted primarily of compensation expenses, professional service expenses, and corporate franchise taxes.The9% year-over-year decrease is primarily related to adecrease in compensation expenses, partially offset by an increase incorporate franchise tax.
**Note 5- Capital Stock**
**Common Stock**
The Companys Common Stockis listed on the Nasdaq Capital Market (Nasdaq)under the ticker symbol TWAV.As of *December 31, 2025*, we had 150,000,000shares of our Common Stock authorized, with3,327,399 and3,327,210 shares issued and outstanding, respectively.
On *April 17, 2025,*the Companys Board of Directors authorized a stock repurchase program (the *Stock Repurchase Program*) granting the Company authority to repurchase up to$500,000of the Companys Common Stock. Under the Companys Stock Repurchase Program, repurchases of Common Stock *may*be funded using the Companys existing cash balance and/or future cash flows through repurchases made in the open market, in privately negotiated transactions, or pursuant to other means determined by the Company, in each case as permitted by securities laws and other legal requirements. The number of shares purchased under the Stock Repurchase Program and the timing of any purchases *may*be based on many factors, including the level of the Companys available cash, general business conditions, and the pricing of the Common Stock. The Stock Repurchase Program does *not* obligate the Company to acquire a specific number of shares, and *may*be suspended, modified, or terminated at any time. All shares of Common Stock repurchased under the Stock Repurchase Program are recorded as treasury stock. The Stock Repurchase Program does *not* have an expiration date. As ofthe filing of this Report, the Company has *not* repurchased any shares of Common Stock and has$500,000remaining under the Stock Repurchase Program.
During the year ended *December 31, 2025*,521,725shares of the Companys Common Stock were issued related to the exercise of521,725Common Warrants. During the year ended *December 31, 2024*,282,314shares of the Company's Common Stock were issued related to the exercise of282,314Common Warrants. See discussion of Common Warrants belowfor further details.
During the year ended *December 31, 2025*,1,403,131 shares of the Company's Common Stock were issued related to the exercise of1,403,131 Pre-Funded Warrants. See discussion of *2025* Private Placement and Pre-Funded Warrants belowfor further details.
During the year ended *December 31, 2025*,257,617 shares of the Company's Common Stockwere issued related to the conversion of970 shares of Series F Preferred Stock, plus accrued dividends of approximately $39,000. During the year ended *December 31, 2024*,288,968 shares of the Companys Common Stockwere issued related to the conversion of3,033 shares of Series F Preferred Stock, plus accrued dividends of approximately $191,000. **See Note 6****- Preferred Stock**for further details.
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Common Stock activity for theyears ended *December 31, 2025,*and *2024*is presented below.
| Issued Shares as of December 31, 2023 | | | 573,644 | | |
| Issuances from Preferred Stock conversions | | | 288,968 | | |
| Issuances related to Common Warrant exercises | | | 282,314 | | |
| Issued Shares as of December 31, 2024 | | | 1,144,926 | | |
| Issuances related to Common Warrant exercises | | | 521,725 | | |
| Issuances related to Pre-Funded Warrant exercises | | | 1,403,131 | | |
| Issuances related to Preferred Stock conversions | | | 257,617 | | |
| Issued Shares as of December 31, 2025 | | | 3,327,399 | | |
| Less Treasury Shares: | | | (189 | ) | |
| Outstanding Shares as of December 31, 2025 | | | 3,327,210 | | |
**Common Stock Warrants and 2023 Placement Agent Warrants**
On *March**30,* *2023,* the Company entered into a Securities Purchase Agreement (the Purchase Agreement) with certain accredited investors (the Investors), pursuant to which we issued and sold, in a private placement (the *2023* Private Placement) (i) 6,550shares of our newly designated Series F Preferred Stock, $0.0001 par value per share (the Series F Preferred Stock), (ii) preferred warrants (the Preferred Warrants) to acquire 32,750shares of Series F Preferred Stock, and (iii) common warrants (Common Warrants and with the Preferred Warrants the Investor Warrants) to acquire up to95,764 shares of Common Stock. Please refer to **Note 6- Preferred Stock******for further discussion on the Series F Preferred Stock and Preferred Warrants.
In connection with the *2023* Private Placement, pursuant to an engagement letter dated *March**30,* *2023* (the "Engagement Letter"), between the Company and Dawson James Securities, Inc. (the Placement Agent), the Company agreed to (i) pay the Placement Agent a cash fee equal to 8% of the aggregate gross proceeds raised in the *2023* Private Placement, and (ii) grant to the Placement Agent warrants (the *2023* Placement Agent Warrants) to purchase 7,663 shares of Common Stock.
On *March**31,* *2023,* the Company issued the Common Warrants and the Placement Agent Warrants to purchase an aggregate of103,427 shares of the Companys Common Stock. The Common Warrants and Placement Agent Warrants have a term of *5* years, commencing *six* months and *one* day from the date of issuance, and were initially exercisable for$68.40 per share. The exercise price is subject to customary adjustments for stock splits, stock dividends, stock combination, recapitalization, or other similar transactions involving the Common Stock, and subject to price-based adjustment on a full ratchet basis in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable exercise price for the Common Warrants (subject to certain exceptions). The Common Warrants and Placement Agent Warrants are exercisable for cash, provided that if there is *no* effective registration statement available permitting the resale of the common shares, they *may*be exercised on a cashless basis. Exercise of the Common Warrants and Placement Agent Warrants is subject to certain limitations, including a 4.99% beneficial ownership limitation.
On *October 6, 2023,*the Company and the Investors holding a majority of the outstanding shares of the Preferred Stock agreed to waive any and all provisions, terms, covenants, and obligations in the Certificate of Designations or Common Warrants to the extent such provisions permit the conversion or exercise of the Preferred Stock and the Common Warrants, respectively, to occur at a price below$11.17(the "Waiver"). Notwithstanding anything to the contrary in the Certificate of Designations, each of the Alternate Conversion Price and the Floor Price as set forth in the Certificate of Designations shall in *no* event be less than$11.17 (as adjusted for stock splits, stock dividends, stock combinations, recapitalization, and similar events). On *September 13, 2024,*theCompany and the Investors agreed to delete Section *2* of the Waiver, removing the minimum price restriction on the exercise of Common Warrants.
During the yearended *December 31, 2024*, 24,104Common Warrants were issued in accordance with the exercise provisions of the Preferred Warrants. **See Note 6- Preferred Stock** for additional detail on the exercises of the Preferred Warrants. These Common Warrants were exercisable at an initial exercise price of$68.40 and have a term of five years.
