Management’s Discussion and Analysis of Financial Condition and Results of Operations
Qualitative and Quantitative Disclosures About Market Risk
Financial Statements and Supplemental Data
Change in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosures Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART IV
Exhibits and Financial Statement Schedules
Signatures
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K (this “ Report ” ) contains statements that are considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and its rules and regulations (the “ Securities Act ” ), and Section 21E of the Securities Exchange Act of 1934, as amended, and its rules and regulations (the “ Exchange Act ” ). These forward-looking statements include, but are not limited to, statements about the plans, objectives, expectations, and intentions of TaoWeave, Inc. ( “ TaoWeave ” or “ we ” or “ us ” or the “ Company ” ). All statements other than statements of current or historical fact contained in this Report, including statements regarding TaoWeave's future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. The words “ anticipate, ” “ believe, ” “ estimate, ” “ expect, ” “ intend, ” “ may, ” “ plan, ” and similar expressions, as they relate to TaoWeave, are intended to identify forward-looking statements. These statements are based on TaoWeave's current plans, and TaoWeave's actual future activities and results of operations may be materially different from those set forth in the forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. Any or all of the forward-looking statements in this Report may turn out to be inaccurate. TaoWeave has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy, and financial needs. The forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks, uncertainties, and assumptions. There are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including our plans, objectives, expectations, intentions, and other factors that are discussed in “ Item 1A. Risk Factors ” and/or listed below. TaoWeave undertakes no obligation to publicly revise these forward-looking statements to reflect events occurring after the date hereof. All subsequent written and oral forward-looking statements attributable to TaoWeave or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this Report. Forward-looking statements in this Report include, among other things: the Company's plans to explore partnerships within the Bittensor ecosystem, demand for our product offerings, future revenues, expenses, capital expenditures and cash flows; our ability to fund operations and continue as a going concern; our liquidity projection; expectations regarding adjustments to our cost of revenue and other operating expenses; the future exercise of warrants; our ability to raise capital through sales of additional equity or debt securities and/or loans from financial institutions; our beliefs about the ongoing performance of our Managed Services business; statements relating to market need and evolution of the industry, our solutions and our service platforms; our beliefs about employee relations; adequacy of our internal controls; and statements regarding our information systems and ability to prevent cybersecurity incidents. For additional information regarding known material factors that could cause our actual results to differ materially from our projected results, please see “ Item 1A. Risk Factors. ” Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:
RISK FACTORS SUMMARY
The following is a summary of the principal risk factors that make an investment in our company speculative or risky, all of which are further described below in the section titled “Risk Factors” in Part I, Item 1A of this Report. This summary should be read in conjunction with the “Risk Factors” section and should not be relied upon as an exhaustive summary of the material risks facing our business.
We own and may purchase additional digital assets, the prices of which have been, and will likely continue to be, highly volatile.
If any of the digital assets we hold are classified as a security, we may be subject to extensive regulation, which could result in significant costs or force us to cease certain operations.
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.
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.
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.
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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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.
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.
Digital asset lending arrangements may expose us to risks of borrower default, operational failures, and cybersecurity threats.
We may incur losses from staking, delegating, and other related services.
Intellectual property disputes related to digital assets technology could threaten our ability to operate.
The open-source structure of digital asset networks exposes us to risks related to software development, security vulnerabilities, and potential disruptions
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.
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 irreversibility of digital asset transactions exposes us to risks of theft, loss, and human error, which could negatively impact our business.
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.
We may be unable to attract and retain qualified and skilled employees or consultants.
Our Company experienced revenue declines in recent fiscal years, and revenue may continue to decline in future periods.
We have a history of substantial net operating losses, and we may incur future net losses.
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.
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.
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.
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.
We depend on our network providers and facilities infrastructure.
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.
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.
We are exposed to the credit and other counterparty risk of our customers in the ordinary course of our business.
Failure to retain and recruit key personnel would harm our ability to meet key objectives.
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.
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.
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.
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.
Our business, operating results, and financial condition could be materially harmed by regulatory uncertainty applicable to our products and services.
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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.
Penny stock regulations may impose certain restrictions on the marketability of our 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.
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 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.
Future issuances of equity or debt securities by us may adversely affect the market price of our Common Stock.
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.
