2.9 Financial Statement Presentation, Including Other Comprehensive Income

Please disclose your accounting policy for digital assets, notes receivable, other long-term assets, accrued expenses, [X] membership, cost of revenues, selling and marketing expenses, general and administrative expenses, and research and development expenses. Also include the nature of the items included in each of these line items. To the extent any accrued liability item exceeds five percent of total current liabilities, state the item separately in the statement of operations in accordance with Rule 5-02.20 of Regulation S-X.

Please state separately, in your balance sheet or in a note thereto, any elements of prepaid expenses and other current assets in excess of five percent of your total current assets. Refer to Rule 5-02(8) of Regulation S-X. In addition, please separately state any elements of other current liabilities in excess of five percent of your total current liabilities. Refer to Rule 5-02(2) of Regulation S-X.

Please present accounts payable separately from accrued expenses. Also, tell us and disclose with quantification as of each balance sheet date any component of accrued expenses exceeding the disclosure threshold. Refer to Rules 5-02.19 and .20 of Regulation S-X.

Please tell us and disclose in greater detail the nature and types of amounts included in customer accounts and other restricted cash, net. Quantify the different types of amounts. Also, tell us how you determined you have control over the amounts included in customer accounts and other restricted cash, net, including whether you (a) have the ability to direct how and when the funds would be used, (b) have physical possession of the funds and/or (c) hold the funds in a bank account in your name and you can transact in this account at any time. Refer to ASCs 230-10-50-7 and 230-10-45-4, Rule 5-02(1) of Regulation S-X and BC9 in ASU 2016-18.

We note you determined that the settlement and merchant reserve assets consist of restricted cash. Please disclose the nature of the restrictions applicable to the settlement and merchant reserve assets. Refer to ASC 230-10-50-7 and Rule 5-02(1) of Regulation S-X.

We note you derive revenue from services and product sales. Please separately present product sales and services and related cost of revenue on the face of your statements of operations pursuant to Rule 5-03(b)(1) and (2) of Regulation S-X and revise your discussions in MD&A accordingly or demonstrate to us why they are not required.

We note from your disclosure . . . that in addition to manufacturing custom-engineered products and systems, you recognize revenue from contracts to provide field service inspection, installation, commissioning, modification, and repair services, as well as retrofit and retrofill components for existing systems. We also note from some of the discussion during the [fiscal-year-end] earnings call, that this service revenue was a significant contributor to your business during [the fiscal year]. Please tell us the amount of revenue related to services as compared to products for the [fiscal year]. If the amount is greater than 10% of the consolidated revenue amount, please revise future filings to separately present revenue and cost of goods sold for products and services. See requirement in Rule 5-03(b)(1) and (b)(2) of Regulation S-X.

We note that you appear to report an incomplete cost of revenues measure that excludes depreciation and amortization, although in the disclosures . . . you allocate substantially all depreciation and amortization to [Segment A and Segment B]. Given the nature of your business, we expect that you would need to allocate depreciation and amortization of equipment used in your revenue generating activities to cost of revenues under GAAP.

If you wish to report cost of revenues components separately you should adhere to the parenthetical labeling accommodation in SAB Topic 11:B, although under this convention it should be clear which particular line items and amounts have been excluded. Any disclosures pertaining to an incomplete cost of revenues measure should include comparable discussion of the excluded amounts.

You present cost of sales exclusive of amortization expense and a subtotal for gross profit. Please tell us how your presentation complies with SAB Topic 11.B. In this regard, you should either include the amortization of acquisition-related intangibles in cost of sales or remove the gross profit subtotal from your statements of operations. Your discussion of gross profit and gross margin in MD&A should be similarly revised. In your response, provide us with the amount of amortization expense excluded from costs of sales for each period presented.

We note you have elected to exclude depreciation and amortization from cost of sales. You may elect to exclude amortization and depreciation from cost of sales by reference to SAB Topic 11.B; however, you must also remove the measures of gross profit and gross margin or label the measures as non-GAAP and conform to Item 10(e)(1)(i) of Regulation S-K. Please clearly identify gross profit and gross margin as presented . . . as non-GAAP and present GAAP gross profit and gross margin with equal or greater prominence, revise your reconciliations . . . to begin with GAAP gross profit and if you continue to adjust gross profit for more than depreciation and amortization, please distinguish its title, such as adjusted gross profit. Please revise accordingly or explain.

