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BUSINESS COMBINATIONS | 12 Months Ended
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Dec. 31, 2023
Business Combination and Asset Acquisition [Abstract] |
BUSINESS COMBINATIONS | 16. BUSINESS COMBINATIONS ROI Acquisition On March 6, 2023, the Company closed a share exchange agreement with ROI and sold to ROI all the outstanding shares of capital stock of the Company’s subsidiary, BitNile.com, Inc. as well as RiskOn360, Inc. (formerly known as Ault Iconic, Inc.) and the securities of Earnity, Inc. beneficially owned by BitNile.com, Inc. as of the date of the Agreement. As consideration for the acquisition, ROI issued shares of preferred stock that could have been convertible into common stock, subject to shareholder approval, of ROI representing approximately 73.2% of ROI’s outstanding common stock at the time of the transaction. Total consideration included $0.3 million purchase consideration, representing the fair value of ROI common stock acquired by the Company, and $6.4 million allocated for the fair value of the non-controlling interest. 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 trade names and patents/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 of 20% for patents and developed technology and 0.25% for trademarks. The resulting net annual royalty payments are then discounted to present value using a discount factor of 24.6%. Goodwill represents the excess of the purchase price over the 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 Company invested in AVLP based on the potential global impact of the novel technology of AVLP. AVLP has developed a novel cost effective and environmentally friendly material synthesis technology for textile applications. AVLP’s Multiplex Laser Surface Enhancement is a unique technology that has the ability to treat both natural and synthetic textiles for a wide variety of functionalities, including dyeability and printing enhancements, hydrophilicity, hydrophobicity, fire retardancy and anti-microbial properties. The use of water, harmful chemicals and energy is significantly reduced in comparison to conventional textile treatment methods. The following table presents the allocation of the consideration transferred to the assets acquired and liabilities assumed based on their fair values.
Schedule of business acquisitions by acquisition, contingent consideration |  |  |  |
|  | Allocation |
Total purchase consideration |  | $ | 22,143,000 |
Fair value of non-controlling interest |  |  | 7,790,000 |
Total consideration |  | $ | 29,933,000 |
Identifiable net liabilities assumed: |  |  |  |
Cash |  | $ | 1,245,000 |
Prepaid expenses and other current assets |  |  | 55,000 |
Property and equipment |  |  | 5,057,000 |
Intangible asset - patents/developed technology (not yet placed in service; upon being placed in service, 7 year estimated useful life) |  |  | 23,984,000 |
Intangible asset - trademarks (9 year estimated useful life) |  |  | 816,000 |
Accounts payable and accrued expenses |  |  | (4,689,000 | )
Deferred tax liability |  |  | (5,000,000 | )
Convertible notes payable, principal |  |  | (10,104,000 | )
Net assets assumed |  |  | 11,364,000 |
Goodwill |  | $ | 18,569,000 |
The Company consolidates the results of AVLP on a one-month lag, therefore the statements of operations include results for AVLP for the post-acquisition periods ended November 30, 2023 and 2022. AVLP Related Party Transaction During the period from June 2022 to November 2022, MTIX Ltd., a subsidiary of AVLP, incurred fees of $0.3 million from 313M Technology Ltd, a U.K. company (“313M”), for the use of facilities and personnel. The Managing Director of 313M is Kristina Mistry, the daughter of Pravin Mistry, who served as a director of AVLP and the Chief Executive Officer of MTIX Ltd. at the time. 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 December 31, 2022. SMC is a NASDAQ-listed seller of consumer karaoke products. SMC leverages a top-tier global distribution network through major mass merchandisers and online retailers. 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 trade names 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 0.5% and 1.0% to the prospective revenue attributable to the intangible asset. The resulting net annual royalty payments are then discounted to present value using a discount factor of 12.0%. 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 3% 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 goodwill resulting from this acquisition is not tax deductible. The following table presents the allocation of the consideration transferred to the assets acquired and liabilities assumed based on their fair values.