We may be delisted from the Nasdaq if we fail to maintain a minimum market value of $5.0 million in listed securities.
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.
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.
Our charter documents and Delaware law could discourage takeover attempts and lead to management entrenchment.
We incur significant accounting and administrative costs as a publicly traded corporation that impact our financial condition.
Our cash and cash equivalents could be adversely affected if the financial institutions in which we hold them fail.
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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, Bittensor’s native cryptocurrency, which we accumulate and stake on the Bittensor network to generate yield in the form of additional TAO tokens. Our goal is to provide public-market investors with economic exposure to the Bittensor ecosystem.
During the year ended December 31, 2025, we deployed approximately $8.7 million to acquire approximately 24,128 TAO 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 approximately 24,665 TAO tokens, inclusive of approximately 544 TAO 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 accordingly—a 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 participant’s 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 Bitcoin’s 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, TAO’s 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.”
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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 validator’s operations, we receive a proportional share of the TAO rewards earned by that validator, net of the validator’s commission (commonly referred to as the validator’s “take”). Rewards are calculated and distributed directly to our digital wallets by the network as part of its consensus mechanism.
During the year ended December 31, 2025, we earned approximately 544 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 subnet’s 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
Our product is called Mezzanine™, a family of turn-key products that enable dynamic and immersive visual collaboration across multi-users, multiple screens, multiple devices, and multiple locations. Mezzanine™ allows multiple people to share, control, and arrange content simultaneously, from any location, enabling all participants to see the same content in its entirety at the same time in identical formats, resulting in dramatic enhancements to both in-room and virtual videoconference presentations. Applications include video telepresence, laptop and application sharing, whiteboard sharing, and slides. Spatial input allows content to be spread across screens spanning different walls, be scalable to an arbitrary number of displays, and interact with our proprietary wand device. Mezzanine™ substantially enhances day-to-day virtual meetings with technology that accelerates decision making, improves communication, and increases productivity. Mezzanine™ scales up to support the most immersive and commanding innovation centers; across to link labs, conference spaces, and situation rooms; and down for the smallest work groups. Mezzanine’s digital collaboration platform can be sold as delivered systems in various configurations for small teams to total immersion experiences. The family includes the 200 Series (two display screens), 300 Series (three screens), and 600 Series (six screens). We also sell maintenance and support contracts related to Mezzanine™.
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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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 years ended 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 for 79% and 85% of the Company’s 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 with bundled 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 puts pressure 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 continue for 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 various manufacturers.
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 comprises a mix of competitive base salaries, bonuses, equity compensation awards, and other 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 purchased into 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 the Securities Act of 1933, as amended (the “Securities Act”), or the Investment Company Act of 1940, as amended (the “Investment Company Act”), could require us to register and comply with additional regulations. Compliance with these requirements could impose extraordinary, non-recurring expenses on our business. If the costs and regulatory burdens become too great, we may be forced to modify or cease certain operations, which could be detrimental to our investors.
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 the Investment 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 the Investment Company Act. If we are unable to rely on an exclusion, we would be required to register with the SEC, which could impose additional financial and regulatory burdens.
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 assets we hold as commodities could subject us to additional CFTC regulation, resulting in significant compliance costs or the cessation of certain operations. If our activities require CFTC registration, we may be required to comply with extensive regulatory obligations, which could result in significant costs and operational disruptions. Additionally, current and future legislative or regulatory developments, including new CFTC interpretations, could further impact how digital assets are classified and traded.
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 to benefit and protect investors. We are not subject to, and do not otherwise voluntarily comply with, these laws and regulations. This means, among other things, that the execution of our changes to our digital asset strategy, our use of leverage, our ability to engage in transactions with affiliated parties, and our operating and investment activities generally are not subject to the extensive legal and regulatory requirements and prohibitions that apply to investment companies and investment advisers.
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 in 2025 from the price decline in TAO but may not fully reflect the potential variability in earnings we may experience from holding or selling digital assets. The prices of digital assets have historically been highly volatile, subject to dramatic fluctuations. We will need to perform an analysis each quarter to identify whether events or changes in circumstances indicate that our digital assets are impaired. As a result, volatility in our earnings may be significantly greater than we have experienced in prior periods.
