UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the quarterly period ended September 30, ~~2018~~2019

☐	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the transition period from ________ to ________.

Commission file number 1-12711

DPW HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

94-1721931

(State or other jurisdiction of incorporation or

organization)

(I.R.S. Employer Identification Number)

201 Shipyard Way, Suite E

Newport Beach, CA 92663

(Address of principal executive offices)

~~(510) 657-2635~~(949) 444-5464

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.001 par value	DPW	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding year (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ☐¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ☐¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐¨	Accelerated filer ☐¨
Non-accelerated filer þ	Smaller reporting company þ
Emerging growth company ☐¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ ¨No þ

At November ~~12, 2018~~18, 2019 the registrant had outstanding ~~73,192,808~~3,251,871 shares of common stock.

DPW HOLDINGS, INC.

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of September 30, ~~2018~~2019 (Unaudited) and December 31, ~~2017~~2018 (Audited)	F-1 – F-2

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2019 and 2018 ~~and 2017~~ (Unaudited)	F-3

	Condensed Consolidated Statements of Changes in Stockholders' Equity for the three and nine months ended September 30, 2019 and 2018 (Unaudited)	F-4 – F-7

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 ~~and 2017~~ (Unaudited)	~~F-5~~F-8 – ~~F-7~~F-9

	Notes to Interim Condensed Consolidated Financial Statements (Unaudited)	~~F-8~~F-10 – ~~F-46~~F-40

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	1412

Item 4.	Controls and Procedures	1412

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	1513
Item 1A.	Risk Factors	1514
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	1614
Item 3.	Defaults Upon Senior Securities	1615
Item 4.	Mine Safety Disclosures	1615
Item 5.	Other Information	1615
Item 6.	Exhibits	1716

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that involve a number of risks and uncertainties. Words such as “anticipates,” “expects,” “intends,” “goals,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” “will,” “would,” “should,” “could,” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, uncertain events or assumptions, and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on management's expectations as of the date of this filing and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include those described throughout this report and our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, particularly the “Risk Factors” sections of such reports. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in this Form 10-Q and in other documents we file from time to time with the Securities and Exchange Commission that disclose risks and uncertainties that may affect our business. The forward-looking statements in this Form 10-Q do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that had not been completed as of ~~August 20, 2018.~~November 19, 2019. In addition, the forward-looking statements in this Form 10-Q are made as of the date of this filing, and we do not undertake, and expressly disclaims any duty, to update such statements, whether as a result of new information, new developments or otherwise, except to the extent that disclosure may be required by law.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

DPW HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

~~U.S. dollars in thousands, except per share data~~

	September 30,		December 31,
	2019		2018
	(Unaudited)
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	756,652	$	902,329
Marketable equity securities		473,314		178,597
Accounts receivable		2,473,500		1,930,971
Accounts and other receivable, related party		1,238,856		3,887,654
Accrued revenue		1,395,171		1,353,411
Inventories, net		2,724,023		3,261,126
Prepaid expenses and other current assets		706,967		775,981
TOTAL CURRENT ASSETS		9,768,483		12,290,069
Intangible assets		4,078,443		4,359,798
Digital currencies		6,634		1,535
Goodwill		8,810,340		8,463,070
Property and equipment, net		2,509,894		9,313,299
Right-of-use assets		3,433,794		—
Investments - related party, net of original issue discount of $1,475,485
and $2,336,693, respectively		9,738,353		5,611,621
Investments in derivative liabilities and common stock - related party		2,351,970		3,043,499
Equity investments in private companies		897,957		480,000
Investment in limited partnership		1,969,000		1,969,000
Loans receivable		2,170,962		2,572,230
Other investments, related parties		840,000		862,500
Other assets		850,148		459,259
TOTAL ASSETS	$	47,425,978	$	49,425,880
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	12,649,593	$	13,065,838
Accounts payable and accrued expenses, related party		62,278		57,752
Operating lease liability, current		741,433		—
Advances on future receipts		2,216,422		2,085,807
Short term advances, related party		699,261		73,761
Revolving credit facility		233,490		285,605
Notes payable, net		6,077,720		6,388,787
Notes payable, related party		168,589		166,925
Convertible notes payable		1,146,141		6,742,494
Other current liabilities		1,859,041		1,868,402
TOTAL CURRENT LIABILITIES		25,853,968		30,735,371
LONG TERM LIABILITIES
Operating lease liability, non-current		2,781,345		—
Notes payable		464,809		483,659
Notes payable, related parties		115,728		142,059
Convertible notes payable		284,284		—
TOTAL LIABILITIES		29,500,134		31,361,089

September 30, December 31,
2018 2017
(Unaudited)
ASSETS

CURRENT ASSETS
Cash and cash equivalents $ 703 $ 1,478
Marketable securities 366 1,835
Accounts receivable, net of allowance of $5 at September 30, 2018 and December 31,
2017 3,884 1,898
Accounts and other receivable, related party 3,888 174
Inventories, net 3,732 1,993
Prepaid expenses and other current assets 2,053 1,407
TOTAL CURRENT ASSETS 14,626 8,785
Intangible assets 2,851 2,898
Digital currencies 30 —
Goodwill 10,419 3,652
Property and equipment, net 10,890 1,217
Investments - related party, net of original issue discount of $2,579
and $2,115, respectively 4,630 2,333
Investments in warrants and common stock - related party 3,228 7,728
Investments in preferred stock of private company 1,000 1,000
Investments in real estate 1,915
Other investments 2,140 1,637
Other investments, related parties 870 917
Other assets 505 343
TOTAL ASSETS $ 53,104 $ 30,510
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 8,641 $ 4,273
Accounts payable and accrued expenses, related party 55 70
Advances on future receipts 1,689 1,963
Short term advances — 2,439
Short term advances, related party 87 245
Revolving credit facility 215 388
Notes payable, net 5,539 402
Notes payable, related party 166 134
Convertible notes payable 7,194 398
Other current liabilities 784 708
TOTAL CURRENT LIABILITIES 24,370 11,020
LONG TERM LIABILITIES
Notes payable 494 525
Notes payable, related parties 143 175
TOTAL LIABILITIES $ 25,007 $ 11,720

