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Credit Risk and Concentrations

9 Months Ended

Sep. 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 nine months ended September 30, 2022, and 2021 (in thousands of dollars):

	For the Nine Months Ended September 30, 2022					For the Period April 15, 2021, through September 30, 2021
	$		%			$		%
Customer A		7,100		60	%		607		13	%
Customer B		2,834		24	%		2,499		55	%

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 September 30, 2022, and 2021 (in thousands of dollars):

	For the Three Months Ended September 30, 2022					For the three months ended September 30, 2021
	$		%			$		%
Customer A		1,335		38	%		-		-
Customer B		1,157		33	%		1,254		63	%
Customer C		-		-			278		14	%

As of September 30, 2022, Customer B represented approximately 60% of total accounts receivable. Two other customer represents approximately 36% of total accounts receivable. As of September 30, 2021, Customers B and C represented approximately 39% and 40% of total accounts receivable, respectively.

For the nine months ended September 30, 2022, two vendors represented approximately 69% and18% of total purchases. Purchases from these vendors during the nine months ended September 30, 2022, were $6.9 million and $1.8 million respectively. In addition, the Company recorded approximately $1.5 million of settlement gains during the nine months ended September 30, 2022. Please see Note 12 – Contractual Commitments for discussion on the settlement gain.

For the three months ended September 30, 2022, four vendors represented approximately 40%, 32%, 11% and 10% of total purchases. Purchases from these vendors during the three months ended September 30, 2022, were $1.2 million $0.9 million, $0.3 million, and $0.3 million respectively.

For the period April 15, 2021, through September 30, 2021, three vendors represented approximately 55%, 17% and 10% of total purchases. Purchases from these vendors during the period April 15, 2021, through September 30, 2021, were $1.7 million, $0.5 million and, $0.3 million respectively. For the three months ended September 30, 2021, two vendors represented approximately 57% and 10% of total purchases. Purchases from these vendors during the three months ended September 30, 2021, were $0.9 million, $0.1 million respectively.

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.

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. As of September 15, 2022, Ethereum switched from a proof-of-work model to a proof-of stake model. The Company is no longer be able to mine Ethereum.