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DECONSOLIDATION OF SUBSIDIARY AND DISCONTINUED OPERATIONS | 12 Months Ended
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Dec. 31, 2024
Deconsolidation Of Subsidiary And Discontinued Operations |
DECONSOLIDATION OF SUBSIDIARY AND DISCONTINUED OPERATIONS | 4. DECONSOLIDATION OF SUBSIDIARY AND DISCONTINUED OPERATIONS Presentation of GIGA as Discontinued Operations On August 14, 2024, GIGA filed a petition for reorganization under Chapter 11 of the bankruptcy laws. The filing placed GIGA under the control of the bankruptcy court, which oversees its reorganization and restructuring process. The Company assessed the inherent uncertainties associated with the outcome of the Chapter 11 reorganization process and the anticipated duration thereof, and concluded that it was appropriate to deconsolidate GIGA and its subsidiaries effective on the petition date. The Company recognized a gain on deconsolidation of GIGA of $2.0 million included in net gain (loss) from discontinued operations. In connection with the Chapter 11 reorganization process, the Company concluded that the operations of GIGA met the criteria for discontinued operations as this strategic shift that will have a significant effect on the Company’s operations and financial results. As a result, the Company has presented the results of operations, cash flows and financial position of GIGA as discontinued operations in the accompanying consolidated financial statements and notes for all periods presented. The following table presents the assets and liabilities of GIGA operations:
Schedule of presents the assets and liabilities |  |  |  |  |  |  |  |
|  | December 31, |  |  | December 31, |
|  | 2024 |  |  | 2023 |
Cash and cash equivalents |  | $ | - |  |  | $ | 3,601,000 |
Restricted cash |  |  | - |  |  |  | 700,000 |
Accounts receivable |  |  | - |  |  |  | 4,350,000 |
Inventories |  |  | - |  |  |  | 6,643,000 |
Prepaid expenses and other current assets |  |  | - |  |  |  | 4,859,000 |
Intangible assets, net |  |  | - |  |  |  | 1,707,000 |
Goodwill |  |  | - |  |  |  | 5,794,000 |
Property and equipment, net - current |  |  | - |  |  |  | 1,690,000 |
Right-of-use assets |  |  | - |  |  |  | 3,023,000 |
Total assets discontinued operations |  |  | - |  |  |  | 32,367,000 |
Accounts payable and accrued expenses |  |  | - |  |  |  | 14,005,000 |
Operating lease liability |  |  | - |  |  |  | 3,098,000 |
Notes payable |  |  | - |  |  |  | 1,174,000 |
Convertible notes payable |  |  | - |  |  |  | 4,388,000 |
Liabilities discontinued operations |  |  | - |  |  |  | 22,664,000 |
Net assets of discontinued operations |  | $ | - |  |  | $ | 9,703,000 |
Net assets of discontinued operations excludes $14.0 million of intercompany notes payable to Hyperscale Data and Ault Lending as of December 31, 2024. The following table presents the results of GIGA operations:
Schedule of operations |  |  |  |  |  |  |  |
|  | For the Year Ended |
|  | December 31, |
|  | 2024 |  |  | 2023 |
Revenue, products |  | $ | 30,862,000 |  |  | $ | 37,759,000 |
Cost of revenue, products |  |  | 23,339,000 |  |  |  | 27,623,000 |
Gross profit |  |  | 7,523,000 |  |  |  | 10,136,000 |
Operating expenses |  |  |  |  |  |  |  |
Research and development |  |  | 2,617,000 |  |  |  | 2,816,000 |
Selling and marketing |  |  | 1,166,000 |  |  |  | 1,876,000 |
General and administrative |  |  | 8,033,000 |  |  |  | 12,989,000 |
Impairment of goodwill and intangible assets |  |  | - |  |  |  | 4,681,000 |
Total operating expenses |  |  | 11,816,000 |  |  |  | 22,362,000 |
Loss from operations |  |  | (4,293,000 | ) |  |  | (12,226,000 | )