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

~~F-1~~

DPW HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

~~U.S. dollars in thousands, except shares and per share data~~

	September 30,			December 31,
	2019			2018
	(Unaudited)

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Series A Cumulative Redeemable Perpetual Preferred Stock, $25.00 stated		7			1
value per share, $0.001 par value – 1,000,000 shares authorized; 7,040 and
1,434 shares issued and outstanding at September 30, 2019 and
December 31, 2018, respectively (redemption amount and liquidation
preference of $176,000 and $35,850 as of September 30, 2019 and December 31, 2018, respectively)
Series B Convertible Preferred Stock, $10.00 stated value per share,		125			125
share, $0.001 par value – 500,000 shares authorized; 125,000 shares issued
and outstanding at September 30, 2019 and December 31, 2018 (liquidation
preference of $1,250,000 at September 30, 2019 and December 31, 2018
Class A Common Stock, $0.001 par value – 500,000,000 shares authorized;		2,542			101
2,541,529 and 100,910 shares issued and outstanding at September 30, 2019
and December 31, 2018, respectively
Class B Common Stock, $0.001 par value – 25,000,000 shares authorized;		—			—
nil shares issued and outstanding at September 30, 2019 and December 31, 2018
Additional paid-in capital		99,883,351			77,647,544
Accumulated deficit		(76,811,910	)		(55,721,115	)
Accumulated other comprehensive loss		(5,156,513	)		(3,902,523	)
TOTAL DPW HOLDINGS STOCKHOLDERS' EQUITY		17,917,602			18,024,133
Non-controlling interest		8,242			40,658
TOTAL STOCKHOLDERS' EQUITY		17,925,844			18,064,791
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	47,425,978		$	49,425,880

September 30, December 31,
2018 2017
(Unaudited)
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred Stock, $0.001 par value, designated in the following classes;
  25,000,000 shares authorized; 125,000 and 478,776 shares issued and
   outstanding at September 30, 2018 and December 31, 2017, respectively $ — $ —
Series B Convertible Preferred Stock, $10 stated value per share,
  share, $0.001 par value – 500,000 shares authorized; 125,000 and 100,000 shares
   issued and outstanding at September 30, 2018 and December 31, 2017,
   respectively (liquidation preference of $1,250 and $1,000 at September 30, 2018
   and December 31, 2017, respectively) — —
Series C Convertible Preferred Stock, $2.40 stated value per share,
  $0.001 par value – 460,000 shares authorized; nil shares issued and outstanding
   at September 30, 2018 and December 31, 2017 — —
Series D Convertible Preferred Stock, $0.01 stated value per
  share, $0.001 par value – 378,776 shares authorized; nil and 378,776
  shares issued and outstanding at September 30, 2018 and December 31, 2017,
  respectively (liquidation preference of $4 at December 31, 2017) — —
Series E Convertible Preferred Stock, $45 stated value per share,
  $0.001 par value – 10,000 shares authorized; nil shares issued and outstanding
  at September 30, 2018 and December 31, 2017 — —
Preferred Stock, $0.001 par value – 23,651,224 shares authorized; nil shares
  issued and outstanding at September 30, 2018 and December 31, 2017 — —
Class A Common Stock, $0.001 par value – 200,000,000 shares authorized;
69,341,486 and 30,222,299 shares issued and outstanding at September 30, 2018
and December 31, 2017, respectively 69 30
Class B Common Stock, $0.001 par value – 25,000,000 shares authorized;
nil shares issued and outstanding at September 30, 2018 and December 31, 2017 — —
Additional paid-in capital 73,950 36,888
Accumulated deficit (43,998 ) (23,412 )
Accumulated other comprehensive loss (2,495 ) 4,503
TOTAL DPW HOLDINGS STOCKHOLDERS' EQUITY 27,526 18,009
Non-controlling interest 571 781
TOTAL STOCKHOLDERS' EQUITY 28,097 18,790
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 53,104 $ 30,510

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

~~F-2~~

DPW HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND ~~COMPREHNSIVE~~COMPREHENSIVE LOSS

(Unaudited)

~~U.S. dollars in thousands, except shares and per share data~~

For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2018 2017 2018 2017

Revenue $ 5,731 $ 3,220 $ 13,245 $ 6,670
Revenue, cryptocurrency mining 590 — 1,546 —
Revenue, related party 353 — 3,912 —
Revenue, restaurant operations 1,585 — 2,087 —
Revenue, lending activities 85 — 194 —
Total revenue 8,344 3,220 20,984 6,670
Cost of revenue 6,317 2,124 16,204 4,136
Gross profit 2,027 1,096 4,780 2,534
Operating expenses
Engineering and product development 334 306 1,044 798
Selling and marketing 791 423 2,291 1,045
General and administrative 5,088 1,685 12,698 4,240
Impairment loss on digital currency 3 — 3 —
Total operating expenses 6,216 2,414 16,036 6,083
Loss from operations (4,189 ) (1,318 ) (11,256 ) (3,549 )
Interest expense (3,359 ) (753 ) (9,378 ) (1,367 )
Loss before income taxes (7,548 ) (2,071 ) (20,634 ) (4,916 )
Income tax benefit 23 — 17 —
Net loss (7,525 ) (2,071 ) (20,617 ) (4,916 )
Less: Net loss attributable to
non-controlling interest 74 104 218 216
Net loss attributable to DPW Holdings $ (7,451 ) $ (1,967 ) $ (20,399 ) $ (4,700 )
Preferred deemed dividends on Series B
and Series C Preferred Stock — — (108 ) (319 )
Preferred dividends on Series C
Preferred Stock — (27 ) — (35 )
Net loss available to common stockholders $ (7,451 ) $ (1,994 ) $ (20,507 ) $ (5,054 )
Basic and diluted net loss per common share $ (0.11 ) $ (0.15 ) $ (0.39 ) $ (0.46 )
Basic and diluted weighted average common
shares outstanding 67,869,778 13,745,540 52,977,059 10,884,948