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Pursuant to Sections *2*(a) and *2*(c) of the Common Warrants (the "Make-whole Provision"), as a result of the *1*-for-40 reverse stock split effected on *August 23, 2024 (*the "Reverse Split"), the exercise price of the Common Warrants and Placement Agent Warrants wereadjusted to$3.41per share, and the number of Common Warrant shares that *may*be purchased upon exercise of the Common Warrants and the Placement Agent Warrantswereincreased proportionately so that after the exercise price adjustment the aggregate exercise price payable hereunder for the adjusted number of Common Warrant Shares was the same as the aggregate exercise price in effect immediately prior to the exercise price adjustment. These adjustments resulted in an aggregate of2,401,047Common Warrants and153,470*2023* Placement Agent Warrants remaining outstandingfollowing the Reverse Split. The additional warrants created by the Make-whole Provision resulted in an aggregate deemed dividend of$8,974,000, which will reduce the net income available to common shareholders. Details of the Make-whole Provision transactions arepresented below:
| Warrant Tranche | | Original Warrants Issued | | | Original Exercise Price (1) | | | Warrants Post Reverse Split (2) | | | Exercise Price Post Reverse Split (2) | | | Warrants Post Make-whole Provision (3) | | | Exercise Price Post Make-whole Provision (4) | | | Deemed Dividend | | |
| Common Warrants issued in 2023 | | | 3,830,417 | | | $ | 1.71 | | | | 95,764 | | | $ | 68.40 | | | | 1,918,371 | | | $ | 3.41 | | | $ | 6,739,000 | | |
| Common Warrants issued in 2024 | | | 963,745 | | | $ | 1.71 | | | | 24,104 | | | $ | 68.40 | | | | 482,676 | | | $ | 3.41 | | | $ | 1,696,000 | | |
| Placement Agent Warrants | | | 306,433 | | | $ | 1.71 | | | | 7,663 | | | $ | 68.40 | | | | 153,470 | | | $ | 3.41 | | | $ | 539,000 | | |
| Total | | | 5,100,595 | | | | | | | | 127,531 | | | | | | | | 2,554,517 | | | | | | | $ | 8,974,000 | | |
| Aggregate Exercise Price | | $ | 8,722,000 | | | | | | | $ | 8,722,000 | | | | | | | $ | 8,722,000 | | | | | | | | | | |
| (1) Original exercise price based on the March 30, 2023 Purchase Agreement. | |
| (2) Adjusted by the Reverse Split. | |
| (3) Based on the original aggregate exercise price divided by the Make Whole Provision exercise price. | |
| (4) Calculated by dividing (x) the sum of the dollar volume-weighted average price of the Company's Common Stock for each of the five lowest trading days during the sixteen trading days after the Reverse Split by (y) five. | |
During the yearended *December 31, 2025*, 152,519Common Warrants were issued in accordance with the exercise provisions of the Preferred Warrants. **See Note 6- Preferred Stock** for additional detail on the exercises of the Preferred Warrants. These Common Warrants are exercisable at an exercise price of$3.41and have a term of five years.
During the yearended *December 31, 2025*,521,725 Common Warrants were exercisedat a price of$3.41 per shareforshares of Common Stock, andthe Company received gross and net proceeds of$1,781,000and $1,639,000, respectively.During the yearended *December 31, 2024*,282,314 Common Warrants were exercisedat a price of$3.41 per shareforshares of Common Stock, andthe Company received gross and net proceeds of$964,000 and $887,000, respectively.
As of *December 31, 2025*,1,749,527 Common Warrants remained outstanding.
One of our directors, Jonathan Schechter, is currently a partner at The Special Equities Group (SEG), a division of Dawson James Securities, Inc. (Dawson James). In *March 2023,*prior to Mr. Schechters appointment to our board in *May 2023,*and pursuant to our *2023* Engagement Letter, Dawson James acted as placement agent in connection with our *March 30, 2023*Purchase Agreement. During the yearended *December 31, 2025*,pursuant to the terms of the *2023* Placement Agent Agreement, we paid Dawson James a cash fee equal to 8% of the aggregate gross proceeds raised from the exercise of theCommon Stock Warrants. Thefees were $142,000. During theyearended *December 31, 2024*, we paid Dawson James a cash fee of $77,000. Mr. Schechter did *not* receive any of the fees paid.
**2025 Private Placement and Pre-Funded Warrants**
On *June 6, 2025,*we entered into a securities purchase agreement, dated as of *June 5, 2025 (*the *2025* Securities Purchase Agreement), with certain accredited investors (the Investors), pursuant to which we issued and sold, in a private placement (the *2025* Private Placement), pre-funded warrants to acquire up to1,989,392 shares of our Common Stock (the Pre-Funded Warrants")in exchange for gross proceeds of approximately $7.5 million. Net proceeds to the Company were approximately $6,888,000, after deducting placement agent fees of $375,000 and other offering expenses of $237,000payable by the Company.
During theyearended *December 31, 2025*,1,403,131 Pre-Funded Warrants were exercised, and as of *December 31, 2025*,586,261 Pre-Funded Warrants remained outstanding.Nominal proceeds were received by the Company upon exercise of the Pre-Funded Warrants.
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The exercise price upon exercise of each Pre-Funded Warrant is $0.0001 per share of Common Stock, with an aggregate exercise price of $3.77 per share of Common Stock, of which $3.7699 per share of Common Stock was paid by the holders at the closing on *June 10, 2025.*The exercise price of the Pre-Funded Warrants is subject to appropriate adjustment in the event of stock dividends, subdivisions, stock splits, stock combinations, cash distributions, reclassifications, exchanges, combinations, or substitutions affecting our Common Stock.In lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holders of Pre-Funded Warrants *may*elect instead to receive upon such exercise the net number of shares of Common Stock determined according to a formula set forth in the Pre-Funded Warrants.
The Pre-Funded Warrants are exercisable immediately upon issuance, subject to the conditions and limitations on exercise set forth in each Pre-Funded Warrant. A holder of the Pre-Funded Warrants *may**not* exercise any portion of such holders Pre-Funded Warrants to the extent that the holder, together with its affiliates, would beneficially own more than 4.99% (or, at the election of the holder, 9.99%) of the Companys outstanding shares of Common Stock immediately after exercise, except that upon at least *61* days prior notice from the holder to the Company, the holder *may*increase the beneficial ownership limitation to up to 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise.
