XML 25 R14.htm IDEA: XBRL DOCUMENT

Credit Risk and Concentrations

6 Months Ended

Jun. 30, 2022

Note 7 — Credit Risk and Concentrations

Financial instruments that subject the Company to credit risk consist principally of trade accounts receivable and cash. The Company performs certain credit evaluation procedures and does not require collateral for financial instruments subject to credit risk. The Company believes that credit risk is limited because the Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk of its customers, establishes an allowance for uncollectible accounts and, consequently, believes that its accounts receivable credit risk exposure beyond such allowances is limited.

The Company maintains cash deposits with financial institutions, which, from time to time, may exceed federally insured limits. The Company has not experienced any losses and believes it is not exposed to any significant credit risk from cash.

The following table sets forth the percentages of sales derived by the Company from those customers that accounted for at least 10% of sales during the six months ended June 30, 2022, and 2021 (in thousands of dollars):

	For the Six Months Ended June 30, 2022					For the Six Months Ended June 30, 2021
	$		%			$		%
Customer A		1,677		20	%		1,254		49	%
Customer B		5,765		69	%		492		19	%

The following table sets forth the percentages of sales derived by the Company from those customers that accounted for at least 10% of sales during the three months ended June 30, 2022, and 2021 (in thousands of dollars):

	For the Three Months Ended June 30, 2022					For the Three Months Ended June 30, 2021
	$		%			$		%
Customer A		507		15	%		1,254		49	%
Customer B		2,181		65	%		492		19	%
Customer C		--		--			302		12	%

As of June 30, 2022, Customers A and B represented approximately 55% of total accounts receivable. Three other customer represents approximately 45% of total accounts receivable. As of June 30, 2021, Customers A and B represented approximately 56% and 12% of total accounts receivable, respectively.

For the six months ended June 30, 2022, two vendors represented approximately 54% and 34% of total purchases. Purchases from these vendors during the six months ended June 30, 2022, were $8.1 million and $5.1 million, respectively. For the three months ended June 30, 2022, two vendors represented approximately 65% and 20% of total purchases. Purchases from these vendors during the three months ended June 30, 2022, were $1.9 million and $0.6 million, respectively.

For the six and three months ended June 30, 2021, four SGS vendors represented approximately 53%, 35%, 28% and 11% of total purchases for SGS products. Purchases from these vendors during the six and three months ended June 30, 2021, were $0.9 million, $0.6 million, $0.4 million and $0.2 million, respectively.

Mining equipment purchased from one TTM vendor during the six months ended June 30, 2021, was $14.2 million. Of the $14.2 million, in consideration exchanged $12 million was paid in Common Stock of the Company and the balance of $2.2 million was settled through payment in digital assets.

Geographic and Technology Concentration

The Company had geographic diversity between April 1, 2021, and June 30, 2022, using a colocation datacenter in North Carolina. Subsequent to June 30, 2022, the Company had consolidated its mining operations exclusively in New York. Any legislation that restricts or bans the mining of proof-of-work related digital asset mining in New York State would have a negative impact on the Company’s ability to operate and generate revenues.

Further, the Company had concentrated exposure to the Ethereum blockchain infrastructure through its mining operations during the periods presented. There is a possibility of digital asset mining algorithms transitioning to proof-of-stake validation and other mining related risks, which could make us less competitive and ultimately adversely affect our business and our ability to generate revenues. When and if Ethereum switches to proof-of stake the Company’s GPUs will no longer be able to mine Ethereum. Additionally, on August 5, 2021, the London Hard Fork protocol went into effect which includes changes in Ethereum’s handling of transaction fees. These changes had an impact on the Company’s future potential Ethereum revenue stream due to less Ethereum being distributed per mined block, if not offset by an increase in the value of ETH and/or additional transaction tipping, the process by which a user can pay an additional amount to ensure a transaction is processed very quickly. The Company saw a financial impact during the first half of 2022. While the Company doubled mining capacity in the first half of 2021, the difficulty to mine increased. This resulted in a steady decrease of average mining rewards, along with the market price of Ethereum, particularly during the second half of 2021 and into the first half of 2022.