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SUBSEQUENT EVENTS | 9 Months Ended
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Sep. 30, 2022
Subsequent Events [Abstract] |
SUBSEQUENT EVENTS | 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.

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- Definition The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 855 -URI https://asc.fasb.org/topic&trid=2122774 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 855 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6842918&loc=SL6314017-165662 + Details
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