Attached files
| file | filename |
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| EX-99.2 - EXHIBIT 99.2 - Ault Global Holdings, Inc. | ex99_2.htm |
| 8-K - Ault Global Holdings, Inc. | r7311818k.htm |
Exhibit 99.3
DPW HOLDINGS, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Combined Financial Statements
Dollars in thousands except per share amounts
The Unaudited Pro Forma Condensed Combined Financial Statements (the “Pro Forma Statements”) presented below are derived from the historical consolidated financial statements of DPW Holdings, Inc. (“DPW” or the “Company”) and Enertec Systems 2001 Ltd. (“Enertec”). The Pro Forma Statements are prepared as a business combination reflecting DPW's acquisition of Enertec (the “Acquisition”) and as if the Acquisition had been completed on January 1, 2017 for statement of income purposes and on March 31, 2018 for balance sheet purposes. The Pro Forma Statements do not give effect to the realization of any expected cost savings or other synergies from the Acquisition as a result of restructuring activities and other cost savings initiatives.
The pro forma amounts have been developed from (a) the audited consolidated financial statements of DPW contained in its Annual Report on Form 10-K for the year ended December 31, 2017 and the unaudited consolidated financial statements of DPW contained in its Quarterly Report on Form 10-Q for the three months ended March 31, 2018, and (b) the audited financial statements of Enertec contained in this Current Report on Form 8-K for the year ended December 31, 2017 and the unaudited consolidated financial statements of Enertec contained in this Current Report on Form 8-K for the three months ended March 31, 2018. Historical results of Enertec have been adjusted to reclassify certain amounts to conform to DPW’s presentation.
The Pro Forma Statements have been prepared to reflect adjustments to our historical consolidated financial information that are (i) directly attributable to the acquisition, (ii) factually supportable and (iii) with respect to the Unaudited Pro Forma Condensed Combined Statement of Income, expected to have a continuing impact on our results.
Under accounting for business combinations, the assets and liabilities of Enertec were recorded at their respective fair values as of the date of the acquisition, May 23, 2018. DPW has not obtained third-party valuations of Enertec’s assets and liabilities. The values of Enertec’s assets and liabilities are based on preliminary valuations, as allowed by U.S. generally accepted accounting principles, and are subject to adjustment as additional information is obtained. We cannot provide any assurance that such adjustments will not result in a material change.
The Pro Forma Statements are provided for illustrative purposes only and do not purport to represent what the actual consolidated results of operations or the consolidated financial position of DPW would have been had the Enertec acquisition occurred on the dates assumed, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position.
The Pro Forma Statements should be read in conjunction with the separate historical consolidated financial statements and accompanying notes of DPW and Enertec.
| 1 |
DPW HOLDINGS, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Combined Financial Statements - Continued
Dollars in thousands except per share amounts
DPW HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PROFORMA CONDENSED COMBINED
STATEMENTS OF INCOME AND
COMPREHENSIVE LOSS
FOR THE YEAR ENDED DECEMBER 31, 2017
| Historical | Pro Forma | |||||||||||||||
| DPW | Enertec | Adjustments | Combined | |||||||||||||
| Revenue | $ | 10,001 | $ | 7,061 | $ | — | $ | 17,062 | ||||||||
| Revenue, related party | 174 | — | — | 174 | ||||||||||||
| Total revenue | 10,175 | 7,061 | — | 17,236 | ||||||||||||
| Cost of revenue | 6,325 | 7,790 | — | 14,115 | ||||||||||||
| Gross profit (loss) | 3,850 | (729 | ) | — | 3,121 | |||||||||||
| Operating expenses | ||||||||||||||||
| Engineering and product development | 1,120 | 672 | — | 1,792 | ||||||||||||
| Selling and marketing | 1,721 | 546 | — | 2,267 | ||||||||||||
| General and administrative | 6,992 | 2,200 | — | 9,192 | ||||||||||||
| Total operating expenses | 9,833 | 3,418 | — | 13,251 | ||||||||||||
| Loss from operations | (5,983 | ) | (4,147 | ) | — | (10,130 | ) | |||||||||