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 unsecured and therefore subordinated to the borrower's secured debt. If a borrower becomes insolvent, we may be unable to recover the loaned digital asset, leading to substantial financial losses.
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 by participating in decentralized governance, bookkeeping, and transaction confirmation activities on their underlying blockchain networks. We stake certain of our crypto assets on blockchain networks through BitGo. Most PoS networks require crypto assets to be transferred into smart contracts on the underlying blockchain networks, not under our or anyone’s control. If any third-party service providers, or smart contracts, fail to behave as expected, suffer cybersecurity attacks, experience security issues, or encounter other problems, our crypto assets may be irretrievably lost. In addition, most PoS blockchain networks dictate requirements for participation in the relevant decentralized governance activity, and may impose penalties, or “slashing,” if the relevant activities are not performed correctly, such as if the node operator acts maliciously on the network, “double-signs” any transactions, or experiences extended downtimes. Slashing penalties can apply due to prolonged inactivity on a blockchain network, inadvertent errors (such as computing or hardware issues), or more serious behavior, such as intentional malfeasance. If we are slashed by an underlying blockchain network, our crypto assets may be confiscated, withdrawn, or burnt by the network, resulting in permanent, irrecoverable losses that could materially impact our financial position. Any penalties or slashing events could damage our brand and reputation, cause financial losses, and adversely impact our business.
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, and although there may be an influential group of leaders within the network community, there is generally no official developer or group of developers that formally controls the network. Without guaranteed financial incentives, there may be insufficient resources to address emerging issues, enhance security, or implement necessary network improvements in a timely manner. If the digital asset network’s software is not properly maintained or developed, it could become vulnerable to security threats, operational inefficiencies, and reduced trust, all of which could negatively impact the digital assets’ long-term viability and our business.
We maintain crime insurance for our digital assets but there is still a risk of total loss in the event of theft or destruction, and if coverage is denied. We maintain third party crime insurance for coverage on digital assets. However, there is no assurance such coverage will protect us from losses if insurers were to deny coverage. If an event occurs that results in the loss of our digital assets, whether due to cyberattacks, fraud, or other malicious activities, we may have no viable legal recourse or ability to recover them. Unlike funds held in insured banking institutions, our digital assets are not protected by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. If our digital assets are lost under circumstances that render another party liable, there is no guarantee that the party responsible will have the financial resources to compensate us. As a result, we and our stockholders could face significant financial losses.
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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 customer assets. 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 assets or a theft of digital assets, will generally not be reversible, and we may not be able to seek compensation for any such transfer or theft.
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, our digital asset holdings, and on our ability to successfully implement it. Implementation of our strategy will require effective management of our operational, financial, and human resources and will place significant demands on those resources. There are risks involved in pursuing our strategy. In addition to the risks set forth elsewhere in this Report, the effectiveness of and the successful implementation of our business strategy could also be affected by a number of factors beyond our control, such as legal developments, government regulation, general economic conditions, increased operating costs or expenses, and changes in industry trends. We may decide to alter or discontinue certain aspects of our business strategy at any time. If we are unable to successfully implement our business strategy, our long-term growth and profitability may be adversely affected. Even if we successfully implement some or all of the initiatives in our business strategy, our operating results may not improve and could decline substantially.
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 decline in 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 to significant customer losses and a decline in 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 least the 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 capital on 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 as not 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 for 79% of the Company’s 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 customer’s financial condition, changes in the customer’s 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 failure to 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. A loss 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 may limit 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 services and may not be able to replace the resulting revenue losses. Historically, we have experienced both significant service disruptions and reductions in the prices of our services. We endeavor to secure long-term commitments from new customers and expand 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 Company’s 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 standard service agreement with us includes an auto-renewal clause at the end of each term, unless the 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 Company’s 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 increase hiring 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 to pay 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, including associated 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 those services to our customers and may adversely affect our ability to retain existing customers or attract new 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 to maintain 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:
investor reaction to our business strategy;
the success of competitive products or technologies;
our ability to comply with the continued listing standards of the Nasdaq Capital Market;
regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our products;
variations in our financial results or those of companies that are perceived to be similar to us;
our ability or inability to raise additional capital and the terms on which we raise it;
declines in the market prices of stocks generally;
the trading volume of our common stock;
conversions of Series F Preferred Stock into common stock and the subsequent sales of common stock;
sales of our common stock by us or our stockholders;
general economic, industry, and market conditions;
fluctuations in demand for our services in part due to changes in the global economic environment;
the overall movement toward industry consolidation among both our competitors and our customers;
changes in sales and implementation cycles for our services and reduced visibility into our customers’ spending plans and associated revenue;
the timing, size, and mix of orders from customers;
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;
our ability to achieve targeted cost reductions;
benefits anticipated from our investments;
changes in tax law or accounting rules, or interpretations thereof;
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;
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
the failure of any bank and the resulting economic uncertainty it causes.