Pursuant to the *2025* Private Placement, the Company agreed to prepare and file a registration statement with the Securities and Exchange Commission (the SEC) registering the resale of the shares of Common Stock underlying the Pre-Funded Warrants *no* later than *15* days after the date of the Purchase Agreement, and to use commercially reasonable efforts to have the registration statement declared effective within *60* days following the date of the Purchase Agreement (or *90* days following the date of the Purchase Agreement in the event of a full review by the SEC). The Company filed the registration statement on *June 20, 2025,*and it was declared effective on *August 1, 2025.*
The *2025* Private Placement is exempt from the registration requirements of theSecurities Act of *1933,* as amended (the Securities Act)pursuant to the exemption for transactions by an issuer *not* involving any public offering under Section *4*(a)(*2*) of the Securities Act and Rule *506* of Regulation D of the Securities Act and in reliance on similar exemptions under applicable state laws. Each of the Investors has represented to the Company that it is an accredited investor within the meaning ofRule*501*(a)ofRegulation Dand that it is acquiring the securities for investment only and *not* with a view towards, or for resale in connection with, the public sale or distribution thereof. The Pre-Funded Warrants are being offered without any general solicitation by the Company or its representatives.
Subject to applicable laws and the restriction on transfer set forth in the Pre-Funded Warrants, the Pre-Funded Warrants *may*be transferred.Upon the consummation of a fundamental transaction (as described in the Pre-Funded Warrants, and generally including any reorganization, recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our assets, our consolidation or merger with or into another person in which we are *not* the surviving entity, the acquisition of more than 50% of our outstanding common stock, or any person or group becoming the beneficial owner of 50% of the voting power of our outstanding common stock), a holder of the Pre-Funded Warrants will be entitled to receive, upon exercise of the Pre-Funded Warrants, the same kind and amount of securities, cash or other property that such holder would have received had they exercised the Pre-Funded Warrants immediately prior to such fundamental transaction, without regard to any limitations on exercise contained in the Pre-Funded Warrants.Except for the right to participate in certain dividends and distributions and as otherwise provided in the Pre-Funded Warrants or by virtue of a holders ownership of our Common Stock, the holders of the Pre-Funded Warrants do *not* have the rights or privileges of holders of our Common Stock, including any voting rights, until they exercise their Pre-Funded Warrants.*No* term of the Pre-Funded Warrants *may*be amended or waived without the written consent of the holder of such Pre-Funded Warrants.
**2025 Placement Agent Warrants**
Dawson James againserved as the Companys exclusive Placement Agent in connection with the *2025* Private Placement, pursuant to that engagement letter, dated as of *June 4, 2025,*as amended, between the Company and Placement Agent (the *2025* Engagement Letter). Pursuant to the *2025* Engagement Letter, the Company paid the Placement Agent (i) a total cash fee equal to 5% of the aggregate gross proceeds raised in the *2025* Private Placementand (ii) up to $50,000 for fees and expenses of legal counsel and other out-of-pocket expenses. In addition, the Company issued to the Placement Agent or its designees warrants (the *2025*Placement Agent Warrants) to purchase up to an aggregate of 99,470 shares of Common Stock. The Placement Agent Warrants are exercisable immediately upon issuance.The terms of the Placement Agent Warrants are substantially the same as those of the Pre-Funded Warrants, except that the Placement Agent Warrants will expire on *June 10, 2030,*are initially exercisable at a price of $4.71per share of Common Stock, *may*only be exercised a cashless basis if there is *no* effective registration statement registering the underlying shares, and in the event of a Fundamental Transaction as defined in the Placement Agent Warrants, warrant holders *may*require the company to purchase the remaining unexercised portion of a Placement Agent Warrant for an amount equal to the Black-Scholes Value of that portion, as of the date of the Fundamental Transaction, unless the Fundamental Transaction is *not* within the Companys control, as described in the Placement Agent Warrants. There is *no* established public trading market for the Placement Agent Warrants, and we do *not* intend to list the Placement Agent Warrants on any national securities exchange or nationally recognized trading system.
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The *2025* Placement Agent Warrants were issued on *June 10, 2025,*and as of *December 31, 2025*, no *2025* Placement Agent Warrants have been exercised.
As discussed above, *one* of our directors is currently a partner at SEG, a division of Dawson James. During theyear ended *December 31, 2025*,pursuant to the terms of the *2025*Placement Agent Agreement, we paid Dawson James a cash fee equal to $375,000 (or 5% of the aggregate gross proceeds raised from the *2025* Private Placement)and $50,000 in fees and expenses.Mr. Schechter did *not* receive any of the fees paid, norwereany of the *2025* Placement Agent Warrants issued to him.
**Advisor Warrants**
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,*areinitially 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.
As of *December 31, 2025*, 50,000 of the Advisor Warrants had vested and no Advisor Warrants had been exercised.
Outstanding warrants for the Company's Common Stock,as of *December 31, 2025*, are as follows:
| Issue Date | | Warrants Issued | | | Exercise Price | | Expiration Date | |
| Q1 2023 Common Warrants | | | 1,206,049 | | | $ | 3.41 | | Q3 2028 | |
| Q1 2023 Placement Agent Warrants | | | 153,470 | | | $ | 3.41 | | Q3 2028 | |
| Q2 2024 Common Warrants | | | 390,959 | | | $ | 3.41 | | Q4 2029 | |
| Q2 2025 Advisor Warrants | | | 100,000 | | | $ | 3.77 | | Q2 2028 | |
| Q2 2025 Placement Agent Warrants | | | 99,470 | | | $ | 4.71 | | Q2 2030 | |
| Q2 2025 Pre-Funded Warrants (1) | | | 586,261 | | | $ | 3.77 | | Q2 2030 | |
| Q3 2025 Common Warrants | | | 152,519 | | | $ | 3.77 | | Q1 2030 | |
| | | | 2,688,728 | | | | | | | |
(*1*) The aggregate exercise price for the Pre-Funded Warrants is $3.77, of which $3.7699was paid upon issuance of the warrants and $0.0001 payable upon exercise of the warrant. The exercise of these warrants will *not* result in materialproceeds for the Company.
Warrant activity for the years ended *December 31, 2025,*and *2024* is presented below:
| | | Outstanding | | |
| | | Number of Warrants | | | Weighted Average Exercise Price | | |
| Warrants outstanding and exercisable, December 31, 2023 | | | 103,453 | | | $ | 69.03 | | |
| Granted | | | 24,104 | | | | 68.40 | | |
| Make-whole provision | | | 2,426,986 | | | | 3.41 | | |
| Exercised | | | (282,314 | ) | | | 3.41 | | |
| Expired | | | (26 | ) | | | 2,578.38 | | |
| Warrants outstanding and exercisable, December 31, 2024 | | | 2,272,203 | | | | 3.41 | | |
| Granted | | | 2,341,381 | | | | 3.81 | | |
| Exercised | | | (1,924,856 | ) | | | 3.67 | | |
| Warrants outstanding and exercisable, December 31, 2025 | | | 2,688,728 | | | $ | 3.57 | | |
**Treasury Shares**
The Company maintains Treasury Stock for the Common Stock shares it buys when it withholds shares to cover taxes on stock compensation transactions. There were *no* treasury stock transactions during the years ended *December 31, 2025,*and *2024*, and the treasury shares outstanding were189 as of *December 31, 2025,*and *2024*.
