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Note 1 - Business Description and Significant Accounting Policies

12 Months Ended

Dec. 31, 2025

Business Description and Accounting Policies [Text Block]

Note 1 - Business Description and Significant Accounting Policies

Business Description

TaoWeave, Inc. (“TaoWeave” or “we” or “us” or the “Company”) was formed as a Delaware corporation in May 2000, and we are a digital asset treasury company dedicated exclusively to Bittensor, a decentralized blockchain network for artificial intelligence ("AI") development and machine learning. The Company is also operating legacy businesses centered around our patented Mezzanine™ product line and our managed services for video collaboration and network solutions. In conjunction with the Company's June 2025 financing, the Company began migrating its product focus from Mezzanine™ and managed services to building a digital asset treasury company. Prior to December 11, 2025, TaoWeave, Inc. was named Oblong, Inc.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of TaoWeave and our 100%-owned subsidiaries (i) GP Communications, LLC (“GP Communications”), whose business function is to provide interstate telecommunications services for regulatory purposes, and (ii) Oblong Industries, Inc. All inter-company balances and transactions have been eliminated in consolidation. The U.S. Dollar is the functional currency for all subsidiaries.

Segments

The Company currently operates in three segments: (1) "Digital Assets", which represents the business surrounding our treasury activity with Bittensor, (2) “Collaboration Products”, which represents the business surrounding our Mezzanine™ product offerings, and (3) “Managed Services”, which represents the business surrounding managed services for video collaboration and network solutions. See Note 9 - Segment Reporting for further discussion.

Use of Estimates

Preparation of the Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts may differ from the estimates. We continually evaluate estimates used in the preparation of our Consolidated Financial Statements for reasonableness. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. The significant areas of estimation include determining estimated credit losses and the inputs used to measure the fair value of equity-based awards.

Cash and Cash Equivalents

As of December 31, 2025, and 2024, our total cash balances were $2,258,000 and $4,965,000, respectively; however, of this balance, $500,000 was held in short-term certificates of deposit with MidFirst Bank in both years. The Company considers highly liquid investments with original maturities of three months or less to be cash equivalents.

Digital Assets

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets ("ASU 2023-08"). ASU 2023-08 requires in-scope digital assets (including the Company's digital asset holdings) to be measured at fair value in the statement of financial position, with gains and losses from changes in the fair value of such digital assets recognized in net income each reporting period. ASU 2023-08 also requires certain interim and annual disclosures for crypto assets within its scope. The Company adopted this guidance during the year ended December 31, 2025.

The Company's TAO tokens are held with two custodians, BitGo Trust Company, Inc. ("BitGo") and Kraken (together the "TAO Custodians"). The TAO Custodians secure the Company's digital assets in regulated, insured, cold storage, and facilitate the Company's acquisitions of TAO. BitGo serves as the Company's principal market for its digital assets. The fair value of digital assets is primarily determined using pricing data from BitGo.

Digital assets are measured at their fair market values using the last close price of the day in the UTC time zone at each reporting period end, as reflected on the balance sheet. The Company's digital assets are presented as current assets. The majority of the Company's digital assets are staked with no lock-up period, and are considered current assets in accordance with ASC 210-10-20, Balance Sheet, due to the Company's ability to sell them in a liquid marketplace and with a reasonable expectation that they will be realized in cash during the normal operating cycle of our business to support operations if needed.

Due to the availability of unadjusted quoted prices in active markets, the Company has determined that its digital assets are measured using Level 1 input. The unrealized gains and losses resulting from remeasurement of digital assets are recorded in other income on the Consolidated Statement of Operations. The Company recorded an unrealized loss of $3,519,000 for the year ended December 31, 2025. As of December 31, 2025, the fair value of our digital assets was $5,395,000.

The cost basis of the Company's digital assets is measured at fair value based on the spot price at the time of receipt if obtained through staking rewards, or the purchase price if obtained by cash, consistent with the applicable guidance under ASC 350-60. The Company has elected to adopt the First-In, First-Out ("FIFO") method for determining the cost basis of digital assets disposed of. The method assumes that the assets that were acquired first are disposed of first. Realized gains and losses from the disposal of digital assets are included in other income in the Consolidated Statements of Operations. The Company had no realized gains or losses from the disposal of digital assets for the year ended December 31, 2025.

Accounts Receivable and Provision for Estimated Credit Losses

Accounts receivable are customer obligations due under normal trade terms. The Company sells its Managed Services to end-users and its Collaboration Products to both resell partners and end-users. The Company extends credit to its customers based on their creditworthiness and historical data and performs ongoing credit evaluations of their financial condition. The Company maintains an allowance for estimated credit losses on accounts receivable for future expected bad debt resulting from customers' inability or unwillingness to make required payments. We estimate our allowance for estimated credit losses based on relevant information, including historical experience, current economic conditions, and future expectations for specifically identified customer balances. This allowance is adjusted as appropriate to reflect current conditions. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. We do not obtain collateral from our customers to secure accounts receivable.

