The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AULT GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
LONG-TERM LIABILITIES
|
|
|
|
|
|
|
|
|
|
Operating lease liability, non-current
|
|
|
4,265,000
|
|
|
|
3,855,000
|
|
|
Notes payable
|
|
|
-
|
|
|
|
336,000
|
|
|
Notes payable, related parties
|
|
|
-
|
|
|
|
52,000
|
|
|
Convertible notes payable
|
|
|
447,000
|
|
|
|
386,000
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
24,740,000
|
|
|
|
26,511,000
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Series A Convertible Preferred Stock, $25.00 stated value per share,
|
|
|
-
|
|
|
|
-
|
|
|
$0.001 par value – 1,000,000 shares authorized; 7,040 shares
|
|
|
|
|
|
|
|
|
|
issued and outstanding at September 30, 2021 and December 31, 2020
|
|
|
|
|
|
|
|
|
|
(redemption amount and liquidation preference of $176,000 as of
|
|
|
|
|
|
|
|
|
|
September 30, 2021 and December 31, 2020)
|
|
|
|
|
|
|
|
|
|
Series B Convertible Preferred Stock, $10 stated value per share,
|
|
|
-
|
|
|
|
-
|
|
|
share, $0.001 par value – 500,000 shares authorized; 125,000 shares issued
|
|
|
|
|
|
|
|
|
|
and outstanding at September 30, 2021 and December 31, 2020 (liquidation
|
|
|
|
|
|
|
|
|
|
preference of $1,250,000 at September 30, 2021 and December 31, 2020)
|
|
|
|
|
|
|
|
|
|
Class A Common Stock, $0.001 par value – 500,000,000 shares authorized;
|
|
|
63,000
|
|
|
|
28,000
|
|
|
63,346,921 and 27,753,562 shares issued and outstanding at September 30, 2021
|
|
|
|
|
|
|
|
|
|
and December 31, 2020, respectively
|
|
|
|
|
|
|
|
|
|
Class B Common Stock, $0.001 par value – 25,000,000 shares authorized;
|
|
|
-
|
|
|
|
-
|
|
|
nil shares issued and outstanding at September 30, 2021 and December 31, 2020
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
331,886,000
|
|
|
|
171,396,000
|
|
|
Accumulated deficit
|
|
|
(120,066,000
|
)
|
|
|
(121,396,000
|
)
|
|
Accumulated other comprehensive loss
|
|
|
(9,631,000
|
)
|
|
|
(1,718,000
|
)
|
|
Treasury stock, at cost
|
|
|
(2,773,000
|
)
|
|
|
-
|
|
|
TOTAL AULT GLOBAL HOLDINGS STOCKHOLDERS’ EQUITY
|
|
|
199,479,000
|
|
|
|
48,310,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interest
|
|
|
1,502,000
|
|
|
|
822,000
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS’ EQUITY
|
|
|
200,981,000
|
|
|
|
49,132,000
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
225,721,000
|
|
|
$
|
75,643,000
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AULT GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
7,803,000
|
|
|
$
|
5,705,000
|
|
|
$
|
24,272,000
|
|
|
$
|
16,709,000
|
|
|
Revenue, cryptocurrency mining
|
|
|
272,000
|
|
|
|
-
|
|
|
|
693,000
|
|
|
|
-
|
|
|
Revenue, lending and trading activities
|
|
|
(38,869,000
|
)
|
|
|
(29,000
|
)
|
|
|
19,615,000
|
|
|
|
(27,000
|
)
|
|
Total revenue
|
|
|
(30,794,000
|
)
|
|
|
5,676,000
|
|
|
|
44,580,000
|
|
|
|
16,682,000
|
|
|
Cost of revenue
|
|
|
5,271,000
|
|
|
|
3,736,000
|
|
|
|
16,657,000
|
|
|
|
11,085,000
|
|
|
Gross profit (loss)
|
|
|
(36,065,000
|
)
|
|
|
1,940,000
|
|
|
|
27,923,000
|
|
|
|
5,597,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
524,000
|
|
|
|
469,000
|
|
|
|
1,657,000
|
|
|
|
1,372,000
|
|
|
Selling and marketing
|
|
|
1,993,000
|
|
|
|
260,000
|
|
|
|
4,740,000
|
|
|
|
893,000
|
|
|
General and administrative
|
|
|
11,292,000
|
|
|
|
2,836,000
|
|
|
|
24,376,000
|
|
|
|
8,656,000
|
|
|
Total operating expenses
|
|
|
13,809,000
|
|
|
|
3,565,000
|
|
|
|
30,773,000
|
|
|
|
10,921,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(49,874,000
|
)
|
|
|
(1,625,000
|
)
|
|
|
(2,850,000
|
)
|
|
|
(5,324,000
|
)
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
125,000
|
|
|
|
102,000
|
|
|
|
176,000
|
|
|
|
139,000
|
|
|
Accretion of discount on note receivable, related party
|
|
|
4,210,000
|
|
|
|
-
|
|
|
|
4,210,000
|
|
|
|
-
|
|
|
Interest expense
|
|
|
(140,000
|
)
|
|
|
(2,366,000
|
)
|
|
|
(475,000
|
)
|
|
|
(4,414,000
|
)
|
|
Change in fair value of marketable equity securities
|
|
|
(750,000
|
)
|
|
|
(29,000
|
)
|
|
|
(705,000
|
)
|
|
|
(58,000
|
)
|
|
Realized gain on marketable securities
|
|
|
30,000
|
|
|
|
-
|
|
|
|
428,000
|
|
|
|
-
|
|
|
Gain (loss) on extinguishment of debt
|
|
|
-
|
|
|
|
(12,823,000
|
)
|
|
|
929,000
|
|
|
|
(13,298,000
|
)
|
|
Change in fair value of warrant liability
|
|
|
259,000
|
|
|
|
-
|
|
|
|
(130,000
|
)
|
|
|
(6,000
|
)
|
|
Total other income (expenses), net
|
|
|
3,734,000
|
|
|
|
(15,116,000
|
)
|
|
|
4,433,000
|
|
|
|
(17,637,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (provision) benefit
|
|
|
3,366,000
|
|
|
|
6,000
|
|
|
|
(144,000
|
)
|
|
|
18,000
|
|
|
Net income (loss) from continuing operations
|
|
|
(42,774,000
|
)
|
|
|
(16,735,000
|
)
|
|
|
1,439,000
|
|
|
|
(22,943,000
|
)
|
|
Net loss from discontinued operations, net of taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,698,000
|
)
|
|
Net income (loss)
|
|
|
(42,774,000
|
)
|
|
|
(16,735,000
|
)
|
|
|
1,439,000
|
|
|
|
(24,641,000
|
)
|
|
Net loss attributable to non-controlling interest
|
|
|
(96,000
|
)
|
|
|
-
|
|
|
|
(93,000
|
)
|
|
|
-
|
|
|
Net income (loss) attributable to Ault Global Holdings
|
|
|
(42,870,000
|
)
|
|
|
(16,735,000
|
)
|
|
|
1,346,000
|
|
|
|
(24,641,000
|
)
|
|
Preferred dividends
|
|
|
(4,000
|
)
|
|
|
(3,000
|
)
|
|
|
(13,000
|
)
|
|
|
(10,000
|
)
|
|
Net income (loss) available to common stockholders
|
|
$
|
(42,874,000
|
)
|
|
$
|
(16,738,000
|
)
|
|
$
|
1,333,000
|
|
|
$
|
(24,651,000
|
)
|
|
Basic net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.73
|
)
|
|
$
|
(1.69
|
)
|
|
$
|
0.03
|
|
|
$
|
(3.40
|
)
|
|
Discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.25
|
)
|
|
Net income (loss) per common share
|
|
$
|
(0.73
|
)
|
|
$
|
(1.69
|
)
|
|
$
|
0.03
|
|
|
$
|
(3.65
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.73
|
)
|
|
$
|
(1.69
|
)
|
|
$
|
0.03
|
|
|
$
|
(3.40
|
)
|
|
Discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.25
|
)
|
|
Net income (loss) per common share
|
|
$
|
(0.73
|
)
|
|
$
|
(1.69
|
)
|
|
$
|
0.03
|
|
|
$
|
(3.65
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average basic common shares outstanding
|
|
|
58,987,000
|
|
|
|
9,879,000
|
|
|
|
49,714,000
|
|
|
|
6,759,000
|
|
|
Weighted average diluted common shares outstanding
|
|
|
58,987,000
|
|
|
|
9,879,000
|
|
|
|
50,145,000
|
|
|
|
6,759,000
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
(42,874,000
|
)
|
|
$
|
(16,738,000
|
)
|
|
$
|
1,333,000
|
|
|
$
|
(24,651,000
|
)
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
(182,000
|
)
|
|
|
44,000
|
|
|
|
(141,000
|
)
|
|
|
(8,000
|
)
|
|
Net unrealized gain (loss) on derivative securities of related party
|
|
|
(4,849,000
|
)
|
|
|
1,561,000
|
|
|
|
(7,773,000
|
)
|
|
|
1,080,000
|
|
|
Other comprehensive income (loss)
|
|
|
(5,031,000
|
)
|
|
|
1,605,000
|
|
|
|
(7,914,000
|
)
|
|
|
1,072,000
|
|
|
Total comprehensive loss
|
|
$
|
(47,905,000
|
)
|
|
$
|
(15,133,000
|
)
|
|
$
|
(6,581,000
|
)
|
|
$
|
(23,579,000
|
)
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AULT GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ EQUITY (Unaudited)
Three Months Ended September 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A & B
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Non-Controlling
|
|
|
Treasury
|
|
|
Stockholders’
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Loss
|
|
|
Interest
|
|
|
Stock
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES, July 1, 2021
|
|
|
132,040
|
|
|
$
|
-
|
|
|
|
56,159,963
|
|
|
$
|
56,000
|
|
|
$
|
311,759,000
|
|
|
$
|
(77,190,000
|
)
|
|
$
|
(4,600,000
|
)
|
|
$
|
1,364,000
|
|
|
$
|
-
|
|
|
$
|
231,389,000
|
|
|
Issuance of common stock for restricted stock awards
|
|
|
-
|
|
|
|
-
|
|
|
|
449,373
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Stock-based compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,794,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,794,000
|
|
|
Restricted stock awards
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,312,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,312,000
|
|
|
Issuance of stock options at Gresham Worldwide
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42,000
|
|
|
|
-
|
|
|
|
42,000
|
|
|
Issuance of common stock for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
6,737,585
|
|
|
|
7,000
|
|
|
|
16,432,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,439,000
|
|
|
Financing cost in connection with sales of common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(411,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(411,000
|
)
|
Adjustment to treasury stock
for holdings in investment
partnerships
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,773,000
|
)
|
|
|
(2,773,000
|
)
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(42,870,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(42,870,000
|
)
|
|
Preferred dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,000
|
)
|
|
Net unrealized gain on derivatives in related party
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,849,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,849,000
|
)
|
|
Foreign currency translation adjustments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(182,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(182,000
|
)
|
|
Net income attributable to non-controlling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
96,000
|
|
|
|
-
|
|
|
|
96,000
|
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES, September 30, 2021
|
|
|
132,040
|
|
|
$
|
-
|
|
|
|
63,346,921
|
|
|
$
|
63,000
|
|
|
$
|
331,886,000
|
|
|
$
|
(120,066,000
|
)
|
|
$
|
(9,631,000
|
)
|
|
$
|
1,502,000
|
|
|
$
|
(2,773,000
|
)
|
|
$
|
200,981,000
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AULT GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ EQUITY (Unaudited)
Three Months Ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A & B
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
Total
|
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Non-Controlling
|
|
|
Stockholders’
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Loss
|
|
|
Interest
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES, July 1, 2020
|
|
|
132,040
|
|
|
$
|
—
|
|
|
|
6,112,117
|
|
|
$
|
6,000
|
|
|
$
|
105,626,000
|
|
|
$
|
(96,565,000
|
)
|
|
$
|
(6,044,000
|
)
|
|
$
|
8,000
|
|
|
$
|
3,031,000
|
|
|
Stock-based compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,000
|
|
|
Common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
37,500
|
|
|
|
—
|
|
|
|
109,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
109,000
|
|
|
Issuance of common stock for conversion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
5,323,793
|
|
|
|
5,000
|
|
|
|
14,017,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
14,022,000
|
|
|
Beneficial conversion feature in connection
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
with convertible notes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15,000
|
|
|
Fair value of warrants issued in connection
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
with convertible notes
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,482,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,482,000
|
|
|
Cash for exchange fees and other financing costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(25,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(25,000
|
)
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(16,735,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(16,735,000
|
)
|
|
Preferred dividends
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,000
|
)
|
|
Net unrealized gain on derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in related party
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,561,000
|
|
|
|
—
|
|
|
|
1,561,000
|
|
|
Foreign currency translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
45,000
|
|
|
|
—
|
|
|
|
44,000
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES, September 30, 2020
|
|
|
132,040
|
|
|
$
|
—
|
|
|
|
11,473,410
|
|
|
$
|
11,000
|
|
|
$
|
122,244,000
|
|
|
$
|
(113,302,000
|
)
|
|
$
|
(4,439,000
|
)
|
|
$
|
8,000
|
|
|
$
|
4,522,000
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AULT GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ EQUITY (Unaudited)
Nine Months Ended September 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A & B
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Non-Controlling
|
|
|
Treasury
|
|
|
Stockholders’
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Loss
|
|
|
Interest
|
|
|
Stock
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES, January 1, 2021
|
|
|
132,040
|
|
|
$
|
-
|
|
|
|
27,753,562
|
|
|
$
|
28,000
|
|
|
$
|
171,396,000
|
|
|
$
|
(121,396,000
|
)
|
|
$
|
(1,718,000
|
)
|
|
$
|
822,000
|
|
|
$
|
-
|
|
|
$
|
49,132,000
|
|
|
Issuance of common stock for restricted stock awards
|
|
|
-
|
|
|
|
-
|
|
|
|
449,373
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Stock-based compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,833,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,833,000
|
|
|
Restricted stock awards
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,312,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,312,000
|
|
|
Issuance of stock options at Gresham Worldwide
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
587,000
|
|
|
|
-
|
|
|
|
587,000
|
|
|
Issuance of common stock for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
34,684,910
|
|
|
|
35,000
|
|
|
|
160,448,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
160,483,000
|
|
Financing cost in connection with sales of common
stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,952,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,952,000
|
)
|
Adjustment to treasury stock
for holdings in
investment partnerships
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,773,000
|
)
|
|
|
(2,773,000
|
)
|
|
Issuance of common stock for conversion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
of convertible notes payable
|
|
|
-
|
|
|
|
-
|
|
|
|
183,214
|
|
|
|
-
|
|
|
|
449,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
449,000
|
|
|
Issuance of common stock for conversion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
of convertible notes payable, related party
|
|
|
-
|
|
|
|
-
|
|
|
|
275,862
|
|
|
|
-
|
|
|
|
400,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
400,000
|
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,346,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,346,000
|
|
|
Preferred dividends
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,000
|
)
|
|
Net unrealized loss on derivatives in related party
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,773,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,773,000
|
)
|
|
Foreign currency translation adjustments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(141,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(141,000
|
)
|
|
Net income attributable to non-controlling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
93,000
|
|
|
|
-
|
|
|
|
93,000
|
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,000
|
)
|
|
|
1,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES, September 30, 2021
|
|
|
132,040
|
|
|
$
|
-
|
|
|
|
63,346,921
|
|
|
$
|
63,000
|
|
|
$
|
331,886,000
|
|
|
$
|
(120,066,000
|
)
|
|
$
|
(9,631,000
|
)
|
|
$
|
1,502,000
|
|
|
$
|
(2,773,000
|
)
|
|
$
|
200,981,000
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AULT GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ EQUITY (Unaudited)
Nine Months Ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
Series A & B
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
Total
|