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**Note 6- Preferred Stock**
Our Certificate of Incorporation authorizes the issuance of up to5,000,000 shares of preferred stock. As of *December 31, 2025,*and *2024*, we had1,983,250 designated shares of preferred stock and150 and545 shares of preferred stock issued and outstanding, respectively.
**Series F Preferred Stock**
The terms of the Series F Preferred Stock are as set forth in the Certificate of Designations of Series F Preferred Stock of TaoWeave, Inc. (the Certificate of Designations), which was filed and became effective with the Secretary of State of the State of Delaware on *March**31,* *2023.* The *2023* Private Placement closed on *March**31,* *2023,* in exchange for gross and net proceeds of$6,386,000 and $5,364,000, respectively. The financing fees underthe Purchase Agreement totaled$1,022,000.
The Series F Preferred Shares are convertible into fully paid and non-assessable shares of the Companys Common Stock at the election of the holder at any time at an initial conversion price of$68.40 (the Conversion Price). The holders of the Series F Preferred Shares *may*also elect to convert their shares at an alternative conversion price equal to the lower of (i) 80% of the applicable Conversion Price as in effect on the date of the conversion, (ii) 80% of the closing price on the trading day immediately preceding the delivery of the conversion notice, and (iii) the greater of (a) the Floor Price (as defined in the Certificate of Designations) and (b) the quotient of (*x*) the sum of the *five* lowest Closing Bid Prices (as defined in the Certificate of Designations) for trading days in the *30* consecutive trading day period ending and including the trading day immediately preceding the delivery of the applicable Conversion Notice, divided by (y) five. The Conversion Price is subject to customary adjustments for stock splits, stock dividends, stock combination recapitalization, or other similar transactions involving the Common Stock and subject to price-based adjustment on a full ratchet basis in the event of any issuances of our common stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable Conversion Price (subject to certain exceptions).
On *October 6, 2023,*the Company and Investors holding a majority of the outstanding shares of the Preferred Stock agreed to waive any and all provisions, terms, covenants, and obligations in the Certificate of Designations to the extent such provisions permit the conversion or exercise of the Preferred Stockto occur at a price below $3.77. Notwithstanding anything to the contrary in the Certificate of Designations, each of the Alternate Conversion Price and the Floor Price as set forth in the Certificate of Designations shall in *no* event be less than$3.77 (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations, and similar events).
Under the Certificate of Designations, the Series F Preferred Shares have an initial stated value of $1,000 per share (the Stated Value). The holders of the Series F Preferred Shares are entitled to dividends of 9% per annum, which will be payable in arrears quarterly. Accrued dividends *may*be paid, at our option, in cash, and if *not* paid, shall increase the stated value of the Series F Preferred Shares. Upon the occurrence and during the continuance of a Triggering Event (as defined in the Certificate of Designations), the Series F Preferred Shares will accrue dividends at the rate of 20% per annum (the Default Rate). The Series F Preferred Shares have *no* voting rights, other than with respect to certain matters affecting the rights of the Series F Preferred Shares. On matters with respect to which the holders of the Series F Preferred Shares have a right to vote, holders of the Preferred Shares will have voting rights on an as-converted basis.
Our ability to settle conversions is subject to certain limitations set forth in the Certificate of Designations. Further, the Certificate of Designations contains a certain beneficial ownership limitation after giving effect to the issuance of shares of common stock issuable upon conversion of the Series F Preferred Shares.
The Certificate of Designations includes certain Triggering Events (as defined in the Certificate of Designations), including, among other things, (i) the failure to file and maintain an effective registration statement covering the sale of the holders securities registrable pursuant to the Registration Rights Agreement, (ii) the failure to pay any amounts due to the holders of the Series F Preferred Shares when due, and (iii) if Peter Holst ceases to be the chief executive officer of the Company other than because of his death, and a qualified replacement, reasonably acceptable to a majority of the holders of the Series F Preferred Shares, is *not* appointed within *thirty* (*30*) business days. In connection with a Triggering Event, the Default Rate is triggered. We are subject to certain affirmative and negative covenants regarding the incurrence of indebtedness, acquisition transactions, the existence of liens, the repayment of indebtedness, the payment of cash in respect of dividends (other than dividends pursuant to the Certificate of Designations), maintenance of properties, and the transfer of assets, among other matters.
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During the years ended *December 31, 2025,*and *2024*,970 and3,033 shares of Series F Preferred Stock, respectively,plus accrued dividends, were converted to257,617 and288,968 shares of the Companys common stock, respectively. There were150 and545 shares of Series F Preferred Stock outstanding, respectively,and accrued dividends of$22,000 and$29,000 as of *December 31, 2025,*and *2024*, respectively.Series F Preferred Stock transactions are summarized in the table below:
| | | Series F Preferred | | | Accrued | | | Weighted Average | | | Common Shares Issued | | |
| | | Stock Shares | | | Dividends | | | Conversion Price | | | from Conversions | | |
| Balance on December 31, 2023 | | | 1,930 | | | $ | 131,000 | | | | | | | | 352,624 | | |
| 2024 Issuance | | | 1,648 | | | | | | | | | | | | | | |
| 2024 Accrued Dividends | | | | | | | 89,000 | | | | | | | | | | |
| 2024 Conversions | | | (3,033 | ) | | | (191,000 | ) | | $ | 11.17 | | | | 288,968 | | |
| Balance on December 31, 2024 | | | 545 | | | | 29,000 | | | | | | | | 641,592 | | |
| 2025 Issuance | | | 575 | | | | | | | | | | | | | | |
| 2025 Accrued Dividends | | | | | | | 32,000 | | | | | | | | | | |
| 2025 Conversions | | | (970 | ) | | | (39,000 | ) | | $ | 3.77 | | | | 257,617 | | |
| Balance on December 31, 2025 | | | 150 | | | $ | 22,000 | | | $ | 3.77 | | | | 899,209 | | |
**Series F Preferred Stock Warrants**
The Preferred Warrants are exercisable for Series F Preferred Shares at an exercise price of $975. The exercise price is subject to customary adjustments for stock splits, stock dividends, stock combination recapitalization, or other similar transactions involving the Common Stock. The Preferred Warrants expire three years from the date of issuance and are exercisable for cash. For each Preferred Warrant exercised, the Investors shall receive Common Warrants to purchase a number of shares of Common Stock equal to 100% of the number of shares of Common Stock the Investors would receive if the Series F Preferred Shares issuable upon exercise of such Warrant were converted at the applicable Conversion Price. The fair value of the Preferred Warrants was recorded within additional paid-in capital upon issuance.