It appears that depreciation of property and equipment represents a significant portion of your general and administrative expense line item. Please revise to disaggregate depreciation expense from general and administrative expenses, or tell us how you determined such disaggregation is not necessary. Reference is made to Rule 5-03 of Regulation S-X.

Reclassify employee costs, consulting expenses, business development expenses to the appropriate expense line-items, i.e. cost of revenues, sales and marketing expenses, and general and administrative expenses. We refer to guidance in Rule 5-03 of Regulation S-X.

We note you reported legal settlement costs, an operating expense, within the income statement line-item “Other, net.” Separately report operating and non-operating expenses on your income statement and clearly identify them as such, pursuant to Rule 5-03 of Regulation S-X.

We note your line item for transaction and integration costs appears to be classified as a non-operating expense and that $[X] million of such costs in [the prior fiscal year], $[Y] million of such costs in [the prior fiscal year], and $[Z] million of such costs for the [first nine months of the current fiscal year] relate to [your business acquisition] and integration related costs. In light of the [business acquisition] taking place in [a previous fiscal year], please clarify for us the nature of such expenses and tell us what consideration you gave to classifying these expenses as operating expenses. Please refer to Rule 5-03 of Regulation S-X.

Please revise to present “Loss on impairment of assets” as an operating expense in your calculation of “Operating loss.”

Income (loss) from operations before income taxes includes various non-operating income and expenses discussed in paragraphs 7 through 9 of Rule 5-03 of Regulation S-X. Accordingly, please retitle this line item here and in your other filings to better reflect what it actually represents.

Please present changes in accounts receivable separately in the changes in assets and liabilities section of your cash flows from operating activities. Refer to ASC 230-10-45-29.

Please present proceeds from and payments of borrowings on a gross basis. Refer to ASC 230-10-45-7 and 45-9.

To the extent any of your short-term borrowings were repaid . . . , please present the gross sum of the repayments in the financing section of the statement of cash flows pursuant to ASC 230-10-45-7. It appears proceeds and repayments may have been netted in the current presentation of the statement of cash flows.

Please breakout the line items under the changes in operating assets and liabilities, net section of your cash flows from operating activities into smaller components. For example, changes in inventories should be presented separately from other assets. Refer to ASC 230-10-45-29.

Please tell us how you determined the cash proceeds from common stock subscription represent operating activities, as opposed to financing activities. Refer to ASC 230-10-45-14.

Based on your response to [a] prior comment . . . , it is unclear why the “Long-term payments — related parties” transactions are classified as operating activities instead of as investing activities. In this regard, it appears that these cash transactions were to acquire equity interests. Please revise . . . , if necessary.

We note that cash flows from long-term loans and other assets are classified as operating activities and cash flows used in the issuance of long-term loan are classified as investing activities. Please explain the nature of these items and tell us why the classification is appropriate based on the guidance in ASC 230-10-45. In addition, please explain why the issuance of the long-term loan in [year 1] is represented as a cash outflow. In this regard, tell us whether this line item should be described as the repayment of a long-term loan.

We note you present the purchase of digital assets . . . as an investing activity. Please tell us how you considered the guidance in ASC 230 in determining to present this activity as an investing activity.

Tell us how you account for the gain on the sale of [business] customer assets in your consolidated statement of cash flows. Refer us to your basis in the accounting literature.

We note your description of the structured payables program that [your company] offers to suppliers, which can extend the original invoice due date and include a service fee. We also note that the suppliers, at their discretion, may assign the negotiable draft they receive from a [subsidiary of your company] under the program to a financial institution. Based on your disclosure that substantially all the outstanding obligations under this program is included in accounts payable, please tell us how you evaluated whether this program meets the three criteria in FASB ASC 405-50-15-2 to be considered a supplier finance program. As part of your response, clarify i) where the portion of the structured payables balance not included in accounts payable is reported and why, and ii) the nature, terms and amount of the service fee and where it is reported in your Consolidated Statements of Income for each reporting period.

In future filings, please provide all disclosures contemplated in ASC 405-50-50-3(a) including a description of the payment terms and whether any assets are pledged as security or other forms of guarantees.