TaoWeave, Inc 10-Q for FY2020 Q2

TaoWeave, Inc. (TWAV)

10-Q 2020-08-14 For: 2020-06-30

Added on April 06, 2026

About this 10-Q

TaoWeave, Inc filed this 10-Q on August 14, 2020, covering the quarter ended June 30, 2020 (FY2020 Q2).

Headline figures

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

Revenue: $2.82M; up 15.5% from $2.44M a year earlier
Net loss: $3.39M; compared with a net loss of $875K 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 June 30, 2020 (unaudited) and December 31, 2019	1
	Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019	3
	Unaudited Condensed Consolidated Statement of Stockholders’ Equity for the three and six months ended June 30, 2020 and 2019	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 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


	June 30, 2020		December 31, 2019
	(Unaudited)
ASSETS
Current assets:
Cash	$	4,141	$	4,602
Accounts receivable, net	1,360		2,543
Inventory	1,344		1,816
Prepaid expenses and other current assets	919		965
Total current assets	7,764		9,926
Property and equipment, net	910		1,316
Goodwill	7,366		7,907
Intangibles, net	11,348		12,572
Operating lease - right of use asset, net	1,806		3,117
Other assets	99		71
Total assets	$	29,293	$	34,909
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt, net of discount	$	3,665	$	2,664
Accounts payable	643		647
Accrued expenses and other current liabilities	1,174		1,752
Deferred revenue	2,139		1,901
Current portion of operating lease liabilities	898		1,294



Total current liabilities	8,519		8,258
Long-term liabilities:

Long-term debt, net of current portion and net of discount	4,304		2,843
Operating lease liabilities, net of current portion	1,063		2,020
Other long-term liabilities	—		3
Total long-term liabilities	5,367		4,866
Total liabilities	13,886		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 June 30, 2020 and December 31, 2019, respectively and liquidation preference of $336 at June 30, 2020	—		—

Preferred stock Series C, convertible; $.0001 par value; $1,000 stated value; 1,750 shares authorized, 325 and 475 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively and liquidation preference of $325 at June 30, 2020	—		—
Preferred stock Series D, convertible; $.0001 par value; $28.50 stated value; 1,750,000 shares authorized, 1,703,096 and 1,734,901 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively and liquidation preference of $48,538 at June 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 June 30, 2020 and December 31, 2019 and liquidation preference of $3,750 at June 30, 2020	—		—
Common stock, $.0001 par value; 150,000,000 shares authorized; 5,340,162 shares issued and 5,226,879 outstanding at June 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 at June 30, 2020 and December 31, 2019, respectively	(181)		(165)
Additional paid-in capital	207,535		207,383
Accumulated deficit	(191,948)		(185,434)

Total stockholders’ equity	15,407		21,785
Total liabilities and stockholders’ equity	$	29,293	$	34,909


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Revenue	$	2,816	$	2,439	$	8,144	$	5,033
Cost of revenue (exclusive of depreciation and amortization)	1,683		1,644		4,072		3,319
Gross profit	1,133		795		4,072		1,714

Operating expenses:
Research and development	988		249		2,315		462
Sales and marketing	834		40		2,040		73
General and administrative	1,815		770		3,842		1,882
Impairment charges	—		453		550		453
Depreciation and amortization	796		157		1,612		316
Total operating expenses	4,433		1,669		10,359		3,186
Loss from operations	(3,300)		(874)		(6,287)		(1,472)
Interest and other expense, net	76		1		220		1

Foreign exchange loss	9		—		7		—
Interest and other expense, net	85		1		227		1


Net loss	(3,385)		(875)		(6,514)		(1,473)
Preferred stock dividends	4		4		8		19
Net loss attributable to common stockholders	$	(3,389)	$	(879)	$	(6,522)	$	(1,492)

Net loss attributable to common stockholders per share:
Basic and diluted net loss per share	$	(0.65)	$	(0.17)	$	(1.25)	$	(0.29)


Weighted-average number of shares of common stock:
Basic and diluted	5,240		5,163		5,222		5,134