During the yearended *December 31, 2025*,575Preferred Warrants were exercised at a price of$975 per share. The Company received gross and net proceeds of$561,000 and $516,000,respectively. During the yearended *December 31, 2024*, 1,648Preferred Warrants were exercised at a price of$975 per share. The Company received gross and net proceeds of $1,607,000 and $1,478,000,respectively. As of *December 31, 2025*, 30,527 Preferred Warrants remained outstanding.
| | | Outstanding and Exercisable | | |
| | | Number of Warrants | | | Weighted Average Exercise Price | | |
| Warrants outstanding and exercisable, December 31, 2023 | | | 32,750 | | | $ | 975 | | |
| Exercised | | | (1,648 | ) | | $ | 975 | | |
| Warrants outstanding and exercisable, December 31, 2024 | | | 31,102 | | | $ | 975 | | |
| Exercised | | | (575 | ) | | $ | 975 | | |
| Warrants outstanding and exercisable, December 31, 2025 | | | 30,527 | | | $ | 975 | | |
As discussed in **Note 5- Capital Stock**, *one* of our directorsis currently a partner at The Special Equities Group ("SEG"), a division of Dawson James Securities, Inc. During the yearended *December 31, 2025*,pursuant to the terms of the Placement Agent Agreement, we paid Dawson Jamesacash feeequal to 8% of the aggregate gross proceeds raised from the exercise of the575Preferred Stock Warrants.Thefee was$45,000. During the yearended *December 31, 2024*, we paid the Placement Agent acash fee of $129,000 forthe exercise of the 1,648Preferred Stock Warrants.Mr. Schechter did *not* receive any of the feespaid.
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**Note 7- Stock-Based Compensation**
**Amended and Restated 2019 Equity Incentive Plan**
On *December**19,* *2019,* the TaoWeave, Inc. *2019* Equity Incentive Plan (the *2019* Plan) was approved by the Companys stockholders at the Companys *2019* Annual Meeting of Stockholders. The *2019* Plan is an omnibus equity incentive plan pursuant to which the Company *may*grant equity and cash incentive awards to certain key service providers of the Company and its subsidiaries. As of *December 31, 2024*, there were no remaining shares in theshare pool available for new grants under the *2019* Plan. On *December 17, 2025,*at the Company's Annual Meeting of Stockholders, an amendment to the *2019* Plan was approved to i) increase the number of shares available for grant of awards by 2,000,000 shares, subject to adjustment for certain changes in our capitalization, and ii) beginning on *January 1, 2026,*incorporate an annual increase of shares available under the *2019* plan, equal to 5% of the total shares of our common stock outstanding on the last day of the immediately preceding calendar year (the "Evergreen Provision"). As of *December 31, 2025*, there were 2,000,000 shares in the share pool available for new grants. On *January 1, 2026,*pursuant to the Evergreen Provision, this amount increased to 2,166,360 shares.
During the year ended *December 31, 2024*, no stock options were granted, 84 stock options vested, and 250 vested stock options expired. As of *December 31, 2024*, no stock options were outstanding. There was no stock option activity during the year ended *December 31, 2025*.
Stock compensation expense recorded for the year ended *December 31, 2024*, was $62,000. This compensation was all related to stock options and was recorded in general and administrative expense on the Consolidated Statement of Operations. As of *December 31, 2024*, and *2025*, no unamortized stock-based compensation remains.
**Note 8- Net Loss Per Share**
Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. The weighted average number of shares of common stock outstanding does *not* include any potentially dilutive securities orunvested restricted shares of common stock. Vested RSUs (for which shares of common stock have *not* yet been delivered) are included in the calculations of basic net loss per share.
Diluted net loss per share is computed by giving effect to all potential shares of common stock, including warrants, stock options, RSUs, and unvested restricted stock awards, to the extent they are dilutive. For the years ended *December 31, 2025*and *2024,all* such common stock equivalents have been excluded from diluted net loss per share as the effect on net loss per share would be anti-dilutive (due to the net losses).
The following table sets forth the computation of the Companys basic and diluted net loss per share (in thousands, except per share data):
| | | Year Ended December 31, | | |
| Numerator: | | 2025 | | | 2024 | | |
| Net loss | | $ | (6,355 | ) | | $ | (4,043 | ) | |
| Less: preferred stock dividends | | | 32 | | | | 89 | | |
| Less: deemed dividend | | | | | | | 8,974 | | |
| Net loss attributable to common stockholders | | $ | (6,387 | ) | | $ | (13,106 | ) | |
| Denominator: | | | | | | | | | |
| Weighted-average number of shares of common stock for basic and diluted net loss per share | | | 2,316,057 | | | | 834,209 | | |
| Basic net loss per share | | $ | (2.76 | ) | | $ | (15.71 | ) | |
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The following table represents the potential shares that were excluded from the computation of the weighted average number of shares of common stock in computing the diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect:
| | | Year Ended December 31, | | |
| | | 2025 | | | 2024 | | |
| Common stock issuable upon conversion of Series F Preferred Stock (1) | | | 45,754 | | | | 51,357 | | |
| Common stock issuable upon conversion of Series F Preferred Warrants (2) | | | 8,097,347 | | | | 2,784,922 | | |
| Common stock issuable upon conversion of Common Stock Warrants | | | 2,688,728 | | | | 2,272,203 | | |
| | (1) | Calculation assumes the conversion of the stated value and accrued dividends of the Series F Preferred Stock into Common Stock at the current exercise price of $3.77for 2025, and a conversion price of $11.17 for 2024. | |
| | (2) | Calculation assumes the exercise of the Series F Preferred Warrants for cash into Series F Preferred Stock and subsequent conversion of the Series F Preferred Stock into Common Stock at the Floor Price of $3.77for 2025, and a conversion price of $11.17 for 2024. | |
**Note 9- Segment Reporting**
The Company currently operates in three segments: (*1*) "Digital Assets," which represents the business surrounding our treasury activity with Bittensor, (*2*) Managed Services, which represents the business surrounding managed services for video collaboration and network solutions, and (*3*) Collaboration Products, which represents the business surrounding our Mezzanine product offerings.
For each of the years ended *December 31, 2025,*and *2024*, the CODM for three and two segments, respectively,was Pete Holst, the Company's President and Chief Executive Officer.Management reviewed the information provided to the CODM and updated the presentation of that information, including Significant Segment Expenses ("SSEs").