As of December 31, 2025, the Company's accounts receivable balance of $138,000 related to our Managed Services segment. As of December 31, 2024, the Company had accounts receivable balances of $161,000 and $25,000 for our Managed Services and Collaboration Products segments, respectively.

The company recorded a recovery of bad debt of $18,000 for our Collaboration Products segment during the year ended December 31, 2025, and a bad debt expense of $2,000 for our Collaboration Products segment during the year ended December 31, 2024. As of December 31, 2025, the Company's analysis resulted in no credit loss reserve remaining on the Consolidated Balance Sheet.

Inventory

Inventory consists of finished goods for our Mezzanine™ products in our Collaboration Products segment, and is determined using average costs and stated at the lower of cost or net realizable value. The Company periodically performs analyses to identify obsolete or slow-moving inventory. Due to declining sales of our Mezzanine™ products, management has determined that there is no guarantee our inventory on hand will be sold, and as a result, has recorded a full reserve, resulting in zero net inventory as of both December 31, 2025, and December 31, 2024. The following is a summary of the changes in inventory and the reserve for inventory for the years ended December 31, 2025, and 2024:

	Inventory			Reserve
Balance as of December 31, 2023	$	930			(691	)
Purchases		163			—
Sales		(211	)		—
Reserve adjustments		—			(191	)
Balance as of December 31, 2024		882			(882	)
Purchases		50			—
Sales		(82	)		33
Reserve adjustments		—			(1	)
Balance as of December 31, 2025	$	850		$	(850	)

Prepaid Expenses

As of December 31, 2025, and 2024, consolidated prepaid expenses and other current assets were $424,000 and $118,000, respectively. Of the balances as of December 31, 2025 i) $168,000 was attributable to our Digital Assets segment and consisted of unamortized stock-based advisor expense; ii) $15,000 was attributable to our Managed Services segment and primarily consisted of licensing fees, iii) $7,000 was attributable to our Collaboration Products segment and primarily consisted of software licenses; and iv) $234,000 was allocated to corporate and attributable to insurance, software licenses, and personnel expenses due to the timing of payroll. The 259% year-over-year increase was primarily due to higher stock-based expense, insurance expense, and the timing of cash outflows for the final payroll of the year. Of the balance as of December 31, 2024 i) $8,000 was attributable to our Managed Services segment primarily consisting of licensing fees, ii) $7,000 was attributable to our Collaboration Products Segment primarily consisting of software licenses, and $103,000 was allocated to Corporate. The following is a summary of our prepaid expense balances as of December 31, 2025, and 2024:

	December 31,
	2025		2024
Prepaid expenses	$	204	$	20
Prepaid insurance		121		51
Other current assets		58		12
Prepaid software licenses		41		35
Prepaid expenses and other current assets	$	424	$	118

Fair Value Measurements

The Company considers its cash and cash equivalents, digital assets, accounts receivable, and accounts payable to meet the definition of financial instruments. The carrying amount of cash and cash equivalents, accounts receivable, and accounts payable approximated their fair value due to the short maturities of these instruments. Due to the availability of unadjusted quoted prices in active markets, the Company has determined that its digital assets are measured using Level 1 input.

The Company measures fair value as required by Accounting Standards Codification (“ASC”) Topic 820“Fair Value Measurements and Disclosures” (“ASC Topic 820”). ASC Topic 820 defines fair value, establishes a framework, provides guidance on the methods used to measure fair value, and expands disclosures about fair value measurements. ASC Topic 820 clarifies that fair value is an exit price, representing the amount that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined using assumptions that market participants would use to price an asset or liability. As a basis for considering such assumptions, there exists a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

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Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.

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Level 2 - inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability, or indirectly observable through corroboration with observable market data.

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Level 3 - unobservable inputs for the asset or liability are only used when there is little, if any, market activity for the asset or liability at the measurement date.

This hierarchy requires the Company to use observable market data when available and to minimize the use of unobservable inputs when determining fair value.

Revenue Recognition

The Company accounts for revenue in accordance with ASC Topic 606.

The Company recognizes revenue using the five-step model as prescribed by Topic 606:

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Identification of the contract, or contracts, with a customer;

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Identification of the distinct performance obligations in the contract;

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Determination of the transaction price;

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Allocation of the transaction price to the performance obligations in the contract; and

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Recognition of revenue when or as the Company satisfies a performance obligation.

Digital Assets

The Company had staked $5,395,000 of digital assets as of December 31, 2025. The 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. As of December 31, 2025, the Company's staked assets have immediate terms, meaning there is no lock-up period upon unstaking.

In exchange for staking the crypto assets on blockchain networks, 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 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. Token rewards earned from staking are calculated and distributed directly to TaoWeave's digital wallets by the blockchain networks as part of their consensus mechanisms.

The Company considers the provision of validating blockchain transactions an output of the Company’s ordinary activities, providing a service to the blockchain network, and accounts for the staking rewards under ASC 606. Each separate validation under a smart contract with a network represents a performance obligation. The satisfaction of the performance obligation for processing and validating blockchain transactions occurs at a point in time when confirmation is received from the network indicating that the validation is complete, and the awards are available for transfer. At that point, the fair value of the staking reward is recognized and recorded as revenue. Once the Company has acquired the reward, the tokens are added to our digital asset holdings, and their fair value is accounted for in accordance with ASC 820.