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 management’s 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 traded and 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 purchaser’s 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-dealer’s 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 Placement and 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 issued in 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 of 150 million shares of Common Stock. As of the filing of this Report, we had an aggregate of approximately 146.7 million shares of Common Stock authorized but unissued, and approximately 127.7 million shares of Common Stock authorized but unissued after giving effect to the exercise or conversion, as applicable, of the 18.9 million shares reserved for the securities issued in the 2023 Private Placement, the 2025 Private Placement, and other outstanding awards, assuming all of the shares of Series F Preferred Stock are converted into 45,754 shares of Common Stock at the conversion price of $3.77, all of the Preferred Warrants are exercised in full and the underlying shares of Series F Preferred Stock are converted into 8,097,347 shares of Common Stock at the conversion price of $3.77, all of the 8,097,347 Common Warrants issued upon the exercise of the Preferred Warrants are then exercised at an exercise price of $3.77 in for 8,097,347 shares of Common Stock, all of the Common Warrants issued in the 2023 Private Placement are exercised at an exercise price of $3.41 for 1,749,527 shares of Common Stock, all of the 2023 Placement Agent Warrants issued in the 2023 Private Placement are exercised at an exercise price of $3.41 for 153,470 shares of Common Stock, all the Pre-Funded Warrants issued in 2025 Private Placement are exercised at an exercise price of $3.77 for 586,261 shares of Common Stock, all of the 2025 Placement Agent Warrants issued in the 2025 Private Placement are exercised at an exercise price of $4.71 for 99,470 share of Common Stock, and the Advisor Warrants are exercised at an exercise price of $3.77 for 100,000 shares of Common Stock. Additionally, depending on the trading price of our Common Stock, we may need to issue more or fewer shares of Common Stock upon exercise of the Preferred Warrants. If we do not have the shares of Common Stock available to issue in connection with such exercises, we will be required to provide the exercising holder a buy-in of cash.
In the future, we may attempt to obtain financing or to increase further our capital resources, or refinance existing obligations, by issuing additional shares of our Common Stock or offering debt or other equity securities, including commercial paper, medium-term notes, senior or subordinated notes, debt securities convertible into equity, or shares of preferred stock. Future acquisitions could require substantial additional capital beyond cash from operations. There can be no guarantee that these offers to exchange will be successful. In addition, we also expect to issue additional shares with the exercise of our stock options under our incentive plans.
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 to maintaining 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 $4.4 million.
If we are unable to satisfy Nasdaq’s continued listing requirements or regain compliance within any applicable cure period, our common stock could be delisted. Delisting would likely reduce the liquidity and market price of our common stock, limit investor interest, and impair our ability to raise additional capital. If our common stock were to trade on an over-the-counter market, trading volume and liquidity would likely be significantly lower. Any such delisting could have a material adverse effect on our business, financial condition, and stockholders.
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Holders of our Series F Preferred Stock will have no rights with in our Common Stock until the Series F Preferred Stock is converted, but may be adversely affected by certain changes made with respect to our Common Stock. Holders of our Series F Preferred Stock will have no rights with respect to our Common Stock, including voting rights, rights to respond to Common Stock tender offers, if any, and rights to receive dividends or other distributions on shares of our Common Stock, if any (other than through a conversion rate adjustment), prior to the conversion date with respect to a conversion of the Series F Preferred Stock, but holders' investment in the Series F Preferred Stock may be negatively affected by these events. Upon conversion, holders will be entitled to exercise the rights of a holder of shares of our Common Stock only as to matters for which the record date occurs on or after the conversion date. For example, in the event that an amendment is proposed to our certificate of incorporation or bylaws requiring shareholder approval and the record date for determining the shareholders of record entitled to vote on the amendment occurs prior to the conversion date, Series F holders will not be entitled to vote on the amendment (unless it would adversely affect the special rights, preferences, privileges and voting powers of the Series F Preferred Stock), although they will nevertheless be subject to any changes in the powers, preferences or special rights of our Common Stock, even if your Series F Preferred Stock has been converted into shares of our Common Stock prior to the effective date of such change.