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Certain information concerning the Companys segments for the years ended *December 31, 2025,*and *2024*is presented in the following tables (in thousands):
| | | For the Years Ended December 31, | | |
| | | 2025 | | | 2024 | | | % Change | | |
| Revenue | | | | | | | | | | | | | |
| Digital Assets | | $ | 186 | | | $ | | | | | 100 | % | |
| Managed Services | | | 1,957 | | | | 2,062 | | | | (5 | )% | |
| Collaboration Products | | | 294 | | | | 316 | | | | (7 | )% | |
| Consolidated | | $ | 2,437 | | | $ | 2,378 | | | | 2 | % | |
| | | | | | | | | | | | | | |
| Cost of revenues | | | | | | | | | | | | | |
| Digital Assets | | $ | 24 | | | $ | | | | | 100 | % | |
| Managed Services | | | 1,384 | | | | 1,337 | | | | 4 | % | |
| Collaboration Products | | | 15 | | | | 710 | | | | (98 | )% | |
| Consolidated | | $ | 1,423 | | | $ | 2,047 | | | | (30 | )% | |
| | | | | | | | | | | | | | |
| Gross Margin | | | | | | | | | | | | | |
| Digital Assets | | $ | 162 | | | $ | | | | | 100 | % | |
| Managed Services | | | 573 | | | | 725 | | | | (21 | )% | |
| Collaboration Products | | | 279 | | | | (394 | ) | | | (171 | )% | |
| Consolidated | | $ | 1,014 | | | $ | 331 | | | | 206 | % | |
| | | | | | | | | | | | | | |
| Operating expenses | | | | | | | | | | | | | |
| Digital Assets (1) | | $ | 209 | | | $ | | | | | 100 | % | |
| Managed Services (2) | | | | | | | | | | | 0 | % | |
| Collaboration Products (3) | | | 11 | | | | 341 | | | | (97 | )% | |
| Corporate (4) | | | 3,756 | | | | 4,192 | | | | (10 | )% | |
| Consolidated | | $ | 3,976 | | | $ | 4,533 | | | | (12 | )% | |
| | | | | | | | | | | | | | |
| Other income (expense), net | | | | | | | | | | | | | |
| Digital Assets (5) | | $ | (3,519 | ) | | $ | | | | | (100 | )% | |
| Managed Services (6) | | | | | | | (1 | ) | | | (100 | )% | |
| Collaboration Products (6) | | | | | | | 16 | | | | 100 | % | |
| Corporate (7) | | | 128 | | | | 154 | | | | (17 | )% | |
| Consolidated | | $ | (3,391 | ) | | $ | 169 | | | | (2107 | )% | |
| Net loss before taxes | | $ | (6,353 | ) | | $ | (4,033 | ) | | | 58 | % | |
| Income tax expense | | $ | 2 | | | $ | 10 | | | | (80 | )% | |
| Net loss | | $ | (6,355 | ) | | $ | (4,043 | ) | | | 57 | % | |
| | | | | | | | | | | | | | |
| | | As of December 31, | | |
| Total assets | | 2025 | | | 2024 | | | % Change | | |
| Digital Assets (8) | | $ | 5,562 | | | $ | | | | | 100 | % | |
| Managed Services (9) | | | 401 | | | | 422 | | | | (5 | )% | |
| Collaboration Products (10) | | | 258 | | | | 285 | | | | (9 | )% | |
| Corporate (11) | | | 1,998 | | | | 4,568 | | | | (56 | )% | |
| Consolidated | | $ | 8,219 | | | $ | 5,275 | | | | 56 | % | |
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| (1) | Operating expenses related to our Digital Assets segment include cash and stock-based advisory fees. | |
| (2) | There were no operating expenses related to our Managed Service segment in 2025 and 2024. | |
| (3) | Operating expenses related to our Collaboration Products segment include non-capitalized software costs and commission expenses. In 2025 and 2024, $18,000 in bad debt recovery and $2,000 in bad debt expense were recorded, respectively. | |
| (4) | Corporate operating expenses include costs that are not specific to a particular segment but are general to the group. These include expenses for administrative, information technology, and accounting staff; general liability and other insurance; professional fees; and similar corporate expenses. | |
| (5) | Other expense for our Digital Assets segment includes unrealized losses from revaluations of our digital assets. | |
| (6) | Other income (expense) for Managed Services and Collaboration Products segments include interest expense and non-operating income. | |
| (7) | Unallocated other income in Corporate is primarily related to interest income. | |
| (8) | Digital Asset assets include the fair value of the Company's digital asset holdings as of the end of the period, and unamortized stock-based advisor expense. | |
| (9) | Managed Services assets include cash equivalents, accounts receivable, and prepaid expenses. | |
| (10) | Collaboration Products' assets include cash equivalents and prepaid expenses. | |
| (11) | Unallocated assets in Corporate include cash and prepaid expenses that are corporate in nature and don't apply to a single segment. | |
The Company's SSEs for our Digital Assets segment include cash and non-cash transaction fees, cash and stock-based advisory expenses, and unrealized losses on revaluation. The Companys SSEs for our Managed Services and Collaboration Products segments include direct labor costs and segment-based management expenses (collectively, labor and labor-related), circuit and network costof revenue, other non-inventory costof revenue, research and development costs, and bad debt (recovery) expense.These are specific costs regularly provided to the CODM and used to evaluate segment performance. Other segment items include expenses recorded within costof revenue and operating expenses, which are *not* regularly provided to the CODM. The CODM evaluates segment profit each period against historical results, factoring in macroeconomic factors such aslabor and supply costs, to assess segment performance.