Comprehensive Loss
Loss available to common stockholders $ (7,451 ) $ (1,994 ) $ (20,507 ) $ (5,054 )
Other comprehensive income (loss)
Foreign currency translation adjustment (78 ) 42 (210 ) 141
Net unrealized loss on securities
available-for-sale (1,342 ) (43 ) (6,788 ) (43 )
Other comprehensive income (loss) (1,420 ) (1 ) (6,998 ) 98
Total comprehensive loss $ (8,871 ) $ (1,995 ) $ (27,505 ) $ (4,956 )

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018

Revenue	$	4,968,440		$	5,732,002		$	15,061,289		$	13,245,419
Revenue, cryptocurrency mining		307,172			590,165			592,092			1,546,418
Revenue, related party		—			352,496			—			3,911,263
Revenue, restaurant operations		1,036,834			1,584,891			3,371,465			2,087,383
Revenue, lending activities		69,217			85,368			443,927			194,120
Total revenue		6,381,663			8,344,922			19,468,773			20,984,603
Cost of revenue		4,642,526			6,317,754			14,350,041			16,204,388
Gross profit		1,739,137			2,027,168			5,118,732			4,780,215
Operating expenses
Engineering and product development		481,902			333,555			1,408,848			1,043,993
Selling and marketing		392,725			790,603			1,293,181			2,290,934
General and administrative		4,519,641			5,088,312			14,584,758			12,697,909
Impairment of property and equipment		4,315,856			—			4,315,856			—
(Gain) loss on digital currency		(951	)		2,543			(6,933	)		2,543
Total operating expenses		9,709,173			6,215,013			21,595,710			16,035,379
Loss from operations		(7,970,036	)		(4,187,845	)		(16,476,978	)		(11,255,164	)
Interest income		898,646			712,262			2,647,110			1,955,885
Interest expense		(2,954,843	)		(4,072,539	)		(5,586,639	)		(11,335,069	)
Change in fair value of marketable equity securities		(330,150	)		—			(173,503	)		—
Loss on extinguishment of convertible debt		(155,448	)		—			(963,232	)		—
Loss on issuance of warrants		—			—			(1,763,481	)		—
Change in fair value of warrant liability		165,840			—			1,112,665			—
Loss before income taxes		(10,345,991	)		(7,548,122	)		(21,204,058	)		(20,634,348	)
Income tax benefit		5,140			23,737			93,284			17,480
Net loss		(10,340,851	)		(7,524,385	)		(21,110,774	)		(20,616,868	)
Less: Net loss attributable to non-controlling interest		—			74,414			32,416			218,494
Net loss attributable to DPW Holdings		(10,340,851	)		(7,449,971	)		(21,078,358	)		(20,398,374	)
Preferred dividends		(5,284	)		—			(12,437	)		(108,049	)
Net loss available to common stockholders	$	(10,346,135	)	$	(7,449,971	)	$	(21,090,795	)	$	(20,506,423	)
Basic and diluted net loss per common share	$	(6.47	)	$	(88.23	)	$	(24.62	)	$	(311.53	)
Basic and diluted weighted average common shares outstanding		1,599,306			84,441			856,689			65,824
Comprehensive Loss
Loss available to common stockholders	$	(10,346,135	)	$	(7,449,971	)	$	(21,090,795	)	$	(20,506,423	)
Other comprehensive income (loss)
Foreign currency translation adjustment		67,166			(77,686	)		259,671			(209,535	)
Net unrealized gain (loss) on derivative securities of related party		(1,152,480	)		(1,341,977	)		(1,513,661	)		(6,787,902	)
Other comprehensive income (loss)		(1,085,314	)		(1,419,663	)		(1,253,990	)		(6,997,437	)
Total Comprehensive loss	$	(11,431,449	)	$	(8,869,634	)	$	(22,344,785	)	$	(27,503,860	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

DPW HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

Three Months Ended September 30, 2019

															Accumulated
									Additional						Other					Total
	Preferred Stock				Common Stock				Paid-In			Accumulated			Comprehensive			Non-Controlling		Stockholders'
	Shares		Amount		Shares		Amount		Capital			Deficit			Income (Loss)			Interest		Equity
BALANCES, June 30, 2019		132,040	$	132		1,037,128	$	1,037	$	92,377,366		$	(66,465,775	)	$	(4,071,199	)	$	8,242	$	21,849,803
Compensation expense due to stock
option issuances		—		—		—		—		187,125			—			—			—		187,125
Issuance of common stock for cash		—		—		1,140,330		1,141		4,415,624			—			—			—		4,416,765
Issuance of common stock for services		—		—		20,000		20		51,980			—			—			—		52,000
Issuance of common stock for conversion
of debt		—		—		344,071		344		2,127,493			—			—			—		2,127,837
Beneficial conversion feature in connection
with convertible notes		—		—		—		—		633,004			—			—			—		633,004
Fair value of warrants issued in connection
with convertible notes		—				—		—		142,070			—			—			—		142,070
Cash for exchange fees and other financing costs		—		—		—		—		(206,759	)		—			—			—		(206,759	)
Loss on debt extinguishment										155,448											155,448
Comprehensive loss:
Net loss		—				—		—		—			(10,340,851	)		—			—		(10,340,851	)
Preferred dividends		—		—		—		—		—			(5,284	)		—			—		(5,284	)
Net unrealized gain on derivatives
in related party		—		—		—		—		—			—			(1,152,480	)		—		(1,152,480	)
Foreign currency translation adjustments		—		—		—		—		—			—			67,166			—		67,166
BALANCES, September 30, 2019		132,040	$	132		2,541,529	$	2,542	$	99,883,351		$	(76,811,910	)	$	(5,156,513	)	$	8,242	$	17,925,844

