v3.26.1
Note 9 - Segment Reporting
 3 Months Ended
Mar. 31, 2026
Notes to Financial Statements  
Segment Reporting [Text Block]

Note 9 - Segment Reporting

 

The Company currently operates in three segments: (1) "Digital Assets", which represents the business surrounding the Company's treasury activity with Bittensor, (2) “Managed Services”, which represents the business surrounding managed services for video collaboration and network solutions, and (3) “Collaboration Products”, which represents the business surrounding the Company's Mezzanine™ product offerings. 

 

For the three months ended March 31, 2026, and 2025, the CODM for the three and two segments, respectively, was Pete Holst, the Company's President and Chief Executive Officer. Management reviewed the information provided to the CODM and updated the presentation of that information, including Significant Segment Expenses ("SSEs").

 

Certain information concerning the Company’s segments for the three months ended March 31, 2026, and 2025, is presented in the following tables (in thousands):

 

 

  

Three Months Ended March 31, 2026

 
  

2026

  

2025

  

% Change

 

Revenue

            

Digital Assets

 $86  $—   100%

Managed Services

  422   508   (17)%

Collaboration Products

  199   114   75%

Consolidated

  707   622   14%
             

Cost of revenues

            

Digital Assets

  6   —   100%

Managed Services

  223   371   (40)%

Collaboration Products

  8   2   300%

Consolidated

  237   373   (36)%
             

Gross Margin

            

Digital Assets

  80   —   100%

Managed Services

  199   137   45%

Collaboration Products

  191   112   71%

Consolidated

  470   249   89%
             

Operating expenses

            

Digital Assets (1)

  99   —   100%

Collaboration Products (2)

  7   (8)  (188)%

Corporate (3)

  923   948   (3)%

Consolidated

  1,029   940   9%
             

Other income (expense), net

            

Digital Assets (4)

  2,250   —   100%

Managed Services (5)

  —   (1)  (100)%

Corporate (6)

  6   27   (78)%

Consolidated

  2,256   26   8577%

Net income (loss) before taxes

  1,697   (665)  (355)%

Income tax expense

  —   7   100%

Net income (loss)

 $1,697  $(672)  (353)%

 

 (1)Operating expenses related to the Company's Digital Assets segment include cash and stock-based advisory fees.
 (2)

Operating expenses related to the Company's Collaboration Products Segment include sales and marketing, and other miscellaneous expenses.

 (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 the Company's Digital Assets segment includes unrealized gains and (losses) from revaluations of the Company's digital assets. The three months ended March 31, 2026 also includes realized gains on the sale of digital assets.
 (5)Other expense for the Company's Managed Services segment includes interest expense.
 (6)Unallocated other income in Corporate is primarily related to interest income.

 

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 recovery, as these are specific costs regularly provided to the CODM and used to evaluate segment performance. 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.

 

  

Three Months Ended March 31, 2026

 
  

Digital Assets

  

Managed Services

  

Collaboration Products

  

Total

 
                 

Revenue

                

Digital Assets

 $86  $—  $—  $86 

Network Services

  —   407   —   407 

Video Collaboration

  —   13   199   212 

Professional and other services

  —   2   —   2 

Total revenue

  86   422   199   707 
                 

Significant Segment Expenses

                

Labor and labor-related (1)

  —   73   7   80 

Cash digital asset transaction fees

  6   —   —   6 

Stock-based expense

  84   —   —   84 

Circuit and network cost of revenue

  —   150   —   150 

Advisory fees

  15   —   —   15 

Unrealized gain on digital asset revaluation

  (2,198)  —   —   (2,198)

Realized gain on disposal of digital assets

  (52)  —   —   (52)

Other segment items (2)

  —   —   8   8 

Segment net profit

 $2,231  $199  $184  $2,614 

Segment net profit margin %

  2594%  47%  92%   
                 

Unallocated (income) expense

                

Corporate expenses (3)

              923 

Interest income

              (6)

Income before income tax expense

             $1,697 

 

 

  

For the Three Months Ended March 31, 2025

 
  

Managed Services

  

Collaboration Products

  

Total

 
             

Revenue

            

Network Services

 $500  $-  $500 

Video Collaboration

  6   114   120 

Professional and other services

  2   —   2 

Total revenue

  508   114   622 
             

Significant Segment Expenses

            

Labor and labor-related (1)

  68   6   74 

Circuit and network cost of revenue

  303   —   303 

Bad debt recovery

  —   (18)  (18)

Other segment items (2)

  1   5   6 

Segment profit

 $136  $121  $257 

Segment profit margin %

  27%  106%   
             

Unallocated (income) expense

            

Corporate expenses (3)

          949 

Interest income

          (27)

Loss before income tax expense

         $(665)

 

 

(1)

Includes direct labor costs (including sales and marketing costs), employment taxes, employee benefits, workers’ compensation, and office expenses.

 

(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 three months ended March 31, 2026, and 2025, 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):

 

  

Three Months Ended March 31,

 
  

2026

  

2025

 

Domestic

 $432  $295 

Foreign

  275   327 
  $707  $622 

 

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

 

Concentration of consolidated revenues was as follows:

 

   

Three Months Ended March 31,

 
   

2026

  

2025

 
 

Segment

 

% of Revenue

  

% of Revenue

 

Customer A

Managed Services

  58%  81%

Customer B

Collaboration Products

  12%  8%

Customer C

Collaboration Products

  11%  —%

 

Staking rewards on the Company's digital assets made up 12% of the Company's consolidated revenue for the three months ended March 31, 2026.

 

Concentration of consolidated accounts receivable was as follows:

 

   

As of March 31,

 
   

2026

  

2025

 
 

Segment

 

% of Accounts Receivable

  

% of Accounts Receivable

 

Customer A

Managed Services

  97%  —%

Customer B

Collaboration Products

  —%  51%

Customer C

Collaboration Products

  —%  42%