TaoWeave, Inc 10-Q for FY2020 Q3

TaoWeave, Inc. (TWAV)

10-Q 2020-11-16 For: 2020-09-30

Added on April 06, 2026

About this 10-Q

TaoWeave, Inc filed this 10-Q on November 16, 2020, covering the quarter ended September 30, 2020 (FY2020 Q3).

Headline figures

Quarter ended September 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $3.27M; up 37.8% from $2.37M a year earlier
Net loss: $2.09M; compared with a net loss of $640K a year earlier

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Delaware			77-0312442
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)


Large accelerated filer ☐			Accelerated filer ☐
Non-accelerated filer ☒			Smaller reporting company ☒
			Emerging growth company ☐


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements		1
	Condensed Consolidated Balance Sheets at September 30, 2020 (unaudited) and December 31, 2019	1
	Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019	3
	Unaudited Condensed Consolidated Statement of Stockholders’ Equity for the three and nine months ended September 30, 2020 and 2019	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019	6
	Notes to unaudited Condensed Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
Item 3. Quantitative and Qualitative Disclosures About Market Risk		36
Item 4. Controls and Procedures		36

PART II - OTHER INFORMATION
Item 1. Legal Proceedings		36
Item 1A. Risk Factors		36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 3. Defaults Upon Senior Securities		37
Item 4. Mine Safety Disclosures		37
Item 5. Other Information		37
Item 6. Exhibits		38
Signatures		39


	September 30, 2020		December 31, 2019
	(Unaudited)
ASSETS
Current assets:
Cash	$	2,670	$	4,602
Accounts receivable, net	2,207		2,543
Inventory	1,126		1,816
Prepaid expenses and other current assets	725		965
Total current assets	6,728		9,926
Property and equipment, net	641		1,316
Goodwill	7,366		7,907
Intangibles, net	10,737		12,572
Operating lease - right of use asset, net	1,665		3,117
Other assets	105		71
Total assets	$	27,242	$	34,909
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt, net of discount	$	4,942	$	2,664
Accounts payable	662		647
Accrued expenses and other current liabilities	1,489		1,752
Deferred revenue	1,973		1,901
Current portion of operating lease liabilities	907		1,294



Total current liabilities	9,973		8,258
Long-term liabilities:

Long-term debt, net of current portion and net of discount	3,035		2,843
Operating lease liabilities, net of current portion	889		2,020
Other long-term liabilities	—		3
Total long-term liabilities	3,924		4,866
Total liabilities	13,897		13,124
Commitments and contingencies (see Note 13)
Stockholders’ equity:
Preferred stock Series A-2, convertible; $.0001 par value; $7,500 stated value; 7,500 shares authorized, 45 and 32 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively and liquidation preference of $338 at September 30, 2020	—		—

Preferred stock Series C, convertible; $.0001 par value; $1,000 stated value; 1,750 shares authorized, 250 and 475 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively and liquidation preference of $250 at September 30, 2020	—		—
Preferred stock Series D, convertible; $.0001 par value; $28.50 stated value; 1,750,000 shares authorized, 1,702,010 and 1,734,901 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively and liquidation preference of $48,507 at September 30, 2020	—		—


Preferred stock Series E, convertible; $.0001 par value; $28.50 stated value; 175,000 shares authorized, 131,579 shares issued and outstanding at September 30, 2020 and December 31, 2019 and liquidation preference of $3,750 at September 30, 2020	—		—
Common stock, $.0001 par value; 150,000,000 shares authorized; 5,355,841 shares issued and 5,242,558 outstanding at September 30, 2020 and 5,266,828 shares issued and 5,161,543 outstanding at December 31, 2019	1		1
Treasury stock, 113,283 and 105,285 shares of common stock at September 30, 2020 and December 31, 2019, respectively	(181)		(165)
Additional paid-in capital	207,558		207,383
Accumulated deficit	(194,033)		(185,434)

Total stockholders’ equity	13,345		21,785
Total liabilities and stockholders’ equity	$	27,242	$	34,909


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Revenue	$	3,266	$	2,370	$	11,410	$	7,403
Cost of revenue (exclusive of depreciation and amortization)	1,612		1,582		5,684		4,901
Gross profit	1,654		788		5,726		2,502