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Non-Controlling
|
|
|
Stockholders’
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Loss
|
|
|
Interest
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES, January 1, 2020
|
|
|
132,040
|
|
|
$
|
-
|
|
|
|
3,318,390
|
|
|
$
|
3,000
|
|
|
$
|
101,099,000
|
|
|
$
|
(88,650,000
|
)
|
|
$
|
(5,511,000
|
)
|
|
$
|
8,000
|
|
|
$
|
6,949,000
|
|
|
Stock based compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
61,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
61,000
|
|
|
Common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
102,500
|
|
|
|
-
|
|
|
|
182,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
182,000
|
|
|
Issuance of common stock in payment of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
short term advances, related party
|
|
|
-
|
|
|
|
-
|
|
|
|
660,667
|
|
|
|
1,000
|
|
|
|
739,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
740,000
|
|
|
Issuance of common stock in payment of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
accrued liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
153,124
|
|
|
|
-
|
|
|
|
229,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
229,000
|
|
|
Issuance of common stock for conversion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
7,238,729
|
|
|
|
7,000
|
|
|
|
16,704,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,711,000
|
|
|
Beneficial conversion feature in connection
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
with convertible notes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
82,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
82,000
|
|
|
Fair value of warrants issued in connection
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
with convertible notes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,173,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,173,000
|
|
|
Cash for exchange fees and other financing costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(25,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(25,000
|
)
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(24,641,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(24,641,000
|
)
|
|
Preferred dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,000
|
)
|
|
Net unrealized loss on derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in related party
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,080,000
|
|
|
|
-
|
|
|
|
1,080,000
|
|
|
Foreign currency translation adjustments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,000
|
)
|
|
|
-
|
|
|
|
(8,000
|
)
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES, September 30, 2020
|
|
|
132,040
|
|
|
$
|
-
|
|
|
|
11,473,410
|
|
|
$
|
11,000
|
|
|
$
|
122,244,000
|
|
|
$
|
(113,302,000
|
)
|
|
$
|
(4,439,000
|
)
|
|
$
|
8,000
|
|
|
$
|
4,522,000
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AULT GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,439,000
|
|
|
$
|
(24,641,000
|
)
|
|
Less: Net loss from discontinued operations
|
|
|
-
|
|
|
|
(1,698,000
|
)
|
|
Net income (loss) from continuing operations
|
|
|
1,439,000
|
|
|
|
(22,943,000
|
)
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
711,000
|
|
|
|
357,000
|
|
|
Amortization
|
|
|
296,000
|
|
|
|
252,000
|
|
|
Amortization of right-of-use assets
|
|
|
683,000
|
|
|
|
47,000
|
|
|
Amortization, related party
|
|
|
23,000
|
|
|
|
-
|
|
|
Interest expense – debt discount
|
|
|
61,000
|
|
|
|
2,379,000
|
|
|
(Gain) loss on extinguishment of debt
|
|
|
(929,000
|
)
|
|
|
2,749,000
|
|
|
Change in fair value of warrant liability
|
|
|
(259,000
|
)
|
|
|
-
|
|
|
Accretion of original issue discount on notes receivable – related party
|
|
|
(4,213,000
|
)
|
|
|
21,000
|
|
|
Accretion of original issue discount on notes receivable
|
|
|
(366,000
|
)
|
|
|
(5,000
|
)
|
|
Increase in accrued interest on notes receivable – related party
|
|
|
(119,000
|
)
|
|
|
-
|
|
|
Stock-based compensation
|
|
|
4,732,000
|
|
|
|
272,000
|
|
|
Realized losses on other investments
|
|
|
-
|
|
|
|
28,000
|
|
|
Realized gains on sale of marketable securities
|
|
|
(15,154,000
|
)
|
|
|
(23,000
|
)
|
|
Unrealized losses on marketable equity securities
|
|
|
6,353,000
|
|
|
|
132,000
|
|
|
Unrealized gains on equity securities – related party
|
|
|
(6,150,000
|
)
|
|
|
(25,000
|
)
|
|
Unrealized (gains) losses on equity securities
|
|
|
(2,795,000
|
)
|
|
|
73,000
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Marketable equity securities
|
|
|
(34,196,000
|
)
|
|
|
-
|
|
|
Accounts receivable
|
|
|
(1,270,000
|
)
|
|
|
(591,000
|
)
|
|
Accrued revenue
|
|
|
(166,000
|
)
|
|
|
600,000
|
|
|
Inventories
|
|
|
(492,000
|
)
|
|
|
(199,000
|
)
|
|
Prepaid expenses and other current assets
|
|
|
(5,155,000
|
)
|
|
|
(750,000
|
)
|
|
Other assets
|
|
|
(407,000
|
)
|
|
|
(86,000
|
)
|
|
Accounts payable and accrued expenses
|
|
|
(1,073,000
|
)
|
|
|
11,986,000
|
|
|
Accounts payable, related parties
|
|
|
(9,000
|
)
|
|
|
(26,000
|
)
|
|
Other current liabilities
|
|
|
2,210,000
|
|
|
|
408,000
|
|
|
Lease liabilities
|
|
|
(666,000
|
)
|
|
|
(13,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in continuing operating activities
|
|
|
(56,911,000
|
)
|
|
|
(5,357,000
|
)
|
|
Net cash provided by discontinued operating activities
|
|
|
—
|
|
|
|
1,000
|
|
|
Net cash used in operating activities
|
|
|
(56,911,000
|
)
|
|
|
(5,356,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(28,145,000
|
)
|
|
|
(554,000
|
)
|
|
Investment in promissory notes, related parties
|
|
|
(4,994,000
|
)
|
|
|
(517,000
|
)
|
|
Investments in common stock and warrants, related parties
|
|
|
(19,590,000
|
)
|
|
|
(93,000
|
)
|
|
Investment in real property, related party
|
|
|
(2,670,000
|
)
|
|
|
-
|
|
|
Proceeds from sale of investment in real property, related party
|
|
|
2,670,000
|
|
|
|
-
|
|
|
Sales of marketable equity securities
|
|
|
430,000
|
|
|
|
144,000
|
|
|
Purchase of marketable equity securities
|
|
|
(2,144,000
|
)
|
|
|
-
|
|
|
Proceeds from loans receivable
|
|
|
-
|
|
|
|
140,000
|
|
|
Investments in debt and equity securities
|
|
|
(14,287,000
|
)
|
|
|
(13,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
$
|
(68,730,000
|
)
|
|
$
|
(893,000
|
)
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AULT GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (continued)
|
|
|
For the Nine Months Ended September 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Gross proceeds from sales of common stock
|
|
$
|
160,483,000
|
|
|
$
|
-
|
|
|
Financing cost in connection with sales of equity securities
|
|
|
(4,952,000
|
)
|
|
|
(25,000
|
)
|
|
Proceeds from convertible notes payable
|
|
|
-
|
|
|
|
100,000
|
|
|
Proceeds from notes payable
|
|
|
724,000
|
|
|
|
7,122,000
|
|
|
Proceeds from short-term advances
|
|
|
-
|
|
|
|
570,000
|
|
|
Payments on short-term advances
|
|
|
-
|
|
|
|
(30,000
|
)
|
|
Proceeds from short-term advances – related party
|
|
|
-
|
|
|
|
653,000
|
|
|
Payments on short-term advances – related party
|
|
|
-
|
|
|
|
(230,000
|
)
|
|
Payments on notes payable
|
|
|
(2,263,000
|
)
|
|
|
(289,000
|
)
|
|
Payments on advances on future receipts
|
|
|
-
|
|
|
|
(762,000
|
)
|
|
Payments of preferred dividends
|
|
|
(13,000
|
)
|
|
|
(10,000
|
)
|
|
Purchase of treasury stock
|
|
|
(2,773,000
|
)
|
|
|
-
|
|
|
Payments on revolving credit facilities, net
|
|
|
(125,000
|
)
|
|
|
(44,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
151,081,000
|
|
|
|
7,055,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(73,000
|
)
|
|
|
(15,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
25,367,000
|
|
|
|
791,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
18,680,000
|
|
|
|
483,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
44,047,000
|
|
|
$
|
1,274,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest
|
|
$
|
712,000
|
|
|
$
|
101,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
Cancellation of convertible notes payable into shares of common stock
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Cancellation of notes payable into shares of common stock
|
|
$
|
449,000
|
|
|
$
|
16,711,000
|
|
|
Payment of accounts payable with digital currency
|
|
$
|
119,000
|
|
|
$
|
-
|
|
|
Issuance of common stock in payment of liability
|
|
$
|
-
|
|
|
$
|
229,000
|
|
|
Cancellation of short-term advances, related party, into shares
|
|
|
|
|
|
|
|
|
|
of common stock
|
|
$
|
-
|
|
|
$
|
740,000
|
|
|
Issuance of notes payable and convertible notes payable in
|
|
|
|
|
|
|
|
|
|
payment of accrued expenses
|
|
$
|
-
|
|
|
$
|
420,000
|
|
|
Conversion of debt and equity securities to marketable securities
|
|
$
|
2,656,000
|
|
|
$
|
-
|
|
|
Conversion of loans to debt and equity securities
|
|
$
|
150,000
|
|
|
$
|
-
|
|
|
Conversion of convertible notes payable, related party, in shares
|
|
|
|
|
|
|
|
|
|
of common stock
|
|
$
|
400,000
|
|
|
$
|
-
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1. DESCRIPTION OF BUSINESS
Ault Global Holdings, Inc.,
a Delaware corporation (“Ault Global” or the “Company”), formerly known as DPW Holdings, Inc., was incorporated
in September 2017. Ault Global is a diversified holding company pursuing growth by acquiring undervalued businesses and disruptive technologies
with a global impact. Through its wholly and majority-owned subsidiaries and strategic investments, the Company owns and operates a data
center at which it mines Bitcoin, and provides mission-critical products that support a diverse range of industries, including defense/aerospace,
industrial, automotive, telecommunications, medical/biopharma, and textiles. In addition, the Company extends credit to select entrepreneurial
businesses through a licensed lending subsidiary. Ault Global was founded by Milton “Todd” Ault III, its Executive Chairman
and is led by Mr. Ault, William B. Horne, its Chief Executive Officer and Vice Chairman and Henry Nisser, its President and General Counsel.
Together, they constitute the Executive Committee, which manages the day-to-day operations of the holding company. The Company’s
long-term objective is to maximize per share intrinsic value. All major investment and capital allocation decisions are made for the Company
by Mr. Ault and the Executive Committee. The Company has three reportable segments:
|
|
·
|
Gresham Worldwide (“GWW”) –
defense solutions,
|
|
|
·
|
TurnOnGreen – commercial electronics solutions,
and
|
|
|
·
|
Ault Alliance – Bitcoin mining, data
center operations, commercial lending and media.
|
On January 19, 2021, the Company
changed its corporate name from DPW Holdings, Inc., to Ault Global Holdings, Inc. The name change was effected through a parent/subsidiary
short form merger pursuant to an agreement and plan of merger dated January 7, 2021. The merger and resulting name change did not affect
the rights of security holders of the Company. The Company’s common stock continues to be listed on the NYSE American under the
symbol “DPW”.
2. LIQUIDITY AND FINANCIAL CONDITION
As of September 30, 2021,
the Company had cash and cash equivalents of $44.0 million, working capital of $93.9 million and total stockholders’ equity
of $201.0 million. In the past, the Company financed its operations principally through issuances of convertible debt, promissory notes
and equity securities. During the nine months ended September 30, 2021, the Company continued to strengthen its liquidity and financial
condition through additional equity financing from its 2021 At-The-Market Offering (the “2021 ATM Offering”); see Note 24 for a discussion of the
Company’s 2021 ATM Offering.
The Company believes its current
cash on hand is sufficient to meet its operating and capital requirements for at least the next twelve months from the date these financial
statements are issued.
3. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING
POLICIES
The accompanying
unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and
Regulation S-X and do not include all the information and disclosures required by generally accepted accounting principles in the
United States of America (“GAAP”). The Company has made estimates and judgments affecting the amounts reported in the
Company’s condensed consolidated financial statements and the accompanying notes. The actual results experienced by the
Company may differ materially from the Company’s estimates. The condensed consolidated financial information is unaudited but
reflects all normal adjustments that are, in the opinion of management, necessary to provide a fair statement of results for the
interim periods presented. These condensed consolidated financial statements should be read in conjunction with the consolidated
financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the
Securities and Exchange Commission (the “SEC”) on April 15, 2021. The condensed consolidated balance sheet as of December
31, 2020 was derived from the Company’s audited 2020 financial statements contained in the above referenced Form 10-K. Results
of the three and nine months ended September 30, 2021, are not necessarily indicative of the results to be expected for the full
year ending December 31, 2021.
Significant Accounting Policies
There have been no material
changes in the Company’s significant accounting policies to those previously disclosed in the 2020 Annual Report other than disclosed
below.
Variable Interest Entities
For Variable Interest Entities
(“VIEs”), the Company assesses whether it is the primary beneficiary as prescribed by the accounting guidance on the consolidation
of a VIE. The primary beneficiary of a VIE is the party that has the power to direct the activities that most significantly impact the
performance of the entity and the obligation to absorb the losses or the right to receive the benefits that could potentially be significant
to the entity.
The Company evaluates its
business relationships with related parties to identify potential VIEs under ASC 810 “Consolidation”. The Company consolidates
VIEs in which it is considered to be the primary beneficiary. Entities are considered to be the primary beneficiary if they have both
of the following characteristics: (i) the power to direct the activities that, when taken together, most significantly impact the VIE’s
performance, and (ii) the obligation to absorb losses and right to receive the returns from the VIE that would be significant to the VIE.
The Company’s judgment with respect to its level of influence or control of an entity involves the consideration of various factors
including the form of its ownership interest, its representation in the entity’s governance, the size of its investment, estimates
of future cash flows, its ability to participate in policy making decisions and the rights of the other investors to participate in the
decision making process and to replace the Company as manager and/or liquidate the joint venture, if applicable.
Treasury Stock
The shares of Company stock
attributable to the Company’s limited partner interest in Ault Alpha LP (the “Alpha Fund”) are considered treasury stock
on the consolidated balance sheet and thereby deemed not to be included in the calculation of weighted average common shares outstanding.
However, these shares are legally outstanding.
Recently Adopted Accounting Pronouncements
In December 2019, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2019-12, Income Taxes (Topic
740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects
related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies
and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2020. The Company has completed its evaluation process and the January 1, 2021 adoption
did not have a material impact to the Company’s consolidated financial statements.
