BITNILE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| | |
September 30, | | |
December 31, | |
| | |
2022 | | |
2021 | |
| ASSETS | |
| | | |
| | |
| | |
| | | |
| | |
| CURRENT ASSETS | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 10,126,000 | | |
$ | 15,912,000 | |
| Restricted cash | |
| 4,617,000 | | |
| 5,321,000 | |
| Marketable equity securities | |
| 8,561,000 | | |
| 40,380,000 | |
| Digital currencies | |
| 2,092,000 | | |
| 2,165,000 | |
| Accounts receivable | |
| 19,234,000 | | |
| 6,455,000 | |
| Accrued revenue | |
| 2,474,000 | | |
| 2,283,000 | |
| Inventories | |
| 28,848,000 | | |
| 5,482,000 | |
| Investment in promissory notes and other, related party | |
| 2,818,000 | | |
| 2,842,000 | |
| Loans receivable, current | |
| 6,861,000 | | |
| 13,337,000 | |
| Prepaid expenses and other current assets | |
| 14,441,000 | | |
| 15,436,000 | |
| TOTAL CURRENT ASSETS | |
| 100,072,000 | | |
| 109,613,000 | |
| | |
| | | |
| | |
| Cash and marketable securities held in trust account | |
| 117,421,000 | | |
| 116,725,000 | |
| Intangible assets, net | |
| 14,095,000 | | |
| 4,035,000 | |
| Goodwill | |
| 54,544,000 | | |
| 10,090,000 | |
| Property and equipment, net | |
| 253,984,000 | | |
| 174,025,000 | |
| Right-of-use assets | |
| 7,404,000 | | |
| 5,243,000 | |
| Investments in common stock, related parties | |
| 12,394,000 | | |
| 13,230,000 | |
| Investments in other equity securities | |
| 45,556,000 | | |
| 30,482,000 | |
| Investment in unconsolidated entity | |
| - | | |
| 22,130,000 | |
Loans receivable, non-current | |
| 500,000 | | |
| 1,000,000 | |
| Other assets | |
| 4,935,000 | | |
| 3,713,000 | |
| TOTAL ASSETS | |
$ | 610,905,000 | | |
$ | 490,286,000 | |
| | |
| | | |
| | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
| | |
| | | |
| | |
| CURRENT LIABILITIES | |
| | | |
| | |
| Accounts payable and accrued expenses | |
$ | 50,607,000 | | |
$ | 22,755,000 | |
| Investment margin accounts payable | |
| 2,377,000 | | |
| 18,488,000 | |
| Operating lease liability, current | |
| 2,825,000 | | |
| 1,123,000 | |
| Notes payable, net | |
| 17,132,000 | | |
| 39,554,000 | |
| Convertible notes payable, current | |
| 1,469,000 | | |
| - | |
| TOTAL CURRENT LIABILITIES | |
| 74,410,000 | | |
| 81,920,000 | |
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
BITNILE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(Unaudited)
| | |
September 30, | | |
December 31, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| LONG TERM LIABILITIES | |
| | | |
| | |
| Operating lease liability, non-current | |
| 4,980,000 | | |
| 4,213,000 | |
| Notes payable | |
| 58,310,000 | | |
| 55,055,000 | |
| Convertible notes payable | |
| 13,878,000 | | |
| 468,000 | |
| Deferred underwriting commissions of Ault Disruptive subsidiary | |
| 3,450,000 | | |
| 3,450,000 | |
| | |
| | | |
| | |
| TOTAL LIABILITIES | |
| 155,028,000 | | |
| 145,106,000 | |
| | |
| | | |
| | |
| COMMITMENTS AND CONTINGENCIES | |
| | | |
| | |
| Redeemable noncontrolling interests in equity of subsidiaries | |
| 117,114,000 | | |
| 116,725,000 | |
| | |
| | | |
| | |
| STOCKHOLDERS’ EQUITY | |
| | | |
| | |
| Series A Convertible Preferred Stock, $25 stated value per share, | |
| - | | |
| - | |
| $0.001 par value – 1,000,000 shares authorized; 7,040 shares | |
| | | |
| | |
| issued and outstanding at September 30, 2022 and December 31, 2021 | |
| | | |
| | |
| (redemption amount and liquidation preference of $176,000 as of | |
| | | |
| | |
| September 30, 2022 and December 31, 2021) | |
| | | |
| | |
| 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, 2022 and December 31, 2021 (liquidation | |
| | | |
| | |
| preference of $1,190,000 at September 30, 2022 and December 31, 2021) | |
| | | |
| | |
| Series D Cumulative Redeemable Perpetual Preferred Stock, $25 stated | |
| | | |
| | |
| value per share, $0.001 par value – 2,000,000 shares authorized; | |
| | | |
| | |
| shares authorized, 154,928 shares and 0 shares issued and outstanding at | |
| | | |
| | |
| September 30, 2022 and December 31, 2021, respectively (liquidation | |
| | | |
| | |
preference of $3,665,450 and $0 as of September 30, 2022 and
December 31, 2021, respectively) | |
| - | | |
| - | |
| Class A Common Stock, $0.001 par value – 500,000,000 shares authorized; | |
| 341,000 | | |
| 84,000 | |
| 341,446,982 and 84,344,607 shares issued and outstanding at September 30, | |
| | | |
| | |
| 2022 and December 31, 2021, respectively | |
| | | |
| | |
| Class B Common Stock, $0.001 par value – 25,000,000 shares authorized; | |
| - | | |
| - | |
0 shares issued and outstanding at September 30, 2022 and December 31,
2021 | |
| | | |
| | |
| Additional paid-in capital | |
| 557,418,000 | | |
| 385,644,000 | |
| Accumulated deficit | |
| (207,647,000 | ) | |
| (145,600,000 | ) |
| Accumulated other comprehensive loss | |
| (1,557,000 | ) | |
| (106,000 | ) |
| Treasury stock, at cost | |
| (28,788,000 | ) | |
| (13,180,000 | ) |
| TOTAL BITNILE HOLDINGS STOCKHOLDERS’ EQUITY | |
| 319,767,000 | | |
| 226,842,000 | |
| | |
| | | |
| | |
| Non-controlling interest | |
| 18,996,000 | | |
| 1,613,000 | |
| | |
| | | |
| | |
| TOTAL STOCKHOLDERS’ EQUITY | |
| 338,763,000 | | |
| 228,455,000 | |
| | |
| | | |
| | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | |
$ | 610,905,000 | | |
$ | 490,286,000 | |
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
BITNLE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE (LOSS) INCOME
(Unaudited)
| | |
|
|
|
|
|
| | |
|
|
|
|
|
| |
| | |
For the Three Months Ended | | |
For the Nine Months Ended | |
| | |
September 30, | | |
September 30, | |
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| Revenue | |
$ | 27,031,000 | | |
$ | 7,803,000 | | |
$ | 43,539,000 | | |
$ | 24,272,000 | |
| Revenue, cryptocurrency mining | |
| 3,874,000 | | |
| 272,000 | | |
| 11,398,000 | | |
| 693,000 | |
| Revenue, hotel operations | |
| 5,513,000 | | |
| - | | |
| 12,809,000 | | |
| - | |
| Revenue, lending and trading activities | |
| 13,360,000 | | |
| (38,869,000 | ) | |
| 32,224,000 | | |
| 19,615,000 | |
| Total revenue | |
| 49,778,000 | | |
| (30,794,000 | ) | |
| 99,970,000 | | |
| 44,580,000 | |
| Cost of revenue, products | |
| 20,193,000 | | |
| 5,011,000 | | |
| 30,985,000 | | |
| 16,011,000 | |
| Cost of revenue, cryptocurrency mining | |
| 5,255,000 | | |
| 260,000 | | |
| 12,206,000 | | |
| 646,000 | |
| Cost of revenue, hotel operations | |
| 3,230,000 | | |
| - | | |
| 8,350,000 | | |
| - | |
| Total cost of revenue | |
| 28,678,000 | | |
| 5,271,000 | | |
| 51,541,000 | | |
| 16,657,000 | |
| Gross profit | |
| 21,100,000 | | |
| (36,065,000 | ) | |
| 48,429,000 | | |
| 27,923,000 | |
| | |
| | | |
| | | |
| | | |
| | |
| Operating expenses | |
| | | |
| | | |
| | | |
| | |
| Research and development | |
| 521,000 | | |
| 524,000 | | |
| 1,945,000 | | |
| 1,657,000 | |
| Selling and marketing | |
| 7,428,000 | | |
| 1,993,000 | | |
| 20,888,000 | | |
| 4,740,000 | |
| General and administrative | |
| 15,947,000 | | |
| 11,292,000 | | |
| 48,666,000 | | |
| 24,376,000 | |
Impairment of deposit due to vendor bankruptcy filing | |
| 2,000,000 | | |
| - | | |
| 2,000,000 | | |
| - | |
| Impairment of mined cryptocurrency | |
| 515,000 | | |
| - | | |
| 2,930,000 | | |
| - | |
| Total operating expenses | |
| 26,411,000 | | |
| 13,809,000 | | |
| 76,429,000 | | |
| 30,773,000 | |
| Loss from operations | |
| (5,311,000 | ) | |
| (49,874,000 | ) | |
| (28,000,000 | ) | |
| (2,850,000 | ) |
| Other income (expenses) | |
| | | |
| | | |
| | | |
| | |
| Interest and other income | |
| 725,000 | | |
| 125,000 | | |
| 1,255,000 | | |
| 176,000 | |
| Accretion of discount on note receivable, related party | |
| - | | |
| 4,210,000 | | |
| | | |
| 4,210,000 | |
| Interest expense | |
| (3,972,000 | ) | |
| (140,000 | ) | |
| (35,827,000 | ) | |
| (475,000 | ) |
| Change in fair value of marketable equity securities | |
| 114,000 | | |
| (750,000 | ) | |
| 355,000 | | |
| (705,000 | ) |
| Realized gain on digital currencies and marketable securities | |
| 595,000 | | |
| 30,000 | | |
| 661,000 | | |
| 428,000 | |
| Loss from investment in unconsolidated entity | |
| - | | |
| - | | |
| (924,000 | ) | |
| - | |
| Gain on extinguishment of debt | |
| - | | |
| - | | |
| - | | |
| 929,000 | |
| Change in fair value of warrant liability | |
| (3,000 | ) | |
| 259,000 | | |
| (27,000 | ) | |
| (130,000 | ) |
| Total other (expenses) income, net | |
| (2,541,000 | ) | |
| 3,734,000 | | |
| (34,507,000 | ) | |
| 4,433,000 | |
| Income tax (provision) benefit | |
| (144,000 | ) | |
| 3,366,000 | | |
| (361,000 | ) | |
| (144,000 | ) |
| Net (loss) income | |
| (7,996,000 | ) | |
| (42,774,000 | ) | |
| (62,868,000 | ) | |
| 1,439,000 | |
| Net loss (income) attributable to non-controlling interest | |
| 725,000 | | |
| (96,000 | ) | |
| 1,061,000 | | |
| (93,000 | ) |
| Net (loss) income attributable to BitNile Holdings, Inc. | |
| (7,271,000 | ) | |
| (42,870,000 | ) | |
| (61,807,000 | ) | |
| 1,346,000 | |
| Preferred dividends | |
| (190,000 | ) | |
| (4,000 | ) | |
| (239,000 | ) | |
| (13,000 | ) |
| Net (loss) income available to common stockholders | |
$ | (7,461,000 | ) | |
$ | (42,874,000 | ) | |
$ | (62,046,000 | ) | |
$ | 1,333,000 | |
| Basic net (loss) income per common share | |
$ | (0.03 | ) | |
$ | (0.73 | ) | |
$ | (0.27 | ) | |
$ | 0.03 | |
| Diluted net (loss) income per common share | |
$ | (0.03 | ) | |
$ | (0.73 | ) | |
$ | (0.27 | ) | |
$ | 0.03 | |
| Weighted average basic common shares outstanding | |
| 294,141,000 | | |
| 58,987,000 | | |
| 225,662,000 | | |
| 49,714,000 | |
| Weighted average diluted common shares outstanding | |
| 294,141,000 | | |
| 58,987,000 | | |
| 225,662,000 | | |
| 50,145,000 | |
| Comprehensive (loss) income | |
| | | |
| | | |
| | | |
| | |
| Net (loss) income available to common stockholders | |
$ | (7,461,000 | ) | |
$ | (42,874,000 | ) | |
$ | (62,046,000 | ) | |
$ | 1,333,000 | |
| Other comprehensive income (loss) | |
| | | |
| | | |
| | | |
| | |
| Foreign currency translation adjustment | |
| 306,000 | | |
| (182,000 | ) | |
| (1,452,000 | ) | |
| (141,000 | ) |
| Net unrealized loss on derivative securities of related party | |
| - | | |
| (4,849,000 | ) | |
| - | | |
| (7,773,000 | ) |
| Other comprehensive income (loss) | |
| 306,000 | | |
| (5,031,000 | ) | |
| (1,452,000 | ) | |
| (7,914,000 | ) |
| Total comprehensive loss | |
$ | (7,155,000 | ) | |
$ | (47,905,000 | ) | |
$ | (63,498,000 | ) | |
$ | (6,581,000 | ) |
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
BITNILE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ EQUITY
(Unaudited)
Three Months Ended September 30, 2022
| | |
|
|
|
|
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
Series A, B &
D | | |
| | |
| | |
Additional | | |
| | |
Other | | |
Non- | | |
| | |
Total | |
| | |
Preferred
Stock | | |
Common
Stock | | |
Paid-In | | |
Accumulated | | |
Comprehensive | | |
Controlling | | |
Treasury | | |
Stockholders’ | |
| | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Loss | | |
Interest | | |
Stock | | |
Equity | |
| BALANCES, July 1, 2022 | |
| 278,658 | | |
$ | - | | |
| 324,440,579 | | |
$ | 324,000 | | |
$ | 549,713,000 | | |
$ | (200,184,000 | ) | |
$ | (1,863,000 | ) | |
$ | 18,048,000 | | |
