DPW Holdings, Inc. (NYSE.MKT: DPW), a diversified
holding company (the “
Company,” or
“
DPW”), today announced it filed its financial
results for FYE 2018 on its Form 10-K with the Securities and
Exchange Commission and reports the following:
Revenues
Our revenues increased by $16,979,719 or 166.9%
to $27,154,219 for the fiscal year ended December 31, 2018, from
$10,174,500 for the fiscal year ended December 31, 2017. The
increase in revenue was primarily due to our four acquisitions
completed during 2017 and 2018. Revenues generated by these four
acquirees during the year ended December 31, 2018, represented
$13,174,615 of our increase in revenues. Excluding the increase in
revenues that were generated by our recent acquirees, the Company
generated revenues of $13,979,604, which represented an increase of
$7,309,882 compared to the fiscal year ended December 31, 2017. As
discussed below, the increase of $7,309,882 resulted primarily from
our cryptocurrency mining operations and from revenues generated
from a related-party from the manufacture of the Multiplex Laser
Surface Enhancement (“MLSE”) plasma-laser
system.
Revenues, cryptocurrency mining
In January 2018, we formed Digital Farms, Inc.
formerly known as Super Crypto Mining, Inc. During the year ended
December 31, 2018, we recognized $1,675,549 of revenues generated
by Digital Farms.
Revenues, related party
During the years ended December 31, 2018 and
2017, we recognized $3,907,280 and $173,751, respectively, in
revenues from our customer, MTIX, Ltd. to manufacture the MLSE
plasma-laser systems. In March 2017, the Company was awarded a
3-year, $50 million purchase order by MTIX, Ltd. to
manufacture, install and service the MLSE plasma-laser system. We
recognize revenue on the manufacture of the MLSE system based upon
proportional performance over time and on April 12, 2019, we
received payment of $2,676,219 for manufacturing services performed
on the first MLSE system
Gross Margins
Gross margins decreased to 19.8% for the year
ended December 31, 2018 compared to 37.8% for the year ended
December 31, 2017. The decrease in gross margins was partially
attributable to the lower margin revenue of $3,907,280 from MTIX,
with gross margins of 21.5% combined with negative margins of
(202.7%) on revenues of $1,675,549 at Digital Farms. The negative
gross margins at Digital Farms are attributable to monthly
recurring fixed costs at our colocation facilities which to date
exceed the revenues from our mining operations while we place our
miners in service. Adjusted gross margins, excluding those revenues
and related costs from Digital Farms and our contract with MTIX,
for the year ended December 31, 2018 were 36.8%. The decrease in
gross margins from 37.8% to 36.8% is mainly attributable to an
increase in costs of our commercial products sold in our U.S.
operations, which historically have had much greater gross margins,
offset by higher gross margins related to restaurant
operations.
We conduct operations in several geographical
markets and for the year ended December 31, 2018, our revenues were
distributed among the primary markets according to the schedule
below.
|
|
|
Year
ended |
Primary
Geographical Markets |
December 31,
2018 |
North America |
$ |
19,025,376 |
Middle East |
|
5,226,075 |
Europe |
|
1,815,866 |
Other |
|
1,086,902 |
|
$ |
27,154,219 |
|
The Company particularly noted that new capital
investment activities during 2018 totaled $20.6M, which the Company
anticipates will increase revenue streams during 2019 and 2020. The
Company incurred interest expense of over $13.4M for 2018 from its
debt financings. A large portion of the interest expense that we
incurred during 2018 was from discounts related to the debt that
was incurred to finance our acquisitions and investments. To date,
we have reduced our debt by approximately $9M and anticipate that
our interest expense will be greatly diminished because of these
reductions. The Company incurred a comprehensive loss of $8.4M
which reflects the $8M of unrealized loss in securities, primarily
in the warrants that we received as a result of our investment in
Avalanche International Corp., which we refer to as AVLP, a related
party. The Company highlighted that for the year ended December 31,
2017, unrealized gains in our investment in AVLP warrants was the
principal component of our comprehensive income. The Company
advises that investors and shareholders should note that
comprehensive income or loss is best analyzed using a longer term
of measurement, such as several years compared to a few months or a
couple of years.