	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	45	$	—	325	$	—	1,703,096	$	—	131,579	$	—	5,340,162	$	1	113,283	$	(181)	$	207,535	$	(191,948)	$	15,407


	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)	382		(382)		—		—
Preferred stock dividends	—	—		—	—		—	—			—	—		—	—		(4)		—		(4)

Purchase of treasury stock	—	—		—	—		—	—			—	—		24	(34)		—		—		(34)
Balance at June 30, 2019	32	$	—	—	$	—	475	$	—		5,173,952	$	1	133,368	$	(149)	$	184,650	$	(179,146)	$	5,356


	Six Months Ended June 30,
	2020		2019
Cash flows from operating activities:
Net loss	$	(6,514)	$	(1,473)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,612		316
Bad debt expense	34		9
Amortization of debt discount	45		—
Amortization of right of use asset	595		—
Payments on lease liability	(626)		—
Loss on disposal of equipment	15		—
Stock-based compensation	61		53
Loss on foreign currency remeasurement	(12)		—
Impairment charges	550		453
Changes in operating assets and liabilities:
Accounts receivable	1,149		(112)
Inventory	473		—
Prepaid expenses and other current assets	47		73
Other assets	(28)		50
Accounts payable	(3)		86
Accrued expenses and other current liabilities	(490)		(423)
Deferred revenue	238		—
Other liabilities	(3)		—
Net cash used in operating activities	(2,857)		(968)
Cash flows from investing activities:
Purchases of property and equipment	(5)		(17)
Net cash used in investing activities	(5)		(17)
Cash flows from financing activities:
Proceeds from PPP Loan	2,417		—
Purchase of treasury stock	(16)		(35)
Net cash provided by (used in) financing activities	2,401		(35)
Decrease in cash and cash equivalents	(461)		(1,020)
Cash at beginning of period	4,602		2,007
Cash at end of period	$	4,141	$	987

Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	96	$	—
Non-cash investing and financing activities:
Issue preferred stock in exchange for accrued dividends	99		—
Accrue preferred stock dividends	8		19
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 June 30, 2019		Six Months Ended June 30, 2019
	($ in thousands)		($ in thousands)
Revenue
Glowpoint	$	2,439	$	5,033
Oblong Industries	$	3,781	$	8,499
Pro forma total revenue	$	6,220	$	13,532
Net loss
Glowpoint	$	875	$	1,473
Oblong Industries	$	4,854	$	7,866
Pro forma net loss	$	5,729	$	9,339


	As of June 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		(700)		294		994		(666)		328
Trademarks	548		(533)		15		548		(504)		44
Subtotal	$	5,877	$	(5,568)	$	309	$	5,877	$	(5,505)	$	372

Oblong Industries
Developed technology	10,060		(1,513)		8,547		10,060		(504)		9,556
Trade names	2,410		(181)		2,229		2,410		(60)		2,350
Distributor relationships	310		(47)		263		310		(16)		294
Subtotal	$	12,780	$	(1,741)	$	11,039	$	12,780	$	(580)	$	12,200
Total	$	18,657	$	(7,309)	$	11,348	$	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	$	1,209
2021	2,354
2022	2,351
2023	2,344
2024	1,827
Thereafter	1,263
Total	$	11,348


	June 30,		December 31,
	2020		2019

Accrued compensation costs	$	470	$	810



Other accrued expenses and liabilities	696		843

Accrued dividends on Series A-2 Preferred Stock	8		99
Accrued expenses and other liabilities	$	1,174	$	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




Options outstanding and exercisable, June 30, 2020	215,345	$	12.27


	Outstanding and Exercisable
Range of price	Number of Options	Weighted Average Remaining Contractual Life (In Years)	Weighted Average Exercise Price
$0.00 – $10.00	110,345	0.40	$	5.01
$10.01 – $20.00	97,500	2.64	19.32
$20.01 – $30.00	2,500	2.02	21.80
$30.01 – $40.00	5,000	1.78	30.20