$ | (20,639,000 | ) | |
$ | 345,399,000 | |
| Preferred stock issued | |
| 8,310 | | |
| - | | |
| - | | |
| - | | |
| 207,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 207,000 | |
| Preferred stock offering costs | |
| - | | |
| - | | |
| - | | |
| - | | |
| (65,000 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| (65,000 | ) |
| Stock-based compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,563,000 | | |
| - | | |
| - | | |
| 479,000 | | |
| - | | |
| 2,042,000 | |
Issuance of Gresham Worldwide common stock
for
GIGA acquisition | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,669,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,669,000 | |
| Issuance of common stock for cash | |
| - | | |
| - | | |
| 17,006,403 | | |
| 17,000 | | |
| 4,540,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 4,557,000 | |
Financing cost in connection with sales of
common
stock | |
| - | | |
| - | | |
| - | | |
| - | | |
| (79,000 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| (79,000 | ) |
| Increase in ownership interest of subsidiary | |
| - | | |
| - | | |
| - | | |
| - | | |
| (132,000 | ) | |
| - | | |
| - | | |
| (1,539,000 | ) | |
| - | | |
| (1,671,000 | ) |
| Non-controlling interest from GIGA acquisition | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,735,000 | | |
| - | | |
| 2,735,000 | |
| Purchase of treasury stock - Ault Alpha | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (8,148,000 | ) | |
| (8,148,000 | ) |
| Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (7,271,000 | ) | |
| - | | |
| - | | |
| - | | |
| (7,271,000 | ) |
| Preferred dividends | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (190,000 | ) | |
| - | | |
| - | | |
| - | | |
| (190,000 | ) |
| Foreign currency translation adjustments | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 306,000 | | |
| - | | |
| - | | |
| 306,000 | |
| Net loss attributable to non-controlling interest | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (725,000 | ) | |
| - | | |
| (725,000 | ) |
| Other | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,000 | | |
| (2,000 | ) | |
| - | | |
| (2,000 | ) | |
| (1,000 | ) | |
| (3,000 | ) |
| BALANCES, September 30, 2022 | |
| 286,968 | | |
$ | - | | |
| 341,446,982 | | |
$ | 341,000 | | |
$ | 557,418,000 | | |
$ | (207,647,000 | ) | |
$ | (1,557,000 | ) | |
$ | 18,996,000 | | |
$ | (28,788,000 | ) | |
$ | 338,763,000 | |
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
BITNILE 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.
BITNILE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ EQUITY
(Unaudited)
Nine Months Ended September 30, 2022
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Accumulated | | |
| | |
| | |
| |
| | |
Series A, B &
D | | |
| | |
| | |
Additional | | |
| | |
Other | | |
Non- | | |
| | |
Total | |
| | |
Preferred
Stock | | |
Common
Stock | | |
Paid-In | | |
Accumulated | | |
Comprehensive | | |
Controlling | | |
Treasury | | |
Stockholders’ | |
| | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Loss | | |
Interest | | |
Stock | | |
Equity | |
| BALANCES, January 1, 2022 | |
| 132,040 | | |
$ | - | | |
| 84,344,607 | | |
$ | 84,000 | | |
$ | 385,644,000 | | |
$ | (145,600,000 | ) | |
$ | (106,000 | ) | |
$ | 1,613,000 | | |
$ | (13,180,000 | ) | |
$ | 228,455,000 | |
Issuance of common stock for restricted stock
awards | |
| - | | |
| - | | |
| 441,879 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Preferred stock issued | |
| 154,928 | | |
| - | | |
| - | | |
| - | | |
| 3,873,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 3,873,000 | |
| Preferred stock offering costs | |
| - | | |
| - | | |
| - | | |
| - | | |
| (602,000 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| (602,000 | ) |
| Stock-based compensation | |
| | | |
| | | |
| | | |
| | | |
| 5,190,000 | | |
| - | | |
| - | | |
| 556,000 | | |
| - | | |
| 5,746,000 | |
Issuance of Gresham Worldwide common stock
for
GIGA acquisition | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,669,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,669,000 | |
| Issuance of common stock for cash | |
| - | | |
| - | | |
| 256,660,496 | | |
| 257,000 | | |
| 167,726,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 167,983,000 | |
Financing cost in connection with sales of
common
stock | |
| - | | |
| - | | |
| - | | |
| - | | |
| (4,103,000 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| (4,103,000 | ) |
| Increase in ownership interest of subsidiary | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,980,000 | ) | |
| - | | |
| - | | |
| (1,921,000 | ) | |
| - | | |
| (3,901,000 | ) |
| Non-controlling interest from AVLP acquisition | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 6,738,000 | | |
| - | | |
| 6,738,000 | |
| Non-controlling interest from SMC acquisition | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 10,336,000 | | |
| - | | |
| 10,336,000 | |
| Non-controlling interest from GIGA acquisition | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,735,000 | | |
| - | | |
| 2,735,000 | |
| Purchase of treasury stock - Ault Alpha | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (15,607,000 | ) | |
| (15,607,000 | ) |
| Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (61,807,000 | ) | |
| - | | |
| - | | |
| - | | |
| (61,807,000 | ) |
| Preferred dividends | |
| | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (239,000 | ) | |
| - | | |
| - | | |
| - | | |
| (239,000 | ) |
| Foreign currency translation adjustments | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,452,000 | ) | |
| - | | |
| - | | |
| (1,452,000 | ) |
| Net loss attributable to non-controlling interest | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,061,000 | ) | |
| - | | |
| (1,061,000 | ) |
| Other | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,000 | | |
| (1,000 | ) | |
| 1,000 | | |
| - | | |
| (1,000 | ) | |
| - | |
| BALANCES, September 30, 2022 | |
| 286,968 | | |
$ | - | | |
| 341,446,982 | | |
$ | 341,000 | | |
$ | 557,418,000 | | |
$ | (207,647,000 | ) | |
$ | (1,557,000 | ) | |
$ | 18,996,000 | | |
$ | (28,788,000 | ) | |
$ | 338,763,000 | |
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
BITNILE 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.
BITNILE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | |
|
|
|
|
|
| |
| | |
For the Nine Months Ended September 30, | |
| | |
2022 | | |
2021 | |
| Cash flows from operating activities: | |
| | | |
| | |
| Net (loss) income | |
$ | (62,868,000 | ) | |
$ | 1,439,000 | |
| Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: | |
| | | |
| | |
| Depreciation and amortization | |
| 11,977,000 | | |
| 1,713,000 | |
| Interest expense – debt discount | |
| 26,958,000 | | |
| 61,000 | |
| Gain on extinguishment of debt | |
| - | | |
| (929,000 | ) |
| Change in fair value of warrant liability | |
| (917,000 | ) | |
| (259,000 | ) |
| Accretion of original issue discount on notes receivable – related party | |
| - | | |
| (4,213,000 | ) |
| Accretion of original issue discount on notes receivable | |
| (618,000 | ) | |
| (366,000 | ) |
| Increase in accrued interest on notes receivable – related party | |
| (148,000 | ) | |
| (119,000 | ) |
| Stock-based compensation | |
| 5,746,000 | | |
| 4,732,000 | |
Impairment of deposit due to vendor bankruptcy filing | |
| 2,000,000 | | |
| - | |
| Impairment of cryptocurrencies | |
| 2,930,000 | | |
| - | |
| Realized gains on sale of marketable securities | |
| (19,194,000 | ) | |
| (15,154,000 | ) |
| Unrealized losses on marketable securities | |
| 16,937,000 | | |
| 6,353,000 | |
| Unrealized losses (gains) on investments in common stock, related parties | |
| 5,676,000 | | |
| (6,150,000 | ) |
| Unrealized gains on equity securities | |
| (32,949,000 | ) | |
| (2,795,000 | ) |
| Loss from investment in unconsolidated entity | |
| 924,000 | | |
| - | |
| Loss on remeasurement of investment in unconsolidated entity | |
| 2,700,000 | | |
| - | |
| Changes in operating assets and liabilities: | |
| | | |
| | |
| Marketable equity securities | |
| 68,532,000 | | |
| (34,196,000 | ) |
| Accounts receivable | |
| (3,022,000 | ) | |
| (1,270,000 | ) |
| Accrued revenue | |
| (109,000 | ) | |
| (166,000 | ) |
| Inventories | |
| (5,867,000 | ) | |
| (492,000 | ) |
| Prepaid expenses and other current assets | |
| 1,780,000 | | |
| (5,155,000 | ) |
| Digital currencies | |
| (12,227,000 | ) | |
| - | |
| Other assets | |
| (2,944,000 | ) | |
| (407,000 | ) |
| Accounts payable and accrued expenses | |
| 8,974,000 | | |
| (1,082,000 | ) |
| Other current liabilities | |
| - | | |
| 2,210,000 | |
| Lease liabilities | |
| (1,334,000 | ) | |
| (666,000 | ) |
| Net cash provided by (used in) operating activities | |
| 12,937,000 | | |
| (56,911,000 | ) |
| Cash flows from investing activities: | |
| | | |
| | |
| Purchase of property and equipment | |
| (84,500,000 | ) | |
| (28,145,000 | ) |
| Investment in promissory notes and other, related parties | |
| (2,200,000 | ) | |
| (4,994,000 | ) |
| Investments in common stock and warrants, related parties | |
| (4,840,000 | ) | |
| (19,590,000 | ) |
| Investment in real property, related party | |
| - | | |
| (2,670,000 | ) |
| Proceeds from sale of investment in real property, related party | |
| - | | |
| 2,670,000 | |
| Purchase of SMC, net of cash received | |
| (8,239,000 | ) | |
| - | |
| Purchase of GIGA, net of cash received | |
| (3,687,000 | ) | |
| - | |
| Cash received upon acquisition of AVLP | |
| 1,245,000 | | |
| - | |
| Acquisition of non-controlling interests | |
| (3,901,000 | ) | |
| - | |
| Sales of marketable equity securities | |
| 11,748,000 | | |
| 430,000 | |
| Investments in loans receivable | |
| (7,081,000 | ) | |
| - | |
| Principal payments on loans receivable | |
| 10,525,000 | | |
| - | |
| Sale of digital currencies | |
| 8,952,000 | | |
| - | |
| Investments in equity securities | |
| (22,449,000 | ) | |
| (14,287,000 | ) |
| Net cash used in investing activities | |
| (106,408,000 | ) | |
| (68,730,000 | ) |
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
BITNILE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
(Unaudited)
| | |
|
|
|
|
| |
| | |
For the Nine Months Ended September 30, | |
| | |
2022 | | |
2021 | |
| Cash flows from financing activities: | |
| | | |
| | |
| Gross proceeds from sales of common stock | |
$ | 167,983,000 | | |
$ | 160,483,000 | |
| Financing cost in connection with sales of common stock | |
| (4,103,000 | ) | |
| (4,952,000 | ) |
| Proceeds from sales of preferred stock | |
| 3,873,000 | | |
| - | |
| Financing cost in connection with sales of preferred stock | |
| (602,000 | ) | |
| - | |
| Proceeds from notes payable | |
| 18,565,000 | | |
| 724,000 | |
| Repayment of margin accounts | |
| (16,111,000 | ) | |
| - | |
| Payments on notes payable | |
| (67,698,000 | ) | |
| (2,263,000 | ) |
| Payments of preferred dividends | |
| (239,000 | ) | |
| (13,000 | ) |
| Purchase of treasury stock | |
| (15,607,000 | ) | |
| (2,773,000 | ) |
| Payments on revolving credit facilities, net | |
| - | | |
| (125,000 | ) |
| Net cash provided by financing activities | |
| 86,061,000 | | |
| 151,081,000 | |
| | |
| | | |
| | |
| Effect of exchange rate changes on cash and cash equivalents | |
| 920,000 | | |
| (73,000 | ) |