4.
Revenue Disaggregation
The following tables summarize disaggregated customer
contract revenues and the source of the revenue for the three and nine months ended September 30, 2021 and 2020. Revenues from lending and trading
activities included in consolidated revenues were primarily interest, dividend and other investment income, which are not considered to
be revenues from contracts with customers under GAAP.
The Company’s disaggregated revenues consist
of the following for the three months ended September 30, 2021:
|
|
|
Three Months ended September 30, 2021
|
|
|
|
|
GWW
|
|
|
TurnOnGreen
|
|
|
Ault Alliance
|
|
|
Total
|
|
|
Primary Geographical Markets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
1,415,000
|
|
|
$
|
1,103,000
|
|
|
$
|
608,000
|
|
|
$
|
3,126,000
|
|
|
Europe
|
|
|
1,848,000
|
|
|
|
(97,000
|
)
|
|
|
-
|
|
|
|
1,751,000
|
|
|
Middle East
|
|
|
2,949,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,949,000
|
|
|
Other
|
|
|
161,000
|
|
|
|
88,000
|
|
|
|
-
|
|
|
|
249,000
|
|
|
Revenue from contracts with customers
|
|
|
6,373,000
|
|
|
|
1,094,000
|
|
|
|
608,000
|
|
|
|
8,075,000
|
|
|
Revenue, lending and trading activities
|
|
|
-
|
|
|
|
-
|
|
|
|
(38,869,000
|
)
|
|
|
(38,869,000
|
)
|
|
Total revenue
|
|
$
|
6,373,000
|
|
|
$
|
1,094,000
|
|
|
$
|
(38,261,000
|
)
|
|
$
|
(30,794,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major Goods
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RF/microwave filters
|
|
$
|
630,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
630,000
|
|
|
Detector logarithmic video amplifiers
|
|
|
905,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
905,000
|
|
|
Power supply units
|
|
|
1,256,000
|
|
|
|
1,094,000
|
|
|
|
-
|
|
|
|
2,350,000
|
|
|
Power supply systems
|
|
|
545,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
545,000
|
|
|
Healthcare diagnostic systems
|
|
|
97,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
97,000
|
|
|
Defense systems
|
|
|
2,940,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,940,000
|
|
|
Digital currency mining
|
|
|
-
|
|
|
|
-
|
|
|
|
272,000
|
|
|
|
272,000
|
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
336,000
|
|
|
|
336,000
|
|
|
Revenue from contracts with customers
|
|
|
6,373,000
|
|
|
|
1,094,000
|
|
|
|
608,000
|
|
|
|
8,075,000
|
|
|
Revenue, lending and trading activities
|
|
|
-
|
|
|
|
-
|
|
|
|
(38,869,000
|
)
|
|
|
(38,869,000
|
)
|
|
Total revenue
|
|
$
|
6,373,000
|
|
|
$
|
1,094,000
|
|
|
$
|
(38,261,000
|
)
|
|
$
|
(30,794,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of Revenue Recognition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goods transferred at a point in time
|
|
$
|
3,336,000
|
|
|
$
|
1,094,000
|
|
|
$
|
607,000
|
|
|
$
|
5,037,000
|
|
|
Services transferred over time
|
|
|
3,037,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,037,000
|
|
|
Revenue from contracts with customers
|
|
$
|
6,373,000
|
|
|
$
|
1,094,000
|
|
|
$
|
607,000
|
|
|
$
|
8,074,000
|
|
The Company’s disaggregated revenues consist
of the following for the three months ended September 30, 2020:
|
|
|
Three Months ended September 30, 2020
|
|
|
|
|
GWW
|
|
|
TurnOnGreen
|
|
|
Ault Alliance
|
|
|
Total
|
|
|
Primary Geographical Markets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
1,740,000
|
|
|
$
|
1,136,000
|
|
|
$
|
-
|
|
|
$
|
2,876,000
|
|
|
Europe
|
|
|
246,000
|
|
|
|
1,000
|
|
|
|
-
|
|
|
|
247,000
|
|
|
Middle East
|
|
|
2,233,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,233,000
|
|
|
Other
|
|
|
110,000
|
|
|
|
239,000
|
|
|
|
-
|
|
|
|
349,000
|
|
|
Revenue from contracts with customers
|
|
|
4,329,000
|
|
|
|
1,376,000
|
|
|
|
-
|
|
|
|
5,705,000
|
|
|
Revenue, lending and trading activities
|
|
|
-
|
|
|
|
-
|
|
|
|
(29,000
|
)
|
|
|
(29,000
|
)
|
|
Total revenue
|
|
$
|
4,329,000
|
|
|
$
|
1,376,000
|
|
|
$
|
(29,000
|
)
|
|
$
|
5,676,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major Goods
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RF/microwave filters
|
|
$
|
1,341,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,341,000
|
|
|
Detector logarithmic video amplifiers
|
|
|
441,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
441,000
|
|
|
Power supply units
|
|
|
-
|
|
|
|
1,376,000
|
|
|
|
-
|
|
|
|
1,376,000
|
|
|
Power supply systems
|
|
|
316,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
316,000
|
|
|
Healthcare diagnostic systems
|
|
|
262,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
262,000
|
|
|
Defense systems
|
|
|
1,969,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,969,000
|
|
|
Revenue from contracts with customers
|
|
|
4,329,000
|
|
|
|
1,376,000
|
|
|
|
-
|
|
|
|
5,705,000
|
|
|
Revenue, lending and trading activities
|
|
|
-
|
|
|
|
-
|
|
|
|
(29,000
|
)
|
|
|
(29,000
|
)
|
|
Total revenue
|
|
$
|
4,329,000
|
|
|
$
|
1,376,000
|
|
|
$
|
(29,000
|
)
|
|
$
|
5,676,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of Revenue Recognition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goods transferred at a point in time
|
|
$
|
2,096,000
|
|
|
$
|
1,376,000
|
|
|
$
|
(29,000
|
)
|
|
$
|
3,443,000
|
|
|
Services transferred over time
|
|
|
2,233,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,233,000
|
|
|
Revenue from contracts with customers
|
|
$
|
4,329,000
|
|
|
$
|
1,376,000
|
|
|
$
|
(29,000
|
)
|
|
$
|
5,676,000
|
|
The Company’s disaggregated revenues consisted
of the following for the nine months ended September 30, 2021:
|
|
|
Nine Months Ended September 30, 2021
|
|
|
|
|
GWW
|
|
|
TurnOnGreen
|
|
|
Ault Alliance
|
|
|
Total
|
|
|
Primary Geographical Markets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
5,444,000
|
|
|
$
|
3,600,000
|
|
|
$
|
1,459,000
|
|
|
$
|
10,503,000
|
|
|
Europe
|
|
|
5,600,000
|
|
|
|
318,000
|
|
|
|
—
|
|
|
|
5,918,000
|
|
|
Middle East
|
|
|
7,845,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,845,000
|
|
|
Other
|
|
|
309,000
|
|
|
|
390,000
|
|
|
|
—
|
|
|
|
699,000
|
|
|
Revenue from contracts with customers
|
|
|
19,198,000
|
|
|
|
4,308,000
|
|
|
|
1,459,000
|
|
|
|
24,965,000
|
|
|
Revenue, lending and trading activities
|
|
|
|
|
|
|
|
|
|
|
19,615,000
|
|
|
|
19,615,000
|
|
|
Total revenue
|
|
$
|
19,198,000
|
|
|
$
|
4,308,000
|
|
|
$
|
21,074,000
|
|
|
$
|
44,580,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major Goods
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RF/microwave filters
|
|
$
|
2,921,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,921,000
|
|
|
Detector logarithmic video amplifiers
|
|
|
1,049,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,049,000
|
|
|
Power supply units
|
|
|
1,734,000
|
|
|
|
4,308,000
|
|
|
|
—
|
|
|
|
6,042,000
|
|
|
Power supply systems
|
|
|
5,253,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,253,000
|
|
|
Healthcare diagnostic systems
|
|
|
510,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
510,000
|
|
|
Defense systems
|
|
|
7,731,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,731,000
|
|
|
Digital currency mining
|
|
|
|
|
|
|
|
|
|
|
693,000
|
|
|
|
693,000
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
766,000
|
|
|
|
766,000
|
|
|
Revenue from contracts with customers
|
|
|
19,198,000
|
|
|
|
4,308,000
|
|
|
|
1,459,000
|
|
|
|
24,965,000
|
|
|
Revenue, lending and trading activities
|
|
|
|
|
|
|
|
|
|
|
19,615,000
|
|
|
|
19,615,000
|
|
|
Total revenue
|
|
$
|
19,198,000
|
|
|
$
|
4,308,000
|
|
|
$
|
21,074,000
|
|
|
$
|
44,580,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of Revenue Recognition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goods transferred at a point in time
|
|
$
|
10,957,000
|
|
|
$
|
4,308,000
|
|
|
$
|
1,459,000
|
|
|
$
|
16,724,000
|
|
|
Services transferred over time
|
|
|
8,241,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,241,000
|
|
|
Revenue from contracts with customers
|
|
$
|
19,198,000
|
|
|
$
|
4,308,000
|
|
|
$
|
1,459,000
|
|
|
$
|
24,965,000
|
|
The Company’s disaggregated revenues consisted
of the following for the nine months ended September 30, 2020:
|
|
|
Nine Months ended September 30, 2020
|
|
|
|
|
GWW
|
|
|
TurnOnGreen
|
|
|
Ault Alliance
|
|
|
Total
|
|
|
Primary Geographical Markets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
5,110,000
|
|
|
$
|
3,102,000
|
|
|
$
|
-
|
|
|
$
|
8,212,000
|
|
|
Europe
|
|
|
694,000
|
|
|
|
288,000
|
|
|
|
-
|
|
|
|
982,000
|
|
|
Middle East
|
|
|
6,838,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,838,000
|
|
|
Other
|
|
|
264,000
|
|
|
|
413,000
|
|
|
|
-
|
|
|
|
677,000
|
|
|
Revenue from contracts with customers
|
|
|
12,906,000
|
|
|
|
3,803,000
|
|
|
|
-
|
|
|
|
16,709,000
|
|
|
Revenue, lending and trading activities
|
|
|
-
|
|
|
|
-
|
|
|
|
(27,000
|
)
|
|
|
(27,000
|
)
|
|
Total revenue
|
|
$
|
12,906,000
|
|
|
$
|
3,803,000
|
|
|
$
|
(27,000
|
)
|
|
$
|
16,682,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major Goods
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RF/microwave filters
|
|
$
|
3,887,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,887,000
|
|
|
Detector logarithmic video amplifiers
|
|
|
1,319,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,319,000
|
|
|
Power supply units
|
|
|
-
|
|
|
|
3,803,000
|
|
|
|
-
|
|
|
|
3,803,000
|
|
|
Power supply systems
|
|
|
863,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
863,000
|
|
|
Healthcare diagnostic systems
|
|
|
785,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
785,000
|
|
|
Defense systems
|
|
|
6,052,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,052,000
|
|
|
Revenue from contracts with customers
|
|
|
12,906,000
|
|
|
|
3,803,000
|
|
|
|
-
|
|
|
|
16,709,000
|
|
|
Revenue, lending and trading activities
|
|
|
-
|
|
|
|
-
|
|
|
|
(27,000
|
)
|
|
|
(27,000
|
)
|
|
Total revenue
|
|
$
|
2,906,000
|
|
|
$
|
,803,000
|
|
|
$
|
(27,000
|
)
|
|
$
|
,682,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of Revenue Recognition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goods transferred at a point in time
|
|
$
|
6,068,000
|
|
|
$
|
3,803,000
|
|
|
$
|
(27,000
|
)
|
|
$
|
9,844,000
|
|
|
Services transferred over time
|
|
|
6,838,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,838,000
|
|
|
Revenue from contracts with customers
|
|
$
|
12,906,000
|
|
|
$
|
3,803,000
|
|
|
$
|
(27,000
|
)
|
|
$
|
16,682,000
|
|
Sales of Products
The Company generates revenues
from the sale of its products through a direct and indirect sales force. The Company’s performance obligations to deliver products
are satisfied at the point in time when title transfers to the customer. Generally products are shipped FOB shipping point and title transfers
to the customer at the time the products are placed on a common carrier. The Company provides standard assurance warranties, which are
not separately priced, that the products function as intended. The Company primarily receives fixed consideration for sales of product.
Some of the Company’s contracts with distributors include stock rotation rights after six months for slow moving inventory, which
represents variable consideration. The Company uses an expected value method to estimate variable consideration and constrains revenue
for estimated stock rotations until it is probable that a significant reversal in the amount of cumulative revenue recognized will not
occur. To date, returns have been insignificant. The Company’s customers generally pay within 30 days from the receipt of an invoice.
Because the Company’s
product sales agreements have an expected duration of one year or less, the Company has elected to adopt the practical expedient in Accounting
Standards Codification (“ASC”) 606-10-50-14(a) of not disclosing information about its remaining performance obligations.
Manufacturing Services
For manufacturing services,
which include revenues generated by the Company’s subsidiary, Enertec Systems 2001 Ltd (“Enertec”), and in certain instances,
revenues generated by the Company’s subsidiary, Gresham Power Electronics Ltd., the Company’s performance obligation for manufacturing
services is satisfied over time as the Company creates or enhances an asset based on criteria that are unique to the customer and that
the customer controls as the asset is created or enhanced. Generally, the Company recognizes revenue based upon proportional performance
over time using a cost-to-cost method which measures progress based on the costs incurred to total expected costs in satisfying its performance
obligation. This method provides a depiction of the progress in providing the manufacturing service because there is a direct relationship
between the costs incurred by the Company and the transfer of the manufacturing service to the customer. Manufacturing services that are
recognized based upon the proportional performance method are included in the above table as services transferred over time and to the
extent the customer has not been invoiced for these revenues, as accrued revenue in the accompanying consolidated balance sheets. Revisions
to the Company’s estimates may result in increases or decreases to revenues and income and are reflected in the consolidated financial
statements in the periods in which they are first identified.
The Company has elected the
practical expedient to not adjust the promised amount of consideration for the effects of a significant financing component to the extent
that the period between when the Company transfers its promised good or service to the customer and when the customer pays in one year
or less.
Lending and Trading Activities
Lending Activities
Ault Alliance, Inc. (“Ault Alliance”),
through its wholly owned subsidiary Digital Power Lending, LLC (“DP Lending”), generates revenue from lending activities primarily
through interest, origination fees and late/other fees. Interest income on these products is calculated based on the contractual interest
rate and recorded as interest income as earned. The origination fees or original issue discounts are recognized over the life of the loan
using the effective interest method.
Trading Activities
Ault Alliance, through DP Lending, generates
revenue from trading activities primarily through sales of securities that have appreciated since their acquisition. Financial instruments
utilized in trading activities are carried at fair value. Fair value is generally based on quoted market prices for the same or similar
assets and liabilities. If these market prices are not available, fair values are estimated based on dealer quotes, pricing models, discounted
cash flow methodologies, or similar techniques where the determination of fair value may require significant management judgment or estimation.
Realized gains and losses are recorded on a trade-date basis. Realized and unrealized gains and losses are recognized in revenue from
lending and trading activities.