The above Condensed Consolidated Statement of Changes in Stockholders’ Equity reflects a 1-for-20 reverse stock split effective March 14, 2019, and a 1-for-40 reverse stock split effective August 5, 2019. See Note 1 for further information.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

~~F-3~~

DPW HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~STATEMENTS~~STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

~~U.S. dollars in thousands, except share data~~Three Months Ended September 30, 2018

Accumulated
Additional Other Total
Preferred Stock Common Stock Paid-In Accumulated Comprehensive Non-Controlling Stockholders'
Shares Shares Amount Capital Deficit Income (Loss) Interest Equity
BALANCES, December 31, 2017 478,776 30,222,299 $ 30 $ 36,888 $ (23,412 ) $ 4,503 $ 781 $ 18,790

Compensation expense due to stock option issuances — — — 725 — — — 725
Compensation expense due to warrant issuances — — — 70 — — — 70
Issuance of common stock and warrants for cash — 25,376,527 25 22,222 — — — 22,247
Issuance of common stock for services — 3,683,059 4 4,153 — — — 4,157
Issuance of common stock for conversion of debt — 2,030,015 2 2,166 — — — 2,168
Issuance of common stock for conversion of short-term advances — 3,632,159 4 2,816 — — — 2,820
Issuance of common stock upon exercise of stock options — 60,000 — 98 — — — 98
Issuance of common stock upon exercise of warrants — 2,145,641 2 865 — — — 867
Issuance of Series B preferred stock for conversion of short-term advances 25,000 — — 250 — — — 250
Issuance of common stock for conversion of Series E preferred stock (378,776 ) 757,552 1 (1 ) — — — —
Issuance of common stock in connection with convertible notes — 1,489,232 1 1,177 — — — 1,178
Repurchase of common stock — (54,998 ) — (55 ) — — — (55 )
Beneficial conversion feature in connection with convertible notes — — — 1,008 — — — 1,008
Fair value of warrants issued in connection with convertible notes — — — 3,411 — — — 3,411
Cash for exchange fees and other financing costs — — — (1,951 ) — — — (1,951 )
Non-controlling interest from acquisition of I. AM — — — — — — 33 33
Non-controlling interest from Microphase — — — — — — (25 ) (25 )
Comprehensive loss:
Net loss — — — — (20,399 ) — — (20,399 )
Preferred deemed dividends — — — 108 (108 ) — — —
Net unrealized gain on securities available-for-sale, net of income taxes — — — — — (6,788 ) — (6,788 )
Foreign currency translation adjustments — — — — (79 ) (210 ) — (289 )
Net loss attributable to non-controlling interest — — — — — — (218 ) (218 )

BALANCES, September 30, 2018 125,000 69,341,486 $ 69 $ 73,950 $ (43,998 ) $ (2,495 ) $ 571 $ 28,097

															Accumulated
									Additional						Other						Total
	Preferred Stock				Common Stock				Paid-In			Accumulated			Comprehensive			Non-Controlling			Stockholders'
	Shares		Amount		Shares		Amount		Capital			Deficit			Income (Loss)			Interest			Equity
BALANCES, July 1, 2018		125,000	$	125		77,028	$	77	$	68,492,048		$	(36,552,389	)	$	(1,074,728	)	$	669,899		$	31,535,032
Compensation expense due to stock											��
option issuances		—		—		—		—		298,594			—			—			—			298,594
Compensation expense due to warrant issuances		—		—		—		—		23,477			—			—			—			23,477
Issuance of common stock and warrants for cash		—		—		7,900		8		3,695,819			—			—			—			3,695,827
Issuance of common stock for services		—		—		1,250		2		399,998			—			—			—			400,000
Issuance of common stock in connection
with convertible notes		—		—		500		—		501,538			—			—			—			501,538
Beneficial conversion feature in connection
with convertible notes		—		—		—		—		720,000			—			—			—			720,000
Cash for exchange fees and other financing costs		—		—		—		—		(112,803	)		—			—			—			(112,803	)
Non-controlling interest from Microphase		—		—		—		—		—			—			—			(25,000	)		(25,000	)
Comprehensive loss:
Net loss		—		—		—		—		—			(7,449,971	)		—			—			(7,449,971	)
Net unrealized gain on securities
available-for-sale, net of income taxes		—		—		—		—		—			—			(1,341,977	)		—			(1,341,977	)
Foreign currency translation adjustments		—		—		—		—		—			4,100			(77,686	)		—			(73,586	)
Net loss attributable to non-controlling interest		—		—		—		—		—			—			—			(74,414	)		(74,414	)
BALANCES, September 30, 2018		125,000	$	125		86,678	$	87	$	74,018,671		$	(43,998,260	)	$	(2,494,391	)	$	570,485		$	28,096,717