| Interest expense | (4,990 | ) | (630 | ) | — | (5,620 | ) | |||||||||
| Loss before income taxes | (10,973 | ) | (4,777 | ) | — | (15,750 | ) | |||||||||
| Income tax benefit (provision) | 78 | (124 | ) | — | 78 | |||||||||||
| Net loss | (10,895 | ) | (4,901 | ) | — | (15,672 | ) | |||||||||
| Less: Net loss attributable to non-controlling interest | 279 | — | — | 279 | ||||||||||||
| Net loss available to common stockholders | $ | (11,254 | ) | $ | (4,901 | ) | $ | — | $ | (15,393 | ) | |||||
| Basic and diluted net loss per common share | $ | (0.88 | ) | $ | (19.53 | ) | $ | — | $ | (1.20 | ) | |||||
| Basic and diluted weighted average common shares outstanding | 12,789,130 | 251,000 | — | 12,789,130 | ||||||||||||
| Comprehensive loss | ||||||||||||||||
| Loss available to common stockholders | $ | (11,254 | ) | $ | (4,901 | ) | $ | — | $ | (15,393 | ) | |||||
| Other comprehensive income (loss) | ||||||||||||||||
| Foreign currency translation adjustment | 152 | 390 | — | 542 | ||||||||||||
| Net unrealized loss on securities available-for-sale | 5,171 | — | — | 5,171 | ||||||||||||
| Other comprehensive income | 5,323 | 390 | — | 5,713 | ||||||||||||
| Total Comprehensive loss | $ | (5,931 | ) | $ | (4,511 | ) | $ | — | $ | (9,680 | ) | |||||
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DPW HOLDINGS, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Combined Financial Statements - Continued
Dollars in thousands except per share amounts
DPW HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PROFORMA CONDENSED COMBINED
STATEMENTS OF INCOME AND
COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED MARCH 31, 2018
| Historical | Pro Forma | |||||||||||||||
| DPW | Enertec | Adjustments | Combined | |||||||||||||
| Revenue | $ | 3,166 | $ | 2,578 | $ | — | $ | 5,744 | ||||||||
| Revenue, cryptocurrency mining | 237 | — | — | 237 | ||||||||||||
| Revenue, related party | 1,793 | — | — | 1,793 | ||||||||||||
| Total revenue | 5,196 | 2,578 | — | 7,774 | ||||||||||||
| Cost of revenue | 3,803 | 1,931 | — | 5,734 | ||||||||||||
| Gross profit | 1,393 | 647 | — | 2,040 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Engineering and product development | 343 | 58 | — | 401 | ||||||||||||
| Selling and marketing | 725 | 119 | — | 844 | ||||||||||||
| General and administrative | 3,222 | 411 | — | 3,633 | ||||||||||||
| Change in fair value of digital currency | 70 | — | — | 70 | ||||||||||||
| Total operating expenses | 4,360 | 588 | — | 4,948 | ||||||||||||
| Income (loss) from operations | (2,967 | ) | 59 | — | (2,908 | ) | ||||||||||
| Interest expense | (3,132 | ) | (99 | ) | — | (3,231 | ) | |||||||||
| Loss before income taxes | (6,099 | ) | (40 | ) | — | (6,139 | ) | |||||||||
| Income tax benefit | 4 | — | — | 4 | ||||||||||||
| Net loss | (6,095 | ) | (40 | ) | — | (6,135 | ) | |||||||||
| Less: Net loss attributable to non-controlling interest | 36 | — | — | 36 | ||||||||||||
| Net loss available to common stockholders | $ | (6,059 | ) | $ | (40 | ) | $ | — | $ | (6,099 | ) | |||||
| Basic and diluted net loss per common share | $ | (0.17 | ) | $ | (0.16 | ) | $ | — | $ | (0.17 | ) | |||||
| Basic and diluted weighted average common shares outstanding | 36,709,506 | 251,000 | — | 36,709,506 | ||||||||||||
| Comprehensive loss | ||||||||||||||||
| Loss available to common stockholders | $ | (6,059 | ) | $ | (40 | ) | $ | — | $ | (6,099 | ) | |||||
| Other comprehensive loss | ||||||||||||||||
| Foreign currency translation adjustment | 26 | (10 | ) | — | 16 | |||||||||||
| Net unrealized loss on securities available-for-sale | (4,741 | ) | — | — | (4,741 | ) | ||||||||||
| Other comprehensive loss | (4,715 | ) | (10 | ) | — | (4,725 | ) | |||||||||
| Total Comprehensive loss | $ | (10,774 | ) | $ | (50 | ) | $ | — | $ | (10,824 | ) | |||||
| 3 |
DPW HOLDINGS, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Combined Financial Statements - Continued
Dollars in thousands except per share amounts
DPW HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PROFORMA CONDENSED COMBINED BALANCE SHEET - CONTINUED
AS OF MARCH 31, 2018
| Historical | Pro Forma | |||||||||||||||||||
| DPW | Enertec | Adjustments | Combined | |||||||||||||||||
| ASSETS | ||||||||||||||||||||
| CURRENT ASSETS | ||||||||||||||||||||
| Cash and cash equivalents | $ | 630 | $ | 139 | $ | 189 | (a2) | $ | 958 | |||||||||||