Schedule of business acquisitions by acquisition, contingent consideration |  |  |  |
|  | 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 assets |  |  | 756,000 |
Inventories |  |  | 12,840,000 |
Property and equipment, net |  |  | 529,000 |
Right-of-use assets |  |  | 1,073,000 |
Intangible assets: |  |  |  |
Trade names (10 year estimated useful life) |  |  | 2,470,000 |
Customer relationships (10 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 |
Overview of GIGA Acquisition On September 8, 2022, GIGA acquired 100% of the capital stock of Gresham Worldwide, Inc. (“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 were 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 matured 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 GIGA 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 (“ASC 805”). 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 total purchase price to acquire GIGA has been allocated to the assets acquired and assumed liabilities based upon 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 reports from a third-party valuation expert. The purchase price allocation is as follows:
Schedule of business acquisitions by acquisition, contingent consideration |  |  |  |
|  | 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 |  |  | 2,930,000 |
Prepaid expenses and other assets |  |  | 1,626,000 |
Accounts payable and accrued liabilities |  |  | (4,704,000 | )
Loans payable, net of discounts and issuance costs |  |  | (387,000 | )
Lease obligations |  |  | (491,000 | )
Net liabilities assumed |  |  | (383,000 | )
Goodwill |  | $ | 9,881,000 |
Overview of Circle 8 Acquisition On November 17, 2022, Circle 8, a wholly owned subsidiary of Circle 8 Holdco LLC (“Circle 8 Holdco”) entered into an asset purchase agreement (“Circle 8 Purchase Agreement”) with Circle 8 Crane Services, LLC (“Seller”), to acquire substantially all of Seller’s operating assets and the recapitalization of the business into Circle 8. The Company has a 65% direct ownership in Circle 8 Holdco and a 5.8% indirect ownership via Circle 8 Crane GP. In accordance with the Circle 8 Purchase Agreement, on December 16, 2022 (“Closing Date”), Circle 8 completed the acquisition and obtained control of the Seller. The aggregate purchase price consideration transferred from Circle 8 to the Seller totaled $31.5 million which included (i) extinguishment of debt amounting to $29.2 million (ii) rollover equity issued to the seller with an estimated fair value of $0.6 million (iii) contingent consideration of $0.9 million and (iv) Seller’s transaction expenses of $0.7 million. The following summarizes the fair value of consideration transferred at the acquisition closing:
Schedule of business acquisitions by acquisition, contingent consideration |  |  |  |
Extinguishment of debt |  | $ | 29,234,000 |
Rollover equity |  |  | 565,000 |
Contingent consideration – earn-out |  |  | 922,000 |
Seller’s transaction expenses reimbursement |  |  | 742,000 |
Total consideration |  | $ | 31,463,000 |
In conjunction with the acquisition, certain individuals of the Seller’s ownership group received rollover equity interest as purchase consideration. The rollover equity includes Circle 8 issuing to the Seller 6,000 Class D interests in Circle 8 Holdco, which is the sole owner of the equity interests of Circle 8. Management engaged a valuation specialist to estimate the fair value of the grants as of the Closing Date. Pursuant to the terms of the Circle 8 Purchase Agreement, additional purchase consideration would be paid by Circle 8 to the Seller, contingent upon achievement of a minimum EBITDA threshold for a three-year earn-out measurement period beginning on the day following the Closing Date and ending on the date that is the 36-month anniversary of the Closing Date, which would then increase for additional EBITDA performance up to a maximum ceiling. Pursuant to the terms of the Circle 8 Purchase Agreement, the earn-out would be paid to the Seller in an amount ranging from $0 up to $0.7 million based on a pro rata basis for incremental EBITDA results starting at a minimum of $5.7 million. The fair value of the earn-out was valued using the Monte Carlo simulation which estimates the fair value based on an analysis of various future outcomes. As such the fair value measurement includes significant unobservable inputs such as risk-adjusted discount rate and projected results of operations over the earn-out period, and thus, represented a Level 3 measurement. The fair value of the earn-out as of the Closing Date was $0.9 million. To date, the year one earn-out measurement period has not been surpassed and thus, no cash payments have been made from Circle 8 to the Seller for contingent purchase consideration. The acquisition was accounted for as a business combination using the acquisition method of accounting in accordance with ASC 805. In accordance with