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

DPW HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

Nine Months Ended September 30, 2019

															Accumulated
									Additional						Other						Total
	Preferred Stock				Common Stock				Paid-In			Accumulated			Comprehensive			Non-Controlling			Stockholders'
	Shares		Amount		Shares		Amount		Capital			Deficit			Income (Loss)			Interest			Equity
BALANCES, January 1, 2019		126,434	$	126		100,910	$	101	$	77,647,544		$	(55,721,115	)	$	(3,902,523	)	$	40,658		$	18,064,791
Compensation expense due to stock
option issuances		—		—		—		—		681,079			—			—			—			681,079
Issuance of common stock for cash		—		—		1,331,509		1,333		9,869,176			—			—			—			9,870,509
Issuance of common stock for services		—		—		29,375		29		304,990			—			—			—			305,019
Issuance of common stock in payment of
accrued liabilities		—		—		9,375		9		108,512			—			—			—			108,521
Issuance of common stock for conversion
of debt		—		—		370,473		370		4,735,925			—			—			—			4,736,295
Issuance of common stock upon exercise
of warrants		—		—		699,887		700		6,620,325			—			—			—			6,621,025
Issuance of Series A preferred stock for cash		5,606		6		—		—		140,144			—			—			—			140,150
Beneficial conversion feature in connection							��
with convertible notes		—		—		—		—		821,452			—			—			—			821,452
Fair value of warrants issued in connection
with convertible notes		—		—		—		—		200,518			—			—			—			200,518
Cash for exchange fees and other financing costs		—		—		—		—		(1,401,762	)		—			—			—			(1,401,762	)
Loss on debt extinguishment		—		—		—		—		155,448			—			—			—			155,448
Comprehensive loss:
Net loss		—				—		—		—			(21,078,358	)		—			—			(21,078,358	)
Preferred dividends		—		—		—		—		—			(12,437	)		—			—			(12,437	)
Net unrealized loss on derivatives
in related party		—		—		—		—		—			—			(1,513,661	)		—			(1,513,661	)
Foreign currency translation adjustments		—		—		—		—		—			—			259,671			—			259,671
Net loss attributable to non-controlling interest		—		—		—		—		—			—			—			(32,416	)		(32,416	)
BALANCES, September 30, 2019		132,040	$	132		2,541,529	$	2,542	$	99,883,351		$	(76,811,910	)	$	(5,156,513	)	$	8,242		$	17,925,844

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

DPW HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

Nine Months Ended September 30, 2018

																		Accumulated
												Additional						Other						Total
	Preferred Stock						Common Stock					Paid-In			Accumulated			Comprehensive			Non-Controlling			Stockholders'
	Shares			Amount			Shares			Amount		Capital			Deficit			Income (Loss)			Interest			Equity
BALANCES, January 31, 2018		478,776		$	479			37,778		$	38	$	36,918,132		$	(23,414,151	)	$	4,503,046		$	780,737		$	18,788,281
Compensation expense due to stock
option issuances		—			—			—			—		725,467			—			—			—			725,467
Compensation expense due to warrant issuances		—			—			—			—		70,431			—			—			—			70,431
Issuance of common stock and warrants for cash		—			—			31,721			32		22,247,384			—			—			—			22,247,416
Issuance of common stock for services		—			—			4,604			5		4,158,291			—			—			—			4,158,296
Issuance of common stock for conversion
of debt		—			—			2,538			3		2,167,841			—			—			—			2,167,844
Issuance of common stock for conversion
of short-term advances		—			—			4,540			4		2,819,580			—			—			—			2,819,584
Issuance of common stock upon exercise
of stock options		—			—			75			—		97,800			—			—			—			97,800
Issuance of common stock upon exercise
of warrants		—			—			2,682			3		867,163			—			—			—			867,166
Issuance of Series B preferred stock for
conversion of short-term advances		25,000			25			—			—		249,975			—			—			—			250,000
Issuance of common stock for conversion
of Series E preferred stock		(378,776	)		(379	)		947			1		378			—			—			—			—
Issuance of common stock in connection
with convertible notes		—			—			1,862			1		1,176,758			—			—			—			1,176,759
Repurchase of common stock		—			—			(69	)		—		(55,000	)		—			—			—			(55,000	)
Beneficial conversion feature in connection
with convertible notes		—			—			—			—		1,008,573			—			—			—			1,008,573
Fair value of warrants issued in connection
with convertible notes		—			—			—			—		3,408,665			—			—			—			3,408,665
Cash for exchange fees and other financing costs		—			—			—			—		(1,950,816	)		—			—			—			(1,950,816	)
Non-controlling interest from acquisition of I. AM		—			—			—			—		—			—			—			33,242			33,242
Non-controlling interest from Microphase		—			—			—			—		—			—			—			(25,000	)		(25,000	)
Comprehensive loss:
Net loss		—			—			—			—		—			(20,398,374	)		—			—			(20,398,374	)
Preferred deemed dividends		—			—			—			—		108,049			(108,049	)		—			—			—
Net unrealized gain on securities
available-for-sale, net of income taxes		—			—			—			—		—			—			(6,787,902	)		—			(6,787,902	)
Foreign currency translation adjustments		—			—			—			—		—			(77,686	)		(209,535	)		—			(287,221	)
Net loss attributable to non-controlling interest		—			—			—			—		—			—			—			(218,494	)		(218,494	)
BALANCES, September 30, 2018		125,000		$	125			86,678		$	87	$	74,018,671		$	(43,998,260	)	$	(2,494,391	)	$	570,485		$	28,096,717

The above Condensed Consolidated Statement of Changes in Stockholders’ Equity reflects a 1 for 20 reverse stock split effective March 14, 2019, and a 1-for-40 reverse stock split effective August 5, 2019. See Note 1 for further information.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

DPW HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

~~U.S. dollars in thousands~~

	For the Nine Months Ended September 30,						For the Nine Months Ended September 30,
	2018			2017			2019			2018

Cash flows from operating activities:
Net loss	$	(20,617	)	$	(4,916	)	$	(21,110,774	)	$	(20,616,868	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		1,642			128			2,673,352			1,642,422
Amortization		101			6			400,661			100,074
Amortization of right-of-use assets								260,549			—
Interest expense – debt discount		8,813			1,239			3,034,454			8,812,972
Accretion of original issue discount on
notes receivable – related party		(1,524	)		(36	)
Interest expense on conversion of promissory notes
to common stock		—			13
Fair value in excess of proceeds upon issuance of warrants								1,763,481			—
Change in fair value of warrant liability								(1,112,665	)		—
Accretion of original issue discount on notes receivable – related party								(1,869,778	)		(1,524,441	)
Accretion of original issue discount on notes receivable								(77,155	)		—
Increase in accrued interest on notes receivable – related party								(732,542	)		—
Stock-based compensation		4,163			1,269			1,354,062			4,164,180
Realized losses on sale of digital currencies		111			—
Realized losses on sale of marketable securities		168			—
Unrealized losses on trading securities		43
Impairment of property and equipment								4,315,856			—
Realized (gains) losses on sale of digital currencies								(394	)		110,523
Realized (gains) losses on sale of marketable securities								(86,741	)		167,779
Unrealized (gains) losses on marketable equity securities								(294,717	)		42,962
Unrealized gains on equity securities – related party								371,970			—
Unrealized gains on equity securities								24,597			—
Changes in operating assets and liabilities:
Accounts receivable		876			(737	)		(397,395	)		876,378
Accounts receivable, related party		(3,517	)		—			2,648,798			(3,517,216	)
Accrued revenue								(41,760	)		—
Digital currencies		(1,503	)		—			(599,025	)		(1,502,956	)
Inventories		(117	)		228			619,185			(117,621	)
Prepaid expenses and other current assets		198			(166	)		(269,047	)		198,058
Other assets		(145	)		(197	)		(433,013	)		(144,593	)
Accounts payable and accrued expenses		1,923			2,083			1,357,307			1,923,193
Accounts payable, related parties		(15	)		104			4,526			(15,258	)
Other current liabilities		(30	)		(595	)		(9,505	)		(29,643	)
Lease liabilities								(171,565	)		—