Other income (expense): |  |  |  |  |  |  |  |
Interest and other income |  |  | 1,594,000 |  |  |  | 849,000 |
Interest expense |  |  | (1,662,000 | ) |  |  | (843,000 | )
Loss on extinguishment of debt |  |  | - |  |  |  | (1,397,000 | )
Change in fair value of warrant liability |  |  | - |  |  |  | (1,775,000 | )
Total other expense, net |  |  | (68,000 | ) |  |  | (3,166,000 | )
Loss before income taxes |  |  | (4,361,000 | ) |  |  | (15,392,000 | )
Income tax benefit |  |  | (15,000 | ) |  |  | (11,000 | )
Net loss |  |  | (4,346,000 | ) |  |  | (15,381,000 | )
Net loss attributable to non-controlling interest |  |  | 1,554,000 |  |  |  | 3,026,000 |
Net loss available to common stockholders |  | $ | (2,792,000 | ) |  | $ | (12,355,000 | )
The net loss from discontinued operations for the year ended December 31, 2024 on the consolidated statement of operations and comprehensive loss includes the gain on deconsolidation as follows:
Schedule of gain on deconsolidation |  |  |  |
|  | For the Year Ended December 31, 2024 |
GIGA net loss |  | $ | (2,792,000 | )
Gain on deconsolidation |  |  | 2,013,000 |
Net loss from discontinued operations |  | $ | (779,000 | )
The cash flow activity related to discontinued operations is presented separately on the statement of cash flows as summarized below:
Schedule of statement of cash flows |  |  |  |  |  |  |  |
|  | For the Year Ended December 31, |
|  | 2024 |  |  | 2023 |
Cash flows from operating activities: |  |  |  |  |  |
Net loss |  | $ | (4,346,000 | ) |  | $ | (15,381,000 | )
Adjustments to reconcile net loss to net cash provided by operating activities: |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 618,000 |  |  |  | 823,000 |
Amortization of right-of-use assets |  |  | 684,000 |  |  |  | 1,004,000 |
Amortization of intangibles |  |  | 157,000 |  |  |  | 273,000 |
Impairment of goodwill and intangible assets |  |  | - |  |  |  | 4,681,000 |
Stock-based compensation |  |  | (858,000 | ) |  |  | 1,799,000 |
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |
Accounts receivable |  |  | (1,638,000 | ) |  |  | 1,157,000 |
Inventories |  |  | 1,514,000 |  |  |  | 1,789,000 |
Prepaid expenses and other current assets |  |  | (1,516,000 | ) |  |  | (1,185,000 | )
Lease liabilities |  |  | (667,000 | ) |  |  | (1,112,000 | )
Accounts payable and accrued expenses |  |  | (314,000 | ) |  |  | 564,000 |
Net cash used in operating activities |  |  | (6,366,000 | ) |  |  | (5,588,000 | )
Cash flows from investing activities: |  |  |  |  |  |  |  |
Purchase of property and equipment |  |  | (249,000 | ) |  |  | (271,000 | )
Cash decrease upon deconsolidation |  |  | (3,550,000 | ) |  |  | - |
Net cash used in investing activities |  |  | (3,799,000 | ) |  |  | (271,000 | )
Cash flows from financing activities: |  |  |  |  |  |  |  |
Proceeds from notes payable |  |  | 2,552,000 |  |  |  | 3,858,000 |
Cash contributions from parent |  |  | 3,383,000 |  |  |  | 3,934,000 |
Net cash provided by financing activities |  |  | 5,935,000 |  |  |  | 7,792,000 |
Effect of exchange rate changes on cash and cash equivalents |  |  | (71,000 | ) |  |  | 173,000 |
Net (decrease) increase in cash and cash equivalents and restricted cash |  |  | (4,301,000 | ) |  |  | 2,106,000 |
Cash and cash equivalents and restricted cash at beginning of period |  |  | 4,301,000 |  |  |  | 2,195,000 |
Cash and cash equivalents and restricted cash at end of period |  | $ | - |  |  | $ | 4,301,000 |
Supplemental disclosures of cash flow information: |  |  |  |  |  |  |  |
Cash paid during the period for interest |  | $ | 946,000 |  |  | $ | 778,000 |

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