Blockchain Mining
The Company has executed contracts
with digital asset mining pools to provide computing power to the mining pool. The contracts are terminable at any time by either party
and the Company’s enforceable right to compensation only begins when the Company provides computing power to the mining pool operator.
In exchange for providing computing power, the Company is entitled to a fractional share of the fixed digital currency award the mining
pool operator receives (less digital asset transaction fees to the mining pool operator which are recorded as a component of cost of revenues),
for successfully adding a block to the blockchain. The Company’s fractional share is based on the proportion of computing power
the Company contributed to the mining pool operator to the total computing power contributed by all mining pool participants in solving
the current algorithm to add a block to the blockchain.
Providing computing power
in digital asset transaction verification services is an output of the Company’s ordinary activities. The provision of providing
such computing power is the only performance obligation in the Company’s contracts with mining pool operators. The transaction consideration
the Company receives, if any, is noncash consideration, which the Company measures at fair value on the date received, which is not materially
different than the fair value at contract inception or the time the Company has earned the award from the pools. All consideration is
variable. The Company cannot determine, during the course of solving for a block, that a reversal of revenue is not probable and therefore
revenue is recognized when the mining pool operator successfully places a block (by being the first to solve an algorithm) and the Company
receives confirmation of the consideration it will receive.
Because it is not probable
that a significant reversal of cumulative revenue will not occur, the consideration is constrained until the mining pool operator successfully
places a block (by being the first to solve an algorithm) and the Company receives confirmation of the consideration it will receive,
at which time revenue is recognized. There is no significant financing component in these transactions.
Fair value of the digital
currency award received is determined using the market rate of the related digital currency at the time of receipt.
There is currently no specific
definitive guidance under GAAP or alternative accounting framework for the accounting for digital currencies recognized as revenue or
held, and management has exercised significant judgment in determining the appropriate accounting treatment. In the event authoritative
guidance is promulgated by the FASB, the Company may be required to change its policies, which could have an effect on the Company’s
consolidated financial position and results from operations.
Expenses associated with running
the cryptocurrency mining business, such as equipment depreciation and electricity costs are recorded as a component of cost of revenues.
5.
fair value of financial instruments
The categorization of a financial
instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The
following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within
the fair value hierarchy:
|
|
|
Fair Value Measurement at September 30, 2021
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Investments in convertible promissory notes
of Avalanche International, Corp. (“AVLP”)
– a related party
|
|
$
|
16,574,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
16,574,000
|
|
|
Investment in term promissory note of Ault &
Company, Inc. (“Ault & Company”) – a
related party
|
|
|
2,620,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,620,000
|
|
|
Investments in common stock of AVLP – a
related party
|
|
|
60,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
60,000
|
|
|
Investment in common stock and warrants of
Alzamend Neuro, Inc. (“Alzamend”) – a
related party
|
|
|
24,851,000
|
|
|
|
20,781,000
|
|
|
|
-
|
|
|
|
4,070,000
|
|
|
Investments in marketable equity securities
|
|
|
49,931,000
|
|
|
|
49,931,000
|
|
|
|
-
|
|
|
|
-
|
|
|
Investments in debt and equity securities
|
|
|
9,924,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,924,000
|
|
|
Total Investments
|
|
$
|
103,960,000
|
|
|
$
|
70,712,000
|
|
|
$
|
-
|
|
|
$
|
33,248,000
|
|
|
|
|
Fair Value Measurement at December 31, 2020
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Investments in convertible promissory notes
and advances of AVLP and Alzamend –
related parties
|
|
$
|
10,668,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,668,000
|
|
Investments in common stock and warrants of
AVLP – a related party
|
|
|
5,486,000
|
|
|
|
500,000
|
|
|
|
—
|
|
|
|
4,986,000
|
|
Investment in common stock and warrants of
Alzamend – a related party
|
|
|
653,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
653,000
|
|
|
Investments in marketable equity securities
|
|
|
2,563,000
|
|
|
|
2,563,000
|
|
|
|
—
|
|
|
|
—
|
|
|
Investments in debt and equity securities
|
|
|
262,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
262,000
|
|
|
Total Investments
|
|
$
|
19,632,000
|
|
|
$
|
3,063,000
|
|
|
$
|
—
|
|
|
$
|
16,569,000
|
|
The Company assesses the inputs
used to measure fair value using the three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable
in the market.
Investments
The Company considers all
highly liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. The
fair values of these investments approximate their carrying values. In general, investments with original maturities of greater than three
months and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one
year may be classified as short-term based on their highly liquid nature and because such marketable securities represent the investment
of cash that is available for current operations.
Debt investments are classified
as available-for-sale and realized gains and losses are recorded using the specific identification method. The Company made an irrevocable
election to record available-for-sale debt investments at fair value utilizing the fair value option available under GAAP. The Company
believed that carrying these investments at fair value better portrayed the economic substance of the investments. Under the fair value
option, gains and losses on the debt investments are included in unrealized gains/(losses) on investments within net earnings each reporting
period. Fair value is calculated based on publicly available market information or other estimates determined by management. If the cost
of an investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, credit quality of debt
instrument issuers, and the extent to which the fair value is less than cost. To determine credit losses, the Company employs a systematic
methodology that considers available quantitative and qualitative evidence. In addition, the Company considers specific adverse conditions
related to the financial health of, and business outlook for, the investee. If the Company has plans to sell the security or it is more
likely than not that the Company will be required to sell the security before recovery, then a decline in fair value below cost is recorded
as an impairment charge in other income (expense), net and a new cost basis in the investment is established. If market, industry, and/or
investee conditions deteriorate, the Company may incur future impairments.
Equity Investments
The following discusses the
Company’s marketable equity securities, non-marketable equity securities, gains and losses on marketable and non-marketable equity
securities.
The Company’s marketable
equity securities are publicly traded stocks or funds measured at fair value and classified within Level 1 and 2 in the fair value hierarchy
because the Company uses quoted prices for identical assets in active markets or inputs that are based upon quoted prices for similar
instruments in active markets.
The Company’s non-marketable
equity securities are investments in privately held companies without readily determinable market values. The carrying value of the Company’s
non-marketable equity securities is adjusted to fair value upon observable transactions for identical or similar investments of the same
issuer or impairment (referred to as the measurement alternative). Non-marketable equity securities that have been remeasured during the
period based on observable transactions are classified within Level 2 or Level 3 in the fair value hierarchy because the Company estimates
the value based on valuation methods which may include a combination of the observable transaction price at the transaction date and other
unobservable inputs including volatility, rights, and obligations of the securities the Company holds. The fair value of non-marketable
equity securities that have been remeasured due to impairment are classified within Level 3.
The Company performs a qualitative
assessment on a periodic basis and recognizes an impairment if there are sufficient indicators that the fair value of the investment is
less than carrying value. Changes in value are recorded in other income (expense), net.
Derivatives
Derivative instruments are
recognized as either assets or liabilities and measured at fair value. The accounting for changes in the fair value of a derivative depends
on the intended use of the derivative and the resulting designation.
For derivative instruments
that are not designated as hedges, gains and losses from changes in fair values are primarily recognized in other income (expense), net.
The following table summarizes
the changes in investments in debt and equity securities measured and carried at fair value on a recurring basis with the use of significant
unobservable inputs (Level 3) for the nine months ended September 30, 2021:
|
|
|
Investments in
|
|
|
|
|
debt and equity
|
|
|
|
|
securities
|
|
|
Balance at January 1, 2021
|
|
$
|
262,000
|
|
|
Investment in convertible promissory notes
|
|
|
3,850,000
|
|
|
Investment in convertible preferred stock
|
|
|
2,850,000
|
|
|
Initial valuation of acquired warrants
|
|
|
2,673,000
|
|
|
Change in fair value of warrants
|
|
|
995,000
|
|
|
Conversion of loans to debt and equity securities
|
|
|
150,000
|
|
|
Unrealized gains on debt and equity securities
|
|
|
1,800,000
|
|
|
Conversion to marketable securities
|
|
|
(2,656,000
|
)
|
|
Balance at September 30, 2021
|
|
$
|
9,924,000
|
|
See Note 13 for the changes
in investments in AVLP, Alzamend and Ault & Company measured and carried at fair value on a recurring basis with the use of significant
unobservable inputs (Level 3) during the nine months ended September 30, 2021.
6.
Net incomE (Loss) per Share
Basic and diluted net income
per common share for the nine months ended September 30, 2021 are calculated as follows:
|
|
|
For the Nine Months Ended September 30, 2021
|
|
|
|
|
Income
|
|
|
Shares
|
|
|
Per-Share
|
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
Net income attributable to Ault Global Holdings
|
|
$
|
1,346,000
|
|
|
|
|
|
|
|
|
|
|
Less: Preferred stock dividends
|
|
|
(13,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
|
1,333,000
|
|
|
|
49,714,000
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock grants
|
|
|
-
|
|
|
|
431,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders plus assumed conversions
|
|
$
|
1,333,000
|
|
|
|
50,145,000
|
|
|
$
|
0.03
|
|
Net
loss per share is computed by dividing the net loss to common stockholders by the weighted
average number of common shares outstanding. The calculation of the basic and diluted earnings
per share is the same for all periods presented, excluding the nine months ended September
30, 2021, as the effect of the potential common stock equivalents is anti-dilutive due to
the Company’s net loss position for all periods presented. Anti-dilutive securities,
which are convertible into or exercisable for the Company’s common stock, consist of
the following at September 30, 2021 and 2020:
|
|
|
September 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Stock options
|
|
|
4,761,000
|
|
|
|
1,000
|
|
|
Warrants
|
|
|
5,936,000
|
|
|
|
3,582,000
|
|
|
Convertible notes
|
|
|
165,000
|
|
|
|
1,396,000
|
|
|
Conversion of preferred stock
|
|
|
2,000
|
|
|
|
2,000
|
|
|
Total
|
|
|
10,864,000
|
|
|
|
4,981,000
|
|
7.
Discontinued Operations
On March 16, 2020, to try
and mitigate the spread of COVID-19, San Diego County health officials issued orders mandating that all restaurants must end dine-in services.
As a result of these temporary closures and the deteriorating business conditions at the Company’s restaurant businesses, the Company
concluded that discontinuing the operations of I.AM, Inc. (“I.AM”) was ultimately in its best interest.
In the first quarter of 2020,
management determined that the permanent closing of the restaurant operations met the criteria for presentation as discontinued operations.
Accordingly, the results of the restaurant operations are presented as discontinued operations in the Company’s condensed consolidated
statements of operations and comprehensive loss and are excluded from continuing operations for all periods presented. On
November 2, 2020, I.AM filed a voluntary petition for bankruptcy under Chapter 7 in the United States Bankruptcy Court in the Central
District of California, Santa Ana Division, case number 8:20-bk-13076. As a result of I.AM’s bankruptcy filing on November 2, 2020,
Ault Global ceded authority for managing the business to the Bankruptcy Court. For this reason, the Company concluded that Ault Global
had lost control of I.AM, and no longer had significant influence over I.AM. Therefore, the Company deconsolidated I.AM effective with
the filing of the Chapter 11 bankruptcy in November 2020.
The restaurant operations
are included in the Company’s results as discontinued operations through March 16, 2020, the date of closing of the restaurants.
The following tables summarize the major classes of line items included in loss from discontinued operations:
|
|
|
For the Nine
|
|
|
|
|
Months Ended
|
|
|
|
|
September 30, 2020
|
|
|
Revenue
|
|
$
|
543,000
|
|
|
Cost of revenue
|
|
|
(160,000
|
)
|
|
Selling and marketing
|
|
|
—
|
|
|
General and administrative
|
|
|
(556,000
|
)
|
|
Impairment of property and equipment and right-of-use assets
|
|
|
(1,525,000
|
)
|
|
Loss from discontinued operations
|
|
$
|
(1,698,000
|
)
|
8. Marketable Equity Securities
Marketable securities in equity
securities with readily determinable market prices consisted of the following as of September 30, 2021 and December 31, 2020:
|
|
|
Marketable equity securities at September 30, 2021
|
|
|
|
|
|
|
|
|
Gross unrealized
|
|
|
Gross unrealized
|
|
|
|
|
|
|
|
|
Cost
|
|
|
gains
|
|
|
losses
|
|
|
Fair value
|
|
|
Common shares
|
|
$
|
55,233,000
|
|
|
$
|
2,112,000
|
|
|
$
|
(7,414,000
|
)
|
|
$
|
49,931,000
|
|
|
|
|
Marketable equity securities at December 31, 2020
|
|
|
|
|
|
|
|
|
Gross unrealized
|
|
|
Gross unrealized
|
|
|
|
|
|
|
|
|
Cost
|
|
|
gains
|
|
|
losses
|
|
|
Fair value
|
|
|
Common shares
|
|
$
|
1,506,000
|
|
|
$
|
1,083,000
|
|
|
$
|
(26,000
|
)
|
|
$
|
2,563,000
|
|
Marketable
Equity Securities
The following table presents additional information
about marketable equity securities:
|
|
|
Marketable
|
|
|
|
|
Equity Securities
|
|
|
Balance at January 1, 2021
|
|
$
|
2,563,000
|
|
|
Purchases of marketable equity securities in operations
|
|
|
338,620,000
|
|
|
Purchases of marketable equity securities
|
|
|
2,144,000
|
|
|
Conversion of debt securities to marketable securities
|
|
|
2,656,000
|
|
|
Sales of marketable equity securities in operations
|
|
|
(303,923,000
|
)
|
|
Sales of marketable equity securities
|
|
|
(430,000
|
)
|
|
Realized gains on marketable equity securities
|
|
|
19,040,000
|
|
|
Realized losses on marketable equity securities
|
|
|
(4,386,000
|
)
|
|
Unrealized gains on marketable equity securities
|
|
|
(6,353,000
|
)
|
|
Balance at September 30, 2021
|
|
$
|
49,931,000
|
|
At September 30, 2021 and
December 31, 2020, the Company had invested in the marketable equity securities of certain publicly traded companies. The Company’s
investment in marketable equity securities will be revalued on each balance sheet date.
At September 30, 2021 and
December 31, 2020, the Company also held an investment in a limited partnership. This investment does not have a readily determinable
fair value and has been measured at cost less impairment, if any, and adjusted for observable price changes for identical or similar investments.
Naked Brand Group Stock Purchase Agreement
On March 29, 2021, DP Lending
entered into a stock purchase agreement with an institutional investor (the “Seller”) to purchase 47,058,824 shares of Naked
Brand Group Limited (the “NAKD shares”). Under the agreement, DP Lending agreed to sell the NAKD shares and pay the Seller
99% of the net proceeds from the sale. In April 2021, DP Lending sold 47,058,824 shares of Naked Brand Group Limited for gross proceeds
of $29.3 million. DP Lending remitted 99% of the proceeds to the institutional investor and retained 1%, or $293,000, which was recorded
as revenue in April 2021.