Net cash used in operating activities		(9,430	)		(1,577	)		(8,377,278	)		(9,430,055	)

Cash flows from investing activities:
Purchase of property and equipment		(9,318	)		(22	)		(149,323	)		(9,317,726	)
Loss on disposition of asset		22			—			—			22,172
Purchase of intangible asset		(54	)		(50	)		—			(53,643	)
Purchase of Power Plus		—			(409	)
Purchase of Enertec		(4,937	)		—			—			(4,936,562	)
Cash received on acquisitions		293			—			—			293,042
Investments – related party		(845	)		(2,710	)		(1,501,912	)		(844,834	)
Related party investment in real property		(1,915	)		—			—			(1,915,000	)
Investment in real property		—			(300	)
Investments in warrants and common stock - related party		(2,288	)		—			(1,102,619	)		(2,287,991	)
Investments in marketable securities		(858	)		—
Sales of marketable securities		2,159			—
Investments in marketable equity securities								—			(858,458	)
Sales of marketable equity securities								571,741			2,158,724
Investments - others		(25	)		(25	)		—			(25,000	)
Loans to third party		—			(814	)
Loans to related parties		—			(54	)
Proceeds from loans to related parties		16			—			—			16,088
Investments in debt and equity securities		(2,166	)		—			(504,393	)		(2,166,505	)

Net cash used in investing activities	$	(19,916	)	$	(4,384	)	$	(2,686,506	)	$	(19,915,693	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

~~F-5~~

DPW HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued)

~~U.S. dollars in thousands~~

	For the Nine Months Ended September 30,						For the Nine Months Ended September 30,
	2018			2017			2019			2018

Cash flows from financing activities:
Gross proceeds from sales of common stock and warrants	$	22,247		$	745		$	15,945,371		$	22,247,416
Repurchase of common stock		(55	)		—			—			(54,747	)
Proceeds from issuance of preferred stock		—			1,540
Proceeds from issuance of Series A Convertible Preferred Stock								131,741			—
Financing cost in connection with sales of equity securities		(1,951	)		(275	)		(1,401,764	)		(1,951,397	)
Proceeds from stock option exercises		98			—			—			97,740
Proceeds from warrant exercises		867			—			127,000			867,166
Proceeds from convertible notes payable		11,550			1,514			500,000			11,550,000
Proceeds from notes payable – related party		—			350
Proceeds from notes payable		12,235			785			4,752,918			12,234,999
Proceeds from short-term advances – related party		137			—			625,500			136,761
Proceeds from short-term advances		761			—			—			761,000
Payments on short-term advances		(425	)		—			—			(425,000	)
Payments on notes payable		(11,782	)		(30	)		(2,001,474	)		(11,781,756	)
Payments on convertible notes payable		(2,362	)		(157	)		(7,079,547	)		(2,362,281	)
Proceeds from advances on future receipts		2,990			1,772			941,804			2,990,277
Payments on advances on future receipts		(5,158	)		(439	)		(1,365,435	)		(5,158,229	)
Payments of preferred dividends		—			(8	)		(12,437	)		—
Financing cost in connection with sales of debt securities		—			(122	)
Payments on revolving credit facilities, net		(361	)		(481	)		(80,445	)		(360,587	)

Net cash provided by financing activities		28,791			5,194			11,083,232			28,791,362

Effect of exchange rate changes on cash and cash equivalents		(220	)		85			(165,125	)		(220,325	)
Net decrease in cash and cash equivalents		(775	)		(682	)		(145,677	)		(774,711	)
Cash and cash equivalents at beginning of period		1,478			996			902,329			1,478,147

Cash and cash equivalents at end of period	$	703		$	314		$	756,652		$	703,436

Supplemental disclosures of cash flow information:
Cash paid during the period for interest							$	1,850,946		$	695,373

Non-cash investing and financing activities:
Cancellation of convertible note payable into shares of common stock							$	4,736,295		$	2,167,844
Payment of accounts payable with digital currency							$	594,320		$	—
Issuance of common stock for prepaid services							$	—		$	794,055
Issuance of common stock in payment of liability							$	108,521		$	—
Cancellation of short term advances into shares of common stock							$	—		$	2,774,584
Cancellation of short term advances, related party into shares
of common stock							$	—		$	45,000
Cancellation of short term advances, related party into shares
of Series B Preferred Stock							$	—		$	250,000
Conversion of loans receivable for marketable equity securities							$	485,000		$	—
Conversion of loans receivable for investments in warrants and
common stock - related party							$	91,483		$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