| | |
| | | |
| | |
| Net (decrease) increase in cash and cash equivalents and restricted cash | |
| (6,490,000 | ) | |
| 25,367,000 | |
| | |
| | | |
| | |
| Cash and cash equivalents and restricted cash at beginning of period | |
| 21,233,000 | | |
| 18,680,000 | |
| | |
| | | |
| | |
| Cash and cash equivalents and restricted cash at end of period | |
$ | 14,743,000 | | |
$ | 44,047,000 | |
| | |
| | | |
| | |
| Supplemental disclosures of cash flow information: | |
| | | |
| | |
| Cash paid during the period for interest | |
$ | 5,202,000 | | |
$ | 712,000 | |
| | |
| | | |
| | |
| Non-cash investing and financing activities: | |
| | | |
| | |
| Conversion of convertible notes payable into shares of common stock | |
$ | - | | |
$ | 449,000 | |
| Settlement of accounts payable with digital currency | |
$ | 417,000 | | |
$ | 119,000 | |
| Conversion of investment in unconsolidated entity for acquisition of AVLP | |
$ | 20,706,000 | | |
$ | - | |
| Conversion of convertible notes payable, related party into shares of common stock | |
$ | 400,000 | | |
$ | 400,000 | |
| Conversion of debt and equity securities to marketable securities | |
$ | 40,324,000 | | |
$ | 2,656,000 | |
| Conversion of loans receivable to marketable securities | |
$ | 3,650,000 | | |
$ | - | |
| Conversion of interest receivable to marketable securities | |
$ | 250,000 | | |
$ | - | |
| Conversion of loans receivable to debt and equity securities | |
$ | - | | |
$ | 150,000 | |
| Recognition of new operating lease right-of-use assets and lease liabilities | |
$ | 2,188,000 | | |
$ | - | |
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
1. DESCRIPTION OF BUSINESS
BitNile Holdings, Inc., a
Delaware corporation (“BitNile” or the “Company”) was incorporated in September 2017. BitNile 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 oil exploration, defense/aerospace, industrial,
automotive, medical/biopharma, karaoke audio equipment, hotel operations and textiles. In addition, the Company extends credit to select
entrepreneurial businesses through a licensed lending subsidiary. BitNile 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 Company. All major investment
and capital allocation decisions are made for the Company by Mr. Ault and the other members of the Executive Committee. The Company has
seven reportable segments:
| · | BitNile, Inc. (“BNI”) – cryptocurrency mining operations; |
| · | Ault Alliance, Inc. (“Ault Alliance”) – commercial lending, activist investing, advanced
textiles processing technology, media, and digital learning; |
| · | Gresham Worldwide, Inc. (“GWW”) – defense solutions; |
| · | Imperalis Holding Corp., to be renamed TurnOnGreen, Inc. (“TurnOnGreen”) – commercial
electronics solutions; |
| · | The Singing Machine Company, Inc. (“SMC”) – karaoke audio equipment; |
| · | Ault Global Real Estate Equities, Inc. (“AGREE”) – hotel operations and other commercial
real estate holdings; and |
| · | Ault Disruptive Technologies Corporation (“Ault Disruptive”) – a special purpose acquisition
company (“SPAC”). |
2. LIQUIDITY AND FINANCIAL
CONDITION
As
of September 30, 2022, the Company had cash and cash equivalents of $10.1 million and working capital of $25.7 million. The Company has
financed its operations principally through issuances of convertible debt, promissory notes and equity securities. 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, 2021, filed with the Securities and Exchange Commission (the “SEC”) on
April 15, 2022. The condensed consolidated balance sheet as of December 31, 2021 was derived from the Company’s audited 2021 financial
statements contained in the above referenced Form 10-K. Results of the three and nine months ended September 30, 2022, are not necessarily
indicative of the results to be expected for the full year ending December 31, 2022.
Significant Accounting
Policies
Other
than as noted below, there have been no material changes to the Company’s significant accounting policies previously disclosed in
the 2021 Annual Report.
Business Combination
The
Company allocates the purchase price of an acquired business to the tangible and intangible assets acquired and liabilities assumed based
upon their estimated fair values on the acquisition date. Any excess of the purchase price over the fair value of the net assets acquired
is recorded as goodwill. The purchase price allocation process requires management to make significant estimates and assumptions at the
acquisition date with respect to intangible assets. The allocation of the consideration transferred in certain cases may be subject to
revision based on the final determination of fair values during the measurement period, which may be up to one year from the acquisition
date. Direct transaction costs associated with the business combination are expensed as incurred. The Company includes the results of
operations of the business that it has acquired in its consolidated results prospectively from the date of acquisition.
If
the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest
in the acquirer is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognized
in profit or loss.
Oil and Gas Properties
The
Company uses the successful efforts method of accounting for oil and natural gas producing properties, as further defined under Accounting
Standards Codification (“ASC”) 932, Extractive Activities - Oil and Natural Gas. Under this method, costs to acquire mineral
interests in oil and natural gas properties are capitalized. The costs of non-producing mineral interests and associated acquisition costs
are capitalized as unproved properties pending the results of leasing efforts and drilling activities of exploration and production (“E&P”)
operators on our interests. As unproved properties are determined to have proved reserves, the related costs are transferred to proved
oil and gas properties. Capitalized costs for proved oil and natural gas mineral interests are depleted on a unit-of-production basis
over total proved reserves. For depletion of proved oil and gas properties, interests are grouped in a reasonable aggregation of properties
with common geological structural features or stratigraphic conditions.
Impairment of Oil
and Gas Properties
The
Company evaluates its producing properties for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. When assessing proved properties for impairment, the Company compares the expected undiscounted future
cash flows of the proved properties to the carrying amount of the proved properties to determine recoverability. If the carrying amount
of proved properties exceeds the expected undiscounted future cash flows, the carrying amount is written down to the properties’
estimated fair value, which is measured as the present value of the expected future cash flows of such properties. The factors used to
determine fair value include estimates of proved reserves, future commodity prices, timing of future production, and a risk-adjusted discount
rate. The proved property impairment test is primarily impacted by future commodity prices, changes in estimated reserve quantities, estimates
of future production, overall proved property balances, and depletion expense. If pricing conditions decline or are depressed, or if there
is a negative impact on one or more of the other components of the calculation, we may incur proved property impairments in future periods.
Unproved
oil and gas properties are assessed periodically for impairment of value, and a loss is recognized at the time of impairment by charging
capitalized costs to expense. Impairment is assessed when facts and circumstances indicate that the carrying value may not be recoverable,
at which point an impairment loss is recognized to the extent the carrying value exceeds the estimated recoverable value. Factors used
in the assessment include but are not limited to commodity price outlooks and current and future operator activity in the respective basins.
The Company recognized no impairment of unproved properties for the three and nine months ended September 30, 2022 and 2021.
Reclassifications
Certain
prior period amounts have been reclassified for comparative purposes to conform to the current-period financial statement presentation.
These reclassifications had no effect on previously reported results of operations.
Recently
Adopted Accounting Standards
In May 2021, the Financial
Accountings Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-04, “Earnings Per Share
(Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and
Hedging-Contracts in Entity’s Own Equity (Subtopic 815- 40): Issuer’s Accounting for Certain Modifications or Exchanges of
Freestanding Equity-Classified Written Call Options.” The guidance became effective for the Company on January 1, 2022. The Company
adopted the guidance on January 1, 2022, and has concluded the adoption did not have a material impact on its unaudited condensed consolidated
financial statements.
In June 2016, the FASB issued
ASU No. 2016-13, “Financial Instruments - Credit Losses,” (“ASU No. 2016-13”) to improve information on credit
losses for financial assets and net investment in leases that are not accounted for at fair value through net income. ASU 2016-13 replaces
the current incurred loss impairment methodology with a methodology that reflects expected credit losses. This guidance is effective for
the Company beginning on January 1, 2023, with early adoption permitted. The Company does not expect that the adoption of this standard
will have a significant impact on its condensed consolidated financial statements.
In August 2020, the FASB issued
ASU 2020-06, “Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own
Equity (Subtopic 815-40)-Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”).
The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently,
more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion
features. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope
exception, which will permit more equity contracts to qualify for it. ASU 2020-06 also simplifies the diluted net income per share calculation
in certain areas. The amendments in ASU 2020-06 are effective for smaller reporting companies as defined by the SEC, for fiscal years
beginning after December 15, 2023, including interim periods within those fiscal years. Effective January 1, 2022, the Company early adopted
ASU 2020-06 using the modified retrospective approach, which resulted in no impact on its condensed consolidated financial statements.
In October 2021, the FASB
issued ASU 2021-08, “Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with
Customers,” which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured
by the acquirer on the acquisition date in accordance with ASC 606, “Revenue from Contracts with Customers.” The guidance
will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. The guidance
should be applied prospectively to acquisitions occurring on or after the effective date. The guidance is effective for fiscal years beginning
after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods,
for any financial statements that have not yet been issued. The Company is currently evaluating this guidance to determine the impact
it may have on its condensed 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, 2022 and 2021.