Operating expenses:
Research and development	747		190		3,062		652
Sales and marketing	668		38		2,708		111
General and administrative	1,332		1,035		5,173		2,917
Impairment charges	117		20		667		473
Depreciation and amortization	780		145		2,392		461
Total operating expenses	3,644		1,428		14,002		4,614
Loss from operations	(1,990)		(640)		(8,276)		(2,112)
Interest and other expense, net	102		—		322		1

Foreign exchange loss (gain)	(7)		—		—		—
Interest and other expense, net	95		—		322		1


Net loss	(2,085)		(640)		(8,598)		(2,113)
Preferred stock dividends	4		4		12		23
Net loss attributable to common stockholders	$	(2,089)	$	(644)	$	(8,610)	$	(2,136)

Net loss attributable to common stockholders per share:
Basic and diluted net loss per share	$	(0.40)	$	(0.12)	$	(1.64)	$	(0.42)


Weighted-average number of shares of common stock:
Basic and diluted	5,237		5,184		5,257		5,128


	Series A-2 Preferred Stock			Series C Preferred Stock		Series D Preferred Stock			Series E Preferred Stock			Common Stock			Treasury Stock
	Shares	Amount			Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Total
Balance at December 31, 2019	32	$	—		475	$	—	1,734,901	$	—	131,579	$	—	5,266,828	$	1	105,285	$	(165)	$	207,383	$	(185,434)	$	21,785
Net loss	—	—			—	—		—	—		—	—		—	—		—	—		—		(3,129)		(3,129)

Stock-based compensation	—	—			—	—		—	—		—	—		—	—		—	—		32		—		32
Preferred stock conversion	—	—			(150)	—			—		—	—		50,000	—		—	—		—		—		—


Forfeitures of restricted stock	—	—			—	—		(14,441)	—		—	—		—	—		—	—		—		—		—
Preferred stock dividends	—	—			—	—		—	—		—	—		—	—		—	—		(4)		—		(4)
Issuance of preferred stock for accrued dividends	13	—			—	—		—	—		—	—		—	—		—	—		98		—		98
Purchase of treasury stock	—	—			—	—		—	—		—	—		—	—		—	(7)		—		—		$	(7)
Balance at March 31, 2020	45	—			325	—		1,720,460	—		131,579	—		5,316,828	1		105,285	(172)		207,509		(188,563)		18,775
Net loss	—	—			—	—		—	—		—	—		—	—		—	—		—		(3,385)		(3,385)
Stock-based compensation	—	—			—	—		—	—		—	—		—	—		—	—		29		—		29


Issuance of stock on vested restricted stock units	—	—			—	—		—	—		—	—		23,334	—		—	—		—		—		—
Forfeited restricted stock					—	—		(17,364)	—		—	—		—	—		—	—		—		—		—
Preferred stock dividends	—	—			—	—		—	—		—	—		—	—		—	—		(4)		—		(4)

Purchase of treasury stock	—	—			—	—		—	—		—	—		—	—		7,998	(9)		—		—		(9)
Issuance of preferred stock for accrued dividends	—	—			—	—		—	—		—	—		—	—		—	—		1		—		1
Balance at June 30, 2020	—	—			325	—		1,703,096	—		131,579	—		5,340,162	1		113,283	(181)		207,535		(191,948)		15,407
Net loss	—	—			—	—		—	—		—	—		—	—		—	—		—		(2,085)		(2,085)
Stock-based compensation	—	—			—	—		—	—		—	—		—	—		—	—		27		—		27

Preferred stock conversion	—	—			(75)	—		—	—		—	—		25,000	—		—	—		—		—		—

Forfeited restricted stock	—	—			—	—		(1,086)	—		—	—		(9,321)	—		—	—		—		—		—
Preferred stock dividends	—	—			—	—		—	—		—	—		—	—		—	—		(4)		—		(4)


Balance as of September 30, 2020	45	$	—		250	$	—	1,702,010	$	—	131,579	$	—	5,355,841	$	1	113,283	$	(181)	$	207,558	$	(194,033)	$	13,345


