TaoWeave, Inc. Segments Disclosure

Note 9 - Segment Reporting

 

The Company currently operates in two segments for purposes of segment reporting: (1) “Collaboration Products,” which represents the Oblong Industries business surrounding our Mezzanine™ product offerings, and (2) “Managed Services,” which represents the Oblong (formerly Glowpoint), business surrounding managed services for network solutions and video collaboration.

 

In 2024, the Company adopted ASU 2023-07. ASU 2023-07 created certain additional disclosure requirements, including, among other requirements, disclosure of the Company’s Significant Segment Expenses (“SSEs”) regularly provided to the Company’s Chief Operating Decision Maker (“CODM”) included within each reported measure of segment profit or loss, a required disclosure for other segment items and a narrative description of such items, a disclosure of the title and the position of the CODM and a narrative disclosure describing how the CODM uses the reported segment profit or loss measures to assess segment performance and allocate resources.

 

The CODM for both segments for each of the years ended December 31, 2024, and 2023 was Pete Holst, the Company's President and Chief Executive Officer. As part of the adoption of ASU 2023-07, management reviewed the information provided to the CODM and updated the presentation of such information, including SSEs, to better align with the requirements of ASU 2023-07. Certain prior period segment information has been recast in order to conform with current-period presentation requirements, including the allocation methodology of bad debt expense, labor and labor-related costs, and certain other segment items to segments. 

 

Certain information concerning the Company’s segments for the years ended December 31, 2024, and 2023 is presented in the following tables (in thousands):

 

		For the Years Ended December 31,
		2024				2023				% Change
Revenue
Managed Services		$	2,062			$	2,518				(18	)%
Collaboration Products			316			$	1,292				(76	)%
Consolidated		$	2,378			$	3,810				(38	)%
Cost of revenues
Managed Services		$	1,337			$	1,671				(20	)%
Collaboration Products			710				1,228				(42	)%
Consolidated		$	2,047			$	2,899				(29	)%
Gross Margin
Managed Services			35	%			34	%			5	%
Collaboration Products			(125	)%			5	%			(2,617	)%
Consolidated			14	%			24	%			(42	)%
Operating expenses
Managed Services (1)			—				3				(100	)%
Collaboration Products (2)			341				486				(30	)%
Corporate (3)			4,192				4,917				(15	)%
Consolidated		$	4,533			$	5,406				(16	)%
Other income (expense), net (4)
Managed Services		$	(1	)		$	(10	)			90	%
Collaboration Products			16				(18	)			189	%
Corporate			154				166				(7	)%
Consolidated		$	169			$	138				22	%
Net loss before taxes		$	(4,033	)		$	(4,357	)			(7	)%
Income tax expense		$	10			$	27				(63	)%
Net loss		$	(4,043	)		$	(4,384	)			(8	)%
		As of December 31,
		2024				2023				% Change
Total assets
Managed Services		$	422			$	613				(31	)%
Collaboration Products			285				822				(65	)%
Corporate			4,568				5,490				(17	)%
Consolidated		$	5,275			$	6,925				(24	)%

 

 

 

(1)	There were no operating expenses related to our Managed Service segment in 2024.  In 2023, the operating expenses for the Managed Services were primarily related to a loss on the sale of property.
(2)	Operating expenses related to our Collaboration Products Segment include research and development, sales and marketing, bad debt, impairment, and other miscellaneous expenses. In 2023, operating expenses also included a bad debt recovery of $52,000.
(3)	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.
(4)	Other income (expense) for our segments includes interest expense and non-operating income. Corporate other income includes interest income on our cash and cash equivalents.
(5)	Managed Services assets include cash equivalents, accounts receivable, and prepaid expenses, which are primarily current.
(6)	Collaboration Products' assets include cash equivalents, accounts receivable, prepaid expenses, and inventory, which are primarily current.
(7)	Unallocated assets in Corporate include cash, prepaid expenses, and accruals that are corporate in nature and don't apply to a single segment.