In aggregate, for the years ended December 31,
2018 and 2017, our reported net loss is comprised of non-cash
charges of $16,812,868 and $6,334,058, respectively. A summary of
these non-cash charges is as follows:
|
|
|
For the Years Ended |
|
December 31, |
|
2018 |
|
2017 |
Interest expense – debt
discount |
$ |
11,191,056 |
|
|
$ |
4,688,630 |
|
Stock-based compensation |
|
4,719,266 |
|
|
|
1,831,435 |
|
Depreciation and amortization |
|
2,906,905 |
|
|
|
254,006 |
|
Interest expense on
conversion of promissory notes to common stock |
|
— |
|
|
|
13,333 |
|
Accretion of original
issue discount on notes receivable – related party |
|
(2,004,358 |
) |
|
|
(453,346 |
) |
Non-cash items included in net
loss |
$ |
16,812,868 |
|
|
$ |
6,334,058 |
|
|
|
|
|
DPW’s CEO and Chairman, Milton “Todd” Ault, III
said, “We are very pleased that the Company has grown its revenue
to over $27M and that our balance sheet has reached approximately
$50M. We are very encouraged that revenues are up for each
operating unit, including Digital Farms, posting $1.67M in sales
despite the downturn in the marketplace and look forward to 2019.
In 2018 we made a large investment in equipment and expanded our
network in the crypto-mining space. We anticipate a boost in
performance by Digital Farms due to the consolidation of its
facilities in 2019.” Ault continued, “Our investments contributed
to our top line with Digital Power Corp.’s recognition of more than
$3.9M in revenue from the MTIX, Ltd. contract and from our
hospitality segment generating more than $3.46M in sales. We
anticipate both will continue to deliver increased revenues for
2019. With the recent corporate realignment of DPW which created
the new reporting subsidiaries, DPW Technologies led by JR Read and
DPW Financial led by Darren Magot, we anticipate both will harness
the achievements from 2018, create new efficiencies and continue
the increase in sales. 2018 was a somewhat challenging year with
the completion of two new acquisitions while completing the
integration of two acquisitions from 2017. Further, we contended
with a collapse of Bitcoin and the cryptocurrency market and the
short-term debt we pursued to accomplish our goals for 2017 and
2018. We are very pleased with our progress as we strive to improve
our capital structure, our cashflow and our performance in 2019. We
anticipate much of the work and investment we have made will bring
discernible results starting in the second quarter of 2019 and
continue through the year well into 2020. In sum, there are two
important indicators that stockholders and investors should pay
attention to; first, the dramatic reduction of outstanding debt and
the continuing increase in sales.”
For more information on DPW Holdings and its
subsidiaries, the Company recommends that stockholders, investors
and any other interested parties read the Company’s public filings
and press releases available under the Investor Relations section
at or available at www.sec.gov.
About DPW Holdings, Inc.
DPW Holdings, Inc. is a diversified holding
company pursuing growth by acquiring undervalued businesses and
disruptive technologies that hold global potential. Through its
wholly owned subsidiaries and strategic investments, the Company
provides mission-critical products that support a diverse range of
industries, including defense/aerospace, industrial,
telecommunications, medical, crypto-mining, and textiles. In
addition, the Company owns a select portfolio of commercial
hospitality properties and extends credit to select entrepreneurial
businesses through a licensed lending subsidiary. DPW’s
headquarters are located at 201 Shipyard Way, Suite E, Newport
Beach, CA 92663; www.DPWHoldings.com.
Forward Looking Statements
This press release contains “forward looking
statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. These forward-looking statements generally
include statements that are predictive in nature and depend upon or
refer to future events or conditions, and include words such as
“believes,” “plans,” “anticipates,” “projects,” “estimates,”
“expects,” “intends,” “strategy,” “future,” “opportunity,” “may,”
“will,” “should,” “could,” “potential,” or similar expressions.
Statements that are not historical facts are forward-looking
statements. Forward-looking statements are based on current beliefs
and assumptions that are subject to risks and uncertainties.
Forward-looking statements speak only as of the date they are made,
and the Company undertakes no obligation to update any of them
publicly in light of new information or future events. Actual
results could differ materially from those contained in any
forward-looking statement as a result of various factors. More
information, including potential risk factors, that could affect
the Company’s business and financial results are included in the
Company’s filings with the U.S. Securities and Exchange Commission,
including, but not limited to, the Company’s Forms 10-K, 10-Q and
8-K. All filings are available at www.sec.gov and on the Company’s
website at www.DPWHoldings.com.
Contacts:IR@DPWHoldings.com or
1-888-753-2235.
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