	Series A-2 Preferred Stock			Series B Preferred Stock			Series C Preferred Stock			Common Stock	Treasury Stock
	Shares	Amount		Shares	Amount		Shares	Amount			Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Total
Balance at December 31, 2018	32	$	—	75	$	—	525	$	—		5,113,726	$	1	132,519	$	(496)	$	184,998	$	(177,673)	$	6,830
Net loss	—	—		—	—		—	—			—	—		—	—		—		(598)		(598)
Stock-based compensation	—	—		—	—		—	—			—	—		—	—		29		—		29

Preferred stock conversion	—	—		(75)	—		(50)	—			43,402	—		—	—		—		—		—
Issuance of stock on vested restricted stock units	—	—		—	—		—	—			16,824	—		—	—		—		—		—
Preferred stock dividends	—	—		—	—		—	—			—	—		—	—		(15)		—		(15)
Purchase of treasury stock	—	—		—	—		—	—			—	—		900	(1)		—		—		(1)
Balance at March 31, 2019	32	—		—	—		475	—			5,173,952	1		133,419	(497)		185,012		(178,271)		6,245
Net loss	—	—		—	—		—	—			—	—		—	—		—		(875)		(875)
Stock-based compensation	—	—		—	—		—	—			—	—		—	—		24		—		24


Issuance of stock on vested restricted stock units	—	—		—	—		—	—			—	—		(75,000)	382		(382)		—		—
Preferred stock dividends	—	—		—	—		—	—			—	—		—	—		(4)		—		(4)

Purchase of treasury stock	—	—		—	—		—	—			—	—		24,000	(34)		—		—		(34)
Balance at June 30, 2019	32	—		—	—		475	—			5,173,952	1		82,419	(149)		184,650		(179,146)		5,356
Net loss	—	—		—	—		—	—			—	—		—	—		—		(640)		(640)
Stock-based compensation	—	—		—	—		—	—			—	—		—	—		14		—		14


Issuance of stock on vested restricted stock units	—	—		—	—		—	—			65,000	—		—	—		—		—		—
Preferred stock dividends	—	—		—	—		—	—			—	—		—	—		(4)		—		(4)
Purchase of treasury stock	—	—		—	—		—	—			—	—		16,000	(16)		—		—		(16)
Balance at September 30, 2019	32	$	—	—	$	—	475	$	—		5,238,952	$	1	98,419	$	(165)	$	184,660	$	(179,786)	$	4,710


	Nine Months Ended September 30,
	2020		2019
Cash flows from operating activities:
Net loss	$	(8,598)	$	(2,113)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,392		461
Bad debt expense	14		12
Amortization of debt discount	53		—
Amortization of right of use asset	834		37
Payments on lease liability	(895)		(43)

Stock-based compensation	89		67
Loss on foreign currency remeasurement	—		1
Change in inventory	—		—
Impairment charges - property and equipment	126		20
Impairment charges - goodwill	541		453
Changes in operating assets and liabilities:
Accounts receivable	322		270
Inventory	689		—
Prepaid expenses and other current assets	240		171
Other assets	(32)		25
Accounts payable	15		202
Accrued expenses and other current liabilities	(184)		(219)
Deferred revenue	72		(12)
Other liabilities	(3)		—
Net cash used in operating activities	(4,325)		(668)
Cash flows from investing activities:
Purchases of property and equipment	(8)		(17)
Net cash used in investing activities	(8)		(17)
Cash flows from financing activities:
Proceeds from PPP Loan	2,417		—
Purchase of treasury stock	(16)		(51)
Net cash provided by (used in) financing activities	2,401		(51)
Decrease in cash and cash equivalents	(1,932)		(736)
Cash at beginning of period	4,602		2,007
Cash at end of period	$	2,670	$	1,271

Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	159	$	—
Non-cash investing and financing activities:
Issuance preferred stock in exchange for accrued dividends	99		—
Accrued preferred stock dividends	12		23
Issuance of common stock for vested restricted stock units	$	—	$	382