 

The Company’s SSEs for each segment include direct labor costs and segment-based management expenses (collectively, “labor and labor related”), costs to purchase, store, and ship inventory, and inventory impairments (inventory and inventory related), circuit and network cost of revenue, other non-inventory cost of revenue, research and development costs, and bad debt expense, as these are specific costs regularly provided to the CODM and used to evaluate segment performance. For the year ended December 31, 2023, we also included amortization and impairment of intangible assets, and insurance proceeds received from a casualty gain. Other segment items include expenses recorded within cost of revenue and operating expenses, which are not regularly provided to the CODM. The CODM evaluates segment profit each period against historical results, factoring in macroeconomic factors such as the cost of labor and supplies, to assess segment performance.

 

		Year Ended December 31, 2024
		Managed Services				Collaboration Products				Total
Revenue
Network services		$	1,990			$	—			$	1,990
Video Collaboration			56				316				372
Professional and other services			16				—				16
Total revenue			2,062				316				2,378
Significant Segment Expenses
Labor and labor-related (1)			132				596				728
Inventory and inventory-related			—				273				273
Circuit and network cost of revenue			1,202				—				1,202
Other non-inventory cost of revenue			4				19				23
Research and development			—				145				145
Bad debt expense			—				2				2
Other segment items (2)			—				—				—
Segment profit (loss)		$	724			$	(719	)		$	5
Segment margin			35	%			(228	)%
Unallocated expenses (income)
Corporate expenses (3)										$	4,127
Stock compensation											62
Interest income											(151	)
Loss before income tax expense										$	(4,033	)

 

 

		Year Ended December 31, 2023
		Managed Services				Collaboration Products				Total
Revenue
Network services		$	2,301			$	—			$	2,301
Video collaboration			183				1,291				1,474
Professional and other services			34				1				35
Total revenue			2,518				1,292				3,810
Significant Segment Expenses
Labor and labor-related (1)			125				863				988
Inventory and inventory-related			—				500				500
Circuit and network cost of revenue			1,529								1,529
Other non-inventory cost of revenue			14				164				178
Bad debt recovery			—				(52	)			(52	)
Amortization expense			—				345				345
Impairment charges			3				259				262
Casualty gain			—				(400	)			(400	)
Other segment items (2)			13				53				66
Segment profit (loss)		$	834			$	(440	)		$	394
Segment margin			33	%			(34	)%
Unallocated expenses (income) (3)
Corporate expenses										$	4,406
Stock compensation											504
Interest income											(159	)
Loss before income tax expense										$	(4,357	)

 

(1)	Includes direct labor costs (including sales and marketing costs), employment taxes, employee benefits, worker's compensation, and office expenses. For the year ended December 31, 2024, this also includes $46,000 of severance costs.
(2)	Other segment items include other income and expenses, net, interest expense, certain professional services, and miscellaneous taxes and fees.
(3)	Represents general and administrative costs, less the amounts allocated to the segments for labor and benefits, general liability insurance, professional services, property taxes, and interest income. For the year ended December 31, 2024, this also includes severance costs of $59,000 and franchise taxes of $176,000.

 

 

 

 

For the years ended December 31, 2024, and 2023, no material revenue was attributable to any individual foreign country. Approximately 1% of foreign revenue is billed in foreign currency, and foreign currency gains and losses are not material. Revenue by geographic area is allocated as follows (in thousands):

 

		Year Ended December 31,
		2024				2023
Domestic		$	913			$	1,843
Foreign			1,465				1,967
		$	2,378			$	3,810

 

The Company considers a significant customer to be one that comprises more than 10% of its consolidated revenues or accounts receivable. Losing or reducing sales or anticipated sales to our most significant customer or several of our smaller customers could have a material adverse effect on our business, financial condition, and results of operations.

 

Concentration of consolidated revenues was as follows:

 

			Year Ended December 31, 2024
			2024				2023
	Segment		% of Revenue				% of Revenue
Customer A	Managed Services			84.9	%			55.9	%

 

 

Concentration of consolidated accounts receivable was as follows:

 

			As of December 31,
			2024				2023
	Segment		% of Accounts Receivable				% of Accounts Receivable
Customer A	Managed Services			82.6	%			38.2	%
Customer B	Collaboration Products			0.0	%			46.8	%