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 consisted of the following for the three months ended September 30, 2022:
| | |
Three months ended September 30, 2022 | |
| | |
GWW | | |
TurnOn Green | | |
Ault
Alliance | | |
SMC | | |
BNI | | |
AGREE | | |
Total | |
| Primary Geographical Markets | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| North America | |
$ | 2,472,000 | | |
$ | 1,428,000 | | |
$ | - | | |
$ | 16,138,000 | | |
$ | 4,146,000 | | |
$ | 5,513,000 | | |
$ | 29,697,000 | |
| Europe | |
| 2,288,000 | | |
| 32,000 | | |
| 201,000 | | |
| 306,000 | | |
| - | | |
| - | | |
| 2,827,000 | |
| Middle East and other | |
| 3,022,000 | | |
| 202,000 | | |
| - | | |
| 670,000 | | |
| - | | |
| - | | |
| 3,894,000 | |
| Revenue from contracts with customers | |
| 7,782,000 | | |
| 1,662,000 | | |
| 201,000 | | |
| 17,114,000 | | |
| 4,146,000 | | |
| 5,513,000 | | |
| 36,418,000 | |
Revenue, lending and trading activities
(North America) | |
| - | | |
| - | | |
| 13,360,000 | | |
| - | | |
| - | | |
| - | | |
| 13,360,000 | |
| Total revenue | |
$ | 7,782,000 | | |
$ | 1,662,000 | | |
$ | 13,561,000 | | |
$ | 17,114,000 | | |
$ | 4,146,000 | | |
$ | 5,513,000 | | |
$ | 49,778,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Major Goods or Services | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Power supply units | |
$ | 2,799,000 | | |
$ | 1,480,000 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 4,279,000 | |
| Digital currency mining, net | |
| - | | |
| - | | |
| - | | |
| - | | |
| 3,874,000 | | |
| - | | |
| 3,874,000 | |
| Hotel operations | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 5,513,000 | | |
| 5,513,000 | |
| Karaoke machines and related | |
| - | | |
| - | | |
| - | | |
| 17,114,000 | | |
| - | | |
| - | | |
| 17,114,000 | |
| Other | |
| 4,983,000 | | |
| 182,000 | | |
| 201,000 | | |
| - | | |
| 272,000 | | |
| - | | |
| 5,638,000 | |
| Revenue from contracts with customers | |
| 7,782,000 | | |
| 1,662,000 | | |
| 201,000 | | |
| 17,114,000 | | |
| 4,146,000 | | |
| 5,513,000 | | |
| 36,418,000 | |
| Revenue, lending and trading activities | |
| - | | |
| - | | |
| 13,360,000 | | |
| - | | |
| - | | |
| - | | |
| 13,360,000 | |
| Total revenue | |
$ | 7,782,000 | | |
$ | 1,662,000 | | |
$ | 13,561,000 | | |
$ | 17,114,000 | | |
$ | 4,146,000 | | |
$ | 5,513,000 | | |
$ | 49,778,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Timing of Revenue Recognition | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Goods transferred at a point in time | |
$ | 5,821,000 | | |
$ | 1,662,000 | | |
$ | 201,000 | | |
$ | 17,114,000 | | |
$ | 4,146,000 | | |
$ | 5,513,000 | | |
$ | 34,457,000 | |
| Services transferred over time | |
| 1,961,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,961,000 | |
| Revenue from contracts with customers | |
$ | 7,782,000 | | |
$ | 1,662,000 | | |
$ | 201,000 | | |
$ | 17,114,000 | | |
$ | 4,146,000 | | |
$ | 5,513,000 | | |
$ | 36,418,000 | |
The Company’s disaggregated
revenues consisted of the following for the nine months ended September 30, 2022:
| | |
Nine months ended September 30, 2022 | |
| | |
GWW | | |
TurnOn Green | | |
Ault
Alliance | | |
SMC | | |
BNI | | |
AGREE | | |
Total | |
| Primary Geographical Markets | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| North America | |
$ | 5,094,000 | | |
$ | 3,262,000 | | |
$ | 19,000 | | |
$ | 16,138,000 | | |
$ | 12,220,000 | | |
$ | 12,809,000 | | |
$ | 49,542,000 | |
| Europe | |
| 7,007,000 | | |
| 79,000 | | |
| 201,000 | | |
| 306,000 | | |
| - | | |
| - | | |
| 7,593,000 | |
| Middle East and other | |
| 9,429,000 | | |
| 512,000 | | |
| - | | |
| 670,000 | | |
| - | | |
| - | | |
| 10,611,000 | |
| Revenue from contracts with customers | |
| 21,530,000 | | |
| 3,853,000 | | |
| 220,000 | | |
| 17,114,000 | | |
| 12,220,000 | | |
| 12,809,000 | | |
| 67,746,000 | |
Revenue, lending and trading activities
(North America) | |
| - | | |
| - | | |
| 32,224,000 | | |
| - | | |
| - | | |
| - | | |
| 32,224,000 | |
| Total revenue | |
$ | 21,530,000 | | |
$ | 3,853,000 | | |
$ | 32,444,000 | | |
$ | 17,114,000 | | |
$ | 12,220,000 | | |
$ | 12,809,000 | | |
$ | 99,970,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Major Goods or Services | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Power supply units | |
$ | 6,928,000 | | |
$ | 3,592,000 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 10,520,000 | |
| Healthcare diagnostic systems | |
| 2,285,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,285,000 | |
| Defense systems | |
| 6,842,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 6,842,000 | |
| Digital currency mining | |
| - | | |
| - | | |
| - | | |
| - | | |
| 11,398,000 | | |
| - | | |
| 11,398,000 | |
| Hotel operations | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 12,809,000 | | |
| 12,809,000 | |
| Karaoke machines and related | |
| - | | |
| - | | |
| - | | |
| 17,114,000 | | |
| - | | |
| - | | |
| 17,114,000 | |
| Other | |
| 5,475,000 | | |
| 261,000 | | |
| 220,000 | | |
| - | | |
| 822,000 | | |
| - | | |
| 6,778,000 | |
| Revenue from contracts with customers | |
| 21,530,000 | | |
| 3,853,000 | | |
| 220,000 | | |
| 17,114,000 | | |
| 12,220,000 | | |
| 12,809,000 | | |
| 67,746,000 | |
| Revenue, lending and trading activities | |
| - | | |
| - | | |
| 32,224,000 | | |
| - | | |
| - | | |
| - | | |
| 32,224,000 | |
| Total revenue | |
$ | 21,530,000 | | |
$ | 3,853,000 | | |
$ | 32,444,000 | | |
$ | 17,114,000 | | |
$ | 12,220,000 | | |
$ | 12,809,000 | | |
$ | 99,970,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Timing of Revenue Recognition | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Goods transferred at a point in time | |
$ | 12,934,000 | | |
$ | 3,853,000 | | |
$ | 220,000 | | |
$ | 17,114,000 | | |
$ | 12,220,000 | | |
$ | 12,809,000 | | |
$ | 59,150,000 | |
| Services transferred over time | |
| 8,596,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 8,596,000 | |
| Revenue from contracts with customers | |
$ | 21,530,000 | | |
$ | 3,853,000 | | |
$ | 220,000 | | |
$ | 17,114,000 | | |
$ | 12,220,000 | | |
$ | 12,809,000 | | |
$ | 67,746,000 | |
The Company’s disaggregated
revenues consisted 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
(North America) | |
| - | | |
| - | | |
| (38,869,000 | ) | |
| (38,869,000 | ) |
| Total revenue | |
$ | 6,373,000 | | |
$ | 1,094,000 | | |
$ | (38,261,000 | ) | |
$ | (30,794,000 | ) |
| Major Goods | |
| | | |
| | | |
| | | |
| | |
| Power supply units | |
$ | 1,256,000 | | |
$ | 1,094,000 | | |
$ | - | | |
$ | 2,350,000 | |
| Defense systems | |
| 2,940,000 | | |
| - | | |
| - | | |
| 2,940,000 | |
| Digital currency mining | |
| - | | |
| - | | |
| 272,000 | | |
| 272,000 | |
| Other | |
| 2,177,000 | | |
| - | | |
| 336,000 | | |
| 2,513,000 | |
| 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 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
(North America) | |
| | | |
| | | |
| 19,615,000 | | |
| 19,615,000 | |
| Total revenue | |
$ | 19,198,000 | | |
$ | 4,308,000 | | |
$ | 21,074,000 | | |
$ | 44,580,000 | |
| Major Goods | |
| | | |
| | | |
| | | |
| | |
| Power supply units | |
$ | 1,734,000 | | |
$ | 4,308,000 | | |
$ | — | | |
$ | 6,042,000 | |
| Power supply systems | |
| 5,253,000 | | |
| — | | |
| — | | |
| 5,253,000 | |
| Defense systems | |
| 7,731,000 | | |
| — | | |
| — | | |
| 7,731,000 | |
| Digital currency mining | |
| | | |
| | | |
| 693,000 | | |
| 693,000 | |
| Other | |
| 4,480,000 | | |
| — | | |
| 766,000 | | |
| 5,246,000 | |
| 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 | |
5. FAIR VALUE OF FINANCIAL
INSTRUMENTS
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, 2022 | |
| | |
Total | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Investment in common stock of Alzamend Neuro, Inc.
(“Alzamend”) – a related party | |
$ | 12,394,000 | | |
$ | 12,394,000 | | |
$ | - | | |
$ | - | |
| Investments in marketable equity securities | |
| 8,561,000 | | |
| 8,561,000 | | |
| - | | |
| - | |
| Cash and marketable securities held in trust account | |
| 117,421,000 | | |
| 117,421,000 | | |
| - | | |
| - | |
| Investments in other equity securities | |
| 3,916,000 | | |
| - | | |
| - | | |
| 3,916,000 | |
| Total assets measured at fair value | |
$ | 142,292,000 | | |
$ | 138,376,000 | | |
$ | - | | |
$ | 3,916,000 | |
| | |
Fair Value Measurement at December 31, 2021 | |
| | |
Total | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
| Investment in common stock of Alzamend – a related party | |
| 13,230,000 | | |
| 13,230,000 | | |
| - | | |
| - | |
| Investments in marketable equity securities | |
| 40,380,000 | | |
| 40,380,000 | | |
| - | | |
| - | |
| Cash and marketable securities held in trust account | |
| 116,725,000 | | |
| 116,725,000 | | |
| - | | |
| - | |
| Investments in other equity securities | |
| 9,215,000 | | |
| - | | |
| - | | |
| 9,215,000 | |
| Total assets measured at fair value | |
$ | 179,550,000 | | |
$ | 170,335,000 | | |
$ | - | | |
$ | 9,215,000 | |
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. For investments where little or no public market exists, management’s determination of fair value is based on the
best available information which may incorporate management’s own assumptions and involves a significant degree of judgment, taking
into consideration various factors including earnings history, financial condition, recent sales prices of the issuer’s securities
and liquidity risks.
The
following table summarizes the changes in investments in other 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, 2022:
| |
| Investments in
other equity
securities |
|
| Balance at January 1, 2022 |
| $ |
9,215,000 |
|
| Investment in preferred stock |
| |
6,495,000 |
|
| Change in fair value of financial instruments |
| |
25,850,000 |
|
| Conversion to marketable securities |
| |
(37,644,000 |
) |
| Balance at September 30, 2022 |
| $ |
3,916,000 |
|
Other
equity securities also include investments in entities that do not have a readily determinable fair value and do not report net asset
value per share. These investments are accounted for using a measurement alternative under which they are measured at cost and adjusted
for observable price changes and impairments. Observable price changes result from, among other things, equity transactions for the same
issuer executed during the reporting period, including subsequent equity offerings or other reported equity transactions related to the
same issuer. For these transactions to be considered observable price changes of the same issuer, the Company evaluates whether these
transactions have similar rights and obligations, including voting rights, distribution preferences, conversion rights, and other factors,
to the investments the Company holds. Any investments adjusted to their fair value by applying the measurement alternative are disclosed
as nonrecurring fair value measurements, including the level in the fair value hierarchy that was used.
As
of September 30, 2022 and December 31, 2021, investments in other equity securities valued using a measurement alternative of $41.6 million
and $21.4 million, respectively, are included in other equity securities in the accompanying condensed consolidated balance sheets.
The following table presents information on certain assets measured at fair value on a recurring basis by level within the fair value hierarchy as of September 30, 2022 and December 31, 2021. There were no observable price changes or indicators of impairment for these investments during the nine months ended September 30, 2022.
| | |
Fair Value Measurement Using | |
| | |
Total
| | |
Quoted prices
in active
markets for
identical assets
(Level 1) | | |
Other
observable
inputs
(Level 2) | | |
Significant
unobservable
inputs
(Level 3) | |
| As of September 30, 2022 | |
| | | |
| | | |
| | | |
| | |
Investments in other equity securities that do not report net asset
value | |
$ | 41,641,000 | | |
$ | - | | |
$ | - | | |
$ | 41,641,000 | |
| | |
Fair Value Measurement Using | |
| | |
Total
| | |
Quoted prices
in active
markets for
identical assets
(Level 1) | | |
Other
observable
inputs
(Level 2) | | |
Significant
unobservable
inputs
(Level 3) | |
| As of December 31, 2021 | |
| | | |
| | | |
| | | |
| | |
Investments in other equity securities that do not report net asset
value | |
$ | 21,241,000 | | |
$ | - | | |
$ | - | | |
$ | 21,241,000 | |
6. MARKETABLE EQUITY SECURITIES
Marketable equity securities
with readily determinable market prices consisted of the following as of September 30, 2022 and December 31, 2021:
| | |
Marketable equity securities at September 30, 2022 | |
| | |
| | | |
Gross unrealized | | |
Gross unrealized | | |
| | |
| | |
Cost | | |
gains | | |
losses | | |
Fair value | |
| Common shares | |
$ | 16,182,000 | | |
$ | 281,000 | | |
$ | (7,902,000 | ) | |
$ | 8,561,000 | |
| | |
Marketable equity securities at December 31, 2021 | |
| | |
| | | |
Gross unrealized | | |
Gross unrealized | | |
| | |
| | |
Cost | | |
gains | | |
losses | | |
Fair value | |
| Common shares | |
$ | 53,475,000 | | |
$ | 32,000 | | |
$ | (13,127,000 | ) | |
$ | 40,380,000 | |
The Company’s investment
in marketable equity securities are revalued on each balance sheet date.