9. LOANS
RECEIVABLE
Loans receivable are summarized as follows:
|
|
|
September 30, 2021
|
|
|
|
|
|
December 31, 2020
|
|
Loans receivable before allowances and discounts
|
|
$
|
9,114,000
|
|
|
|
|
|
|
$2,032,000
|
|
Allowances for uncollectible loans
|
|
|
(1,281,000
|
)
|
|
|
|
|
|
(1,281,000)
|
|
Unamortized discounts
|
|
|
(1,956,000
|
)
|
|
|
|
|
|
(1,000)
|
|
Loans
receivable
|
|
$
|
5,877,000
|
|
|
|
|
|
|
$750,000
|
DP Lending provides commercial
loans to companies throughout the United States to provide them with operating capital to finance the growth of their businesses.
Activity
related to loans receivable for the nine months ended September 30, 2021 is summarized as follows:
|
|
|
Loans Receivable
|
|
|
Balance at January 1, 2021
|
|
$
|
750,000
|
|
|
Investment in convertible promissory notes
|
|
|
4,923,000
|
|
|
Accretion of discount
|
|
|
366,000
|
|
|
Foreign currency loss
|
|
|
(8,000
|
)
|
|
Balance at September 30, 2021
|
|
$
|
5,877,000
|
|
10. PROPERTY AND EQUIPMENT, NET
During the quarter ended
September 30, 2021, the Company executed contracts to purchase 4,000 Antminer S-19 Pro Bitcoin miners. As of September
30, 2021, the Company had received 1,000 of the Bitcoin miners. The remaining 3,000 units are expected to be delivered at a rate
of 300 units per month between October 2021 and July 2022. The gross purchase price is $27.3 million, of which $18.1 million was paid
as of September 30, 2021 with the balance scheduled to be paid between October 2021 and June 2022. During the quarter ended September
30, 2021, the Company capitalized $433,000 of shipping costs and $1.2 million of third-party commissions related to cryptocurrency machines
and related equipment.
At September 30, 2021 and December 31,
2020, property and equipment consisted of:
|
|
|
September 30, 2021
|
|
|
December 31, 2020
|
|
|
Cryptocurrency machines and related equipment
|
|
$
|
20,362,000
|
|
|
$
|
567,000
|
|
|
Computer, software and related equipment
|
|
|
4,364,000
|
|
|
|
3,057,000
|
|
|
Office furniture and equipment
|
|
|
702,000
|
|
|
|
490,000
|
|
|
Land
|
|
|
2,567,000
|
|
|
|
—
|
|
|
Building
|
|
|
1,439,000
|
|
|
|
—
|
|
|
Leasehold improvements
|
|
|
4,229,000
|
|
|
|
1,352,000
|
|
|
|
|
|
33,663,000
|
|
|
|
5,466,000
|
|
|
Accumulated depreciation and amortization
|
|
|
(4,113,000
|
)
|
|
|
(3,343,000
|
)
|
|
Property and equipment, net
|
|
$
|
29,550,000
|
|
|
$
|
2,123,000
|
|
For the nine months ended
September 30, 2021 and 2020, depreciation expense amounted to $711,000 and $357,000, respectively.
Acquisition of Michigan
Cloud Data Center
On
January 29, 2021, Alliance Cloud Services, LLC, a majority-owned subsidiary of Ault Alliance, closed on the acquisition of a 617,000 square
foot energy-efficient facility located on a 34.5 acre site in southern Michigan for a purchase price of $3.9 million. The facility is
subject to a final corrective measures plan with the Environment Protection Agency. The seller performed remedial activities at the Michigan
facility relating to historical soil and groundwater contamination and the Company is responsible for ongoing monitoring and final remediation
plans. The Company’s estimated cost of the environmental remediation obligation is approximately $369,000 and reflects its best
estimate of probable future costs for remediation based on the current assessment data and regulatory obligations. Future costs will depend
on many factors, including the extent of work necessary to implement monitoring and final remediation plans and the Company’s time
frame for remediation. The Company may incur actual costs in the future that are materially different than this estimate and such costs
could have a material impact on results of operations, financial condition, and cash flows during the period in which they are recorded.
11. INTANGIBLE ASSETS, NET
At September 30, 2021 and December 31,
2020 intangible assets consisted of:
|
|
|
Useful Life
|
|
September 30, 2021
|
|
|
December 31, 2020
|
|
|
Trade name and trademark
|
|
Indefinite life
|
|
$
|
1,544,000
|
|
|
$
|
1,551,000
|
|
|
Customer list
|
|
10-14 years
|
|
|
3,421,000
|
|
|
|
3,441,000
|
|
|
Domain name and other intangible assets
|
|
5 years
|
|
|
688,000
|
|
|
|
690,000
|
|
|
|
|
|
|
|
5,653,000
|
|
|
|
5,682,000
|
|
|
Accumulated depreciation and amortization
|
|
|
|
|
(1,584,000
|
)
|
|
|
(1,292,000
|
)
|
|
Intangible assets, net
|
|
|
|
$
|
4,069,000
|
|
|
$
|
4,390,000
|
|
The Company’s
trade names and trademarks were determined to have an indefinite life. The remaining definite lived intangible assets are primarily
being amortized on a straight-line basis over their estimated useful lives. Amortization expense was $296,000 and $252,000,
respectively, for the nine months ended September 30, 2021 and 2020.
12. GOODWILL
The following table summarizes
the changes in the Company’s goodwill during the nine months ended September 30, 2021:
|
|
|
Goodwill
|
|
|
Balance as of January 1, 2021
|
|
$
|
9,646,000
|
|
|
Effect of exchange rate changes
|
|
|
(40,000
|
)
|
|
Balance as of September 30, 2021
|
|
$
|
9,606,000
|
|
13. INVESTMENTS – RELATED PARTIES
Investments in AVLP, Alzamend
and Ault & Company at September 30, 2021 and December 31, 2020, are comprised of the following:
Investment in Promissory
Notes, Related Parties
|
|
|
Interest
|
|
Due
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
Rate
|
|
Date
|
|
|
2021
|
|
|
2020
|
|
|
Investment in convertible promissory note of AVLP
|
|
12%
|
|
December 31, 2023
|
|
|
$
|
16,549,000
|
|
|
$
|
11,269,000
|
|
|
Short-term advance in Alzamend
|
|
|
|
|
|
|
|
-
|
|
|
|
750,000
|
|
|
Investment in convertible promissory note of Alzamend
|
|
|
|
|
|
|
|
-
|
|
|
|
50,000
|
|
|
Investment in promissory note of Ault & Company
|
|
8%
|
|
February 25, 2022
|
|
|
|
2,500,000
|
|
|
|
-
|
|
|
Accrued interest receivable, AVLP
|
|
|
|
|
|
|
|
2,025,000
|
|
|
|
2,025,000
|
|
|
Accrued interest receivable, Ault & Company and Alzamend
|
|
|
|
|
|
|
|
120,000
|
|
|
|
2,000
|
|
|
Total investment in promissory notes, related parties – gross
|
|
|
|
|
|
|
|
21,194,000
|
|
|
|
14,096,000
|
|
|
Less: original issue discount
|
|
|
|
|
|
|
|
-
|
|
|
|
(4,000
|
)
|
|
Less: provision for loan losses, AVLP
|
|
|
|
|
|
|
|
(2,000,000
|
)
|
|
|
(3,424,000
|
)
|
|
Total investment in promissory notes, related parties
|
|
|
|
|
|
|
$
|
19,194,000
|
|
|
$
|
10,668,000
|
|
Investment in Common
Stock and Warrants, Related Parties
|
|
|
Weighted Avg.
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
Contractual Term
|
|
2021
|
|
|
2020
|
|
|
Investment in warrants of AVLP
|
|
2.9 years
|
|
$
|
-
|
|
|
$
|
4,986,000
|
|
|
Investment in common stock of AVLP
|
|
|
|
|
60,000
|
|
|
|
500,000
|
|
|
Investment in warrants of Alzamend
|
|
4.7 years
|
|
|
4,070,000
|
|
|
|
11,000
|
|
|
Investment in common stock of Alzamend
|
|
|
|
|
20,781,000
|
|
|
|
642,000
|
|
|
Total investment in common stock and warrants, related parties
|
|
|
|
$
|
24,911,000
|
|
|
$
|
6,139,000
|
|
The following table summarizes
the changes in the Company’s investments in AVLP, Alzamend and Ault & Company during the nine months ended September 30, 2021:
|
|
|
|
|
|
Investment in
|
|
|
|
|
|
|
|
Investment in
|
|
|
promissory notes
|
|
|
Total
|
|
|
|
|
warrants and
|
|
|
and advances
|
|
|
investment in
|
|
|
|
|
common stock
|
|
|
of AVLP,
|
|
|
AVLP, Alzamend
|
|
|
|
|
of AVLP and
|
|
|
Alzamend and
|
|
|
and Ault &
|
|
|
|
|
Alzamend
|
|
|
Ault & Company
|
|
|
Company, net
|
|
|
Balance at January 1, 2021
|
|
$
|
6,139,000
|
|
|
$
|
10,668,000
|
|
|
$
|
16,807,000
|
|
|
Investment in convertible promissory notes of AVLP
|
|
|
—
|
|
|
|
2,494,000
|
|
|
|
2,494,000
|
|
|
Investment in convertible promissory note of Alzamend
|
|
|
—
|
|
|
|
(50,000
|
)
|
|
|
(50,000
|
)
|
|
Investment in promissory note of Ault & Company
|
|
|
—
|
|
|
|
2,500,000
|
|
|
|
2,500,000
|
|
|
Investment in common stock of AVLP and Alzamend
|
|
|
16,118,000
|
|
|
|
—
|
|
|
|
16,118,000
|
|
|
Investment in warrants of Alzamend
|
|
|
1,490,000
|
|
|
|
—
|
|
|
|
1,490,000
|
|
|
Short-term advance in Alzamend
|
|
|
—
|
|
|
|
(750,000
|
)
|
|
|
(750,000
|
)
|
|
Fair value of warrants issued by AVLP
|
|
|
2,786,000
|
|
|
|
—
|
|
|
|
2,786,000
|
|
|
Unrealized loss in warrants of AVLP
|
|
|
(7,772,000
|
)
|
|
|
—
|
|
|
|
(7,772,000
|
)
|
|
Unrealized gain in warrants of Alzamend
|
|
|
2,568,000
|
|
|
|
—
|
|
|
|
2,568,000
|
|
|
Unrealized gain in common stock of AVLP and Alzamend
|
|
|
3,582,000
|
|
|
|
—
|
|
|
|
3,582,000
|
|
|
Accretion of discount
|
|
|
—
|
|
|
|
4,213,000
|
|
|
|
4,213,000
|
|
|
Accrued interest
|
|
|
—
|
|
|
|
119,000
|
|
|
|
119,000
|
|
|
Balance at September 30, 2021
|
|
$
|
24,911,000
|
|
|
$
|
19,194,000
|
|
|
$
|
44,105,000
|
|
Investments in AVLP
The Company’s investments
in AVLP, a related party controlled by Philou Ventures, LLC (“Philou”), an affiliate of the Company, consist of convertible
promissory notes, warrants and shares of AVLP common stock. As of September 30, 2021, loans to AVLP totaled $16.5 million and, in addition
to the 12% convertible promissory notes, AVLP has issued to the Company warrants to purchase 33.1 million shares of AVLP common stock
at an exercise price of $0.50 per share and an initial contractual term of five years.
During the nine months
ended September 30, 2021, the Company recorded an unrealized loss of $7.7
million due to the decline in value of the warrant derivative securities that the Company received as a result of its
investment in AVLP. The unrealized loss was recorded in accumulated other comprehensive loss in the stockholder’s equity
section of the Company’s consolidated balance sheet. The Company’s investment in AVLP will be revalued on each balance
sheet date.
Fair Value Assessment of Convertible Notes
- AVLP
During the nine months ended
September 30, 2021 and 2020, no interest income was recognized from the Company’s investment in convertible promissory notes in
AVLP. The Company evaluated the collectability of both interest and principal for the convertible promissory notes in AVLP to determine
whether there was an impairment. At September 30, 2021, the Company determined that the fair value of the convertible promissory notes
in AVLP was $16.6 million. The Company’s determination of fair value requires significant judgments
and are based on significant assumptions related to the borrower’s credit risk, financial performance, expected sales, and estimated
fair value of the collateral.
Fair Value Assessment of Common Stock –
AVLP
In aggregate, the Company
has 999,175 shares of AVLP common stock which represents 18.0% of AVLP’s outstanding shares of common stock.
As a result of new rules implemented
by the SEC, which became effective September 28, 2021, shares of AVLP were
no longer eligible for quotation on the “Pink – No Information” tier operated by the OTC Markets Group, Inc. Under the
new rules, companies like AVLP are required to have current financial information publicly available for brokers to publish competing
quotes and provide continuous market making. As AVLP does not have financial information publicly available, AVLP was removed from the
Pink Market, which resulted in almost a complete loss of liquidity for shares of AVLP common stock.
Shares of AVLP are available
only through the “Expert Market” tier operated by the OTC Markets Group, in which quotes are “unsolicited only.”
That means broker-dealers can publish unsolicited quotes representing limit orders from customers who are not affiliates or insiders of
the issuer. However, many broker-dealers will not effectuate trades in securities that are not eligible for competing quotes, such as
those on the Expert Market tier. Quotations in Expert Market tier securities are only made available to broker-dealers, institutions and
other sophisticated investors. Securities that are on Expert Market tier do not have trading bid and ask prices and share trading volumes
publicly quoted. As a result, any transactions would be unknown to the public marketplace and would not provide stockholders with a reliable
market value for their shares.
At September 30, 2021, the
Company estimated the fair value of AVLP’s common stock was $0.06 per share, a decrease from $0.50 at December 31, 2020. Based
upon the estimated fair value of AVLP common stock at September 30, 2021, the Company’s investment in AVLP common stock had an unrealized
loss of $688,000.
Variable Interest Entity Considerations - AVLP
The Company has determined
that AVLP is a VIE as it does not have sufficient equity at risk. The Company does not consolidate AVLP because the Company is not the
primary beneficiary and does not have a controlling financial interest. To be a primary beneficiary, an entity must have the power to
direct the activities of a VIE that most significantly impact the VIE’s economic performance, among other factors. Although the
Company has made a significant investment in AVLP, the Company has determined that Philou, which controls AVLP through the voting power
conferred by its equity investment and which is deemed to be more closely associated with AVLP, is the primary beneficiary. As a result,
AVLP’s financial position and results of operations are not consolidated in the Company’s financial position and results of
operations.
Extension of AVLP Loan Agreement
On April 13, 2021, the AVLP
Loan Agreement was increased to up to $15 million and extended to December 31, 2023. On June 4, 2021, the AVLP Loan Agreement was
increased to up to $20 million.