| | | Year Ended December 31, 2025 | | |
| | | Digital Assets | | | Managed Services | | | Collaboration Products | | | Total | | |
| | | | | | | | | | | | | | | | | | |
| Revenue | | | | | | | | | | | | | | | | | |
| Digital Assets | | $ | 186 | | | $ | | | | $ | | | | $ | 186 | | |
| Network Services | | | | | | | 1,898 | | | | | | | | 1,898 | | |
| Video Collaboration | | | | | | | 44 | | | | 294 | | | | 338 | | |
| Professional and other services | | | | | | | 15 | | | | | | | | 15 | | |
| Total revenue | | | 186 | | | | 1,957 | | | | 294 | | | | 2,437 | | |
| | | | | | | | | | | | | | | | | | |
| Significant Segment Expenses | | | | | | | | | | | | | | | | | |
| Labor and labor-related (1) | | | | | | | 261 | | | | 19 | | | | 280 | | |
| Property and office expense | | | | | | | | | | | 21 | | | | 21 | | |
| Cash digital asset transaction fees | | | 16 | | | | | | | | | | | | 16 | | |
| Non-cash digital asset transaction fees | | | 8 | | | | | | | | | | | | 8 | | |
| Stock-based expense | | | 169 | | | | | | | | | | | | 169 | | |
| Circuit and network cost of revenue | | | | | | | 1,123 | | | | | | | | 1,123 | | |
| Advisory fees | | | 40 | | | | | | | | | | | | 40 | | |
| Unrealized loss on digital asset revaluation | | | 3,519 | | | | | | | | | | | | 3,519 | | |
| Bad debt recovery | | | | | | | | | | | (18 | ) | | | (18 | ) | |
| Other segment items (2) | | | | | | | | | | | 4 | | | | 4 | | |
| Segment profit (loss) | | $ | (3,566 | ) | | $ | 573 | | | $ | 268 | | | $ | (2,725 | ) | |
| Segment margin | | | (1917 | )% | | | 29 | % | | | 91 | % | | | | | |
| | | | | | | | | | | | | | | | | | |
| Unallocated expenses (income) | | | | | | | | | | | | | | | | | |
| Corporate expenses (3) | | | | | | | | | | | | | | $ | 3,756 | | |
| Interest income | | | | | | | | | | | | | | | (128 | ) | |
| Loss before income tax expense | | | | | | | | | | | | | | $ | (6,353 | ) | |
| | | | | | | | | | | | | | | | | | |
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| | | Year Ended December 31, 2024 | | |
| | | Managed Services | | | Collaboration Products | | | Total | | |
| | | | | | | | | | | | | | |
| Revenue | | | | | | | | | | | | | |
| Network services | | $ | 1,990 | | | $ | | | | $ | 1,990 | | |
| Video collaboration | | | 56 | | | | 316 | | | | 372 | | |
| Professional and other services | | | 16 | | | | | | | | 16 | | |
| Total revenue | | | 2,062 | | | | 316 | | | | 2,378 | | |
| | | | | | | | | | | | | | |
| Significant Segment Expenses | | | | | | | | | | | | | |
| Labor and labor-related (1) | | | 132 | | | | 550 | | | | 682 | | |
| Severance | | | | | | | 46 | | | | 46 | | |
| Circuit and network cost of revenue | | | 1,202 | | | | | | | | 1,202 | | |
| Inventory and inventory-related | | | | | | | 273 | | | | 273 | | |
| Other non-inventory cost of revenue | | | 4 | | | | 19 | | | | 23 | | |
| Research and development | | | | | | | 145 | | | | 145 | | |
| Bad debt expense | | | | | | | 2 | | | | 2 | | |
| Segment profit (loss) | | $ | 724 | | | $ | (719 | ) | | $ | 5 | | |
| Segment margin | | | 35 | % | | | (228 | )% | | | | | |
| | | | | | | | | | | | | | |
| Unallocated expenses (income) (3) | | | | | | | | | | | | | |
| Corporate expenses | | | | | | | | | | $ | 4,067 | | |
| Stock compensation | | | | | | | | | | | 62 | | |
| Severance | | | | | | | | | | | 60 | | |
| Interest income | | | | | | | | | | | (151 | ) | |
| Loss before income tax expense | | | | | | | | | | $ | (4,033 | ) | |
| | | | | | | | | | | | | | |
| (1) | Includes direct labor costs (including sales and marketing costs), employment taxes, employee benefits, workers' compensation, and office expenses. For the year ended December 31, 2024, this also includes $46,000of severance costs. | |
| (2) | Other segment items include other income and expenses, net; interest expense; certain professional services; and miscellaneous taxes and fees. | |
| (3) | Represents general and administrative costs, less the amounts allocated to the segments for labor and benefits, general liability insurance, professional services, property taxes, and interest income. For the year ended December 31, 2024, this also includes severance costs of $59,000. | |
For the years ended *December 31, 2025,*and *2024*, *no* material revenue was attributable to any individual foreign country. Approximately 1% of foreign revenue is billed in foreign currency, and foreign currency gains and losses are *not* material. Revenue by geographic area is allocated as follows (in thousands):
| | | Year Ended December 31, | | |
| | | 2025 | | | 2024 | | |
| Domestic | | $ | 1,142 | | | $ | 913 | | |
| Foreign | | | 1,295 | | | | 1,465 | | |
| | | $ | 2,437 | | | $ | 2,378 | | |
The Company considers a significant customer to be *one* that comprises more than *10%* of its consolidated revenues or accounts receivable. Losing or reducing sales or anticipated sales to our most significant customer or several of our smaller customers could have a material adverse effect on our business, financial condition, and results of operations.
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Concentration of consolidated revenues was as follows:
| | | | Year Ended December 31, 2025 | | |
| | | | 2025 | | | 2024 | | |
| | Segment | | % of Revenue | | | % of Revenue | | |
| Customer A | Managed Services | | | 79.0 | % | | | 84.9 | % | |
Concentration of consolidated accounts receivable was as follows:
| | | | As of December 31, | | |
| | | | 2025 | | | 2024 | | |
| | Segment | | % of Accounts Receivable | | | % of Accounts Receivable | | |
| Customer A | Managed Services | | | 97.3 | % | | | 82.6 | % | |
**Note 10- Commitments and Contingencies**
From time to time, we are subject to various legal proceedings arising in the ordinary course of business, including those covered by insurance. As of the date hereof, we are *not* a party to any legal proceedings that we currently believe will have a material adverse effect on our business, financial position, results of operations, or liquidity.