7. PROPERTY AND EQUIPMENT, NET
At September 30, 2022 and
December 31, 2021, property and equipment consisted of:
| | |
September 30, 2022 | | |
December 31, 2021 | |
| Cryptocurrency machines and related equipment | |
$ | 131,141,000 | | |
$ | 10,763,000 | |
| Computer, software and related equipment | |
| 20,315,000 | | |
| 8,884,000 | |
| Office furniture and equipment | |
| 2,750,000 | | |
| 702,000 | |
| Oil and natural gas properties, unproved properties | |
| 972,000 | | |
| - | |
| Land | |
| 25,646,000 | | |
| 25,696,000 | |
| Building and improvements | |
| 76,012,000 | | |
| 68,959,000 | |
| | |
| 256,836,000 | | |
| 115,004,000 | |
| Accumulated depreciation and amortization | |
| (14,180,000 | ) | |
| (5,096,000 | ) |
| Property and equipment placed in service, net | |
| 242,656,000 | | |
| 109,908,000 | |
| Deposits on cryptocurrency machines | |
| 11,328,000 | | |
| 64,117,000 | |
| Property and equipment, net | |
$ | 253,984,000 | | |
$ | 174,025,000 | |
Summary of depreciation expense:
| | |
For the Three Months Ended | | |
For the Nine Months Ended | |
| | |
September 30, | | |
September 30, | |
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| Depreciation expense | |
$ | 3,942,000 | | |
$ | 265,000 | | |
$ | 10,229,000 | | |
$ | 711,000 | |
Ault Energy Oil and Gas Properties
On July 11, 2022, the Company
announced the formation of Ault Energy, LLC (“Ault Energy”), as an indirect wholly-owned subsidiary of the Company through
Ault Alliance. Ault Energy is partnering with White River Holdings Corp. (“White River”), a wholly owned subsidiary of Ecoark
Holdings, Inc. (“Ecoark”), on drilling projects across 30,000 acres in Texas, Louisiana and Mississippi. Ault Energy, as the
designee of Ault Lending, LLC (“Ault Lending”), has the right to purchase up to 25%, or such higher percentages at the discretion
of White River, in various drilling projects of White River. In August 2022, Ault Energy purchased a 40% working interest of the Harry
O’Neal 20-9 No.1 drilling project in Mississippi for $972,000 included in property and equipment. The Company has not recorded any
depletion as the Harry O’Neal 20-9 No.1 drilling project was considered an unproved property as of September 30, 2022.
Compute North Bankruptcy
On September 22, 2022, Compute North Holdings, Inc. (along with its
affiliated debtors, collectively, “Compute North”), filed for chapter 11 bankruptcy protection in the U.S. Bankruptcy Court
for the Southern District of Texas under Chapter 11 of the U.S. Bankruptcy Code (11 U.S. Code section 101 et seq.). At the time of Compute
North’s bankruptcy filing, BitNile had 6,572 Bitcoin miners with a carrying amount of $38.0 million, classified within property
and equipment on the consolidated balance sheet, with Compute North at the Wolf Hollow hosting facility in Texas. Additionally, the Company
has a deposit of approximately $2.0 million with Compute North for services yet to be performed by Compute North. The ultimate outcome
of the bankruptcy process, and its impact on the deposit held by the Company, remains to be determined. The Company assessed this financial
exposure and recorded an impairment of the deposit totaling $2 million during the three months ended September 30, 2022. The Company has
inspected the Bitcoin miners that are installed at the hosting facility in Texas. No impairment on the mining equipment was recorded as
of September 30, 2022. The Company has retained counsel to assist in this matter.
8. BUSINESS COMBINATIONS
Avalanche International Corp.
(“AVLP”) Acquisition
On June 1, 2022, the Company
converted the principal amount under the convertible promissory notes issued to it by AVLP and accrued unpaid interest into common stock
of AVLP. The Company converted $20.0 million in principal and $5.9 million of accrued interest receivable at a conversion price of $0.50
per share and received 51,889,168 shares of common stock increasing its common stock ownership of AVLP from less than 20% to approximately
92%.
Prior to the conversion of
the convertible promissory notes, the Company accounted for its investment in AVLP as an investment in an unconsolidated entity under
the equity method of accounting. In connection with the conversion of the convertible promissory notes, the Company’s consolidated
financial statements now include all of the accounts of AVLP, and any significant intercompany balances and transactions have been eliminated
in consolidation.
The consideration transferred
for the Company’s approximate 92% ownership interest in connection with this acquisition aggregated $20.7 million, which represented
the fair value of the Company’s holdings in AVLP immediately prior to conversion. The carrying amount of the Company’s holdings
in AVLP immediately prior to conversion was $23.4 million, resulting in a $2.7 million loss for the related remeasurement, which was recognized
in interest and other income.
The Company estimated the
fair values of assets acquired and liabilities assumed using valuation techniques, such as the income, cost and market approaches. The
fair values are based on available historical information and on future expectations and assumptions deemed reasonable by management but
are inherently uncertain. The income method to measure the fair value of intangible assets, is based on forecasts of the expected future
cash flows attributable to the respective assets. Significant estimates and assumptions inherent in the valuations reflected a consideration
of other marketplace participants and included the amount and timing of future cash flows (including expected growth rates and profitability),
the underlying product or technology life cycles, economic barriers to entry and the discount rate applied to the cash flows. Unanticipated
market or macroeconomic events and circumstances could affect the accuracy or validity of the estimates and assumptions.
The allocation of the total
consideration transferred to the assets acquired, including intangible assets and goodwill, and the liabilities assumed is preliminary
and could be revised as a result of additional information obtained due to the finalization of a third-party valuation report, leases
and related commitments, tax related matters and contingencies and certain assets and liabilities, including receivables and payables.
Amounts will be finalized within the measurement period, which will not exceed one year from the acquisition date. Goodwill represents
the excess of the purchase price over the preliminary fair value of identifiable assets acquired and liabilities assumed at the acquisition
date and is primarily attributable to the assembled workforce and expected synergies at the time of the acquisition. The goodwill resulting
from this acquisition is not tax deductible.
The following table presents
the final allocation of the consideration transferred to the assets acquired and liabilities assumed based on their fair values.
| | |
Preliminary
allocation | |
| Total purchase consideration | |
$ | 20,706,000 | |
| Fair value of non-controlling interest | |
| 6,738,000 | |
| Total consideration | |
$ | 27,444,000 | |
| | |
| | |
| Identifiable net liabilities assumed: | |
| | |
| Cash | |
$ | 1,245,000 | |
| Prepaid expenses and other current assets | |
| 55,000 | |
| Property and equipment | |
| 5,057,000 | |
| Note receivable | |
| 800,000 | |
| Accounts payable and accrued expenses | |
| (5,018,000 | ) |
| Convertible notes payable, principal | |
| (9,734,000 | ) |
| Fair value of embedded derivative | |
| (1,226,000 | ) |
| Fair value of bifurcated conversion option | |
| (4,425,000 | ) |
| Fair value of bifurcated put option | |
| (200,000 | ) |
| Net liabilities assumed | |
| (13,446,000 | ) |
| Goodwill | |
$ | 40,890,000 | |
The Company consolidates the
results of AVLP on a one-month lag, therefore the statements of operations include results for AVLP for the three months ended August
31, 2022.
Overview of SMC Acquisition
Beginning in June 2022, the
Company, through its subsidiary Ault Lending, began making open market purchases of SMC common stock. These purchases granted the Company
a greater than 20% effective ownership on June 9, 2022, and subsequently, on June 15, 2022, the Company owned more than 50% of the issued
and outstanding common stock of SMC. The Company’s ownership of SMC stood at approximately 57% as of September 30, 2022.
As of June 15, 2022 (“Acquisition
Date”), the purchase price of the common stock acquired totaled $7.4 million and on June 15, 2022 a $3.1 million gain
was recognized in interest and other income for the remeasurement of the Company’s previously held ownership interest to $10.5 million,
based on the trading price of SMC common stock. The Company also recognized non-controlling interest at fair value as of the Acquisition
Date in the amount of $10.3 million.
The tradenames and developed
technology intangible assets were valued using the relief-from-royalty method. The relief-from-royalty method is one of the methods under
the income approach wherein estimates of a company’s earnings attributable to the intangible asset are based on the royalty rate
the company would have paid for the use of the asset if it did not own it. Royalty payments are estimated by applying royalty rates between
of 0.5% and 1.0% to the prospective revenue attributable to the intangible asset. The resulting annual royalty payments are tax-affected
and then discounted to present value.
The Company determined
an estimated fair value of customer relationships using an income approach utilizing a discounted cash flow methodology. The
analysis included assumptions regarding the development of new businesses and organic growth rates, a discount rate of 12%
using a weighted average cost of capital analysis, and capital expenditure requirements associated with any new initiatives
developed by SMC. Significant assumptions utilized in the income approach were based on company specific information and
projections which are not observable in the market and are therefore considered Level 3 fair value measurements.
The allocation of the total
consideration transferred to the assets acquired, including intangible assets and goodwill, and the liabilities assumed, is preliminary
and could be revised as a result of additional information obtained due to the finalization of a third-party valuation report, leases
and related commitments, tax related matters and contingencies and certain assets and liabilities, including receivables and payables.
Amounts will be finalized within the measurement period, which will not exceed one year from the Acquisition Date. The goodwill resulting
from this acquisition is not tax deductible.
The following table presents
the preliminary allocation of the consideration transferred to the assets acquired and liabilities assumed based on their fair values.
| | |
Preliminary
Allocation | |
| Total purchase consideration | |
$ | 10,517,000 | |
| Fair value of non-controlling interest | |
| 10,336,000 | |
| Total consideration | |
$ | 20,853,000 | |
| | |
| | |
| Identifiable net assets acquired: | |
| | |
| Cash | |
$ | 2,278,000 | |
| Accounts receivable | |
| 9,891,000 | |
| Prepaid expenses and other current assets | |
| 673,000 | |
| Inventories | |
| 12,840,000 | |
| Property and equipment, net | |
| 529,000 | |
| Right-of-use assets | |
| 1,073,000 | |
| Other assets | |
| 83,000 | |
| Intangible assets: | |
| | |
| Tradenames (19 year estimated useful life) | |
| 2,470,000 | |
| Customer relationships (16 year estimated useful life) | |
| 1,380,000 | |
| Proprietary technology (3 year estimated useful life) | |
| 600,000 | |
| Accounts payable and accrued expenses | |
| (10,052,000 | ) |
| Notes payable | |
| (2,972,000 | ) |
| Lease liabilities | |
| (1,124,000 | ) |
| Net assets acquired | |
| 17,669,000 | |
| Goodwill | |
$ | 3,184,000 | |
Unaudited Pro Forma Financial Information
The following unaudited pro
forma consolidated results of operations for the nine months ended September 30, 2022 have been prepared as if the SMC acquisition had
occurred on January 1, 2022.
| | |
Nine Months Ended | |
| | |
September 30, 2022 | |
| Total revenues | |
$ | 131,609,000 | |
| Net loss attributable to BitNile Holdings, Inc. | |
$ | (62,202,000 | ) |
The unaudited pro forma information
is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved
had the acquisition been consummated as of that time, nor is it intended to be a projection of future results.
Overview of GIGA acquisition
On September 8, 2022, Giga-tronics
Incorporated (“GIGA”) acquired 100% of the capital stock of GWW from the Company in exchange for 2.92 million shares of GIGA’s
common stock and 514.8 shares of GIGA’s Series F Convertible Preferred Stock (“Series F”) that are convertible
into an aggregate of 3.96 million shares of GIGA’s common stock. GIGA also assumed GWW’s outstanding equity awards representing
the right to receive up to 749,626 shares of GIGA’s common stock, on an as-converted basis. The transaction described above resulted
in a change of control of GIGA. Assuming the Company was to convert all of the Series F, the common stock owned by the Company after such
conversion would result in the Company owning approximately 71.2% of GIGA’s outstanding shares.
On September 8, 2022,
the Company loaned GIGA $4.25
million by purchasing a convertible note that carries an interest rate of 10% per annum and matures on February 14, 2023. The
convertible note between the Company and GIGA is eliminated in consolidation beginning on September 8, 2022. The Company received
the right to appoint four members of a seven member GIGA board of directors. These factors contributed to the Company’s
determination that GWW be treated as the accounting acquirer.
The Company believes there
are synergies between GIGA and GWW. GIGA manufactures specialized electronics equipment for use in both military test and airborne operational
applications. GIGA focuses on the design and manufacture of custom microwave products for military airborne, sea, and ground applications
as well as the design and manufacture of high-fidelity signal simulation and recording solutions for RADAR and electronic warfare test
applications. GIGA’s results of operations subsequent to the acquisition are included in the Company’s GWW defense business
segment.
In respect of the above transactions,
the acquired assets and assumed liabilities, together with acquired processes and employees, represent a business as defined in ASC 805,
Business Combinations. The transactions were accounted for as a reverse acquisition using the acquisition method of accounting with GIGA
treated as the legal acquirer and GWW treated as the accounting acquirer. In identifying GWW as the acquiring entity for accounting purposes,
GIGA and GWW took into account a number of factors, including the relative voting rights, executive management and the corporate governance
structure of the Company. GWW is considered the accounting acquirer since the Company controls the board of directors of GIGA following
the transactions and received a 71.2% beneficial ownership interest in GIGA. However, no single factor was the sole determinant in the
overall conclusion that GWW is the acquirer for accounting purposes; rather all factors were considered in arriving at such conclusion.