Investments in Alzamend Common Stock and Warrants
The following table summarizes
the changes in the Company’s investments in Alzamend common stock during the nine months ended September 30, 2021:
|
|
|
Shares of
|
|
|
Per Share
|
|
|
Investment in
|
|
|
|
|
Common Stock
|
|
|
Price
|
|
|
Common Stock
|
|
|
Balance at January 1, 2021
|
|
|
427,888
|
|
|
$
|
1.50
|
|
|
$
|
642,000
|
|
|
Purchase of shares from an Alzamend shareholder
|
|
|
62,500
|
|
|
$
|
0.80
|
|
|
|
50,000
|
|
|
March 9, 2021 securities purchase agreement
|
|
|
4,000,000
|
|
|
$
|
1.13
|
|
|
|
4,510,000
|
|
|
Investment in Alzamend initial public offering
|
|
|
2,000,000
|
|
|
$
|
5.00
|
|
|
|
10,000,000
|
|
|
Open market purchases after initial public offering
|
|
|
230,000
|
|
|
$
|
7.17
|
|
|
|
1,648,000
|
|
|
Unrealized gain in common stock of Alzamend
|
|
|
|
|
|
|
|
|
|
|
3,849,000
|
|
|
Investment in Alzamend common stock
|
|
|
6,720,388
|
|
|
$
|
3.08
|
|
|
|
20,699,000
|
|
|
Investment in Alzamend options
|
|
|
|
|
|
|
|
|
|
|
82,000
|
|
|
Balance at September 30, 2021
|
|
|
|
|
|
|
|
|
|
$
|
20,781,000
|
|
At December 31, 2020, the
Company had provided Alzamend a short-term advance of $750,000 and invested $50,000 in an 8% convertible promissory note. In conjunction
with the issuance of the 8% convertible promissory note, Alzamend issued to the Company warrants to purchase 16,667 shares of Alzamend
common stock at an exercise price of $3.00 per share for a period of five years.
On
March 9, 2021, DP Lending entered into a securities purchase agreement with Alzamend to invest $10.0 million in Alzamend common stock
and warrants, subject to the achievement of certain milestones. DP Lending funded $4.0 million upon execution of the securities purchase
agreement, which included the conversion of the short-term advance and convertible promissory note in the aggregate amount of $800,000.
The remaining $6.0 million will be funded upon Alzamend achieving certain milestones related to the U.S. Food and Drug Administration
approval of Alzamend’s Investigational New Drug application and Phase 1a human clinical trials for Alzamend’s lithium based
ionic cocrystal therapy, known as AL001. Under the securities purchase agreement, in aggregate, Alzamend has agreed to sell up to 6,666,667
shares of its common stock to DP Lending for $10.0 million, or $1.50 per share, and issue to DP Lending warrants to acquire 3,333,334
shares of Alzamend common stock with an exercise price of $3.00 per share. The transaction was approved by the Company’s independent
directors after receiving a third-party valuation report on Alzamend.
On
June 15, 2021, Alzamend closed an initial public offering at a price to the public of $5.00 per share. DP Lending purchased 2 million
shares of Alzamend’s Common stock in the initial public offering for an aggregate of $10 million. Alzamend’s common stock
is listed on The Nasdaq Capital Market under the ticker symbol “ALZN”.
On
July 28, 2021, Alzamend received from the U.S. Food and Drug Administration a “Study May Proceed” letter for a Phase 1 study
under the Alzamend’s Investigational New Drug application for AL001, a lithium-based ionic cocrystal oral therapy for patients with
dementia related to mild, moderate, and severe cognitive impairment associated with Alzheimer’s disease.
Based
on the achievement of this milestone, under the March 9, 2021 securities purchase agreement, Alzamend sold an additional 1,333,333 shares
of its common stock to DPL for $2 million, or $1.50 per share, and issued to DPL warrants to acquire 666,667 shares of Alzamend common
stock with an exercise price of $3.00 per share.
At September 30, 2021, the
fair value of Alzamend’s common stock was $3.08 based on the closing price of Alzamend’s common stock. Based upon the fair
value of Alzamend common stock at September 30, 2021, during the nine months ended September 30, 2021, the Company recorded an unrealized
gain of $3.8 million related to its investment in Alzamend common stock.
In conjunction with the March
2021 securities purchase agreement, Alzamend issued to the Company warrants to purchase 1,333,334 shares of Alzamend common stock at an
exercise price of $3.00 per share for a period of five years. The Company computed the fair value of Alzamend warrants using the Black-Scholes
option pricing model. During the nine months ended September 30, 2021, the Company recorded an unrealized gain on its investment in warrants
of Alzamend of $2.6 million. The Company’s investment in Alzamend will be revalued on each balance sheet date.
Fair Value Assessment of Alzamend Warrants
The fair value of the Company’s
holdings in the 2,016,667 Alzamend warrants was estimated using the Black-Scholes option-pricing method and the following assumptions:
|
|
|
|
|
Exercise price
|
|
$3.00
|
|
Remaining contractual term (in years)
|
|
3.9 — 4.8
|
|
Volatility
|
|
86.3%
|
|
Weighted average risk free interest rate
|
|
0.76% — 0.98%
|
|
Expected dividend yield
|
|
0%
|
Significant Fluctuation
in the Fair Value of Investment in Alzamend
Revenues
from the Company’s trading activities during the nine months ended September 30, 2021 included significant net gains on equity securities,
including unrealized gains and losses from market price changes. These gains and losses have caused, and will continue to cause, significant
volatility in the Company’s periodic earnings.
At
September 30, 2021, the fair value of Alzamend’s common stock was $3.08 based on the closing price of Alzamend’s common stock.
Based upon the fair value of Alzamend common stock at September 30, 2021, during the three months ended September 30, 2021, the Company
recorded an unrealized loss of $27.4 million related to its investment in Alzamend common stock and during the nine months ended September
30, 2021, the Company recorded an unrealized gain of $3.8 million related to its investment in Alzamend common stock.
During
the three months ended September 30, 2021, the Company recorded an unrealized loss on its investment in warrants of Alzamend of $6.0 million
and during the nine months ended September 30, 2021, the Company recorded an unrealized gain on its investment in warrants of Alzamend
of $2.6 million. The Company’s investment in Alzamend will be revalued on each balance sheet date.
Investment in Ault
& Company
On
February 25, 2021, Ault & Company, a related party, sold and issued an 8% Secured Promissory Note in the principal
amount of $2.5 million to the Company. The principal amount of the Secured Promissory Note, plus any accrued and unpaid
interest at a rate of 8% per annum, is due and payable on February 25, 2022. The carrying value of the 8% Secured Promissory
Note is considered to be a reasonable estimate of its fair value.
14.
INVESTMENT PARTNERSHIP
Investments in the Alpha Fund
During fiscal year 2021, the
Company has invested in the Alpha Fund. The Alpha Fund operates as a private investment fund. The general partner of the Alpha Fund, Ault
Alpha GP LLC (“Alpha GP”) is owned by Ault Capital Management LLC (the “Investment Manager”), which also acts
as the investment manager to the Alpha Fund. The Investment Manager is owned by Ault & Company, Inc. (“Ault & Co.”).
Messrs. Ault, Horne and Nisser as well as Kenneth Cragun, who serve as executive officers and/or directors of the Company, are executive
officers of the Investment Manager, and Messrs. Ault, Horne and Nisser are executive officers and directors of Ault & Company.
As of September 30, 2021,
the Company subscribed for $10 million of limited partnership interests in the Alpha Fund, of which $7.5 million was funded, and was the
only limited partner in the Alpha Fund at such date. These investments are subject to a rolling five-year lock-up period, provided that
after three years, Alpha GP will waive the last twenty-four (24) months of the lock-up period upon receipt of written notice from an executive
officer of the Company that a withdrawal of capital is required to prevent a going concern opinion from the Company’s auditors,
under the terms of the Alpha Fund’s partnership agreement and side letter entered into between the Company and the Alpha Fund.
The Company consolidates Alpha
Fund as a VIE due to its significant level of influence and control of Alpha Fund, the size of its investment, and its ability to participate
in policy making decisions, the Company is considered the primary beneficiary of the VIE.
Investments by Alpha Fund
The Alpha Fund has purchased
shares of the Company’s common stock in open market transactions. As of September 30, 2021, the Alpha Fund owned 1,000,000 shares
of the Company’s common stock, accounted for as treasury stock as of September 30, 2021.
15. EXECUTIVE CHAIRMAN RELOCATION BENEFIT
On February 23, 2021, as
part of a relocation benefit for the Company’s Executive Chairman, Milton C. Ault, III, related to the Company moving its
corporate headquarters from Newport Beach, CA to Las Vegas, NV, the Company agreed to purchase Mr. Ault’s California residence
for $2.7
million. The transaction was structured such that upon the closing of the subsequent sale of the residence, the Company shall have
not recognized a gain or a loss on the transaction. The Company and Mr. Ault agreed to escrow $254,000
of the purchase price in the event of a loss on the subsequent sale of the residence. During April 2021, the Company entered into an
agreement for the subsequent sale of the residence, which closed on April 19, 2021.
16. STOCK-BASED COMPENSATION
The options outstanding as of September 30, 2021,
have been classified by exercise price, as follows:
|
Outstanding
|
|
|
Exercisable
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
Exercise
|
|
|
Number
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
|
Price
|
|
|
Outstanding
|
|
|
Life (Years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
$2.51
|
|
|
|
1,760,000
|
|
|
9.90
|
|
|
$
|
2.51
|
|
|
|
141,900
|
|
|
$
|
2.51
|
|
|
$480 - $560
|
|
|
|
894
|
|
|
4.20
|
|
|
$
|
537.34
|
|
|
|
774
|
|
|
$
|
533.84
|
|
|
$1,208 - $1,352
|
|
|
|
25
|
|
|
2.50
|
|
|
$
|
1,336.00
|
|
|
|
25
|
|
|
$
|
1,336.00
|
|
|
$480 - $1,352
|
|
|
|
1,760,919
|
|
|
9.90
|
|
|
$
|
2.80
|
|
|
|
142,699
|
|
|
$
|
5.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuances Outside of Plans
|
|
$1.79
|
|
|
|
850,000
|
|
|
8.97
|
|
|
$
|
1.79
|
|
|
|
569,591
|
|
|
$
|
1.79
|
|
|
$2.46 - $2.55
|
|
|
|
2,150,000
|
|
|
9.58
|
|
|
$
|
2.54
|
|
|
|
-
|
|
|
|
-
|
|
|
$1.79 - $2.55
|
|
|
|
3,000,000
|
|
|
9.41
|
|
|
$
|
2.33
|
|
|
|
569,591
|
|
|
$
|
1.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Options
|
|
$1.79 - $1,856
|
|
|
|
4,760,919
|
|
|
9.59
|
|
|
$
|
2.50
|
|
|
|
712,290
|
|
|
$
|
2.56
|
|
The
total stock-based compensation expense related to stock options and stock awards issued to the Company’s employees,
consultants and directors, included in reported net loss for the three and nine months ended September 30, 2021 and 2020, was
comprised as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
General and administrative
|
|
$
|
4,148,000
|
|
|
$
|
20,000
|
|
|
$
|
4,732,000
|
|
|
$
|
272,000
|
|
|
Total stock-based compensation
|
|
$
|
4,148,000
|
|
|
$
|
20,000
|
|
|
$
|
4,732,000
|
|
|
$
|
272,000
|
|
A summary of option activity
under the Company’s stock option plans as of September 30, 2021, and changes during the nine months ended are as follows:
|
|
|
|
|
|
|
Outstanding Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
Available
|
|
|
Number
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
|
for Grant
|
|
|
of Options
|
|
|
Price
|
|
|
Life (years)
|
|
|
Value
|
|
|
January 1, 2020
|
|
|
103,105
|
|
|
|
1,388
|
|
|
$
|
636.47
|
|
|
6.33
|
|
|
$
|
0
|
|
|
Restricted stock awards
|
|
|
(96,875
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
463
|
|
|
|
(463
|
)
|
|
|
780.54
|
|
|
|
|
|
|
|
|
|
January 1, 2021
|
|
|
6,693
|
|
|
|
925
|
|
|
$
|
564.43
|
|
|
4.87
|
|
|
$
|
0
|
|
|
Authorized
|
|
|
7,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options granted
|
|
|
(1,760,000
|
)
|
|
|
1,760,000
|
|
|
$
|
2.51
|
|
|
|
|
|
|
|
|
|
Restricted stock awards
|
|
|
(1,070,000
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
6
|
|
|
|
(6
|
)
|
|
$
|
1,352
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
|
4,676,699
|
|
|
|
1,760,919
|
|
|
$
|
2.80
|
|
|
9.90
|
|
|
$
|
0
|
|
As of September 30, 2021,
there was $3.3 million of unrecognized compensation cost related to non-vested stock-based compensation arrangements granted under the
Company’s stock incentive plans. That expense is expected to be recognized over a weighted average period of 3.54 years.
GWW Stock-Based Compensation
On May 25, 2021, GWW issued
to Jonathan Read, its Chief Executive Officer, and Timothy Long, its Chief Operating Officer, options to purchase an aggregate total of
100,000 shares of GWW Class A common stock, at an exercise price per share of $14.64. The options vest over a four-year period. Additionally,
Messrs. Read and Long were also granted a restricted stock award to acquire an aggregate of 50,000 shares of GWW Class A common stock,
vesting annually over a three-year term. As of the date of grant, the authorized share capital of GWW is 1,000,000 shares of Class A common
stock, of which 700,000 shares were issued and outstanding, 500,000 shares of Class B common stock of which 500,000 shares were issued
and outstanding and 100,000 shares of preferred stock of which no shares of which were outstanding. The stock-based compensation expense
related to the options included in reported net loss for the three and nine months ended September 30, 2021 was $42,000 and $587,000,
respectively, based on the estimated fair value of the options on the date of issuance. The estimated fair value of the options was based
on observable market prices of the Company’s common stock and extrapolated to GWW based upon its relative fair value within the
Company as determined by equal weighting of revenues, operating income, and net tangible assets between the Company’s subsidiaries.
As of September 30, 2021, there was $472,000 of unrecognized compensation cost related to non-vested stock-based compensation arrangements
with Messrs. Read and Long. That cost is expected to be recognized over a weighted average period of 2.7 years.
17. WARRANTS
During the nine months ended
September 30, 2021, the Company did not issue any warrants. The following table summarizes information about common stock warrants outstanding
at September 30, 2021:
|
Outstanding
|
|
|
Exercisable
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
Exercise
|
|
Number
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
|
Price
|
|
Outstanding
|
|
|
Life (Years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
$—
|
|
|
6,500
|
|
|
|
2.50
|
|
|
$
|
—
|
|
|
|
6,500
|
|
|
$
|
—
|
|
|
$0.88 - $3.01
|
|
|
5,864,410
|
|
|
|
2.99
|
|
|
$
|
1.81
|
|
|
|
5,864,410
|
|
|
|
$1.81
|
|
|
$8.00 - $19.80
|
|
|
53,452
|
|
|
|
2.63
|
|
|
$
|
12.74
|
|
|
|
53,452
|
|
|
|
$12.74
|
|
|
$440 - $920
|
|
|
16,225
|
|
|
|
1.45
|
|
|
$
|
733.40
|
|
|
|
16,225
|
|
|
|
$733.40
|
|
|
$1,040 - $2,000
|
|
|
2,367
|
|
|
|
1.43
|
|
|
$
|
1,404.85
|
|
|
|
2,367
|
|
|
|
$1,404.85
|
|
|
$0.88 - $2,000.00
|
|
|
5,942,954
|
|
|
|
3.98
|
|
|
$
|
4.46
|
|
|
|
5,942,954
|
|
|
$
|
4.46
|
|
The Company utilized the Black-Scholes
option pricing model and the assumptions used during the nine months ended September 30, 2021:
|
|
|
|
Exercise price
|
$0.88 - $3.01
|
|
Remaining contractual term (in years)
|
1.4 - 5.0
|
|
Volatility
|
86.3% - 104.6%
|
|
Risk free interest rate
|
0.17% - 1.38%
|
|
Expected dividend yield
|
0%
|
18. OTHER CURRENT LIABILITIES
Other current liabilities at September
30, 2021 and December 31, 2020 consisted of:
|
|
|
September 30, 2021
|
|
|
December 31, 2020
|
|
|
Accrued payroll and payroll taxes
|
|
$
|
3,213,000
|
|
|
$
|
1,412,000
|
|
|
Warranty liability
|
|
|
90,000
|
|
|
|
91,000
|
|
|
Deferred tax liability
|
|
|
-
|
|
|
|
18,000
|
|
|
Other accrued expenses
|
|
|
305,000
|
|
|
|
269,000
|
|
|
|
|
$
|
3,608,000
|
|
|
$
|
1,790,000
|
|
19. LEASES
The Company has operating
leases for office space. The Company’s leases have remaining lease terms of 1.5 years to ten years, some of
which may include options to extend the leases perpetually, and some of which may include options to terminate the leases within one year.