Holders of our Series F Preferred Stock may have to pay taxes if we adjust the conversion ratio of the Series F Preferred Stock in certain circumstances, even though the holders would not receive any cash. Upon certain adjustments to (or certain failures to make adjustments to) the conversion ratio of the Series F Preferred Stock, holders may be deemed to have received a dividend distribution from us, resulting in taxable income to them for U.S. federal income tax purposes, even though holders would not receive any cash in connection with such adjustment to (or failure to adjust) the conversion ratio. If a holder is a non-U.S. holder of the Series F Preferred Stock, any deemed dividend distribution may be subject to U.S. federal withholding tax at a 30% rate, or such lower rate as may be specified by an applicable treaty. Please consult your tax advisor regarding the U.S. federal income tax consequences of an adjustment to the conversion ratio of the Series F Preferred Stock.
Our charter documents and Delaware law could discourage takeover attempts and lead to management entrenchment. The Company’s 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 Company’s management. These provisions include:
no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
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;
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 our board of directors;
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;
the ability of our board of directors, by majority vote, to amend the Company’s 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
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 acquirer’s 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 deemed effective 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 Company’s 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 from remote 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 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.
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 Company’s 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 $1.33 per share on March 19, 2026. As of March 19, 2026, 3,327,210 shares of our common stock were issued and outstanding. As of March 19, 2026, there were 185 holders 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 the payment 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 Company’s Board of Directors authorized a stock repurchase program (the “Stock Repurchase Program”) granting the Company authority to repurchase up to $500,000 of the Company’s 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 are a 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, Bittensor’s native cryptocurrency. In 2025, the Company invested $8,736,000 to acquire 24,128 TAO tokens. As of December 31, 2025, the Company holds 24,665 TAO tokens. The Company’s 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.
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Digital Assets
As a digital asset treasury company dedicated exclusively to Bittensor, a decentralized blockchain network for AI development 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, Bittensor’s native cryptocurrency. We generally stake all our TAO token holdings, subject to various liquidity and operational considerations, and we review this allocation periodically. All staking services are provided through the TAO Custodians, enabling yield generation while 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
Our product is called Mezzanine™, a family of turn-key products that enable dynamic and immersive visual collaboration across multi-users, multiple screens, multiple devices, and multiple locations. Mezzanine™ allows multiple people to share, control, and arrange content simultaneously, from any location, enabling all participants to see the same content in its entirety at the same time in identical formats, resulting in dramatic enhancements to both in-room and virtual videoconference presentations. Applications include video telepresence, laptop and application sharing, whiteboard sharing, and slides. Spatial input allows content to be spread across screens spanning different walls, be scalable to an arbitrary number of displays, and interact with our proprietary wand device. Mezzanine™ substantially enhances day-to-day virtual meetings with technology that accelerates decision making, improves communication, and increases productivity. Mezzanine™ scales up to support the most immersive and commanding innovation centers; across to link labs, conference spaces, and situation rooms; and down for the smallest work groups. Mezzanine’s digital collaboration platform can be sold as delivered systems in various configurations for small teams to total immersion experiences. The family includes the 200 Series (two display screens), 300 Series (three screens), and 600 Series (six screens). We also sell maintenance and support contracts related to Mezzanine™.
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.
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Results of Operations
Year Ended December 31, 2025 ( “ 2025 ” ) versus Year Ended December 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 ended December 31, 2025, and 2024 (in thousands):
For the Years Ended December 31,
% Change
Revenue
Digital Assets
Managed Services
Collaboration Products
Consolidated
Cost of revenues
Digital Assets
Managed Services
Collaboration Products
Consolidated
Gross Margin
Digital Assets
Managed Services
Collaboration Products
Consolidated
Operating expenses
Digital Assets (1)
Managed Services (2)
Collaboration Products (3)
Corporate (4)
Consolidated
Other income (expense), net
Digital Assets (5)
Managed Services (6)
Collaboration Products (6)
Corporate (7)
Consolidated
Net loss before taxes
Income tax expense
Net loss
As of December 31,
Total assets
% Change
Digital Assets (8)
Managed Services (9)
Collaboration Products (10)
Corporate (11)
Consolidated
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Operating expenses related to our Digital Assets segment include cash and stock-based advisory fees.