The fair value of the purchase
consideration was $9.5 million, consisting of $4.0 million for GIGA’s common stock and prefunded warrants, $0.4 million fair value
of vested stock incentives, $3.7 million cash and $1.3 million related to an existing loan agreement between Ault Lending and GIGA, which was deemed settled.
The tradenames and developed
technology intangible assets were valued using the relief-from-royalty method. The relief-from-royalty method is one of the methods under
the income approach wherein estimates of a company’s earnings attributable to the intangible asset are based on the royalty rate
the company would have paid for the use of the asset if it did not own it. Royalty payments are estimated by applying royalty rates between
1.0% and 7.0% to the prospective revenue attributable to the intangible asset. The resulting annual royalty payments are tax-affected
and then discounted to present value.
The Company determined an
estimated fair value of customer relationships using an income approach utilizing a discounted cash flow methodology. The analysis included
assumptions regarding the development of new businesses and organic growth rates, a discount rate of 22% using a weighted average cost
of capital analysis, and capital expenditure requirements associated with any new initiatives developed by GIGA. Significant assumptions
utilized in the income approach were based on company specific information and projections which are not observable in the market and
are therefore considered Level 3 fair value measurements.
The total purchase price to
acquire GIGA has been allocated to the assets acquired and assumed liabilities based upon preliminary estimated fair values, with any
excess purchase price allocated to goodwill. The goodwill resulting from this acquisition is not tax deductible. The fair value of the
acquired assets and assumed liabilities as of the date of acquisition are based on preliminary estimates assisted, in part, by a third-party
valuation expert. The estimates are subject to change upon the finalization of appraisals and other valuation analyses, which are expected
to be completed no later than one year from the date of acquisition. Although the completion of the valuation activities may result in
asset and liability fair values that are different from the preliminary estimates included herein, it is not expected that those differences
would alter the understanding of the impact of this transaction on the consolidated financial position and results of operations of the
Company.
The preliminary purchase price
allocation is as follows:
| | |
Preliminary allocation | |
| Total purchase consideration | |
$ | 6,763,000 | |
| Fair value of non-controlling interest | |
| 2,735,000 | |
| Total consideration | |
$ | 9,498,000 | |
| | |
| | |
| Identifiable net assets acquired (liabilities assumed): | |
| | |
| Cash | |
$ | 107,000 | |
| Trade accounts receivable | |
| 536,000 | |
| Inventories | |
| 5,180,000 | |
| Prepaid expenses | |
| 116,000 | |
| Accrued revenue | |
| 363,000 | |
| Property and equipment | |
| 331,000 | |
| Right-of-use asset | |
| 370,000 | |
| Other long-term assets | |
| 446,000 | |
| Intangible assets: | |
| | |
| Tradename (12 year estimated useful life) | |
| 1,040,000 | |
| Developed Technology (8 year estimated useful life) | |
| 1,410,000 | |
| Existing customer relationships (10-15 year estimated useful life) | |
| 3,910,000 | |
| Accounts payable | |
| (2,831,000 | ) |
| Loans payable, net of discounts and issuance costs | |
| (387,000 | ) |
| Accrued payroll and benefits | |
| (1,488,000 | ) |
| Lease obligations | |
| (491,000 | ) |
| Other current liabilities | |
| (368,000 | ) |
| Other non-current liabilities | |
| (17,000 | ) |
| Net assets acquired | |
| 8,227,000 | |
| Goodwill | |
$ | 1,271,000 | |
9. GOODWILL
The following table summarizes
the changes in the Company’s goodwill for the nine months ended September 30, 2022:
| | |
Goodwill | |
| Balance as of January 1, 2022 | |
$ | 10,090,000 | |
| Acquisition of AVLP | |
| 40,890,000 | |
| Acquisition of SMC | |
| 3,184,000 | |
| Acquisition of GIGA | |
| 1,271,000 | |
| Effect of exchange rate changes | |
| (891,000 | ) |
| Balance as of September 30, 2022 | |
$ | 54,544,000 | |
10. INCREASE IN OWNERSHIP INTEREST OF SUBSIDIARIES
On May 12, 2022, BNI closed
a $1.8 million membership interest purchase agreement whereby BNI acquired the 30% minority interest of Alliance Cloud Services, LLC (“ACS”)
which BNI did not previously own, resulting in ACS becoming a wholly-owned subsidiary of BNI. ACS owns and operates the Company’s
Michigan data center, where BNI conducts the Company’s Bitcoin mining operations.
Between June 15, 2022 and
September 30, 2022, Ault Lending increased the Company’s ownership interest in SMC through the open market purchase of approximately
274,000 shares for $ million.
11. INVESTMENTS – RELATED PARTIES
Investments in Alzamend and
Ault & Company at September 30, 2022 and December 31, 2021, were comprised of the following:
Investment in Promissory Notes, Related
Parties
| | |
Interest | |
Due | |
September 30, | | |
December 31, | |
| | |
rate | |
date | |
2022 | | |
2021 | |
| Investment in promissory note of Ault & Company | |
8% | |
December 31, 2022 | |
$ | 2,500,000 | | |
$ | 2,500,000 | |
| Accrued interest receivable, Ault & Company | |
| |
| |
| 318,000 | | |
| 170,000 | |
| Other | |
| |
| |
| - | | |
| 172,000 | |
| Total investment in promissory note, related party | |
| |
| |
$ | 2,818,000 | | |
$ | 2,842,000 | |
Investment in Common Stock and Options,
Related Parties
| | |
September 30, | | |
December 31, | |
| | |
2022 | | |
2021 | |
| Investment in common stock and options of Alzamend | |
$ | 12,394,000 | | |
$ | 13,230,000 | |
The following table summarizes
the changes in the Company’s investments in Alzamend and Ault & Company during the nine months ended September 30, 2022:
| | |
Investment in
warrants and
common stock of
Alzamend | | |
Investment in
promissory notes of
Ault & Company | |
| Balance at January 1, 2022 | |
$ | 13,230,000 | | |
$ | 2,842,000 | |
| Investment in common stock and options of Alzamend | |
| 4,840,000 | | |
| - | |
| Unrealized loss in common stock of Alzamend | |
| (5,676,000 | ) | |
| - | |
| Amortization of related party investment | |
| - | | |
| (173,000 | ) |
| Accrued interest | |
| - | | |
| 149,000 | |
| Balance at September 30, 2022 | |
$ | 12,394,000 | | |
$ | 2,818,000 | |
Investments in
Alzamend Common Stock
The
following table summarizes the changes in the Company’s investments in Alzamend common stock during the nine months ended September
30, 2022:
| | |
Shares of | | |
Per Share | | |
Investment in | |
| | |
Common Stock | | |
Price | | |
Common Stock | |
| Balance at January 1, 2022 | |
| 6,947,000 | | |
$ | 1.90 | | |
$ | 13,230,000 | |
| March 9, 2021 securities purchase agreement* | |
| 2,667,000 | | |
$ | 1.50 | | |
| 4,000,000 | |
| Open market purchases after initial public offering | |
| 801,000 | | |
$ | 1.05 | | |
| 840,000 | |
| Unrealized loss in common stock of Alzamend | |
| | | |
| | | |
| (5,676,000 | ) |
| Balance at September 30, 2022 | |
| 10,415,000 | | |
$ | 1.19 | | |
$ | 12,394,000 | |
| * | Pursuant to the March 9, 2021 securities purchase agreement, in
aggregate, Alzamend agreed to sell up to 6,666,667 shares of its common stock to Ault Lending for $10.0 million, or $1.50 per share, and
issue to Ault Lending warrants to acquire 3,333,334 shares of Alzamend common stock with an exercise price of $3.00 per share. As of December
31, 2021, Ault Lending funded $6.0 million, including the conversion of notes and advances of $0.8 million, and the remaining $4.0 million
was funded upon Alzamend achieving certain milestones during the nine months ended September 30, 2022. |
12. INVESTMENT IN UNCONSOLIDATED ENTITY –
AVLP
Equity Investments in Unconsolidated Entity
– AVLP
The Company converted its
AVLP convertible promissory note on June 1, 2022 as part of the acquisition of AVLP (see Note 8). Equity investments in the then
unconsolidated entity, AVLP, at December 31, 2021, were comprised of the following:
Investment in Promissory Notes
| | |
Interest rate | |
Due date | |
December 31, 2021 | |
| Investment in convertible promissory note | |
12% | |
2022-2026 | |
$ | 17,799,000 | |
| Investment in promissory note – Alpha Fund | |
8% | |
June 30, 2022 | |
| 3,600,000 | |
| Accrued interest receivable | |
| |
| |
| 2,092,000 | |
| Other | |
| |
| |
| 600,000 | |
| Total investment in promissory notes, gross | |
| |
| |
| 24,091,000 | |
| Less: provision for loan losses | |
| |
| |
| (2,000,000 | ) |
| Total investment in promissory note | |
| |
| |
$ | 22,091,000 | |
The following table summarizes
the changes in the Company’s equity investments in the then unconsolidated entity, AVLP, during the nine months ended September
30, 2022:
| | |
Investment in | | |
Investment in | | |
| |
| | |
warrants and | | |
promissory notes | | |
Total | |
| | |
common stock | | |
and advances | | |
investment | |
| Balance at January 1, 2022 | |
$ | 39,000 | | |
$ | 22,091,000 | | |
$ | 22,130,000 | |
| Investment in convertible promissory notes | |
| - | | |
| 2,200,000 | | |
| 2,200,000 | |
| Loss from equity investment | |
| (39,000 | ) | |
| (885,000 | ) | |
| (924,000 | ) |
| Accrued interest | |
| - | | |
| 143,000 | | |
| 143,000 | |
| Loss on remeasurement upon conversion | |
| - | | |
| (2,700,000 | ) | |
| (2,700,000 | ) |
| Conversion of AVLP convertible promissory notes | |
| - | | |
| (17,040,000 | ) | |
| (17,040,000 | ) |
| Elimination of intercompany debt after conversion | |
| - | | |
| (3,809,000 | ) | |
| (3,809,000 | ) |
| Balance at September 30, 2022 | |
$ | - | | |
$ | - | | |
$ | - | |
13. CONSOLIDATED VARIABLE INTEREST ENTITY -
ALPHA FUND
Alpha Fund – Consolidated Variable
Interest Entity
As of September 30, 2022 and
December 31, 2021, the Company held an investment in Ault Alpha LP (“Alpha Fund”). Alpha Fund operates as a private investment
fund. The general partner of 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 Alpha Fund. The Investment Manager is owned by Ault & Company. Messrs.
Ault, Horne, Nisser and 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,
2022, Ault Lending subscribed for $33 million
or approximately 100% of
the limited partnership interests in Alpha Fund, the full amount of which was funded, an increase of $16
million from the $17 million subscribed
and funded as of December 31, 2021. These investments are subject to a rolling five-year lock-up period, provided that after three
years, Alpha GP will waive 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
Alpha Fund’s partnership agreement and side letter entered into between the Company and Alpha Fund.
The Company consolidates Alpha
Fund as a variable interest entity (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 – Treasury
Stock
As of September 30, 2022,
Alpha Fund owned 45,049,871 shares of the Company’s common stock and 91,033 shares of the Company’s 13.00% Series D Cumulative
Redeemable Perpetual Preferred Stock (the “Series D Preferred Stock”), accounted for as treasury stock as of September 30,
2022.
14. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Other current liabilities at September
30, 2022 and December 31, 2021 consisted of:
Schedule of other current liabilities
| | |
September 30, | | |
December 31, | |
| | |
2022 | | |
2021 | |
| Accounts payable | |
| 22,467,000 | | |
$ | 6,902,000 | |
| Accrued payroll and payroll taxes | |
| 9,531,000 | | |
| 5,027,000 | |
| Financial instrument liabilities | |
| 937,000 | | |
| 4,249,000 | |
| Accrued legal | |
| 1,787,000 | | |
| 2,637,000 | |
| Interest payable | |
| 4,140,000 | | |
| 187,000 | |
| Other accrued expenses | |
| 11,745,000 | | |
| 3,753,000 | |
| Total | |
$ | 50,607,000 | | |
$ | 22,755,000 | |
Financial Instruments
Under authoritative guidance
used by the FASB on determining whether an instrument (or embedded feature) is indexed to an entity’s own stock, instruments that
do not have fixed settlement provisions are deemed to be derivative instruments. In prior years, the Company granted certain warrants
that resulted in these warrants accounted for as a financial instrument and being re-measured every reporting period with the change in
value reported in the statement of operations.