| Restricted cash | — | 4,343 | — | 4,343 | ||||||||||||||||
| Marketable securities | 1,938 | — | — | 1,938 | ||||||||||||||||
| Digital currencies | 166 | — | — | 166 | ||||||||||||||||
| Accounts receivable, net | 1,565 | 4,844 | — | 6,409 | ||||||||||||||||
| Accounts and other receivable, related party | 1,967 | 316 | (189 | ) | (a2) | 2,094 | ||||||||||||||
| Inventories, net | 2,237 | 1,646 | — | 3,883 | ||||||||||||||||
| Prepaid expenses and other current assets | 2,702 | 13 | — | 2,715 | ||||||||||||||||
| TOTAL CURRENT ASSETS | 11,205 | 11,301 | — | 22,506 | ||||||||||||||||
| Intangible assets | 2,868 | — | — | 2,868 | ||||||||||||||||
| Goodwill | 3,652 | — | 4,234 | (a) | 7,886 | |||||||||||||||
| Property and equipment, net | 8,590 | 650 | — | 9,240 | ||||||||||||||||
| Investments - related party, net | 2,970 | — | — | 2,970 | ||||||||||||||||
| Investments in warrants and common stock - related party | 4,624 | — | — | 4,624 | ||||||||||||||||
| Investments in preferred stock of private company | 1,000 | — | — | 1,000 | ||||||||||||||||
| Other investments | 2,011 | — | — | 2,011 | ||||||||||||||||
| Other investments, related parties | 893 | — | — | 893 | ||||||||||||||||
| Other assets | 680 | 96 | — | 776 | ||||||||||||||||
| TOTAL ASSETS | $ | 38,493 | $ | 12,047 | $ | 4,234 | $ | 54,774 | ||||||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||||||
| CURRENT LIABILITIES | ||||||||||||||||||||
| Accounts payable and accrued expenses | $ | 4,680 | $ | 2,589 | $ | — | $ | 7,269 | ||||||||||||
| Accounts payable and accrued expenses, related party | 81 | — | — | 81 | ||||||||||||||||
| Advances on future receipts | 3,775 | — | — | 3,775 | ||||||||||||||||
| Short term advances | 2,776 | — | — | 2,776 | ||||||||||||||||
| Short term advances, related party | 295 | — | — | 295 | ||||||||||||||||
| Revolving credit facility | 339 | — | — | 339 | ||||||||||||||||
| Notes payable, net | 3,160 | 8,596 | 4,962 | (a3) | 16,718 | |||||||||||||||
| Notes payable, related party | 162 | — | — | 162 | ||||||||||||||||
| Other current liabilities | 727 | — | — | 727 | ||||||||||||||||
| TOTAL CURRENT LIABILITIES | 15,995 | 11,185 | 4,962 | 32,142 | ||||||||||||||||
| LONG TERM LIABILITIES | ||||||||||||||||||||
| Notes payable | 520 | — | — | 520 | ||||||||||||||||
| Notes payable, related parties | 146 | — | — | 146 | ||||||||||||||||
| Accrued severance, net | — | 134 | — | 134 | ||||||||||||||||
| TOTAL LIABILITIES | $ | 16,661 | $ | 11,319 | $ | — | $ | 32,942 | ||||||||||||
| 4 |
DPW HOLDINGS, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Combined Financial Statements - Continued
Dollars in thousands except per share amounts
DPW HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PROFORMA CONDENSED COMBINED BALANCE SHEET - CONTINUED
AS OF MARCH 31, 2018
| Historical | Pro Forma | |||||||||||||||||||
| DPW | Enertec | Adjustments | Combined | |||||||||||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||||||||||||||
| STOCKHOLDERS' EQUITY | ||||||||||||||||||||
| Preferred shares issued | $ | — | $ | — | $ | — | $ | — | ||||||||||||
| Common shares issued | 42 | 57 | (57 | ) | (a1) | 42 | ||||||||||||||
| Additional paid-in capital | 50,728 | — | — | 50,728 | ||||||||||||||||
| Accumulated deficit | (29,471 | ) | 373 | (373 | ) | (a1) | (29,471 | ) | ||||||||||||
| Accumulated other comprehensive loss | (212 | ) | 298 | (298 | ) | (a1) | (212 | ) | ||||||||||||
| TOTAL DPW HOLDINGS STOCKHOLDERS' EQUITY | 21,087 | 728 | (728 | ) | 21,087 | |||||||||||||||
| Non-controlling interest | 745 | — | — | 745 | ||||||||||||||||
| TOTAL STOCKHOLDERS' EQUITY | 21,832 | 728 | (728 | ) | 21,832 | |||||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 38,493 | $ | 12,047 | $ | (728 | ) | $ | 54,774 | |||||||||||
| 5 |
DPW HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
Dollars in thousands except per share amounts
Note 1. Basis of Presentation
The accompanying Unaudited Pro Forma Condensed Combined Financial Statements (the “Pro Forma Statements”) present the pro forma combined consolidated financial position and results of operations of the combined company based upon the historical consolidated financial statements of DPW and Enertec, after giving effect to DPW's acquisition of Enertec (the “Acquisition”) and adjustments described in these footnotes, and are intended to reflect the impact of the Acquisition on DPW.