~~F-6~~

~~DPW HOLDINGS, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued)~~

~~U.S. dollars in thousands~~

For the Nine Months Ended
September 30,

2018 2017

Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 695 $ 69

Non-cash investing and financing activities:
Cancellation of convertible note payable into shares of common stock $ 2,168 $ 145
Cancellation of short term advances into shares of common stock $ 2,775 $ —
Cancellation of short term advances, related party into shares of
common stock $ 45 $ —
Cancellation of short term advances, related party into shares of Series
B Preferred Stock $ 250 $ —
Issuance of common stock for prepaid services $ 794 $ —
Cancellation of notes payable – related party into shares of
common stock $ — $ 100
Cancellation of notes payable into shares of common stock $ — $ 648
Cancellation of note payable – related party into series B
convertible preferred stock $ — $ 500

~~In connection with the Company's acquisition of Microphase Corporation, equity instruments were issued and liabilities assumed during 2017 as follows:~~

Fair value of assets acquired $ 8,275
Equity instruments issued (1,451 )
Non-controlling interest (945 )
Liabilities assumed $ 5,879

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~

~~F-7~~

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited

SEPTEMBER 30, ~~2018~~

~~U.S. dollars in thousands, except share and per share data~~2019

1. DESCRIPTION OF BUSINESS

DPW Holdings, Inc., a Delaware corporation (“DPW” or the “Company”), formerly known as Digital Power Corporation, was incorporated in September 2017. The Company isa diversified holding company owning subsidiaries engaged in the following operating businesses: commercial and defense solutions, commercial lending, cryptocurrency blockchain mining, advanced textile technology and restaurant operations. The Company’s wholly-owned subsidiaries areCoolisys Technologies, Inc. (“Coolisys”), Digital Power Limited (“DP Limited”), EnertecSystems 2001 Ltd (“Enertec”),Power-Plus Technical Distributors, LLC (“Power-Plus”), Digital Power Lending, LLC (“DP Lending”) and~~Super Crypto Mining,~~ Digital Farms, Inc. (“~~SC Mining”~~Digital Farms”). The Company also has a controlling ~~interest~~interests in Microphase Corporation (“Microphase”)and I. AM, Inc. (“I.AM”). The Company has five reportable segments – North America with operations conducted by Microphase, Coolisys, Power-Plus and DP Lending, Europe with operations through DP Limited, Middle East with operations through Enertec, digital currency blockchain mining through ~~SC Mining~~Digital Farms and restaurant operations through I.AM.

On March 14, 2019, pursuant to the authorization provided by the Company’s stockholdersat a Special Meeting of Stockholders, the Company’s Board of Directors (the “Board”) approved the Certificate of Incorporation Amendment (the “COI Amendment”) to effectuate a reverse stock split of the Common Stock of the Company’s issued and outstanding number of such shares by a ratio of one-for-twenty (the “First Stock Split”). At the Company’s 2019 reconvened Annual Meeting of Stockholders, the Company’s stockholders approved a proposal permitting the Board to effectuate a second reverse stock split (the “Second Stock Split”) of the Company’s issued and outstanding Common Stock. Thereafter, on July 23, 2019, the Board approved the Second Stock Split with a ratio of one-for-forty. The Second Stock Split did not affect the number of authorized shares of Common Stock or their par value per share. As a result of the Second Stock Split, each forty shares of common stock issued and outstanding prior to the Second Stock Split were converted into one share of common stock. The Second Stock Split became effective in the State of Delaware on August 5, 2019.

2. LIQUIDITY, GOING CONCERN AND MANAGEMENT’S PLANS

The accompanying condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern. As of September 30, ~~2018,~~2019, the Company had cash and cash equivalents of ~~$703,~~$756,652, an accumulated deficit of ~~$43,998~~$76,811,910 and a negative working capital of ~~$9,744.~~$16,085,485. The Company has incurred recurring losses and reported losses for the three and nine months ended September 30, ~~2018,~~2019, totaled ~~$7,525~~$10,340,851 and ~~$20,617,~~$21,110,774, respectively. In the past, the Company has financed its operations principally through issuances of convertible debt, promissory notes and equity securities. During ~~2018,~~2019, the Company continued to successfully obtain additional equity and debt financing and in restructuring existing debt.

The Company expects to continue to incur losses for the foreseeable future and needs to raise additional capital to continue its business development initiatives and to support its working capital requirements. ~~In March 2017,~~On April 2, 2019, the Company ~~was awarded~~received gross proceeds of approximately $7 million in a 3-year, $50 million purchase order by MTIX Ltd. (“MTIX”) to manufacture, install and service the Multiplex Laser Surface Enhancement (“MLSE”) plasma-laser system. Currently, the Company has subcontracted out a significant amountpublic offering of ~~these services to third parties. Management believes that the MLSE purchase order will be a source of revenue and generate significant cash flows for the Company.~~its securities (see Note 20). Management believes that the Company has access to capital resources through potential public or private ~~issuance~~issuances of debt or equity securities. However, if the Company is unable to raise additional capital, it may be required to curtail operations and take additional measures to reduce costs, including reducing its workforce, eliminating outside consultants and reducing legal fees to conserve its cash in amounts sufficient to sustain operations and meet its obligations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might become necessary should the Company be unable to continue as a going concern.

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, 2019

3. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Regulation S-X and do not include all the information and disclosures required by generally accepted accounting principles in the United States of America (“GAAP”). The Company has made estimates and judgments affecting the amounts reported in our condensed consolidated financial statements and the accompanying notes. The actual results experienced by the Company may differ materially from our estimates. The condensed consolidated financial information is unaudited but reflects all normal adjustments that are, in the opinion of management, necessary to provide a fair statement of results for the interim periods presented. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, filed with the Securities and Exchange Commission on April ~~17, 2018.~~16, 2019. The condensed consolidated balance sheet as of December 31, ~~2017~~2018 was derived from the Company’s audited ~~2017~~2018 financial statements contained in the above referenced Form 10-K. Results of the three and nine months ended September 30, ~~2018,~~2019, are not necessarily indicative of the results to be expected for the full year ending December 31, ~~2018.~~2019.