**Note 11- Income Taxes**
In *December 2023,*the FASBissued ASU*No.* *202309,* Income Taxes (Topic *740*): Improvements to Income Tax Disclosures, which enhances the transparency of income tax disclosures by requiring additional disaggregation in the effective tax rate reconciliation and disclosures of income taxes paid by jurisdiction. The guidance does *not* change the recognition or measurement of income taxes. The Company adopted ASU *202309* effective *January 1, 2025,*on a prospective basis. The adoption impacted the Companys income tax disclosures but did *not* have a material impact on its consolidated financial statements
The following table sets forth pretax book loss (in thousands):
| | | Year Ended December 31, | | |
| | | 2025 | | | 2024 | | |
| United States | | $ | (6,353 | ) | | $ | (4,033 | ) | |
| Foreign | | | | | | | | | |
| Total | | $ | (6,353 | ) | | $ | (4,033 | ) | |
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The following table sets forth income before taxes and the income tax expense for the years ended *December 31, 2025,*and *2024* (in thousands):
| | | Year Ended December 31, | | |
| | | 2025 | | | 2024 | | |
| Current: | | | | | | | | | |
| Federal | | $ | | | | $ | | | |
| Foreign | | | | | | | 3 | | |
| State | | | 2 | | | | 7 | | |
| Total current | | | 2 | | | | 10 | | |
| | | | | | | | | | |
| Total deferred | | | | | | | | | |
| Income tax expense | | $ | 2 | | | $ | 10 | | |
Upon adoption of ASU *2023*-*09,* the reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the year ended *December 31, 2025*, was as follows (in thousands, except for percentages):
| | | Amount | | | Percent | | |
| U.S. federal statutory rate | | $ | (1,334 | ) | | | 21.00 | % | |
| State and local taxes, net of federal effects (1) | | | 1 | | | | (0.01 | )% | |
| Change in valuation allowance | | | 1,259 | | | | (19.82 | )% | |
| Nontaxable or nondeductible items | | | 54 | | | | (0.85 | )% | |
| Other Reconciling Items | | | 22 | | | | (0.35 | )% | |
| Effective tax rates | | $ | 2 | | | | (0.03 | )% | |
| (1) | The states and local jurisdictions that contribute to the majority (greater than 50% of the tax effect in this category include California, Colorado, and Pennsylvania. | |
The reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the yearended *December 31, 2024*, in accordance with the guidance prior to the adoption of ASU *2023*-*0,* was as follows (in thousands):
| | | Amount | | |
| U.S. federal income taxes at the statutory rate | | $ | (847 | ) | |
| State Taxes, Net of Federal Effects | | | (57 | ) | |
| U.S Federal and State NOL Carryforward adjustment for expired NOLs and other | | | 62 | | |
| Stock Compensation Adjust for Expired Options | | | 67 | | |
| Change in valuation allowance | | | 1,026 | | |
| State Taxes, Change in Apportionment Rate | | | (297 | ) | |
| Other | | | 56 | | |
| Income tax expense | | $ | 10 | | |
Upon adoption of ASU *2023*-*09,*cash paid for income taxes, net of refunds, during the year ended *December 31, 2025*, was as follows (in thousands):
| Federal | | $ | | | |
| State | | | | | |
| California | | | 2 | | |
| New Jersey | | | 4 | | |
| Other States | | | 1 | | |
| Total cash paid for income taxes, net of refunds | | $ | 7 | | |
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The tax effect of the temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of *December 31, 2025,*and *2024* is presented below (in thousands):
| | | Year Ended December 31, | | |
| | | 2025 | | | 2024 | | |
| Deferred tax assets (liabilities): | | | | | | | | | |
| Tax benefit of operating loss carry forward - Federal | | $ | 30,801 | | | $ | 30,164 | | |
| Tax benefit of operating loss carry forward - State | | | 6,360 | | | | 6,319 | | |
| Accrued expenses | | | 193 | | | | 211 | | |
| Deferred revenue | | | 3 | | | | 8 | | |
| Fixed assets | | | | | | | 1 | | |
| Inventory | | | 195 | | | | 199 | | |
| Intangible amortization | | | 8 | | | | 19 | | |
| Section 174 research and experimentation | | | 174 | | | | 261 | | |
| R&D credit | | | 2,154 | | | | 2,154 | | |
| Texas margin tax temporary credit | | | 37 | | | | 37 | | |
| Charitable contributions | | | 41 | | | | 33 | | |
| Unrealized loss - digital assets | | | 795 | | | | | | |
| Total deferred tax asset, net of deferred tax liabilities | | | 40,761 | | | | 39,406 | | |
| | | | | | | | | | |
| Valuation allowance | | | (40,761 | ) | | | (39,406 | ) | |
| Net deferred tax asset | | $ | | | | $ | | | |
The ending balances of the deferred tax asset have been fully reserved, reflecting uncertainties regarding therealizability, as evidenced by the Companys historical results. The change in the valuation allowance for the year ended *December 31, 2025*, is an increase of $1,356,000.The change in the valuation allowance for the year ended *December 31, 2024*, was a decrease of $1,026,000.
We and our subsidiary file federal and state tax returns on a consolidated basis. On *October 1, 2019,*TaoWeave, Inc. (fka Oblong, Inc.) acquired the stock of Oblong Industries Inc., resulting in Oblong Industries Inc.'s shareholders owning *75%* of TaoWeave, Inc. Therefore, an ownership change occurred on this date (as defined under Section *382* of the Internal Revenue Code of *1986,* as amended), which places an annual limitation on the utilization of the net operating loss (NOL) carryforwards accumulated before the ownership change. If additional ownership changes have occured or do occur in the future, the use of NOL carryforwards and research and development credits could be subject to further limitation. As a result of this annual limitation and the limited carryforward life of the accumulated NOLs, we determined the *2019* ownership change resulted in a permanent loss of approximately $30,880,000 of federal NOL carryforwards. State NOL carryforwards were limited in a similar fashion. The Company has *not* conducted a study subsequent to the *2019* *one* to determine if any such additional changes have occurred that could limit the Company's ability to use net operating losses and tax credit carryforwards.
The Company had federal net operating loss carryforwards of $146,673,000 as of *December 31, 2025*. Of this amount, $75,138,000 will expire in various amounts from *2026* through *2037.* As of *December 31, 2025*, the Company also has various state net operating loss carryforwards of an estimated $107,065,000. The determination of the state net operating loss carryforwards is dependent upon apportionment percentages and state laws that can change, from year to year and impact the amount of such carryforwards. The Company has Research and Development credits carryforwardof $2,154,000 at*December 31, 2025*. The Research and Development credits begin to expire in *2026.*
There were *no* significant matters determined to be unrecognized tax benefits taken or expected to be taken in a tax return, in accordance with ASC Topic *740* *Income Taxes* (ASC *740*), which clarifies the accounting for uncertainty in income taxes recognized in the financial statements, that have been recorded on the Companys Consolidated Financial Statements for the years ended *December 31, 2025,*and *2024*. The Company does not anticipate any material change to its unrecognized tax benefits in the next *twelve* months.
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Additionally, ASC *740* provides guidance on the recognition of interest and penalties related to unrecognized tax benefits. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years ended *December 31, 2025,*and *2024*.
The Internal Revenue Service *may*generally assess additional income tax for the last *three* years. This would generally prevent the Service from opening an examination for years ended on or before *December 31, 2022.*However, there are exceptions that can extend the statute of limitations to *six* years and, in some cases, prevent it from ever expiring.
**Note 12- 401(k) Plan**
We have adopted a Section *401*(k) retirement plan underthe Internal Revenue Code. The *401*(k) plan covers substantially all employees who meet minimum age and service requirements. Company contributions to the *401*(k) plan for the years ended *December 31, 2025,*and *2024* were $37,000 and $58,000, respectively.
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