	Pro forma and unaudited (as if the Acquisition of Oblong Industries had occurred on January 1, 2019)
	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
	($ in thousands)		($ in thousands)
Revenue
Glowpoint	$	2,370	$	7,403
Oblong Industries	$	4,259	$	12,758
Pro forma total revenue	$	6,629	$	20,161
Net loss
Glowpoint	$	640	$	2,113
Oblong Industries	$	3,756	$	12,782
Pro forma net loss	$	4,396	$	14,895


	As of September 30, 2020						As of December 31, 2019
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Glowpoint
Customer Relationships	$	4,335	$	(4,335)	$	—	$	4,335	$	(4,335)	$	—
Affiliate network	994		(718)		276		994		(666)		328
Trademarks	548		(548)		—		548		(504)		44
Subtotal	$	5,877	$	(5,601)	$	276	$	5,877	$	(5,505)	$	372

Oblong Industries
Developed technology	10,060		(2,016)		8,044		10,060		(504)		9,556
Trade names	2,410		(241)		2,169		2,410		(60)		2,350
Distributor relationships	310		(62)		248		310		(16)		294
Subtotal	$	12,780	$	(2,319)	$	10,461	$	12,780	$	(580)	$	12,200
Total	$	18,657	$	(7,920)	$	10,737	$	18,657	$	(6,085)	$	12,572


Glowpoint
Affiliate network			12 years
Trademarks			8 years

Oblong Industries
Developed technology			5 years
Trade names			10 years
Distributor relationships			5 years


Remainder of 2020	$	597
2021	2,388
2022	2,386
2023	2,378
2024	1,844
Thereafter	1,144
Total	$	10,737


	September 30,		December 31,
	2020		2019

Accrued compensation costs	$	627	$	810



Other accrued expenses and liabilities	858		843

Accrued dividends on Series A-2 Preferred Stock	4		99
Accrued expenses and other liabilities	$	1,489	$	1,752


Future Minimum Principal Payments	SVB Loan		PPP Loan		Total
Remainder of 2020	$	874	$	269	$	1,143
2021	3,498		1,611		5,109
2022	1,237		537		1,774
	$	5,609	$	2,417	$	8,026


	Outstanding and Exerciseable
	Number of Options	Weighted Average Exercise Price
Options outstanding, December 31, 2018	118,003	$	19.90
Exchanged for Oblong Industries stock options	107,845	4.92

Expired	(440)	16.48
Forfeited	(10,063)	23.20
Options outstanding, December 31, 2019	215,345	12.27


Expired	(107,845)	4.92

Options outstanding and exercisable, September 30, 2020	107,500	$	19.64


	Outstanding and Exercisable
Range of price	Number of Options	Weighted Average Remaining Contractual Life (In Years)	Weighted Average Exercise Price
$0.00 – $10.00	2,500	2.70	$	9.00
$10.01 – $20.00	97,500	2.31	19.32
$20.01 – $30.00	2,500	1.68	21.80
$30.01 – $40.00	5,000	1.45	30.20

	107,500	2.26	$	19.64


	Restricted Stock Units	Weighted Average Grant Price
Unvested restricted stock units outstanding, December 31, 2018	503,518	$	1.94
Granted	55,479	1.30
Vested	(114,505)	3.05
Forfeited	(421,158)	1.54
Unvested restricted stock units outstanding, December 31, 2019	23,334	2.20

Vested	(23,334)	2.20

Unvested restricted stock units outstanding, September 30, 2020	—	$	—


Remaining Lease Payments
Remainder of 2020	$	258
2021	968
2022	566
2023	116
Total lease payments	$	1,908
Effect of discounting	(112)
Total lease liability	$	1,796


	Restricted Shares	Weighted Average Grant Date Price
Unvested restricted stock outstanding, December 31, 2018	11,320	$	14.88
Granted	—	—
Vested	(1,372)	15.72
Forfeited	(9,321)	14.70
Unvested restricted stock outstanding, December 31, 2019	627	15.80



Unvested restricted stock outstanding, September 30, 2020	627	$	15.80


	Three Months Ended September 30,		Nine Months Ended September 30,		Three and Nine Months Ended September 30,
	2020		2020		2019

Research and development	$	11	$	39	$	—
Sales and marketing	7		17		—
General and administrative	10		27		—
	$	28	$	83	$	—