There were no operating expenses related to our Managed Service segment in 2025 and 2024.
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.
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.
Other expense for our Digital Assets segment includes unrealized losses from revaluations of our digital assets.
Other income (expense) for Managed Services and Collaboration Products segments includes interest expense and non-operating income.
Unallocated other income in Corporate is primarily related to interest income.
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.
Managed Services assets include cash equivalents, accounts receivable, and prepaid expenses.
Collaboration Products' assets include cash equivalents and prepaid expenses.
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 increased 2.5% 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,
% of Revenue
% of Revenue
Revenue: Digital Assets
Staking rewards
Total Digital Assets revenue
Revenue: Managed Services
Network services
Video collaboration
Professional and other services
Total Managed Services revenue
Revenue: Collaboration Products
Visual collaboration product offerings
Total Collaboration Products revenue
Total consolidated revenue
Digital Assets
During the year ended December 31, 2025, we earned 544 TAO tokens through staking, or $186,000 in revenue.
In exchange for staking TAO on the Bittensor blockchain network, the Company is entitled to a fractional share of the fixed digital asset award a third-party validator node receives for 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 Company’s staking reward received 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 rewards earned from staking are calculated and distributed directly to the Company’s digital wallets by the blockchain networks as part of their consensus mechanisms.
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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 for 98% of Managed Services revenue and 79% of consolidated revenue. For the year ended December 31, 2024, this same customer made up 98% of Managed Services revenue and 85% 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 lower sales of our Mezzanine™ products, driven by lower 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,
Cost of Revenue
Digital Assets
Managed Services
Collaboration Products
Total cost of revenue
Digital Assets
Our Digital Assets segment recorded a gross profit percentage of 87% in 2025. Our cost of revenue for digital assets consists of custodian fees and advisor fees on our staked digital assets.
Managed Services
Our Managed Services segment recorded a gross profit percentage of 29% and 35% for 2025 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 percentage of 95% for 2025, compared to a negative gross profit percentage of 125% 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.
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Consolidated
The year-over-year decrease in the cost of revenue is mainly attributable to lower costs in our Collaboration Products segment. The Company’s consolidated gross profit percentage was 42% in 2025 compared to 14% in 2024.
Operating expenses are presented in the following table (in thousands):
Year Ended December 31,
$ Change
% Change
Operating expenses:
Research and development
Sales and marketing
General and administrative
Total operating expenses
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 in 2025 relative to 2024 is primarily attributable to lower consulting and outsourced labor costs. There were no research and development costs for our Managed Services segment in 2025 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 in 2025 compared to 2024 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 in 2025 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 in 2025 compared to 2024 is mainly attributable to decreases in personnel costs resulting from our headcount reduction in September 2024 and a recovery in bad debt, partially offset by increases in professional service, stock-based expense, and insurance expense.
Loss from Operations. The year-over-year decrease in the Company’s 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).
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Liquidity and Capital Resources
As of December 31, 2025, we had $2,258,000 in cash and cash equivalents, $5,395,000 in digital asset balances, and $7,029,000 in working capital. For the year ended December 31, 2025, we incurred a net loss of $6,355,000, and we used $3,015,000 of net cash in operating activities.
Cash used in investing activities for 2025 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 for 2025 was $9,043,000, consisting of net proceeds from the 2025 Private Placement and warrant exercises. Net cash provided by financing activities for 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).
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 least the 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 capital on 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 Company’s 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.
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The Company had staked $5,395,000 of digital assets as of December 31, 2025. The Company’s 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 assets could 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-time revenue. The Company stakes its TAO directly from BitGo and Kraken custody, qualified custodians, enabling yield generation while maintaining the highest standards of security and regulatory compliance.
The Company’s 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 Company’s 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, ranging from 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 $63,000 and $156,000, respectively. Revenue recorded at a period in time for the years ended December 31, 2025, and 2024, was $2,374,000 and $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.