On January 2, 2018, Coolisys Technologies Inc., a Delaware corporation and wholly owned subsidiary of DPW (“Coolisys”), entered into a Share Purchase Agreement dated December 31, 2017 (the “Enertec Agreement”) with Micronet Enertec Technologies, Inc., a Delaware corporation (“MICT”), Enertec Management Ltd., an Israeli corporation and wholly owned subsidiary of MICT (“EML” and, together with MICT, the “Seller Parties”), and Enertec Systems 2001 Ltd., an Israeli corporation and wholly owned subsidiary of EML (“Enertec”). On May 23, 2018, Coolisys acquired Enertec subject to the terms and conditions set forth in the Enertec Agreement (the “Acquisition”) for an aggregate purchase price of $5,250, which includes a deduction of (i) a closing debt of $288 in excess of the Allowed Company Debt to be assumed by the Company (as defined in the Enertec Agreement) of $4,000 and (ii) $189 in Intercompany Accounts (as defined in the Enertec Agreement) for a total cash payment of $4,778.
The assets and liabilities of Enertec have been reflected on the opening balance sheet. Long-lived assets such as property, plant and equipment reflect a value that a market participant would spend to replace the assets, which takes into account changes in technology, usage, and relative obsolescence of the assets. This approach often results in differences, sometimes material, from recorded book values even if, absent the acquisition, the assets would be neither increased in value nor impaired. In addition, assets and liabilities that would not usually be recorded in ordinary operations will be recorded at their acquisition values (e.g., customer relationships that were developed by the acquired company). Debt instruments and investments are valued in relation to current market conditions and other assets and liabilities are valued based on the acquiring company's estimates. After all identifiable assets and liabilities are valued, the remainder of the purchase price is recorded as goodwill. These values are subject to adjustment for up to one year after the close of the transaction as additional information is obtained.
The accompanying Pro Forma Statements are presented for illustrative purposes only and do not give effect to any cost savings, revenue synergies or restructuring costs which may result from the integration of DPW's and Enertec's operations. The accompanying Pro Forma Statements have been adjusted to reflect adjustments to our historical consolidated financial information that are (i) directly attributable to the acquisition, (ii) factually supportable and (iii) to reclassify certain Enertec items to conform to DPW’s presentation. The Unaudited Pro Forma Combined Statements of Income reflect the Enertec Acquisition as if it had been completed on January 1, 2017. The Unaudited Pro Forma Condensed Combined Balance Sheet reflects the acquisition as if it was completed on March 31, 2018.
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DPW HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Pro Forma Condensed Combined Financial Statements - Continued
Dollars in thousands except per share amounts
Note 2. Pro Forma Adjustments
(a) This entry reflects the preliminary allocation of the purchase price to identifiable net assets acquired and the excess purchase price to Goodwill as follows:
| Book value of net assets acquired | ||||||
| Enertec's equity | $ | 728 | (a1) | |||
| Preliminary fair value adjustment of Enertec: | ||||||
| Preliminary estimate of fair value of identifiable net assets (liabilities) acquired | 728 | |||||
| Goodwill | $ | 4,234 | (a) | |||
(a1) The Pro Forma Balance Sheet has been adjusted to eliminate the historical shareholders' equity accounts of Enertec.
(a2) The Pro Forma Balance Sheet has been adjusted to reflect a reduction in the proceeds paid to the Seller of $189, the amount owed to Enertec by the Seller, which was paid to Enertec pursuant.
(a3) The Pro Forma Balance Sheet has been adjusted by the amount of cash investment required pursuant to the terms of the Share Purchase Agreement.
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