	Three Months ended September 30, 2020
	Glowpoint			Oblong Industries			Total
Revenue	$	1,324		$	1,942		$	3,266
Cost of revenues	893			719			1,612
Gross profit	$	431		$	1,223		$	1,654
Gross profit %	33		%	63		%	51		%

Allocated operating expenses	$	1,187		$	1,477		$	2,664
Unallocated operating expenses							980
Total operating expenses	$	1,187		$	1,477		$	3,644

Loss from operations	$	(756)		$	(254)		$	(1,990)
Interest and other expense, net	5			90			95
Net loss	$	(761)		$	(344)		$	(2,085)


	Three Months ended September 30,
	2020		% of Revenue		2019		% of Revenue
Revenue: Glowpoint
Video collaboration services	$	249	8	%	$	1,317	56	%
Network services	1,028		31	%	969		41	%
Professional and other services	47		1	%	84		4	%
Total Glowpoint revenue	$	1,324	40	%	$	2,370	100	%

Revenue: Oblong Industries
Visual collaboration product offerings	$	1,686	52	%	—		—	%
Professional services	—		—	%	—		—	%
Licensing	256		8	%	—		—	%
Total Oblong Industries revenue	$	1,942	60	%	—		—	%
Total revenue	$	3,266	100	%	$	2,370	100	%


	As of September 30, 2020
	Glowpoint		Oblong		Total
Total assets	$	3,370	$	23,872	$	27,242


		September 30, 2020
Assets
	Operating lease, right-of-use asset, net	$	1,665

Liabilities
	Current portion of operating lease liabilities	$	907
	Operating lease liabilities, net of current portion	889
	Total operating lease liabilities	$	1,796


	For the Three Months Ended September 30,
	2020		2019
Cost of Revenue
Glowpoint	$	893	$	1,582
Oblong Industries	719		—
Total cost of revenue	$	1,612	$	1,582


	Nine Months Ended September 30, 2020
	Glowpoint			Oblong Industries			Total
Revenue	$	4,741		$	6,669		$	11,410
Cost of revenues	2,948			2,736			5,684
Gross profit	$	1,793		$	3,933		$	5,726
Gross profit %	38		%	59		%	50		%

Allocated operating expenses	$	3,398		$	7,545		$	10,943
Unallocated operating expenses							3,059
Total operating expenses	$	3,398		$	7,545		$	14,002

Loss from operations	$	(1,605)		$	(3,612)		$	(8,276)
Interest and other expense, net	12			310			322
Net loss	$	1,617		$	3,922		$	(8,598)


	For the Nine Months Ended September 30,
	2020		2019
Cost of Revenue
Glowpoint	$	2,948	$	4,901
Oblong Industries	2,736		—
Total cost of revenue	$	5,684	$	4,901


Exhibit Number						Description
4.1						Form of Common Stock Purchase Warrant (filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 26, 2020, and incorporated herein by reference).
10.1						Form of Securities Purchase Agreement (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 26, 2020, and incorporated herein by reference).
10.2						Agreement, dated October 20, 2020, by and among Oblong, Inc., Oblong Industries, Inc., GP Communications LLC, and Silicon Valley Bank (filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 26, 2020, and incorporated herein by reference).
31.1*						Rule 13a—14(a)/15d—14(a) Certification of the Chief Executive Officer.
31.2*						Rule 13a—14(a)/15d—14(a) Certification of the Chief Financial Officer.
32.1**						Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer.
101.INS						XBRL Instance Document
101.SCH						XBRL Taxonomy Extension Schema
101.CAL						XBRL Taxonomy Extension Calculation Linkbase
101.DEF						XBRL Taxonomy Extension Definition Linkbase
101.LAB						XBRL Taxonomy Extension Label Linkbase
101.PRE						XBRL Taxonomy Extension Presentation Linkbase


	OBLONG, INC.

November 16, 2020	By:	/s/ Peter Holst
		Peter Holst
		Chief Executive Officer
		(Principal Executive Officer)


November 16, 2020	By:	/s/ David Clark
		David Clark
		Chief Financial Officer
		(Principal Financial and Accounting Officer)