The following table provides
a summary of leases by balance sheet category as of September 30, 2021:
|
|
|
September 30, 2021
|
|
|
Operating right-of-use assets
|
|
$
|
5,201,000
|
|
|
Operating lease liability - current
|
|
|
1,014,000
|
|
|
Operating lease liability - non-current
|
|
|
4,265,000
|
|
The components of lease expenses
for the nine months ended September 30, 2021, were as follows:
|
|
|
Nine Months Ended
|
|
|
|
|
September 30, 2021
|
|
|
Operating lease cost
|
|
$
|
1,025,000
|
|
|
Short-term lease cost
|
|
|
—
|
|
|
Variable lease cost
|
|
|
—
|
|
The following tables provides
a summary of other information related to leases for the nine months ended September 30, 2021:
|
|
|
September 30, 2021
|
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
Operating cash flows from operating leases
|
|
$
|
1,025,000
|
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities
|
|
$
|
—
|
|
|
Weighted-average remaining lease term - operating leases
|
|
|
6.4 years
|
|
|
Weighted-average discount rate - operating leases
|
|
|
8.0
|
%
|
The Company determined that
using a weighted average discount rate of 8% is reasonable, as this is consistent with the mortgage rates for commercial properties for
the time period commensurate with the terms of the leases.
Maturity of lease liabilities
under the Company’s non-cancellable operating leases as of September 30, 2021, were as follows:
|
Payments due by period
|
|
|
|
|
2021 (remainder)
|
|
$
|
380,000
|
|
|
2022
|
|
|
1,428,000
|
|
|
2023
|
|
|
1,130,000
|
|
|
2024
|
|
|
1,018,000
|
|
|
2025
|
|
|
751,000
|
|
|
Thereafter
|
|
|
2,180,000
|
|
|
Total lease payments
|
|
|
6,887,000
|
|
|
Less interest
|
|
|
(1,608,000
|
)
|
|
Present value of lease liabilities
|
|
$
|
5,279,000
|
|
20. NOTES PAYABLE
Notes payable at September
30, 2021 and December 31, 2020, were comprised of the following:
|
|
|
Interest
Rate
|
|
|
Due
Date
|
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
Esousa purchased notes
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
200,000
|
|
|
Short-term notes payable
|
|
|
12.0%
|
|
|
|
Past Due
|
|
|
|
660,000
|
|
|
|
1,089,000
|
|
|
Notes payable to Wells Fargo
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
183,000
|
|
|
Note payable to Dept. of Economic and Community Development
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
196,000
|
|
|
Paycheck Protection Program Loans
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
1,162,000
|
|
|
SBA Economic Injury Disaster Loan
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
150,000
|
|
|
Short-term bank credit
|
|
|
3.9%
|
|
|
|
2021
|
|
|
|
1,037,000
|
|
|
|
1,404,000
|
|
|
Total notes payable
|
|
|
|
|
|
|
|
|
|
$
|
1,697,000
|
|
|
$
|
4,384,000
|
|
|
Less: current portion
|
|
|
|
|
|
|
|
|
|
|
(1,697,000
|
)
|
|
|
(4,048,000
|
)
|
|
Notes payable – long-term portion
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
336,000
|
|
Master Exchange Agreement
On
February 10, 2020, the Company entered into a master exchange agreement (the “Master Exchange Agreement”) with Esousa Holdings,
LLC (“Esousa”) which acquired certain promissory notes that had been previously issued by the Company. During January 2021,
the Company issued to Esousa an aggregate of 183,214
shares of the Company’s common stock upon the exchange of principal and interest in the aggregate amount of $216,000. A loss on extinguishment of $234,000
was recognized on the issuance of common stock based on the fair value of the Company’s common stock at the date of the
exchanges.
Paycheck
Protection Program
During
April 2020, the Company received loans under the Paycheck Protection Program (“PPP”)
in the principal amount of $715,000 and the Company’s majority owned subsidiary, Microphase, received
loans in the principal amount of $467,000. On January 11, 2021, the Company received forgiveness in the principal amount of $715,000.
On May 20, 2021, Microphase received forgiveness in the principal amount of $467,000.
21. NOTES PAYABLE – RELATED PARTIES
Notes payable – related
parties at September 30, 2021 and December 31, 2020, were comprised of the following:
|
|
|
September 30, 2021
|
|
|
December 31, 2020
|
|
|
Notes payable, related parties
|
|
$
|
—
|
|
|
$
|
240,000
|
|
|
Less: current portion
|
|
|
—
|
|
|
|
(188,000
|
)
|
|
Notes payable, related parties – long-term portion
|
|
$
|
—
|
|
|
$
|
52,000
|
|
Microphase was party to several
notes payable agreements with six of its past officers, employees and their family members. As of September 30, 2021, the related party
notes payable were paid in full.
22. CONVERTIBLE NOTES
Convertible notes payable
at September 30, 2021 and December 31, 2020, were comprised of the following:
|
|
|
Interest
Rate
|
|
Due Date
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
Convertible promissory note
|
|
4%
|
|
May 13, 2024
|
|
$
|
660,000
|
|
|
$
|
660,000
|
|
|
Less: Unamortized debt discounts
|
|
|
|
|
|
|
(213,000
|
)
|
|
|
(274,000
|
)
|
|
Total convertible notes payable, net of financing cost
|
|
|
|
|
|
$
|
447,000
|
|
|
$
|
386,000
|
|
4% Convertible Promissory Note
On May 20, 2019, the Company
entered into a securities purchase agreement with an investor to sell, for a purchase price of $500,000, a 4% original issue discount
(“OID”) convertible promissory note with an aggregate principal face amount of $660,000 and a five-year warrant to purchase
an aggregate of 12,500 shares of the Company’s common stock. The Company is required to make quarterly interest payments and the
principal amount of the note is due on May 20, 2024. The note is convertible into shares of common stock at $4.00 per share. The exercise
price of the warrant is $12.00 per share. In addition, the Executive Chairman of the Company agreed to guarantee and act as surety for
the Company’s obligation to repay the note pursuant to a personal guarantee.
The Company computed the fair
value of the warrants using the Black-Scholes option pricing model and, as a result of this calculation, recorded debt discount in the
amount of $58,000 based on the estimated fair value of the warrants. At the time of issuance of the note, the closing price of the common
stock was in excess of the effective conversion price, resulting in a beneficial conversion feature
(“BCF”) of $188,000, based on the difference between the effective conversion price and the fair value of the Company’s
common stock at the commitment date of the transaction.
In aggregate, the Company
recorded a debt discount in the amount of $407,000 based on the relative fair values of the warrants, BCF and OID. During each of the
nine months ended September 30, 2021 and 2020, non-cash interest expense of $40,000 was recorded from the amortization of debt discounts.
The fair value of the warrants was estimated using the Black-Scholes option-pricing method. The risk-free rate of 2.18% was derived from
the U.S. Treasury yield curve, matching the term of the warrant, in effect at the measurement date. The volatility factor of 87.51% was
determined based on historical stock prices of similar technology companies.
23. COMMITMENTS AND CONTINGENCIES
Blockchain Mining Supply and Services, Ltd.
On November 28, 2018, Blockchain
Mining Supply and Services, Ltd. (“Blockchain Mining”) a vendor who sold computers to the Company’s subsidiary, filed
a Complaint (the “Complaint”) in the United States District Court for the Southern District of New York against the Company
and the Company’s subsidiary, Digital Farms, Inc. (f/k/a Super Crypto Mining, Inc.), in an action captioned Blockchain Mining
Supply and Services, Ltd. v. Super Crypto Mining, Inc. and DPW Holdings, Inc., Case No. 18-cv-11099.
The Complaint asserts claims
for breach of contract and promissory estoppel against the Company and its subsidiary arising from the subsidiary’s alleged failure
to honor its obligations under the purchase agreement. The Complaint seeks monetary damages in excess of $1,388,495, plus attorneys’
fees and costs.
The Company intends to vigorously
defend against the claims asserted against it in this action.
On April 13, 2020, the Company
and its subsidiary, jointly filed a motion to dismiss the Complaint in its entirety as against us, and the promissory estoppel claim as
against its subsidiary. On the same day, the Company’s subsidiary also filed a partial Answer to the Complaint in connection with
the breach of contract claim.
On April 29, 2020, Blockchain
Mining filed an amended complaint (the “Amended Complaint”). The Amended Complaint asserts the same causes of action and seeks
the same damages as the initial Complaint.
On May 13, 2020, the Company
and its subsidiary, jointly filed a motion to dismiss the Amended Complaint in its entirety as against the Company, and the promissory
estoppel claim as against of its subsidiary. On the same day, the Company’s subsidiary also filed a partial Answer to the Amended
Complaint in connection with the breach of contract claim.
In its partial Answer, the
Company’s subsidiary admitted to the validity of the contract at issue and also asserted numerous affirmative defenses concerning
the proper calculation of damages.
On December 4, 2020, the Court
issued an Order directing the Parties to engage in limited discovery (the “Limited Discovery”) to be completed by March 4,
2021. In connection therewith, the Court also denied the defendants’ motion to dismiss without prejudice.
On June 2, 2021, the Company
and its subsidiary filed a motion to dismiss the amended complaint in its entirety as against the Company, and the promissory estoppel
claim as against the subsidiary.
The motion to dismiss has
been fully briefed and is currently pending before the Court.
Based on the Company’s
assessment of the facts underlying the claims, the uncertainty of litigation, and the preliminary stage of the case, the Company cannot
reasonably estimate the potential loss or range of loss that may result from this action. Notwithstanding, the Company has established
a reserve in the amount of the unpaid portion of the purchase agreement, which is included in accounts payable and accrued expenses. An
unfavorable outcome may have a material adverse effect on the Company’s business, financial condition and results of operations.
Ding Gu (a/k/a Frank Gu) and Xiaodan Wang Litigation
On January 17, 2020, Ding
Gu (a/k/a Frank Gu) (“Gu”) and Xiaodan Wang (“Wang” and with “Gu” collectively, “Plaintiffs”),
filed a Complaint (the “Complaint”) in the Supreme Court of the State of New York, County of New York against the Company
and the Company’s Chief Executive Officer, Milton C. Ault, III, in an action captioned Ding Gu (a/k/a Frank Gu) and Xiaodan Wang
v. DPW Holdings, Inc. and Milton C. Ault III (a/k/a Milton Todd Ault III a/k/a Todd Ault), Index No. 650438/2020.
The Complaint asserts causes
of action for declaratory judgment, specific performance, breach of contract, conversion, attorneys’ fees, permanent injunction,
enforcement of Guaranty, unjust enrichment, money had and received, and fraud arising from: (i) a series of transactions entered into
between Gu and us, as well as Gu and Ault, in or about May 2019; and (ii) a term sheet entered into between Plaintiffs and the Company,
in or about July 2019. The Complaint seeks, among other things, monetary damages in excess of $1.1 million, plus a decree of specific
performance directing the Company to deliver unrestricted shares of common stock to Gu, plus attorneys’ fees and costs.
The Company intends to vigorously
defend against the claims asserted against it in this action.
On May 4, 2020, the Company
and Ault jointly filed a motion to dismiss the Complaint in its entirety, with prejudice.
On July 28, 2021, the Court
conducted oral argument in connection with the motion to dismiss. During the oral argument, the Court informed the parties that the Court
was dismissing the fraud claim, in its entirety, and provided Plaintiffs an opportunity to amend their fraud claim within sixty days of
the date of the oral argument. The Court reserved decision on the other causes of action.
Based on the Company’s
assessment of the facts underlying the above claims, the uncertainty of litigation, and the preliminary stage of the case, the Company
cannot reasonably estimate the potential loss or range of loss that may result from this action. An unfavorable outcome may have a material
adverse effect on the Company’s business, financial condition and results of operations.
Subpoena
The Company received a subpoena
from the SEC for the voluntary production of documents. The Company is fully cooperating with this non-public, fact-finding inquiry and
Management believes that the Company has operated its business in compliance with all applicable laws. The subpoena expressly provides
that the inquiry is not to be construed as an indication by the SEC or its staff that any violations of the federal securities laws have
occurred, nor should it be considered a reflection upon any person, entity or security. However, there can be no assurance as to the outcome
of this matter.
Other Litigation Matters
The Company is involved in
litigation arising from other matters in the ordinary course of business. The Company is regularly subject to claims, suits, regulatory
and government investigations, and other proceedings involving labor and employment, commercial disputes, and other matters. Such claims,
suits, regulatory and government investigations, and other proceedings could result in fines, civil penalties, or other adverse consequences.
Certain of these outstanding
matters include speculative, substantial or indeterminate monetary amounts. The Company records a liability when it believes that it is
probable that a loss has been incurred and the amount can be reasonably estimated. If the Company determines that a loss is reasonably
possible and the loss or range of loss can be estimated, the Company discloses the reasonably possible loss. The Company evaluates developments
in its legal matters that could affect the amount of liability that has been previously accrued, and the matters and related reasonably
possible losses disclosed, and makes adjustments as appropriate. Significant judgment is required to determine both likelihood of there
being and the estimated amount of a loss related to such matters.
With respect to the Company’s
other outstanding matters, based on the Company’s current knowledge, the Company believes that the amount or range of reasonably
possible loss will not, either individually or in aggregate, have a material adverse effect on the Company’s business, consolidated
financial position, results of operations, or cash flows. However, the outcome of such matters is inherently unpredictable and subject
to significant uncertainties.
24. STOCKHOLDERS’ EQUITY
Preferred Stock
The
Company is authorized to issue 25.0
million shares of Preferred Stock $0.001
par value. The Company’s board of directors (the “Board”) has designated 1.0
million shares as Series A Convertible Preferred Stock (the “Series A Preferred Stock”), 500,000
shares as Series B Convertible Preferred Stock (the “Series B Preferred Stock”) and 2,500
shares as Series C Convertible Redeemable Preferred Stock (the “Series C Preferred Stock”). The rights, preferences,
privileges and restrictions on the remaining authorized 23.5 million shares of Preferred Stock have not been determined. The Board
is authorized to designate a new series of preferred shares and determine the number of shares, as well as the rights, preferences,
privileges and restrictions granted to or imposed upon any series of preferred shares. As of September
30, 2021, there were 7,040
shares of Series A Preferred Stock, 125,000
shares of Series B Preferred Stock and no other shares of Preferred Stock issued or outstanding.
