| SEGMENTS AND CONCENTRATIONS |
NOTE 6 SEGMENTS AND CONCENTRATIONS
As a result of our new digital
asset treasury strategy and discontinuing the OEM segment, the Company now has two reportable segments: digital assets and design. See
Note 2 for more information on the composition and accounting policies of our reportable segments. The results of the OEM segment were
classified as discontinued operations as discussed in Note 3. The prior year segment disclosures have been reformatted from what was previously
disclosed to conform to the current year presentation.
The Company’s Chief
Executive Officer serves as the Chief Operating Decision Maker (“CODM”) and evaluates the financial performance of the business
and makes resource allocation decisions on the basis of revenue, gross profit and net loss from continuing operations before income taxes
for each reportable segment.
The tables below represent
the primary measure of segment performance evaluated by the CODM, as well as additional measures that are regularly provided to the CODM
on a segment level.
| Schedule of segment performance | |
| | | |
| | | |
| | | |
| | |
| | |
Digital Assets Segment |
| | |
For the Three Months Ended June 30, | |
For the Nine Months Ended June 30, |
| | |
2026 | |
2025 | |
2026 | |
2025 |
| Revenues | |
$ | 7,345,000 | | |
$ | – | | |
$ | 34,060,000 | | |
$ | – | |
| Cost of revenues | |
| 1,368,000 | | |
| – | | |
| 3,584,000 | | |
| – | |
| Gross profit | |
| 5,977,000 | | |
| – | | |
| 30,476,000 | | |
| – | |
| Asset management fees (a) | |
| 820,000 | | |
| – | | |
| 3,666,000 | | |
| – | |
| Impairment of digital assets | |
| 15,222,000 | | |
| – | | |
| 133,359,000 | | |
| – | |
| Loss on digital assets | |
| 49,753,000 | | |
| – | | |
| 811,672,000 | | |
| – | |
| Derivative loss, net | |
| 4,561,000 | | |
| – | | |
| 4,292,000 | | |
| – | |
| Interest income | |
| (37,000 | ) | |
| – | | |
| (631,000 | ) | |
| – | |
| Loss from continuing operations before income taxes | |
$ | (64,342,000 | ) | |
$ | – | | |
$ | (921,882,000 | ) | |
$ | – | |
| | |
| | | |
| | | |
| | | |
| | |
| |
Design Segment |
| |
For the Three Months Ended June
30, | |
For the Nine Months Ended June 30, |
| | |
2026 | |
2025 | |
2026 | |
2025 |
| Revenues | |
$ | 3,435,000 | | |
$ | 2,495,000 | | |
$ | 11,116,000 | | |
$ | 10,242,000 | |
| Cost of revenues | |
| 2,687,000 | | |
| 3,086,000 | | |
| 8,928,000 | | |
| 9,820,000 | |
| Depreciation expense (a) | |
| 21,000 | | |
| 30,000 | | |
| 39,000 | | |
| 89,000 | |
| Gross profit | |
| 727,000 | | |
| (621,000 | ) | |
| 2,149,000 | | |
| 333,000 | |
| Sales and marketing personnel costs | |
| 70,000 | | |
| 108,000 | | |
| 154,000 | | |
| 321,000 | |
| Sales promotion and marketing expenses | |
| 157,000 | | |
| 32,000 | | |
| 339,000 | | |
| 127,000 | |
| General and administrative personnel costs | |
| 327,000 | | |
| 450,000 | | |
| 954,000 | | |
| 1,591,000 | |
| Occupancy costs | |
| 104,000 | | |
| 167,000 | | |
| 439,000 | | |
| 502,000 | |
| Amortization expense (a) | |
| – | | |
| 53,000 | | |
| – | | |
| 160,000 | |
| Impairment of goodwill and intangible assets | |
| – | | |
| – | | |
| – | | |
| 225,000 | |
| Interest income | |
| (5,000 | ) | |
| (7,000 | ) | |
| (8,000 | ) | |
| (35,000 | ) |
| Other segment expenses (b) | |
| 116,000 | | |
| 128,000 | | |
| 386,000 | | |
| 469,000 | |
| Loss from continuing operations before income taxes | |
$ | (42,000 | ) | |
$ | (1,552,000 | ) | |
$ | (115,000 | ) | |
$ | (3,027,000 | ) |
| (a) |
Depreciation expense, amortization expense and asset management fees are not regularly provided to the CODM, however they are components
of loss from continuing operations before income taxes and identified as a "specific profit or loss" item and therefore disclosed
separately in accordance with the related accounting guidance. |
| (b) |
Other segment expenses include insurance expense, office, software and computer related expenses, bad debt expense, bank and payroll
processing fees, and various other general and administrative expenses. |
The following table is a
reconciliation of segment income/loss from continuing operations before taxes to our condensed consolidated loss from continuing operations
before taxes.
| Schedule of reconciliation
of segment loss | |
| | | |
| | | |
| | | |
| | |
| | |
For the Three Months Ended June
30, | |
For the Nine Months Ended June 30, |
| | |
2026 | |
2025 | |
2026 | |
2025 |
| Digital asset segment loss from continuing operations before taxes | |
$ | ) | |
$ | | |
$ | ) | |
$ | |
| Design segment loss from continuing operations before taxes | |
| ) | |
| ) | |
| ) | |
| ) |
| Corporate and other non-segment expenses | |
| (6,308,000 | ) | |
| (852,000 | ) | |
| (15,615,000 | ) | |
| (2,097,000 | ) |
| Consolidated loss from continuing operations before taxes | |
$ | ) | |
$ | ) | |
$ | ) | |
$ | ) |
Segment assets are shown
in the table below and consist of digital assets, derivative assets and accounts receivable.
| Schedule of segment assets | |
| | | |
| | |
| | |
June 30 | |
September 30, |
| | |
2026 | |
2025 |
| Digital assets segment | |
$ | 581,644,000 | | |
$ | 1,430,486,000 | |
| Design segment | |
| 1,917,000 | | |
| 3,380,000 | |
| Total segment assets | |
| 583,561,000 | | |
| 1,433,866,000 | |
| General corporate assets | |
| 18,974,000 | | |
| 41,076,000 | |
| Total assets | |
$ | 602,535,000 | | |
$ | 1,474,942,000 | |
No customers represented
more than 10% of the Company’s consolidated net revenues for the three and nine months ended June 30, 2026. Revenues from two design
customers represented 32.4% of the Company’s consolidated net revenues for the three months ended June 30, 2025. Revenues from three
design customers represented 42.5% of the Company’s consolidated net revenues for the nine months ended June 30, 2025.
Accounts receivable from
two design segment customers represented 59.1% of the Company’s consolidated accounts receivable at June 30, 2026. Accounts receivable
from three design segment customers represented 49.4% of the Company’s consolidated accounts receivable at September 30, 2025.
There was no concentration
of revenue or accounts receivable with any customers in our digital assets segment.
|