The financial
instruments were valued using a variety of pricing models with the following valuation assumptions:
Schedule of Financial Instrument
| | |
September 30,
2022 | | |
December 31,
2021 | |
| Contractually stipulated stock price | |
$ | 2.50 | | |
$ | 2.50 | |
| Exercise price | |
$ | 2.50 | | |
$ | 2.50 | |
| Contractually defined remaining term | |
| 5.0 | | |
| 5.0 | |
| Contractually defined volatility | |
| 135 | % | |
| 135 | % |
| Dividend yield | |
| 0 | % | |
| 0 | % |
| Risk-free interest rate | |
| 4.1 | % | |
| 1.3 | % |
Per the terms of
the warrant agreements underlying the financial instruments, the value to the warrant holders is defined within the agreement based on
a stock price, contractual term, volatility factor and dividend rate as defined in the warrant agreement, and not indexed to the company’s
stock, resulting in the financial instrument accounting. The risk-free interest rate was based on rates established by the Federal Reserve
Bank.
The following table sets forth
a summary of the changes in the estimated fair value of the financial instruments during the nine months ended September 30, 2022 and
2021:
Schedule of fair value of the financial instruments
| | |
September 30, 2022 | | |
September 30, 2021 | |
| Beginning balance | |
$ | 4,249,000 | | |
$ | 4,192,000 | |
| Change in fair value | |
| 27,000 | | |
| 388,000 | |
| Extinguishment | |
| (3,339,000 | ) | |
| - | |
| Ending balance | |
$ | 937,000 | | |
$ | 4,580,000 | |
15. NOTES PAYABLE
Notes payable at September
30, 2022 and December 31, 2021, were comprised of the following:
Schedule of notes payable
| | |
Interest
rate | |
Due date | |
September 30,
2022 | | |
December 31,
2021 | |
| Short-term notes payable | |
12.0% | |
Nov. 2022 | |
$ | 35,000 | | |
$ | 118,000 | |
| 10% original issue discount senior secured notes | |
| |
| |
| - | | |
| 65,972,000 | |
| AGREE Madison secured construction loans | |
7.0% | |
January 1, 2025 | |
| 58,351,000 | | |
| 55,055,000 | |
| SMC line of credit | |
15.5% | |
June 11, 2023 | |
| 2,500,000 | | |
| - | |
| SMC installment notes | |
7.6% | |
June 18, 2024 | |
| 177,000 | | |
| - | |
| SMC notes payable | |
6.0% | |
Sept. 2024-Feb. 2025 | |
| 353,000 | | |
| - | |
| XBTO note payable | |
12.5% | |
December 30, 2023 | |
| 3,384,000 | | |
| - | |
| 10% secured promissory notes | |
10.0% | |
August 10, 2023 | |
| 10,093,000 | | |
| - | |
| Short-term bank line of credit | |
4.7% | |
Renews monthly | |
| 2,325,000 | | |
| 960,000 | |
| Total notes payable | |
| |
| |
$ | 77,218,000 | | |
$ | 122,105,000 | |
| Less: | |
| |
| |
| | | |
| | |
| Unamortized debt discounts | |
| |
| |
| (1,776,000 | ) | |
| (27,496,000 | ) |
| Total notes payable, net | |
| |
| |
$ | 75,442,000 | | |
$ | 94,609,000 | |
| Less: current portion | |
| |
| |
| (17,132,000 | ) | |
| (39,554,000 | ) |
| Notes payable – long-term portion | |
| |
| |
$ | 58,310,000 | | |
$ | 55,055,000 | |
10% Secured Promissory Notes
On August 10, 2022, the
Company, through its BNI subsidiary, entered into a note purchase agreement providing for the issuance of secured promissory notes
with an aggregate principal face amount of $11,000,000 and
an interest rate of 10%.
The purchase price (proceeds to the Company) for the secured promissory notes was $10.0 million.
The secured promissory notes have a security interest in $10 million of marketable securities and investments and certain Bitcoin
mining equipment with a carrying amount of $23.1 million. The secured promissory notes are further secured by a guaranty provided by the Company, Ault Lending and by
Milton C. Ault, the Executive Chairman of the Company.
The maturity date of the secured
promissory notes is August 10, 2023. The Company is required to make monthly payment (principal and interest) of $1,000,000 on the tenth
calendar day of each month, starting in September 2022. Provided that the Company makes the first six monthly payments in full and on
a timely basis, after six months, the Company may elect to pay a forbearance fee of $250,000 in lieu of a monthly payment, which would
extend the maturity date of the related secured promissory notes by one month for each forbearance. The Company may not elect forbearance
in consecutive months.
SMC Debt Security Interest
The SMC debt is secured by
a perfected security interest in all SMC assets including a first-priority security interest in SMC accounts receivable and inventory.
Amortization of Debt Discount of Secured
Promissory Notes
During the three months ended
March 31, 2022, the $66 million Secured Promissory Notes were repaid and the Company fully amortized the related debt discount of $26.3
million, which is included within interest expense on the condensed consolidated statements of operations.
The following table summarizes
the principal maturity schedule for our notes payable outstanding as of September 30, 2022:
| Year | | |
Principal | |
| 2022 | | |
$ | 18,049,000 | |
| 2023 | | |
| 818,000 | |
| 2024 | | |
| - | |
| 2025 | | |
| 58,351,000 | |
| Total | | |
$ | 77,218,000 | |
16. CONVERTIBLE NOTES
Convertible notes payable at September 30, 2022
and December 31, 2021, were comprised of the following:
| | |
Conversion price per
share | |
Interest rate | |
Due date | |
September 30,
2022 |
| | December 31,
2021 |
|
| Convertible promissory note | |
$4.00 | |
4% | |
May 10, 2024 | |
$ | 660,000 |
| | $ |
660,000 |
|
| AVLP convertible promissory notes | |
$0.35 (AVLP stock) | |
15% | |
August 22, 2025 | |
| 9,911,000 |
| | |
- |
|
| Fair value of embedded options and derivatives | |
| |
| |
| |
| 4,908,000 |
| | |
- |
|
| Less: unamortized debt discounts | |
| |
| |
| |
| (132,000 |
) | | |
(192,000 |
) |
| Total convertible notes payable, net of financing cost | |
| |
| |
| |
$ | 15,347,000 |
| | $ |
468,000 |
|
| Less: current portion | |
| |
| |
| |
| (1,469,000 |
) | | |
- |
|
| Total convertible notes payable, net of financing cost, long term | |
| |
| |
| |
$ | 13,878,000 |
| | $ |
468,000 |
|
AVLP convertible promissory notes
The AVLP convertible notes
payable are due and payable on August 22, 2025, with interest at 7% per annum. At the election of the holders, outstanding principal and
accrued interest under the notes are convertible into shares of AVLP’s common stock at a conversion price equal to either (i) if
the aggregate market capital of AVLP on the date of conversion (the “Market Cap”) is $35 million or less, at a 25% discount
to the market price, or (ii) if the Market Cap is greater than $35 million, at a 25% discount to the market price, provided that such
discount shall be increased by dividing it by the quotient that shall be obtained by dividing $35 million by the Market Cap at the time
of conversion, provided, however, any increase in the discount to the market price shall not result in a discount that is greater than
a 75% discount (the “Conversion Price”). Notwithstanding the foregoing, in no event shall the Conversion Price be less than
$0.35.
17. 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 one of the Company’s subsidiaries,
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 the Company, 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 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.
On August 8, 2022, the Court
issued an Order denying the motion to dismiss, in its entirety.
On September 2, 2022, the
Company and its subsidiary filed an answer to the Amended Complaint and asserted numerous affirmative defenses.
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 the Company, 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.
On December 14, 2021, the
Court entered a decision and order in connection with the motion to dismiss whereby the Court dismissed Plaintiff’s causes of action
for specific performance, conversion, permanent injunction, and reiterated its prior determination that the fraud claim was also dismissed.
The Court denied the motion to dismiss in connection with the other causes of action asserted in the complaint.
On January 26, 2022, the Company
and Mr. Ault filed an answer to the complaint and asserted numerous affirmative defenses.
On November 1, 2022, the parties
informed the Court that they reached a settlement in principle and requested an extension of time, until November 22, 2022, to file motions
for summary judgment to allow the parties time to draft formal settlement documents. The Court granted the parties’ request and
the deadline for the Company and Mr. Ault to file their summary judgment is November 22, 2022.
Based on the terms of
the settlement in principle, the Company believes its current legal accrual is adequate to cover the cost of settlement.
Subpoena
The Company and certain affiliates
and related parties have received several subpoenas from the SEC for the production of documents and testimony. 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 subpoenas expressly provide 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 they 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.
18. STOCKHOLDERS’ EQUITY
2022 Issuances
2022 ATM Offering – Common Stock
On February 25, 2022, the
Company entered into an At-The-Market issuance sales agreement with Ascendiant Capital Markets, LLC (“Ascendiant Capital”)
to sell shares of common stock having an aggregate offering price of up to $200 million from time to time, through an “at the market
offering” program (the “2022 Common ATM Offering”). As of September 30, 2022, the Company had sold an aggregate of 256.7
million shares of common stock pursuant to the 2022 Common ATM Offering for gross proceeds of $168.0 million.
Public Offering of Series D Preferred Stock
The Company has designated
2,000,000 shares of preferred stock, par value $0.001 per share, of the Company as the Series D Preferred Stock.
On June 3, 2022, the Company
announced the closing of its public offering of 144,000 shares of its Series D Preferred Stock at a price to the public of $25.00 per
share. Gross proceeds from the offering were approximately $3.6 million, before deducting offering expenses. Net proceeds to the Company,
after payment of commissions, non-accountable fees and offering expenses were $3.1 million.
2022 ATM Offering – Preferred Stock
On June 14, 2022, the Company
entered into an At-The-Market equity offering program with Ascendiant Capital under which it may sell, from time to time, shares of its
Series D Preferred Stock for aggregate gross proceeds of up to $46,400,000 (the “2022 Preferred ATM Offering”). As of September
30, 2022, the Company had sold an aggregate of 10,928 shares of Series D Preferred Stock pursuant to the 2022 Preferred ATM Offering for
gross proceeds of $207,000.
19. INCOME TAXES
The
Company calculates its interim income tax provision in accordance with ASC Topic 270, Interim Reporting, and ASC Topic 740, Income Taxes.
The Company’s effective tax rate (“ETR”) from continuing operations was 0.6% and (9.1%) for the nine months ended
September 30, 2022 and 2021, respectively. The Company an income tax provision of $0.4 million and $0.1 million for the nine months
ended September 30, 2022 and 2021, 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.
