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DISCONTINUED OPERATIONS AND DECONSOLIDATION OF I.AM

12 Months Ended

Dec. 31, 2020

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS AND DECONSOLIDATION OF I.AM

4. Discontinued Operations and Deconsolidation of I.AM

On March 16, 2020, to try and mitigate the spread of COVID-19, San Diego County health officials issued orders mandating that all restaurants must end dine-in services. As a result of these temporary closures and the deteriorating business conditions at the Company’s restaurant businesses, during the first quarter of 2020, the Company concluded that discontinuing the operations of I.AM was ultimately in its best interest. In addition, during the first quarter of 2020, due to deteriorating business conditions in the cryptocurrency mining sector, the Company ceased operations at Digital Farms. The Company’s decision to cease cryptocurrency mining operations in 2020 was based several factors, which had negatively affected the number of active miners the Company 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.

Digital Farms was established to pursue a variety of digital currencies and mined the top three cryptocurrencies for its own account. Although the Company has ceased operations at Digital Farms, since the assets and operations have not yet been abandoned, sold or distributed, these assets do not yet meet the requirement for presentation as discontinued operations. In the first quarter of 2020, management determined that the permanent closing of the restaurant operations met the criteria for presentation as discontinued operations. Accordingly, the results of the restaurant operations are presented as discontinued operations in our consolidated statements of operations and comprehensive loss and are excluded from continuing operations for all periods presented. In addition, the assets and liabilities of the restaurant operations are classified as held for sale in our consolidated balance sheets for all periods presented.

On November 2, 2020, I.AM filed a voluntary petition for bankruptcy under Chapter 7 in the United States Bankruptcy Court in the Central District of California, Santa Ana Division, case number 8:20-bk-13076. As a result of I.AM’s bankruptcy filing on November 2, 2020, Ault Global ceded authority for managing the business to the Bankruptcy Court. For this reason, the Company concluded that Ault Global had lost control of I.AM, and no longer had significant influence over I.AM. Therefore, the Company deconsolidated I.AM effective with the filing of the Chapter 11 bankruptcy in November 2020 and recorded a gain on deconsolidation of 2,358,992.

The following tables summarize the major classes of assets and liabilities included as part of discontinued operations as of December 31, 2019:

		December 31, 2019
Current assets
Cash and cash equivalents		$	5,170
Accounts receivable			83,885
Inventories, net			60,341
Prepaid expenses and other current assets			131,956
Total current assets classified as held for sale			281,352

Property and equipment, net			504,802
Right-of-use assets			1,098,466
Total assets classified as held for sale		$	1,884,620

Current liabilities
Accounts payable and accrued expenses		$	881,601
Operating lease liability, current			229,574
Other current liabilities			482,375
Total current liabilities classified as held for sale			1,593,550

Long term liabilities
Operating lease liability, non-current			951,072
Total liabilities classified as held for sale		$	2,544,622

The restaurant operations are included in our results as discontinued operations through March 16, 2020, the date of closing of the restaurants. The following tables summarize the major classes of line items included in loss from discontinued operations:

		For the Year Ended
		December 31,
		2020				2019
Revenue		$	543,327			$	4,149,646
Cost of revenue			(160,310	)			(1,149,645	)
Selling and marketing			—				(221,813	)
General and administrative			(555,445	)			(4,146,815	)
Impairment of property and equipment and right-of-use assets			(1,525,316	)			—
Impairment of Impairment of intangible assets			—				(610,000	)
Impairment of goodwill			—				(265,252	)
Gain on deconsolidation of I.AM			2,358,992				—
Interest expense			—				(789	)
Income (loss) from discontinued operations		$	661,248			$	(2,244,668	)