	215,345	1.46	$	12.27


	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, June 30, 2020	627	$	15.80


	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, June 30, 2020	—	$	—


	Three Months Ended June 30,		Six Months Ended June 30,		Three and Six Months Ended June 30,
	2020		2020		2019

Research and development	$	14	$	28	$	—
Sales and marketing	6		10		—
General and administrative	9		17		—
	$	29	$	55	$	—


	Three Months ended June 30, 2020
	Glowpoint			Oblong Industries			Total
Revenue	$	1,373		$	1,443		$	2,816
Cost of revenues	898			785			1,683
Gross profit	$	475		$	658		$	1,133
Gross profit %	35		%	46		%	40		%

Allocated operating expenses	$	1,063		$	2,574		$	3,637
Unallocated operating expenses	—			—			796
Total operating expenses	$	1,063		$	2,574		$	4,433

Loss from operations	$	(588)		$	(1,916)		$	(3,300)
Interest and other expense, net	(7)			(78)			(85)
Net loss	$	(595)		$	(1,994)		$	(3,385)


	Six Months Ended June 30, 2020
	Glowpoint			Oblong Industries			Total
Revenue	$	3,417		$	4,727		$	8,144
Cost of revenues	2,055			2,017			4,072
Gross profit	$	1,362		$	2,710		$	4,072
Gross profit %	40		%	57		%	50		%

Allocated operating expenses	$	2,212		$	5,985		$	8,197
Unallocated operating expenses	—			—			2,162
Total operating expenses	$	2,212		$	5,985		$	10,359

Loss from operations	$	(850)		$	(3,275)		$	(6,287)
Interest and other expense, net	(7)			(220)			(227)
Net loss	$	(857)		$	(3,495)		$	(6,514)


	Three Months ended June 30,
	2020		% of Revenue		2019		% of Revenue
Revenue: Glowpoint
Video collaboration services	$	553	20	%	$	1,452	60	%
Network services	766		27	%	945		39	%
Professional and other services	54		2	%	42		2	%
Total Glowpoint revenue	$	1,373	49	%	$	2,439	100	%

Revenue: Oblong Industries
Visual collaboration product offerings	$	923	33	%	—		—	%
Professional services	228		8	%	—		—	%
Licensing	292		10	%	—		—	%
Total Oblong Industries revenue	$	1,443	51	%	—		—	%
Total revenue	$	2,816	100	%	$	2,439	100	%


	As of June 30, 2020
	Glowpoint		Oblong		Total
Total assets	$	5,235	$	24,058	$	29,293


		June 30, 2020
Assets
	Operating lease, right-of-use asset, net	$	1,806

Liabilities
	Current portion of operating lease liabilities	$	898
	Operating lease liabilities, net of current portion	1,063
	Total operating lease liabilities	$	1,961


Remaining Lease Payments
Remainder of 2020	$	539
2021	891
2022	556
2023	116
Total lease payments	$	2,102
Effect of discounting	(141)
Total lease liability	$	1,961


	For the Three Months Ended June 30,
	2020		2019
Cost of Revenue
Glowpoint	$	898	$	1,644
Oblong Industries	785		—
Total cost of revenue	$	1,683	$	1,644


	For the Six Months Ended June 30,
	2020		2019
Cost of Revenue
Glowpoint	$	2,055	$	3,319
Oblong Industries	2,017		—
Total cost of revenue	$	4,072	$	3,319


Exhibit Number						Description
10.1						Promissory Note, dated April 10, 2020, by the Registrant in favor of MidFirst Bank (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 16, 2020, and incorporated herein by reference).
10.2						Default Waiver and First Amendment to Second Amended and Restated Loan and Security Agreement, dated June 26, 2020, by and among by and among Oblong, Inc., Oblong Industries, Inc., and GP Communications, LLC, as borrowers, and Silicon Valley Bank as lender (filed as Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q filed with the SEC on June 29, 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.

August 14, 2020	By:	/s/ Peter Holst
		Peter Holst
		Chief Executive Officer
		(Principal Executive Officer)


August 14, 2020	By:	/s/ David Clark
		David Clark
		Chief Financial Officer
		(Principal Financial and Accounting Officer)