Common Stock
Common stock confers upon
the holders the rights to receive notice to participate and vote at any meeting of stockholders of the Company, to receive dividends,
if and when declared, and to participate in a distribution of surplus of assets upon liquidation of the Company. The Class B common stock
carries the voting power of 10 shares of Class A common stock.
2021 ATM Offering
On January 22, 2021, the Company
entered into an At-The-Market Issuance Sales Agreement, as amended on February 17, 2021 and thereafter on March 5, 2021 (the “2021
Sales Agreement”) with Ascendiant Capital Markets, LLC, or the sales agent, relating to the sale of shares of common stock offered
by a prospectus supplement and the accompanying prospectus, as amended by the amendments to the sales agreement dated February 16, 2021
and March 5, 2021. In accordance with the terms of the 2021 Sales Agreement, the Company may offer and sell shares of common stock having
an aggregate offering price of up to $200.0 million from time to time through the sales agent. As of September 30, 2021, the Company
had sold an aggregate of 34.7 million shares of common stock pursuant to the sales agreement for gross proceeds of $160.5 million.
Issuance of Common Stock for Conversion
of Debt
During January 2021, the Company
issued to Esousa an aggregate of 183,214 shares of the Company’s common stock upon the exchange of principal and interest in the
amount of $200,000 and $16,000, respectively. A loss on extinguishment of $234,000 was recognized on the issuance of common stock based
on the fair value of the Company’s common stock at the date of the exchanges.
Issuance of Common Stock for Convertible Promissory
Note, Related Party
On
May 12, 2021, the Company issued 275,862 shares of common stock to Ault & Company, Inc. upon the conversion of $400,000 of principal
on an 8% Convertible Promissory Note dated February 5, 2020.
Securities Purchase
Agreement, Related Party
On
June 11, 2021, the Company entered into a securities purchase agreement with Ault & Company. Under the terms of the agreement,
Ault & Company agreed to purchase an aggregate of 1,000,000
shares of the Company’s common stock for a total purchase price of $2.99
million, at a purchase price per share of $2.99,
which was $0.05 per share above the closing stock price on June 10, 2021, subject to the approval of the NYSE American.
25. SEGMENT, CUSTOMERS AND GEOGRAPHICAL INFORMATION
The Company has three reportable
segments; see Note 1 for a brief description of the Company’s business.
The following data presents
the revenues, expenditures and other operating data of the Company’s operating segments and presented in accordance with ASC No.
280. The total income (loss) from operations of the Company’s reportable segments is different than the Company’s consolidated
loss from operations due to the Company’s corporate expenses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2021
|
|
|
|
|
GWW
|
|
|
TurnOnGreen
|
|
|
Ault Alliance
|
|
|
Total
|
|
|
Revenue
|
|
$
|
6,373,000
|
|
|
$
|
1,094,000
|
|
|
$
|
336,000
|
|
|
$
|
7,803,000
|
|
|
Revenue, lending and trading activities
|
|
|
—
|
|
|
|
—
|
|
|
|
(38,869,000
|
)
|
|
|
(38,869,000
|
)
|
|
Revenue, cryptocurrency mining
|
|
|
—
|
|
|
|
—
|
|
|
|
272,000
|
|
|
|
272,000
|
|
|
Total revenues
|
|
$
|
6,373,000
|
|
|
$
|
1,094,000
|
|
|
$
|
(38,261,000
|
)
|
|
$
|
(30,794,000
|
)
|
|
Depreciation and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
amortization expense
|
|
$
|
213,000
|
|
|
$
|
6,000
|
|
|
$
|
151,000
|
|
|
$
|
370,000
|
|
|
Income (loss) from operations
|
|
$
|
19,000
|
|
|
$
|
(408,000
|
)
|
|
$
|
(41,872,000
|
)
|
|
$
|
(42,261,000
|
)
|
|
Capital expenditures for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
segment assets, as of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
$
|
120,000
|
|
|
$
|
-
|
|
|
$
|
22,435,000
|
|
|
$
|
22,555,000
|
|
|
Identifiable assets as of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
$
|
30,584,000
|
|
|
$
|
3,811,000
|
|
|
$
|
192,326,000
|
|
|
$
|
225,721,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2020
|
|
|
|
|
GWW
|
|
|
TurnOnGreen
|
|
|
Ault Alliance
|
|
|
Total
|
|
|
Revenue
|
|
$
|
4,329,000
|
|
|
$
|
1,376,000
|
|
|
$
|
—
|
|
|
$
|
5,705,000
|
|
|
Revenue, lending and trading activities
|
|
|
—
|
|
|
|
—
|
|
|
|
(29,000
|
)
|
|
|
(29,000
|
)
|
|
Total revenues
|
|
$
|
4,329,000
|
|
|
$
|
1,376,000
|
|
|
$
|
(29,000
|
)
|
|
$
|
5,676,000
|
|
|
Depreciation and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
amortization expense
|
|
$
|
171,000
|
|
|
$
|
11,000
|
|
|
$
|
—
|
|
|
$
|
182,000
|
|
|
Income (loss) from operations
|
|
$
|
119,000
|
|
|
$
|
(27,000
|
)
|
|
$
|
(122,000
|
)
|
|
$
|
(30,000
|
)
|
|
Capital expenditures for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
segment assets, as of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
$
|
528,000
|
|
|
$
|
26,000
|
|
|
$
|
-
|
|
|
$
|
554,000
|
|
|
Identifiable assets as of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
$
|
21,186,000
|
|
|
$
|
21,010,000
|
|
|
$
|
1,450,000
|
|
|
$
|
43,646,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2021
|
|
|
|
|
GWW
|
|
|
TurnOnGreen
|
|
|
Ault Alliance
|
|
|
Total
|
|
|
Revenue
|
|
$
|
19,198,000
|
|
|
$
|
4,308,000
|
|
|
$
|
766,000
|
|
|
$
|
24,272,000
|
|
|
Revenue, lending and trading activities
|
|
|
—
|
|
|
|
—
|
|
|
|
19,615,000
|
|
|
|
19,615,000
|
|
|
Revenue, cryptocurrency mining
|
|
|
—
|
|
|
|
—
|
|
|
|
693,000
|
|
|
|
693,000
|
|
|
Total revenues
|
|
$
|
19,198,000
|
|
|
$
|
4,308,000
|
|
|
$
|
21,074,000
|
|
|
$
|
44,580,000
|
|
|
Depreciation and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
amortization expense
|
|
$
|
641,000
|
|
|
$
|
19,000
|
|
|
$
|
347,000
|
|
|
$
|
1,007,000
|
|
|
Income (loss) from operations
|
|
$
|
(766,000
|
)
|
|
$
|
(490,000
|
)
|
|
$
|
11,220,000
|
|
|
$
|
9,964,000
|
|
|
Capital expenditures for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
segment assets, as of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
$
|
686,000
|
|
|
$
|
-
|
|
|
$
|
27,459,000
|
|
|
$
|
28,145,000
|
|
|
Identifiable assets as of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
$
|
30,584,000
|
|
|
$
|
3,811,000
|
|
|
$
|
191,326,000
|
|
|
$
|
225,721,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020
|
|
|
|
|
GWW
|
|
|
TurnOnGreen
|
|
|
Ault Alliance
|
|
|
Total
|
|
|
Revenue
|
|
$
|
12,906,000
|
|
|
$
|
3,803,000
|
|
|
$
|
—
|
|
|
$
|
16,709,000
|
|
|
Revenue, lending and trading activities
|
|
|
—
|
|
|
|
—
|
|
|
|
(27,000
|
)
|
|
|
(27,000
|
)
|
|
Total revenues
|
|
$
|
12,906,000
|
|
|
$
|
3,803,000
|
|
|
$
|
(27,000
|
)
|
|
$
|
16,682,000
|
|
|
Depreciation and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
amortization expense
|
|
$
|
479,000
|
|
|
$
|
130,000
|
|
|
$
|
—
|
|
|
$
|
609,000
|
|
|
Income (loss) from operations
|
|
$
|
119,000
|
|
|
$
|
(27,000
|
)
|
|
$
|
(122,000
|
)
|
|
$
|
(30,000
|
)
|
|
Capital expenditures for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
segment assets, as of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
$
|
528,000
|
|
|
$
|
26,000
|
|
|
$
|
—
|
|
|
$
|
554,000
|
|
|
Identifiable assets as of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
$
|
21,186,000
|
|
|
$
|
21,009,000
|
|
|
$
|
1,450,000
|
|
|
$
|
43,645,000
|
|
Concentration Risk
The following tables provide
the percentage of total revenues for the three and nine months ended September 30, 2021 and 2020 to a single customer from which
10% or more of total revenues are derived.
|
|
|
For the Three Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
|
September 30, 2021
|
|
|
September 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
|
Percentage of
|
|
|
Total Revenues
|
|
|
Percentage of
|
|
|
|
|
by Major
|
|
|
Total Company
|
|
|
by Major
|
|
|
Total Company
|
|
|
|
|
Customers
|
|
|
Revenues
|
|
|
Customers
|
|
|
Revenues
|
|
|
Customer A
|
|
$
|
2,635,000
|
|
|
|
9
|
%
|
|
$
|
6,819,000
|
|
|
|
15
|
%
|
|
|
|
For the Nine Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
|
September 30, 2020
|
|
|
September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
|
Percentage of
|
|
|
Total Revenues
|
|
|
Percentage of
|
|
|
|
|
by Major
|
|
|
Total Company
|
|
|
by Major
|
|
|
Total Company
|
|
|
|
|
Customers
|
|
|
Revenues
|
|
|
Customers
|
|
|
Revenues
|
|
|
Customer A
|
|
$
|
1,863,000
|
|
|
|
33
|
%
|
|
$
|
5,596,000
|
|
|
|
34
|
%
|
|
Customer B
|
|
|
1,065,000
|
|
|
|
19
|
%
|
|
|
2,661,000
|
|
|
|
16
|
%
|
Revenue from Customer A is
attributable to Enertec. Revenue from Customer B is attributable to Microphase. MTIX Ltd. represented all the Company’s accounts
and other receivable, related party.
26. INCOME TAXES
The Company calculates its
interim income tax provision in accordance with ASC 270 and ASC 740. The Company’s effective tax rate (“ETR”) from continuing
operations was (7.3%) and 0% for the three months ended September 30, 2021 and September 30, 2020, respectively, and (9.1%) and (0.1%)
for the nine months ended September 30, 2021 and 2020, respectively. The Company recorded income tax (provision) benefit of $3.4 million
and $6,000 for the three months ended September 30, 2021 and 2020, respectively and ($144,000) and $18,000 for the nine months ended September
30, 2021 and 2020, respectively. The difference between the ETR and federal statutory rate of 21% is primarily attributable to items recorded
for GAAP but permanently disallowed for U.S. federal income tax purposes and changes in valuation allowance.
A valuation allowance is recorded
when it is more-likely-than-not some of the Company’s deferred tax assets may not be realized. Significant judgment is applied when
assessing the need for a valuation allowance and the Company considers future taxable income, reversals of existing deferred tax assets
and liabilities and ongoing prudent and feasible tax planning strategies, in making such assessment. As of September 30, 2021, the Company
maintains a full US federal, state and UK valuation allowance.
The Company records uncertain
tax positions in accordance with ASC 740, Income Taxes, on the basis of a two-step process in which (i) the Company determines whether
it is more likely than not a tax position will be sustained on the basis of the technical merits of such position and (ii) for those tax
positions meeting the more-likely-than-not recognition threshold, the Company would recognize the largest amount of tax benefit that is
more than 50% likely to be realized upon ultimate settlement with the related tax authority. The Company has determined it has no uncertain
tax positions as of September 30, 2021 and 2020. The Company classifies interest and penalties recognized on uncertain tax positions as
a component of income tax expense.
27. SUBSEQUENT EVENTS
Activity Under 2021 ATM Offering
From October 1, 2021 through
November 18, 2021, the Company sold an aggregate of 17.9 million shares of common stock pursuant to the 2021 Sales Agreement for gross
proceeds of $39.5 million.
Investments in Alpha Fund
In October and November 2021,
the Company purchased an additional $8.5 million of limited partnership interests in the Alpha Fund.
Investments by Alpha Fund
In October 2021, Alpha Fund
purchased 1,650,000 shares of the Company’s common stock in open market transactions at an average purchase price of $2.42 per share.
As of November 15, 2021, the Alpha Fund owned 2,650,000 shares of the Company’s common stock.
Stock Option and Restricted Stock Grants
On
November 9, 2021, the Board approved the following grants:
|
|
·
|
Grants to each independent director of non-qualified stock options to purchase
100,000 shares of the Company’s common stock with an exercise price of $2.19 per share, vesting monthly beginning on January 1,
2023 and ending December 31, 2024 and will be exercisable upon approval by the NYSE American and the Company’s stockholders;
|
|
|
·
|
Grants to each of Milton C. Ault, III, William Horne, Henry Nisser and
Kenneth Cragun of non-qualified stock options to purchase 1,000,000, 800,000, 600,000
and 300,000
shares of the Company’s common stock, respectively, with an exercise price of $2.19
per share, vesting
monthly beginning on January 1, 2023 and ending December 31, 2024 and exercisable upon approval by the NYSE American and the
Corporation’s stockholders;
|
|
|
·
|
Grant to certain employees of non-qualified stock options to purchase
an aggregate of 1,635,000
shares of the Company’s common stock with an exercise price of $2.19
per share, vesting
over 36 months beginning on January 1, 2022 and exercisable pursuant to the Company’s 2021 Stock Incentive Plan,
although one employee’s stock option grant of 100,000
options is exercisable at $2.66
per share vesting
ratably over 48 months beginning October 1, 2021; and
|
|
|
·
|
Restricted stock grant to certain employees of an aggregate of 200,000 shares
pursuant to the Company’s 2021 Stock Incentive Plan. Such shares will vest 25% on November 15, 2021, 25% on May 15, 2022, 25% on
November 15, 2022 and 25% on May 15, 2023.
|
TurnOnGreen Lease Agreement
On November 5, 2021, the
Company’s subsidiary, TurnOnGreen, entered into a lease agreement to lease a 31,165
square foot building in Milpitas, California. The
lease term is approximately 50 months ending January 31, 2026. The total commitment under the lease is $2.3
million.
Purchase Agreement for Bitcoin Mining Equipment
In November 2021, Ault
Alliance entered into contracts with Bitmain Technologies Limited to purchase an aggregate of 16,000 Bitcoin miners for $121
million. The purchase includes both the environmentally friendly S19 XP Antminers that feature a processing power of 140
terahashes per second (TH/s) with an energy consumption of 3.01 kilowatt-hours (kWh) and the S19j Pro Antminers that feature a
processing power of 100 TH/s with an energy consumption of 2.95 kWh. Based on current delivery schedules, Ault Alliance expects that
the 16,000 newly purchased miners will be shipped by Bitmain between March 2022 and September 2022.