20. NET (LOSS) INCOME 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 BitNile 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,
2022 and 2021:
Net Loss Per Share
| | |
|
|
|
| |
| | |
September 30, | |
| | |
2022 | | |
2021 | |
| Stock options | |
| 6,396,000 | | |
| 4,761,000 | |
| Restricted stock grants | |
| 2,085,000 | | |
| - | |
| Warrants | |
| 18,493,000 | | |
| 5,936,000 | |
| Convertible notes | |
| 165,000 | | |
| 165,000 | |
| Convertible preferred stock | |
| 2,000 | | |
| 2,000 | |
| Total | |
| 27,141,000 | | |
| 10,864,000 | |
21. SEGMENT AND CUSTOMERS INFORMATION
The Company had seven
reportable segments as of September 30, 2022 and five as of September 30, 2021; 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 for the three and nine months ended September
30, 2022:
| | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| | |
Nine Months Ended September 30, 2022 | |
| | |
GWW | | |
TurnOn Green | | |
Ault
Alliance | | |
BNI | | |
AGREE | | |
Ault
Disruptive | | |
SMC | | |
Holding
Company | | |
Total | |
| Revenue | |
$ | 21,530,000 | | |
$ | 3,853,000 | | |
$ | 220,000 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 17,114,000 | | |
$ | - | | |
$ | 42,717,000 | |
| Revenue, cryptocurrency mining | |
| - | | |
| - | | |
| - | | |
| 11,398,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 11,398,000 | |
| Revenue, commercial real estate leases | |
| - | | |
| - | | |
| - | | |
| 822,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 822,000 | |
| Revenue, lending and trading activities | |
| - | | |
| - | | |
| 32,224,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 32,224,000 | |
| Revenue, hotel operations | |
| - | | |
| - | | |
| - | | |
| - | | |
| 12,809,000 | | |
| - | | |
| - | | |
| - | | |
| 12,809,000 | |
| Total revenues | |
$ | 21,530,000 | | |
$ | 3,853,000 | | |
$ | 32,444,000 | | |
$ | 12,220,000 | | |
$ | 12,809,000 | | |
$ | - | | |
$ | 17,114,000 | | |
$ | - | | |
$ | 99,970,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Depreciation and amortization expense | |
$ | 1,259,000 | | |
$ | 403,000 | | |
$ | 240,000 | | |
$ | 6,949,000 | | |
$ | 2,487,000 | | |
$ | - | | |
$ | 166,000 | | |
$ | 473,000 | | |
$ | 11,977,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Income (loss) from operations | |
$ | (1,881,000 | ) | |
$ | (2,577,000 | ) | |
$ | 4,212,000 | | |
$ | (6,138,000 | ) | |
$ | 149,000 | | |
$ | (1,100,000 | ) | |
$ | 597,000 | | |
$ | (19,262,000 | ) | |
$ | (26,000,000 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital expenditures for the nine
months ended September 30, 2022 | |
$ | 612,000 | | |
$ | 176,000 | | |
$ | 1,739,000 | | |
$ | 77,299,000 | | |
$ | 4,444,000 | | |
$ | - | | |
$ | 66,000 | | |
$ | 164,000 | | |
$ | 84,500,000 | |
| | |
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| | |
Three Months Ended September 30, 2022 | |
| | |
GWW | | |
TurnOn Green | | |
Ault
Alliance | | |
BNI | | |
AGREE | | |
Ault
Disruptive | | |
SMC | | |
Holding
Company | | |
Total | |
| Revenue | |
$ | 7,781,000 | | |
$ | 1,662,000 | | |
$ | 201,000 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 17,114,000 | | |
$ | - | | |
$ | 26,758,000 | |
| Revenue, cryptocurrency mining | |
| - | | |
| - | | |
| - | | |
| 3,874,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 3,874,000 | |
| Revenue, commercial real estate leases | |
| - | | |
| - | | |
| - | | |
| 273,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 273,000 | |
| Revenue, lending and trading activities | |
| - | | |
| - | | |
| 13,360,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 13,360,000 | |
| Revenue, hotel operations | |
| - | | |
| - | | |
| - | | |
| - | | |
| 5,513,000 | | |
| - | | |
| - | | |
| - | | |
| 5,513,000 | |
| Total revenues | |
$ | 7,781,000 | | |
$ | 1,662,000 | | |
$ | 13,561,000 | | |
$ | 4,147,000 | | |
$ | 5,513,000 | | |
$ | - | | |
$ | 17,114,000 | | |
$ | - | | |
$ | 49,778,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Depreciation and amortization expense | |
$ | 740,000 | | |
$ | 393,000 | | |
$ | 172,000 | | |
$ | 2,809,000 | | |
$ | 832,000 | | |
$ | - | | |
$ | 166,000 | | |
$ | (264,000 | ) | |
$ | 4,848,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Income (loss) from operations | |
$ | (661,000 | ) | |
$ | (957,000 | ) | |
$ | 3,786,000 | | |
$ | (2,321,000 | ) | |
$ | 1,697,000 | | |
$ | (314,000 | ) | |
$ | 597,000 | | |
$ | (5,138,000 | ) | |
$ | (3,311,000 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital expenditures for the three
months ended September 30, 2022 | |
$ | 327,000 | | |
$ | 51,000 | | |
$ | 890,000 | | |
$ | 5,915,000 | | |
$ | 4,425,000 | | |
$ | - | | |
$ | 66,000 | | |
$ | 47,000 | | |
$ | 11,721,000 | |
AVLP, SMC and GIGA Segment Information
The AVLP and SMC acquisitions
were completed in June 2022 and the GIGA acquisition was completed in September 2022. As of September 30, 2022, identifiable assets for
AVLP, SMC and GIGA were $47.5 million, $40.0 million and $19.2 million, respectively.
Segment information for the
three and nine months ended September 30, 2021:
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| | |
Nine Months Ended September 30, 2021 | |
| | |
GWW | | |
TurnOnGreen | | |
Ault
Alliance | | |
BNI | | |
Ault
Disruptive | | |
Holding
Company | | |
Total | |
| Revenue | |
$ | 19,198,000 | | |
$ | 4,308,000 | | |
$ | 236,000 | | |
| | | |
| | | |
| | | |
$ | 23,742,000 | |
| Revenue, cryptocurrency mining | |
| - | | |
| - | | |
| | | |
| 693,000 | | |
| | | |
| | | |
| 693,000 | |
| Revenue, commercial real estate leases | |
| - | | |
| - | | |
| | | |
| 530,000 | | |
| | | |
| | | |
| 530,000 | |
| Revenue, lending and trading activities | |
| - | | |
| - | | |
| 19,615,000 | | |
| | | |
| | | |
| | | |
| 19,615,000 | |
| Revenue, hotel operations | |
| - | | |
| - | | |
| | | |
| | | |
| | | |
| | | |
| - | |
| Total revenues | |
$ | 19,198,000 | | |
$ | 4,308,000 | | |
$ | 19,851,000 | | |
$ | 1,223,000 | | |
$ | - | | |
$ | - | | |
$ | 44,580,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Depreciation and amortization expense | |
$ | 951,000 | | |
$ | 69,000 | | |
$ | 146,000 | | |
$ | 250,000 | | |
$ | - | | |
$ | 297,000 | | |
$ | 1,713,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Income (loss) from operations | |
$ | (766,000 | ) | |
$ | (490,000 | ) | |
$ | 12,390,000 | | |
$ | (839,000 | ) | |
$ | (331,000 | ) | |
$ | (12,814,000 | ) | |
$ | (2,850,000 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital expenditures for the nine
months ended September 30, 2021 | |
$ | 686,000 | | |
$ | - | | |
$ | - | | |
$ | 27,459,000 | | |
$ | - | | |
$ | - | | |
$ | 28,145,000 | |
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| | |
Three Months Ended September 30, 2021 | |
| | |
GWW | | |
TurnOn Green | | |
Ault
Alliance | | |
BNI | | |
Ault
Disruptive | | |
Holding
Company | | |
Total | |
| Revenue | |
$ | 6,373,000 | | |
$ | 1,094,000 | | |
$ | 110,000 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 7,577,000 | |
| Revenue, cryptocurrency mining | |
| - | | |
| - | | |
| - | | |
| 272,000 | | |
| - | | |
| - | | |
| 272,000 | |
| Revenue, commercial real estate leases | |
| - | | |
| - | | |
| - | | |
| 226,000 | | |
| - | | |
| - | | |
| 226,000 | |
| Revenue, lending and trading activities | |
| - | | |
| - | | |
| (38,869,000 | ) | |
| - | | |
| - | | |
| - | | |
| (38,869,000 | ) |
| Revenue, hotel operations | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Total revenues | |
$ | 6,373,000 | | |
$ | 1,094,000 | | |
$ | (38,759,000 | ) | |
$ | 498,000 | | |
$ | - | | |
$ | - | | |
$ | (30,794,000 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Depreciation and amortization expense | |
$ | 523,000 | | |
$ | 56,000 | | |
$ | 118,000 | | |
$ | 98,000 | | |
$ | - | | |
$ | 281,000 | | |
$ | 1,076,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Income (loss) from operations | |
$ | 19,000 | | |
$ | (408,000 | ) | |
$ | (41,390,000 | ) | |
$ | (339,000 | ) | |
$ | (143,000 | ) | |
$ | (7,613,000 | ) | |
$ | (49,874,000 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital expenditures for the three
months ended September 30, 2021 | |
$ | 120,000 | | |
$ | - | | |
| | | |
$ | 22,435,000 | | |
$ | - | | |
$ | - | | |
$ | 22,555,000 | |
22. CONCENTRATIONS OF CREDIT AND REVENUE RISK
Accounts receivable are concentrated
with certain large customers. At September 30, 2022, approximately 36% of accounts receivable were due from two customers in North America,
each of which individually accounted for over 10% of consolidated accounts receivable.
For the three months ended
September 30, 2022, one customer represented 15% and one customer represented 10% of consolidated revenues.
23. SUBSEQUENT EVENTS
2022 Common ATM Offering
During the period between
October 1, 2022 through November 18, 2022, the Company sold an aggregate of 14.8
million shares of common stock pursuant to the 2022 Common ATM Offering for gross proceeds of $2.6
million.
2022 Preferred
ATM Offering
During
the period between October 1, 2022 through November 18, 2022, the Company sold an aggregate of 8,933
shares of Series D Preferred Stock pursuant to the 2022 Preferred ATM Offering for gross proceeds of $124,000.
Investments in Alpha Fund
During the period between
October 1, 2022 through November 18, 2022, Ault Lending purchased an additional $0.2 million
of limited partnership interests in Alpha Fund.
SMC Credit and Security Agreement with Fifth
Third Bank
On October 14, 2022, SMC entered
into a credit agreement with Fifth Third Bank. The credit agreement provides for a three-year secured revolving credit facility in an
aggregate principal amount of up to $15 million decreased to $7.5 million during the non-peak period of January 1 through July 31 of each
year. The credit agreement matures on October 14, 2025.
The revolving credit facility
bears interest of the Prime Rate plus 0.50% or the 30-day term secured overnight financing rate plus 3.00%.
Under the credit agreement:
| · | Accounts receivable advance rate up to an 85% against SMC’s eligible accounts receivable; |
| · | Inventory advance of up to 85% of SMC’s eligible inventory; and |
| · | SMC must maintain a minimum fixed charge coverage of 1.05 to 1. |
Availability under the credit
agreement was approximately $4.0 million as of November 18, 2022.
Secured Debt Financing
On November 7, 2022, the Company
and certain of its subsidiaries borrowed $18.9 million of principal amount of term loans (the “Loans”) from a group of institutional
investors (the “Financing”). The Loans mature in 18 months, which may be extended to 24 months, accrue interest at the rate
of 8.5% per annum and are secured by certain assets of the Company and various subsidiaries. Starting in January 2023, the lenders have
the right to require the Company to make monthly payments of $0.6 million, which will increase to $1.1 million in November 2023. The Loans
were issued with an original issue discount of $1.89 million.
The lenders received warrants
to purchase approximately 4.5 million shares of the Company’s common stock, exercisable for four years at $0.45 per share and warrants
to purchase another approximately 4.5 million shares of the Company’s common stock, exercisable for four years at $0.75 per share,
subject to adjustment.
On November 7, 2022, Ault Aviation used proceeds from the Loans to purchase a private aircraft for a total purchase
price of $15.8 million. In addition, the Company and
certain of its subsidiaries entered into various agreements as collateral for the repayment of the Loans, including (i) a security interest
in certain Bitcoin mining equipment, (ii) a pledge of the membership interests of Third Avenue Apartments, LLC, a wholly owned subsidiary
of the Company (“Third Apartments”), (iii) a pledge of the membership interests of Alliance Cloud Services, LLC, a wholly
owned subsidiary of the Company (“Alliance Cloud”), (iv) a pledge of the membership interests of Ault Aviation, LLC, a wholly
owned subsidiary of the Company (“Ault Aviation”), (v) a pledge in a segregated deposit account of $1.5 million of cash, (vi)
a mortgage and security agreement by Third Avenue on the real estate property owned by Third Avenue in St. Petersburg, Florida, (vii)
a future advance mortgage by Alliance Cloud on the real estate property owned by Alliance Cloud in Dowagiac, Michigan, and (viii) an aircraft
mortgage and security agreement by Ault Aviation on the private aircraft purchased by Ault Aviation on November 7, 2022. The Loans are further secured by a guaranty provided by Ault Lending and Milton C. Ault, the Executive Chairman of the Company.
3% Secured Promissory Notes
On November 18, 2022, the
Company, through its BNI subsidiary, entered into a note purchase agreement providing for the issuance of secured promissory notes with
an aggregate principal face amount of $8,181,819 and an interest rate of 3%. The purchase price (proceeds to the Company) for the secured
promissory notes was $8.2 million. The secured promissory notes have a security interest in certain marketable securities to be acquired
by BNI (the “Collateral”).
The maturity date of the secured
promissory notes is May 18, 2023. When the Company sells the Collateral, the Company is required to make a payment towards the secured
promissory notes equal to 45% of the realized gains. After the secured promissory notes have been repaid in full and until all of the
Collateral is sold, when the Company sells any remaining Collateral, the Company is required to give the investors a profits participation
interest equal to 45% of the realized gains.
Amendment to 10% Secured Promissory Notes
On November 18, 2022, the
Company’s BNI subsidiary entered into an amendment to the 10% secured promissory notes issued on August 10, 2022, whereby the investors
permitted the Company to (i) elect to utilize one of the six monthly forbearances under the notes for the November 2022 monthly payment
and (ii) make the forbearance payment with the December 2022 monthly payment.