Managed Services

The 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, under Topic 606, are deferred on our consolidated balance sheets and amortized over the expected life of the customer contract. During the year ended December 31, 2025, the Company recorded $1,957,000 as point-in-time revenue. As of December 31, 2025, and 2024, there was no deferred revenue related to Managed Services.

Collaboration Products

The 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 the commencement of revenue recognition for maintenance services, ranging from one to three years. Revenue from maintenance services is recognized over time. During the year ended December 31, 2025, the Company recorded $231,000 of point-in-time revenue and $63,000 of over time revenue. Deferred revenue for Collaboration Products, as of December 31, 2025 and 2024, totaled $13,000 and $36,000, respectively, as certain performance obligations were not satisfied as of this date. During the year ended December 31, 2025, the Company recorded $36,000 of revenue that was included in deferred revenue as of December 31, 2024. During the year ended December 31, 2024, the Company recorded $132,000 of revenue that was included in deferred revenue as of December 31, 2023.

Consolidated revenue recorded over time for the years ended December 31, 2025, and 2024 was $63,000 and $156,000, respectively. Revenue recorded at a point in time for the years ended December 31, 2025, and 2024 was $2,374,000 and $2,222,000, respectively.

The Company disaggregates its revenue by geographic region. See Note 9 - Segment Reporting for more information.

Taxes Billed to Customers and Remitted to Taxing Authorities

We recognize taxes billed to customers in revenue and taxes remitted to taxing authorities in our cost of revenue. For the years ended December 31, 2025, and 2024, we included taxes of $62,000 and $68,000, respectively, in revenue and $70,000 and $74,000, respectively, in cost of revenue.

Concentration of Credit Risk

Financial instruments that may subject us to significant concentrations of credit risk consist principally of cash and trade accounts receivable. We place our cash needed for operations in commercial checking accounts, and the majority of our cash is held in a money market fund. Commercial bank balances may, from time to time, exceed federal insurance limits. Deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”) in an amount up to $250,000 for any depositor; any deposit in excess of this insured amount could be lost.

Income Taxes

On July 4, 2025, the U.S. H.R.1, an act to provide for reconciliation pursuant to title II of H. Con. Res. 14. (the “OBBBA”) was enacted. The OBBBA introduces multiple tax law and other legislative changes, including modifications to income tax provisions such as existing 21% corporate income tax rate made permanent, domestic research and development expenses, the restoration of 100% bonus depreciation, changes to Section 163(j) interest limitations, and U.S. taxation of international earnings; the repeal or acceleration of the sunset of certain tax credits under the 2022 Inflation Reduction Act and elimination of certain penalties for violations of certain regulatory credit programs. We have recognized the effects of the OBBBA provisions in our financial results to the extent they are applicable to the year ended December 31, 2025.

Stock-based Compensation

Stock-based awards have been accounted for as required by ASC Topic 718 “Compensation – Stock Compensation” (“ASC Topic 718”). Under ASC Topic 718, stock-based awards are valued at fair value on the date of grant, and that fair value is recognized over the requisite service period. The Company accounts for forfeitures when they occur. The Company recorded $62,000 in stock compensation for the year ended December 31, 2024. As of December 31, 2025, there are no stock compensation awards outstanding. See Note 7 - Stock-Based Compensation for further details.

Stock-based Expense

In June 2025, the Company granted warrants to an advisor related to digital assets. See Note 5 - Capital Stock for further information. The total stock-based cost of these warrants is $335,000, which will be expensed ratably over the twelve-month original life of the contract and vesting period of the warrants. During the year ended December 31, 2025, $169,000 was recorded as stock-based advisory fees in general and administrative expense, as such expense was not directly related to staking revenue. As of December 31, 2025, $168,000 of expense remains to be recognized through June 2026.

Research and Development

Research and development expenses include internal and external costs related to developing new service offerings, features, and enhancements to our existing product offerings.

Treasury Stock

Purchases and sales of treasury stock are recorded under the cost method. Under this method, shares acquired are recorded at the acquisition price directly to the treasury stock account. Upon sale, the treasury stock account is reduced by the original acquisition price of the shares, and any excess is recorded in additional paid-in capital on a first-in, first-out basis. The Company does not recognize a gain or loss to income from the purchase and sale of treasury stock.

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements

In December 2023, the FASB issued ASU No. 2023‑09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency of income tax disclosures by requiring additional disaggregation in the effective tax rate reconciliation and disclosures of income taxes paid by jurisdiction. The guidance does not change the recognition or measurement of income taxes. The Company adopted ASU 2023‑09 effective January 1, 2025, on a prospective basis. The adoption impacted the Company’s income tax disclosures but did not have a material impact on its consolidated financial statements.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses, which requires public business entities to disclose additional information about certain expenses in the notes to the financial statements. This guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements.