CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Such forward-looking statements include statements regarding, among others, (a) our expectations about possible business combinations, (b) our growth strategies, (c) our future financing plans, and (d) our anticipated needs for working capital. Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "approximate," "estimate," "believe," "intend," "plan," "budget," "could," "forecast," "might," "predict," "shall" or "project," or the negative of these words or other variations on these words or comparable terminology. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found in this Annual Report.

Forward-looking statements are based on our current expectations and assumptions regarding our business, potential target businesses, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements as a result of various factors, including, without limitation, the risks outlined under "Risk Factors" in this Annual Report, changes in local, regional, national or global political, economic, business, competitive, market (supply and demand) and regulatory conditions and the following:

· Adverse economic conditions;

· Our ability to effectively execute our business plan;

· Inability to raise sufficient additional capital to operate our business;

· Our ability to manage our expansion, growth and operating expenses;

· Our ability to evaluate and measure our business, prospects and performance

metrics;

· Our ability to compete and succeed in highly competitive and evolving

industries;

· Our ability to respond and adapt to changes in technology and customer

behavior;

· Our ability to protect our intellectual property and to develop, maintain and

enhance a strong brand; and

· Other specific risks referred to in the section entitled "Risk Factors".

We caution you therefore that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance. All forward-looking statements speak only as of the date of this Annual Report. We undertake no obligation to update any forward-looking statements or other information contained herein unless required by law.

Information regarding market and industry statistics contained in this Annual Report is included based on information available to us that we believe is accurate. It is generally based on academic and other publications that are not produced for purposes of securities offerings or economic analysis. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services. Except as required by U.S. federal securities laws, we have no obligation to update forward-looking information to reflect actual results or changes in assumptions or other factors that could affect those statements. See the section entitled "Risk Factors" for a more detailed discussion of risks and uncertainties that may have an impact on our future results.

In this Annual Report, the "Company," "Ault Global," "we," "us" and "our" refer to Ault Global Holdings, Inc., a Delaware corporation, our wholly-owned subsidiaries, Gresham Worldwide, Inc. ("GWW"), Coolisys Technologies Corp. ("Coolisys"), Gresham Power Electronics Ltd. (f/k/a Digital Power Limited) ("Gresham Power"), Enertec Systems 2001 Ltd ("Enertec"), Relec Electronics Ltd., Digital Power Lending, LLC ("DP Lending"), Ault Alliance, Inc. ("Ault Alliance"), Tansocial, LLC and Digital Farms, Inc. ("Digital Farms") and our majority owned subsidiaries, Microphase Corporation and Alliance Cloud Services.





  53







Recent Developments

Reorganization of Our Corporate Structure

Commencing in October and continuing through February 2021, we reorganized our corporate structure pursuant to a series of transactions among our company and our directly and indirectly-owned subsidiaries. The purpose of the reorganization was to align our various businesses by the products and services that constitute the majority of each subsidiaries' revenues. As a result of the foregoing transactions, our corporate structure is as follows:





                               [[Image Removed]]



Other Matters

On August 5, 2020, we received $2,000,000 from Esousa Holdings, LLC ("Esousa") and on October 22, 2020, we issued to Esousa a promissory note in the principal face amount of $2,000,000, with an interest rate of 13%. The outstanding principal face amount, plus any accrued and unpaid interest, is due by November 3, 2020, or as otherwise provided in accordance with the terms set forth therein. In connection therewith, we delivered to Esousa a warrant to purchase 729,927 shares of common stock at an exercise price of $3.01. The exercise of the warrant is subject to approval of the NYSE American. The foregoing debt was paid off in December of 2020.

On October 2, 2020, we entered into an At-The-Market Issuance Sales Agreement (the "Sales Agreement") with Ascendiant Capital Markets, LLC to sell shares of common stock having an aggregate offering price of up to $8,975,000 from time to time, through an "at the market offering" program (the "2020 ATM Offering"). On December 1, 2020, we filed an amendment to the prospectus supplement with the SEC to increase the amount of common stock that may be offered and sold in the ATM Offering, as amended under the Sales Agreement to $40,000,000 in the aggregate, inclusive of the up to $8,975,000 in shares of common stock previously sold in the 2020 ATM Offering. The offer and sale of shares of common stock from the 2020 ATM Offering was made pursuant to our effective "shelf" registration statement on Form S-3 and an accompanying base prospectus contained therein (Registration Statement No. 333-222132) which became effective on January 11, 2018. Through December 31, 2020, we had received gross proceeds of $39,978,350 through the sale of 12,582,000 shares of common stock from the 2020 ATM Offering. The 2020 ATM Offering was terminated on December 31, 2020.





  54

On October 27, 2020, we issued to Esousa two unsecured promissory notes in the aggregate principal face amount of $1,200,000, of which $850,000 was received prior to September 30, 2020. The principal amount of $850,000 of the first note dated October 27, 2020, together with all accrued unpaid interest at an annual rate of 14%, was due and payable on December 28, 2020. The principal amount of $350,000 of the second note dated October 27, 2020, together with all accrued unpaid interest at an annual rate of 14%, was due and payable on January 7, 2021. Both unsecured promissory notes were repaid on December 14, 2020. In connection with the two promissory notes, we delivered to the Esousa (i) a warrant dated October 27, 2020, to purchase 425,000 shares of common stock at an exercise price of $2.20, and (ii) a warrant dated October 27, 2020, to purchase 148,936 shares of common stock at an exercise price of $2.59. The exercise of the warrants is subject to approval of the NYSE American.

On November 9, 2020, our wholly-owned subsidiary Gresham Worldwide, Inc. ("GWW") entered into a stock purchase agreement with Tabard Holdings Inc., a Delaware corporation and wholly owned subsidiary of GWW ("Tabard"), the legal and beneficial owners (the "Sellers") of 100% of the issued shares in the capital of Relec Electronics Ltd., a corporation organized under the laws of England and Wales ("Relec"), and Peter Lappin, in his capacity as the representative of the Sellers. Upon the terms and subject to the conditions set forth in the stock purchase agreement, Tabard agreed to acquire Relec pursuant to the stock purchase agreement whereby the Sellers will sell to Tabard (i) 100% of the issued shares of Relec. The purchase price is approximately £3,000,000 plus an amount equal to Relec's cash balance immediately prior to closing of the acquisition. The acquisition of Relec was consummated on November 30, 2020.

On November 19, 2020, we issued to Esousa and two other institutional investors unsecured promissory notes in the aggregate principal face amount of $2,250,000, with an interest rate of 12%. The outstanding principal face amount, plus any accrued and unpaid interest, was due by February 18, 2021, or as otherwise provided in accordance with the terms set forth therein. These unsecured promissory notes were repaid on December 28, 2020. In connection therewith, we delivered warrants to purchase an aggregate of 1,323,531 shares of common stock at an exercise price of $1.87, subject to adjustments. Exercise of the warrants is subject to approval of the NYSE American.

On January 29, 2021, Alliance Cloud Services, LLC, a majority-owned subsidiary of its wholly-owned subsidiary, Ault Alliance, closed on the acquisition of a 617,000 square foot energy-efficient facility located on a 34.5 acre site in southern Michigan for a purchase price of $3,991,497. The purchase price was paid by the Company using its own working capital.

Settlement of Derivative Litigation

On February 24, 2020, we entered into a definitive settlement agreement (the "Settlement Agreement") intended to settle the previously disclosed derivative litigation captioned Ethan Young and Greg Young, Derivatively on Behalf of Nominal Defendant, DPW Holdings, Inc. v. Milton C. Ault, III, Amos Kohn, William B. Horne, Jeff Bentz, Mordechai Rosenberg, Robert O. Smith, and Kristine Ault and DPW Holdings, Inc., as the nominal defendant (Case No. 18-cv-6587) (as amended on March 11, 2019, the "Amended Complaint") against us and certain of our officers and directors pending in the United States District Court for the Central District of California (the "Court"). As previously disclosed, the Amended Complaint alleges violations including breaches of fiduciary duties and unjust enrichment claims based on the previously pled transactions.

On April 15, 2020, the Court issued an Order (the "Order") approving a Motion for Preliminary Approval of Settlement in the Derivative Action. On July 16, 2020, the Court issued an Order (the "Final Order") approving a Motion for Final Approval of Settlement in the Derivative Action filed against DPW as a Nominal Defendant and its directors who served on its board of directors on July 31, 2018 who were not dismissed from the action as a result of the Court's partial grant of the Motion.

In accordance with the terms of the Final Order, the Board has adopted certain resolutions and amendments to our committee charters and/or bylaws, to ensure adherence to certain corporate governance policies (collectively, the "Reforms"). The Final Order further provides that such Reforms shall remain in effect for a period of no less than five (5) years and shall be subject to any of the following: (a) a determination by a majority of the independent directors that the Reforms are no longer in our best interest, including, but not limited to, due to circumstances making the Reforms no longer applicable, feasible, or available on commercially reasonable terms, or (b) modifications which we reasonably believe are required by applicable law or regulation.

In connection with the Settlement Agreement, the parties agreed to a payment of attorneys' fees in the amount of $600,000, which sum was paid by our directors & officers liability insurance. The Settlement Agreement contains no admission of wrongdoing.

We have always maintained and continue to believe that neither we nor our current or former directors engaged in any wrongdoing or otherwise committed any violation of federal or state securities laws or any other laws or regulations.





  55

Impact of Coronavirus on Our Operations

Our business has been disrupted and materially adversely affected by the recent outbreak of COVID-19. As a result of measures imposed by the governments in affected regions, businesses and schools have been suspended due to quarantines intended to contain this outbreak and many people have been forced to work from home in those areas. The spread of COVID-19 from China to other countries has resulted in the Director General of the World Health Organization declaring the outbreak of COVID-19 as a Public Health Emergency of International Concern, based on the advice of the Emergency Committee under the International Health Regulations (2005), and the Centers for Disease Control and Prevention in the U.S. issued a warning on February 25, 2020 regarding the likely spread of COVID-19 to the U.S. While the COVID-19 outbreak is still in its early stages, international stock markets have begun to reflect the uncertainty associated with the slow-down in the American, Israeli and UK economies and the reduced levels of international travel experienced since the beginning of January and the significant decline in the Dow Industrial Average at the end of February 2020 was largely attributed to the effects of COVID-19. We are still assessing our business operations and system supports and the impact COVID-19 may have on our results and financial condition, but there can be no assurance that this analysis will enable us to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally or in our sectors in particular.

Our operations are located in Alameda County, CA, Orange County, CA, Fairfield County, CT, the United Kingdom, Israel and members of our senior management work in Seattle, WA and New York, NY, which is also the location of the offices of the Company's independent auditor. We have been following the recommendations of local health authorities to minimize exposure risk for its employees for the past several weeks, including the temporary closures of our offices and having employees work remotely to the extent possible, which has to an extent adversely affected their efficiency.

Updates by business unit are as follows:

· Ault Global's corporate headquarters, located in Las Vegas, NV, largely


   operates normally with adherence to the governor's Directives and Declarations.
   Certain individuals deemed to be high risk may work remotely, as required.

· Ault Global's finance and accounting offices, located in Newport Beach, CA, has begun


   working remotely, based on the occupancy and social distancing order from the Orange
   County Health Officer
   (http://www.ochealthinfo.com/phs/about/epidasmt/epi/dip/prevention/novel_coronavirus).
   The administrative staff has tested the secure remote access systems and technology
   infrastructure to adjust working arrangements for its employees and believes it has
   adequate internal communications system and can remain operational with a remote
   staff.

· Coolisys, located in Milpitas, CA, had largely returned to normal operations


   with adherence to guidelines published by the Santa Clara Public Health
   Department. Certain individuals deemed to be high risk may work remotely as
   required. Coolisys has experienced disruption in its supply chain as a result
   of the COVID-19 impact on its vendors.

· Microphase operates a production facility in Connecticut. In March 2020, the

Defense Department designated Microphase an "essential" operation of critical

infrastructure workers as part of the defense industrial base. To limit the

impact of the COVID-19 pandemic, Microphase implemented a series of protocols

to limit access to the facility, heighten sanitization, facilitate social

distancing and require face coverings. The Company asked workers to travel only

as necessary and limit exposure to others. All employees, including management,

that do not have to be in the facility work remotely whenever possible. Any

employees who come in contact or potential contact with anyone who has tested

positive for COVID-19 or who traveled outside the immediate area went into

quarantine and must provide proof of negative tests before returning to work.

Rigorous adherence to these protocols enabled Microphase to operate without


   disruption for 10 months.

In December 2020, five employees tested positive for COVID-19. Microphase temporarily shut down the production facility in Connecticut for a week for deep cleaning and to have all employees tested for COVID-19. Since the outbreak disproportionately affected assembly workers, Microphase's assembly operations remained shut down for three weeks until all assembly workers had at least 2 negative tests. Operations resumed as workers gradually in late December and the workforce returned to full strength in mid-January 2021.

The disruption to production operations deferred order completion and delayed shipments with a significant decrease in revenue from forecast for December of 2020 and a lingering, but only partial and less substantial, effect on January 2021 and February 2021 revenue. Disruption of production added costs from paying employees who could not work and deferred revenue from delayed shipments.





  56

Microphase continues to follow CDC guidelines for social distancing, face coverings and heightened sanitizing to keep the workforce safe and healthy. Microphase has strictly limited access to its facility and mandated that all employees minimize exposure to the others. All Microphase employees who can work from home will do so while COVID-19 levels remain high in the surrounding communities. However, some workers may still need to work in proximity to others. Management is working with state and federal authorities to get all employees vaccinated on a priority basis as "essential workers" whom the DoD has officially designated as "critical infrastructure workforce" as part of the "defense industrial base." Some employees have already received vaccinations and we expect all employees to have both vaccinations by the end of March 2021.

· Gresham Power suspended production operations in its Salisbury, UK facility


   from mid-March through June 2020 before resuming production until a subsequent
   shutdown in November 2020. Notwithstanding the current lockdown, production
   operations have resumed to complete work on order for products critically
   needed for military operations. However, engineers, back office staff and
   management have worked from home as much as possible throughout the pandemic
   period and continue to do so. The pandemic has disrupted production at times
   and delayed contract actions as well as other customer decision making, which
   decreased revenue realized in 2020.

· Relec, which does not operate any manufacturing or assembly facilities, has not


   experienced any material COVID-19 related disruptions to date and continues
   normal operations notwithstanding the lockdown in the United Kingdom. All
   employees who can work from home do so. Others who must work at the Wareham
   site to move product or access systems continue to do so under strict safety
   protocols with face coverings, social distancing and heightened attention to
   sanitization. The principal impact on Relec's operations has come from deferral
   of some orders and modest decrease in revenue year-over-year. We presently
   expect business to rebound and resume a steady growth pattern in the third
   quarter of 2021, although the pandemic may impact this outlook.

· The Israeli government exempted Enertec from pandemic-related lockdown orders


   to keep production operations open for key projects that impact national
   security. Approximately 50% of the Enertec's workforce is working remotely.
    Enertec incurred additional costs for increased sanitizing costs, personal
   protective equipment, increased virtual operations, measures to facilitate
   social distancing and other precautions to avoid the spread of COVID-19. The
   pandemic also affected Enertec's customers and supply chain partners, slowing
   order processing, materials and parts delivery and service order completion.
   The principal impact on Enertec's business has come from deferral of customer
   decisions and order issuance.  We presently expect business to rebound and
   resume substantial growth in second quarter of 2021 as orders increase to
   address deferred, pent up demand.

The COVID-19 global pandemic has been unprecedented and unpredictable and is likely to continue to result in significant national and global economic disruption, which may adversely affect our business. Based on the Company's current assessment, however, the Company does not expect any material impact on its long-term strategic plans, its operations, or its liquidity due to the worldwide spread of the COVID-19 virus. However, the Company is actively monitoring this situation and the possible effects on its financial condition, liquidity, operations, suppliers, and industry.





GENERAL

As a holding company, our business strategy is designed to increase shareholder value. Under this strategy, we are focused on managing and financially supporting our existing subsidiaries and partner companies, with the goal of pursuing monetization opportunities and maximizing the value returned to shareholders. We have, are and will consider initiatives including, among others: public offerings, the sale of individual partner companies, the sale of certain or all partner company interests in secondary market transactions, or a combination thereof, as well as other opportunities to maximize shareholder value. We anticipate returning value to shareholders after satisfying our debt obligations and working capital needs.

From time to time, we engage in discussions with other companies interested in our subsidiaries or partner companies, either in response to inquiries or as part of a process we initiate. To the extent we believe that a subsidiary partner company's further growth and development can best be supported by a different ownership structure or if we otherwise believe it is in our shareholders' best interests, we will seek to sell some or all of our position in the subsidiary or partner company. These sales may take the form of privately negotiated sales of stock or assets, mergers and acquisitions, public offerings of the subsidiary or partner company's securities and, in the case of publicly traded partner companies, sales of their securities in the open market. Our plans may include taking subsidiaries or partner companies public through rights offerings and directed share subscription programs. We will continue to consider these (or similar) programs and the sale of certain subsidiary or partner company interests in secondary market transactions to maximize value for our shareholders.





  57

Over the recent past we have provided capital and relevant expertise to fuel the growth of businesses in defense/aerospace, industrial, telecommunications, medical, crypto-mining, textiles and a select portfolio of commercial hospitality properties. We have provided capital to subsidiaries as well as partner companies in which we have an equity interest or may be actively involved, influencing development through board representation and management support.

We are a Delaware corporation with our corporate office located at 11411 Southern Highlands Pkwy, Suite 240, Las Vegas, NV 89141. Our phone number is 949-444-5464 and our website address is www.aultglobal.com.





  58







Results of Operations

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019





The following table summarizes the results of our operations for the years ended
December 31, 2020 and 2019.



                                                                 For the Year Ended
                                                                      December
                                                               2020              2019

Revenue                                                    $  23,628,859     $  21,057,509
Revenue, cryptocurrency mining                                         -           641,745
Revenue, lending activities                                      242,418           662,740
Total revenue                                                 23,871,277        22,361,994
Cost of revenue                                               16,356,741        19,302,647
Gross profit                                                   7,514,536         3,059,347
Total operating expenses                                      13,548,009        27,757,265

Loss from continuing operations                               (6,033,473 )     (24,697,918 )
Interest income                                                  104,869         3,351,226
Interest expense                                              (9,648,820 )      (7,261,857 )
Change in fair value of marketable equity securities             919,083          (596,242 )
Loss on extinguishment of debt                               (18,706,488 )        (966,134 )
Loss on issuance of warrants                                           -        (1,763,481 )
Change in fair value of warrant liability                        (48,842 )       1,124,953

Loss from continuing operations before income taxes (33,413,671 ) (30,809,453 ) Income tax benefit

                                                23,794           108,293
Net loss from continuing operations                          (33,389,877 )     (30,701,160 )

Net gain (loss) from discontinued operations, net of taxes

                                                            661,248        (2,244,668 )
Net loss                                                     (32,728,629 )     (32,945,828 )
Less: Net loss attributable to non-controlling interest                -            32,416
Net loss attributable to Ault Global Holdings                (32,728,629 )     (32,913,412 )
Preferred dividends                                              (17,621 )         (15,938 )
Net loss available to common stockholders                  $ (32,746,250 )   $ (32,929,350 )

Basic and diluted net loss per common share:
Continuing operations                                      $       (3.48 )   $      (21.41 )
Discontinued operations                                             0.07             (1.57 )
Net loss per common share                                  $       (3.41 )   $      (22.97 )

Weighted average common shares outstanding, basic and diluted

                                                        9,606,493         1,433,464

Comprehensive loss
Loss available to common stockholders                      $ (32,746,250 )   $ (32,929,350 )
Other comprehensive income (loss)
Foreign currency translation adjustment                          481,596           341,774

Net unrealized gain (loss) on derivative securities of related party

                                                  3,312,094        (1,950,875 )
Other comprehensive income (loss)                              3,793,690        (1,609,101 )
Total comprehensive loss                                   $ (28,952,560 )   $ (34,538,451 )




  59







Revenues



Revenues by segment for the years ended December 31, 2020 and 2019 are as
follows:



                                        For the Year Ended
                                             December                 Increase
                                       2020             2019         (Decrease)           %

GWW                                $ 18,212,721     $ 15,231,843     $ 2,980,878              20 %
Coolisys                              5,416,138        5,825,666        (409,528 )            -7 %
Ault Alliance:
Revenue, cryptocurrency mining                -          641,745        (641,745 )          -100 %
Revenue, lending and investing
activities                              242,418          662,740        (420,322 )           -63 %
Total revenue                      $ 23,871,277     $ 22,361,994     $ 1,509,283               7 %

Our revenues increased by $1,509,283, or 7%, to $23,871,277 for the year ended December 31, 2020, from $22,361,994 for the year ended December 31, 2019.





GWW

GWW revenues increased by $2,980,878, or 20%, to $18,212,721 for the year ended December 31, 2020, from $15,231,843 for the year ended December 31, 2019. The increase in revenue from our Gresham Worldwide segment for customized solutions for the military markets reflected the benefit of capital that was allocated to our defense business during the second half of 2019. GWW revenue in 2020 includes $598,500 from Relec, which was acquired on November 30, 2020. Revenue from Enertec, which largely consists of revenue recognized over time, for the year ended December 31, 2020 increased $421,974 or 5% from the prior year.





Coolisys

Coolisys revenues decreased by $409,528, or 7%, to $5,416,138 for the year ended December 31, 2020, from $5,825,666 for the year ended December 31, 2019.

Ault Alliance

Revenues from our cryptocurrency mining operations revenues decreased by $641,745, or 100% from the year ended December 31, 2019, due to our decision to cease our cryptocurrency mining operations. During the first quarter of 2020, due to deteriorating business conditions in the cryptocurrency mining sector, we ceased operations at Digital Farms. Our decision to cease cryptocurrency mining operations in 2020 was based on several factors, which had negatively affected the number of active miners we operated, including the market prices of digital currencies at the time, power cost considerations available to Digital Farms, and a significant increase in the difficulty of mining blocks of cryptocurrency.

Revenues from our lending and investing activities decreased by $420,322, or 63%, to $242,418 for the year ended December 31, 2020, from $662,740 for the year ended December 31, 2019 attributed to a reduction in our loan portfolio.





Gross Margins

Gross margins increased to 31.5% for the year ended December 31, 2020, compared to 13.7% for the year ended December 31, 2019. Our gross margin of 13.7% recognized during the year ended December 31, 2019, was impacted by the approximate $2.1 million negative margins at Digital Farms and the provision for credit losses of $1,550,000 at DP Lending, compared to no provision for credit losses during the year ended December 31, 2020. Excluding the effects of Digital Farms and credit losses at DP Lending, our adjusted gross margin for the year ended December 31, 2019 would have been 31.1%.

Engineering and Product Development

Engineering and product development expenses decreased slightly by $12,237 to $1,848,866 for the year ended December 31, 2020, from $1,861,103 for the year ended December 31, 2019.





  60







Selling and Marketing

Selling and marketing expenses were $1,177,321 for the year ended December 31, 2020, compared to $1,409,996 for the year ended December 31, 2019, a decrease of $232,675. This decrease was the result of decreases in personnel costs directly attributed to a reduction in sales and marketing personnel primarily at Coolisys.





General and Administrative

General and administrative expenses were $12,526,855 for the year ended December 31, 2020 compared to $15,524,180 for the year ended December 31, 2019, a decrease of $2,997,325. General and administrative expenses decreased from the comparative prior period, mainly due to lower legal fees, stock compensation expense, other third-party fees and travel related costs, which decreased during the year ended December 30, 2020 due to travel restrictions related to the COVID-19 pandemic.





Asset Impairment Charges

There were no asset impairment charges recognized during the year ended December 31, 2020, compared to $4,315,856 for year ended December 31, 2019. The impairment charges for the year ended December 31, 2019 related to impairments of our cryptocurrency mining equipment.

Impairment loss on goodwill and intangible assets

During the year ended December 31, 2019, we performed a qualitative assessment and concluded that the goodwill at Coolisys was impaired and recorded an impairment of $480,953. Further, during the year ended December 31, 2019, we also recorded an impairment loss of $170,692 related to intangible assets primarily comprised of trade names, customer relationships and a non-competition agreement at Coolisys. For the year ended December 31, 2020, the Company did not record any impairment loss.





Provision for credit losses

Loans are generally carried at the amount of unpaid principal, adjusted for unearned loan fees and original issue discount, which are amortized over the term of the loan using the effective interest rate method. Interest on loans is accrued based on the principal amounts outstanding. During the years ended December 31, 2020 and 2019, we evaluated the collectability of both interest and principal for the convertible promissory notes in AVLP to determine whether there was an impairment. As of December 31, 2019, based on information and events available at that time, primarily the value of the underlying conversion feature and recent economic events, we concluded that an impairment existed and, accordingly, we recorded a $4,000,000 provision for credit losses. As of December 31, 2020, due to an increase in the value of the underlying conversion feature, we reduced the provision by $2,000,000.





Interest Income

Interest income was $104,869 for the year ended December 31, 2020 compared to $3,351,226 for the year ended December 31, 2019. The decrease in interest income for the year ended December 31, 2020 is related to a decrease in interest income pursuant to the AVLP Loan Agreement entered into on September 6, 2017, with AVLP, a related party, as subsequently amended. Due to the impaired status of the loan, no interest was recognized during the year ended December 31, 2020.





Interest expense

Interest expense was $9,648,820 for the year ended December 31, 2020, compared to $7,261,857 for the year ended December 31, 2019. The increase in interest expense for the year ended December 31, 2020 is primarily related to an increase of amortization of debt discount resulting from original issue discount from the issuance of warrants in conjunction with the sale of debt instruments. During the year ended December 31, 2020 and 2019, as a result of these issuances, non-cash interest expense of $7,251,365 and $3,709,993, respectively, was recorded from the amortization of debt discount and debt financing costs.





  61







Loss on issuance of warrants

On March 29, 2019, the Company entered into an underwriting agreement (the "Underwriting Agreement") with A.G.P./Alliance Global Partners (the "Underwriter"), pursuant to which the Company agreed to issue and sell an aggregate of (a) 71,388 shares of its common stock (the "Shares") together with warrants to purchase 71,388 shares of common stock (the "Common Warrants") and (b) pre-funded warrants to purchase up to 317,500 shares of its common stock (the "Pre-Funded Warrants") together with a number of Common Warrants to purchase 317,500 shares of common stock (the "Offering"). The Shares were sold to the purchasers at the public offering price of $17.60 per share (the "Offering Price"). The Common Warrants were sold at a public offering price of $0.40 per Common Warrant. The Pre-Funded Warrants were offered to each purchaser whose purchase of the Shares and the Common Warrant in the Offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of the Company's outstanding common stock immediately following the consummation of the Offering. The purchase price of each Pre-Funded Warrant equaled the Offering Price at which the Shares were sold to the public in the Offering, minus $0.40, and the exercise price of each Pre-Funded Warrant equaled $0.40 per share. In addition, the Company has also issued the Underwriter a warrant to purchase a maximum of 15,550 additional shares of common stock at an initial exercise price of $19.80 per share, with a term of five years (the "Underwriter Warrants").

We recognized a loss on issuance of warrants of $1,763,481 for the year ended December 31, 2019, based upon the fair value of the warrants issued in our March 2019 underwritten public offering of common stock and warrants (the "Offering") in excess of the proceeds received from the Offering.

Change in fair value of warrant liability

During the year ended December 31, 2020, the fair value of the warrants that were issued in our Offering increased by $48,842 whereas during the year ended December 31, 2019, the fair value of the warrants decreased by $1,124,953. The fair value of these warrants is re-measured at each financial reporting period and immediately before exercise, with any changes in fair value recorded as change in fair value of warrant liability in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

Loss on extinguishment of debt

Loss on extinguishment of debt was $18,706,488 for the year ended December 31, 2020 compared to $966,134 for the year ended December 31, 2019. During the year ended December 31, 2020, principal and accrued interest of $6,411,795 and $2,196,599, respectively, on the Company's debt securities was satisfied through the issuance of 9,632,219 shares of Common Stock. The Company recognized a loss on extinguishment of $15,572,326 as a result of these issuances. The remaining loss on extinguishment is primarily due to the estimated fair value of warrants to purchase an aggregate of 1,700,361 shares of common stock that were issued to Esousa pursuant to the Master Exchange Agreement.

Net gain (loss) from discontinued operations

As a result of temporary closures of restaurants in San Diego County and the deteriorating business conditions at the Company's restaurant businesses, during the first quarter of 2020, the Company concluded that discontinuing the operations of I.AM was ultimately in its best interest. Management determined that the permanent closing of the restaurant operations met the criteria for presentation as discontinued operations. Accordingly, the results of the restaurant operations are presented as discontinued operations in our consolidated statements of operations and comprehensive loss and are excluded from continuing operations for all periods presented. Additionally, on November 2, 2020, I.AM filed a voluntary petition for bankruptcy under Chapter 7 in the United States Bankruptcy Court in the Central District of California, Santa Ana Division, case number 8:20-bk-13076. As a result of I.AM's bankruptcy filing on November 2, 2020, Ault Global ceded authority for managing the business to the Bankruptcy Court. For this reason, we concluded that Ault Global had lost control of I.AM, and no longer had significant influence over I.AM. Therefore, we deconsolidated I.AM effective with the filing of the Chapter 11 bankruptcy in November 2020 and recorded a gain on deconsolidation of 2,358,992.





Net Loss

For the foregoing reasons, our net loss for the year ended December 31, 2020, was $32,728,629 compared to a net loss of $32,945,828 for the year ended December 31, 2019. After taking into consideration the loss attributable to the non-controlling interest of the minority shareholders of Microphase during the years ended December 31, 2020 and 2019, of $0 and $32,416, respectively, and preferred dividends of $17,621 and $15,938, respectively, the net loss available to common shareholders during the years ended December 31, 2020 and December 31, 2019, was $32,746,250 and $32,929,350, respectively.





  62

As reflected in our consolidated statement of cash flows for the years ended December 31, 2020 and 2019, our reported net loss includes a significant number of non-cash charges of $29,325,236 and $11,435,682, respectively. A summary of these non-cash charges is as follows:





                                                                For the Year Ended
                                                                   December 31,
                                                               2020             2019
Loss on extinguishment of debt                             $ 18,706,488     $          -
Interest expense - debt discount                              7,251,365        3,709,993
Stock-based compensation                                      1,105,688        1,583,991
Depreciation and amortization                                   727,373        3,465,091
Impairment of property and equipment                          1,525,316        4,315,856

Accretion of original issue discount on notes receivable - related party

                                                  21,998       (2,277,777 )
Accretion of original issue discount on notes receivable        (61,834 )              -
Fair value in excess of proceeds upon issuance of
warrants                                                              -        1,763,481
Change in fair value of warrant liability                        48,842       (1,124,953 )
Non-cash items included in net loss                        $ 29,352,236     $ 11,435,682

Other comprehensive loss

Other comprehensive loss was $28,952,560 and $34,538,451, respectively, for the years ended December 31, 2020 and 2019. Other comprehensive income for the year ended December 31, 2020, which increased our equity, was primarily due to unrealized gains in the warrant derivative securities that we received as a result of our investment in Avalanche International, Corp., or AVLP, a related party, and from fluctuations in exchange rates between the U.S. dollar and the Israeli Shekel. During the year ended December 31, 2019, unrealized losses in the warrant derivative securities of AVLP was the primary component of other comprehensive loss.

LIQUIDITY AND CAPITAL RESOURCES

On December 31, 2020, we had cash and cash equivalents of $18,679,848. This compares with cash and cash equivalents of $483,383 at December 31, 2019. The increase in cash and cash equivalents was primarily due to cash provided by financing activities with the remaining variance attributed to fluctuations in exchange rates between the U.S. dollar and the Israeli Shekel.

Net cash used in continuing operating activities totaled $11,182,225 for the year ended December 31, 2020, compared to $10,262,733 for the year ended December 31, 2019. The most significant change was a decrease in cash provided from payments on accounts receivable, related party. During April 2019, we received a payment $2,676,219 and no such payments were received during the year ended December 30, 2020. Cash flow from operating activities during the year ended December 31, 2020 benefited from improved operating results compared to the prior year period, including improved gross margins from ceasing the negative margin cryptocurrency mining operations and lower general and administrative expenses from lower third-party fees and travel related costs.

Net cash used in investing activities was $7,783,215 for the year ended December 31, 2020, compared to $2,851,055 for the year ended December 31, 2019. The increase of the net usage of cash from investing activities was primarily attributed to $3,627,534 cash used for the acquisition of Relec, net of cash acquired, $2,118,411 related party investments in AVLP and Alzamend, and $1,425,341 related to the purchase of marketable equity securities.

Net cash provided by financing activities was $37,283,639 and $12,925,203 for the year ended December 31, 2020 and 2019, respectively. Net cash provided by financing activities for the year ended December 31, 2020, primarily related to net proceeds from the sale of shares of common stock through our at-the-market offerings, net proceeds from our debt financings, partially offset by net payments related to advances on future receipts. Net cash provided by financing activities for the year ended December 31, 2019, primarily related to net proceeds from the sale of shares of common stock through our at-the-market offering, partially offset by net payments related to our debt financings and advances on future receipts.