ASU 2014-18, Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination, the Company elected not to separately recognize intangible assets that would otherwise arise from customer-related intangible assets. The value of these intangible assets is effectively subsumed into goodwill. The purchase price has been allocated to the tangible and intangible assets acquired and liabilities assumed at their estimated fair values on the acquisition date, with the exception of the deferred income tax assets acquired and liabilities assumed which are recognized and measured in accordance with ASC 740, Income Taxes. The excess of the fair value of purchase consideration over the values of the identifiable assets and liabilities is recorded as goodwill. The acquisition resulted in the fair value of the net assets acquired exceeding the amount of consideration transferred, which occurred as a result of negotiations with the Seller at a time of depressed EBITA as well as imposing a requirement on the Seller to provide preliminary net working capital equal to or greater than $3.0 million without the ability for adjustments up or down. ASC 805 refers to this as a “bargain purchase” and requires Circle 8 to recognize a gain for the amount that the values assigned to the net assets acquired exceed the consideration transferred and cannot recognize goodwill from the acquisition. Consequently, the Company reassessed the recognition and measurement of identifiable assets acquired, and liabilities assumed and concluded that all acquired assets and assumed liabilities were recognized and that the valuation procedures and resulting measures were appropriate. As a result, the Company recognized a gain of $0.8 million. The gain is included in the line item “gain from bargain purchase of business” in the consolidated statement of operations. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:
Schedule of recognized identified assets acquired and liabilities assumed |  |  |  |
Assets |  |  |
Cash and cash equivalents |  | $ | 290,000 |
Trade receivable, net |  |  | 4,334,000 |
Prepaids and other current assets |  |  | 1,226,000 |
Property and equipment, net |  |  | 36,395,000 |
Right-of-use assets |  |  | 1,558,000 |
Intangible assets – trade name (10 year estimated useful life) |  |  | 1,030,000 |
Intangible assets – customer relationships (8 year estimated useful life) |  |  | 1,290,000 |
Total Assets |  | $ | 46,123,000 |
Liabilities |  |  |  |
Accounts payable and accrued liabilities |  | $ | (1,589,000 | )
Notes payable – equipment notes |  |  | (10,685,000 | )
Operating lease liabilities |  |  | (1,580,000 | )
Total Liabilities |  | $ | (13,854,000 | )
Net Assets Acquired |  | $ | 32,269,000 |
The fair value of the acquired trade accounts receivables approximates the carrying value due to the short-term nature of the expected timeframe to collect the amounts due and the contractual cash flows, which are expected to be collected related to these receivables. As part of the purchase price allocation, the Company determined the identifiable intangible assets were: (i) trade name and (ii) customer relationships. The fair value of the intangible assets was estimated using variations of the income approach. Specifically, the relief from royalty method was utilized to estimate the fair value of the trade name and the multi-period excess earnings method was utilized to estimate the fair value of the customer relationships. The trade name relates to the overall consolidated group name and related industry recognition. The customer relationships represent a source of repeat business that is critical to the operations providing crane operators, engineering, custom rigging and transportation services for oilfield, construction, commercial and infrastructure markets. The discounted cash flows were based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital. These nonrecurring fair value measurements are primarily determined using unobservable inputs. Accordingly, these fair value measurements are classified within Level 3 of the fair value hierarchy. Unaudited Pro Forma Financial Information The following unaudited pro forma consolidated results of operations for the year ended December 31, 2022 have been prepared as if the AVLP, SMC, GIGA and Circle 8 acquisitions had occurred on January 1, 2022. This table has been prepared for comparative purposes only and is not indicative of the actual results that would have been attained had the acquisition occurred as of the beginning of the periods presented, nor is it indicative of future results.
Business acquisition, pro forma information |  |  |  |
|  | For the Year Ended December 31, 2022 |
Total revenues |  | $ | 214,636,000 |
Net loss attributable to Ault Alliance, Inc. |  | $ | (185,957,000 | )

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent + Details
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