Historically, we have financed our operations principally through issuances of convertible debt, promissory notes and equity securities. During 2020, as reflected below, we continued to successfully obtain additional equity and debt financing and in restructuring existing debt.

· On February 10, 2020, we entered into a Master Exchange Agreement with Esousa,

which acquired approximately $4.2 million dollars in principal amount from

previous noteholders, plus accrued but unpaid interest, of certain promissory

notes that had been previously issued by us. Esousa also agreed to purchase

additional notes and during the three months ended September 30, 2020, Esousa

acquired $2,240,015 in principal amount, plus accrued but unpaid interest, of

certain additional promissory notes that had been previously issued by us

(collectively, the "Notes"). Pursuant to the Master Exchange Agreement, Esousa

has the unilateral right to acquire shares of the Company's common stock in


   exchange for the Notes.




  63

· Between August 2020 and September 2020, the Company received $2,850,000 in


   loans from Esousa pursuant to which the Company agreed to issue unsecured
   short-term promissory notes with interest rates of 13% and 14%. Pursuant to
   these loans, and an additional loan of $350,000 received during October 2020,
   we issued two unsecured promissory notes in the aggregate principal face amount
   of $1,200,000 with an interest rate of 14% and issued a promissory note in the
   principal face amount of $2,000,000 with an interest rate of 13%.

· On October 2, 2020, the Company entered into an At-The-Market Issuance Sales


   Agreement (the "2020 Sales Agreement") with Ascendiant Capital Markets, LLC to
   sell shares of its common stock having an aggregate offering price of up to
   $8,975,000 from time to time, through an "at the market offering" program (the
   "2020 ATM Offering"). On December 1, 2020, the Company filed an amendment to
   the prospectus supplement with the SEC to increase the amount of common stock
   that may be offered and sold in the 2020 ATM Offering, as amended under the
   Sales Agreement to $40,000,000 in the aggregate, inclusive of the up to
   $8,975,000 in shares of common stock previously sold in the 2020 ATM Offering.
   The offer and sale of shares of common stock from the 2020 ATM Offering was
   made pursuant to our effective "shelf" registration statement on Form S-3 and
   an accompanying base prospectus contained therein (Registration Statement No.
   333-222132) which became effective on January 11, 2018. Through December 31,
   2020, the Company had received gross proceeds of $39,978,350 through the sale
   of 12,582,000 shares of common stock from the 2020 ATM Offering. The 2020 ATM
   Offering was terminated on December 31, 2020.

· On January 22, 2021, the Company entered into an At-The-Market Issuance Sales


   Agreement (the "2021 Sales Agreement"), with Ascendiant Capital Markets, LLC,
   or the sales agent, relating to the sale of shares of Common Stock offered by a
   prospectus supplement and the accompanying prospectus, as amended by the
   amendment to the 2021 Sales Agreement dated February 16, 2021, or the amended
   sales agreement. In accordance with the terms of the amended sales agreement,
   the Company may offer and sell shares of Common Stock having an aggregate
   offering price of up to $125,000,000 from time to time through the sales agent.
   As of February 22, 2021, the Company had sold an aggregate of 21,561,900 shares
   of its common stock pursuant to the sales agreement for gross proceeds of
   $124,983,305.

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 the financial statements for its fiscal year ended December 31, 2020 are issued.

Critical Accounting Policies

Fair value of Financial Instruments

In accordance with ASC No. 820, Fair Value Measurements and Disclosures, fair value is defined as the exit price, or the amount that would be received for the sale of an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.

The guidance also establishes a three-tier hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs include those that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the factors that market participants would use in valuing the asset or liability.

We assess 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.

The Company's investments in AVLP, a related party controlled by Philou, an affiliate of the Company, consist of convertible promissory notes, derivative instruments and shares of AVLP common stock. As of December 31, 2020, the Company has provided loans to AVLP in the principal amount $11,269,136 and, in addition to the 12% convertible promissory notes, AVLP has issued to the Company warrants to purchase 22,537,871 shares of AVLP common stock at an exercise price of $0.50 per share for a period of five years. Management used both a market and income approach to quantify the carrying amount of the convertible notes, including credit risk. The market approach considered the fair value of AVLP's common stock adjusted for a lack of marketability discount and the time value of money based on expectation as to the timing of a potential liquidity event which could affect the timing of a settlement of the convertible notes. The income approach was primarily based on a discounted cash flow analysis with assumptions regarding forecasted revenues, operating margins and a risk-adjusted discount rate to compute the net present value of such cash flows.

In determining the revenue and expense assumptions that were used in the discounted cash flow analysis, the Company considered the disruptive nature of AVLP's Multiplex Laser Surface Enhancement ("MLSE") plasma-laser system, the size of the market for the treatment of textiles, customer demand, existing treatment methods, the performance capabilities of the MLSE system and the risk of business execution and the adoption of AVLP's disruptive technology.

© Edgar Online, source Glimpses