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

Principles of Consolidation

The ~~condensed~~ consolidated financial statements include the accounts of DPW and its wholly-owned subsidiaries, Coolisys, DP Limited, Power-Plus, Enertec, DP Lending, Digital Power Corporation, Power-Plus Technical Distributors and ~~SC Mining~~Digital Farms and its majority-owned subsidiaries, Microphase and I.AM. All significant intercompany accounts and transactions have been eliminated in consolidation.

Accounting Estimates

The preparation of financial statements, in conformity with U.S. GAAP, requires management to make estimates, judgments and assumptions. The Company's management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Key estimates include acquisition accounting, fair value of certain financial instruments, reserve for trade receivables and inventories, carrying amounts of investments, ~~fair value~~carrying amounts of digital currencies, accruals of certain liabilities including product warranties, useful lives and ~~depreciation,~~the recoverability of long-lived assets, impairment analysis of intangibles and goodwill, and deferred income taxes and related valuation allowance.

Impairment of long-lived assets:

Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted expected future cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by comparing the amount by which the carrying amount of the assets to their fair value. Based on its reviews, management determined that its digital currency miners were impaired by a total of $4,315,856 based upon an assessment as of September 30, 2019, including consideration of the decline in bitcoin values which occurred throughout 2019.

Revenue Recognition

The Company recognizes revenue under ASC 606,Revenue from Contracts with Customers. The core principle of the new revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

Step 1: Identify the contract with the customer,

Step 2: Identify the performance obligations in the contract,

Step 3: Determine the transaction price,

Step 4: Allocate the transaction price to the performance obligations in the contract, and

Step 5: Recognize revenue when the company satisfies a performance obligation.

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, ~~2018~~

~~U.S. dollars in thousands, except share and per share data~~2019

The Company’s disaggregated revenues consist of the following for the nine months ended September 30, ~~2018:~~2019:

Nine Months ended September 30, 2018
DPC DPL Enertec SC Mining I.AM Total

Primary Geographical Markets
North America $ 11,957 $ 9 $ — $ 1,546 $ 2,087 $ 15,599
Europe 107 1,231 — — — 1,338
Middle East — — 3,374 — — 3,374
Other 574 99 — — — 673
$ 12,638 $ 1,339 $ 3,374 $ 1,546 $ 2,087 $ 20,984

Major Goods
RF/Microwave Filters $ 2,949 $ — $ — $ — $ — $ 2,949
Detector logarithmic video amplifiers 840 — — — — 840
Power Supply Units 4,743 — — — — 4,743
Power Supply Systems — 1,339 — — — 1,339
Healthcare diagnostic systems — — 1,156 — — 1,156
Defense systems — — 2,218 — — 2,218
Digital Currency Mining — — — 1,546 — 1,546
Restaurant operations — — — — 2,087 2,087
Lending activities 194 — — — — 194
MLSE Systems 3,912 — — — — 3,912
$ 12,638 $ 1,339 $ 3,374 $ 1,546 $ 2,087 $ 20,984

Timing of Revenue Recognition
Goods transferred at a point in time $ 8,726 $ 1,339 $ — $ 1,546 $ 2,087 $ 13,698
Services transferred over time 3,912 — 3,374 — — 7,286
$ 12,638 $ 1,339 $ 3,374 $ 1,546 $ 2,087 $ 20,984

	Nine Months ended September 30, 2019
							Digital
	DPC¹		DP Limited		Enertec		Farms		I.AM		Total

Primary Geographical
Markets
North America	$	7,146,478	$	—	$	—	$	592,092	$	3,371,465	$	11,110,035
Europe		90,154		1,193,158		—		—		—		1,283,312
Middle East		21,348		—		6,336,852		—		—		6,358,200
Other		296,190		230,813		190,223		—		—		717,226
	$	7,554 170	$	1,423,971	$	6,527,075	$	592,092	$	3,371,465	$	19,468,773
Major Goods
RF/Microwave Filters	$	2,245,748	$	—	$	—	$	—	$	—	$	2,245,748
Detector logarithmic
video amplifiers		558,155		—		—		—		—		558,155
Power Supply Units		4,306,340		—		—		—		—		4,306,340
Power Supply Systems		—		1,423,971		—		—		—		1,423,971
Healthcare diagnostic systems		—		—		1,503,306		—		—		1,503,306
Defense systems		—		—		5,023,769		—		—		5,023,769
Digital Currency Mining		—		—		—		592,092		—		592,092
Restaurant operations		—		—		—		—		3,371,465		3,371,465
Lending activities		443,927		—		—		—		—		443,927
	$	7,554,170	$	1,423,971	$	6,527,075	$	592,092	$	3,371,465	$	19,468,773
Timing of Revenue
Recognition
Goods transferred at a
a point in time	$	7,554,170	$	1,287,070	$	—	$	592,092	$	3,371,465	$	12,804,797
Services transferred over time		—		136,901		6,527,075		—		—		6,663,976
	$	7,554,170	$	1,423,971	$	6,527,075	$	592,092	$	3,371,465	$	19,468,773

¹ Consists of Microphase, Coolisys, Power-Plus and DP Lending

Sales of Products

The Company generates revenues from the sale of its products through a direct and indirect sales force. The Company’s performance obligations to deliver products are satisfied at the point in time when products are received by the customer, which is when the customer ~~has title and~~obtains control over the ~~significant risks and rewards of ownership.~~goods. The Company provides standard assurance warranties, which are not separately priced, that the products function as intended. The Company primarily receives fixed consideration for sales of product. Some of the Company’s contracts with distributors include stock rotation rights after six months for slow moving inventory, which represents variable consideration. The Company uses an expected value method to estimate variable consideration and constrains revenue for estimated stock rotations until it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. To date, returns have ~~not~~ been ~~material.~~insignificant. The Company’s customers generally pay within 30 days from the receipt of a valid invoice.

Because the Company’s product sales agreements have an expected duration of one year or less, the Company has elected to adopt the practical expedient in ASC 606-10-50-14(a) of not disclosing information about its remaining performance obligations.

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, ~~2018~~

~~U.S. dollars in thousands, except share and per share data~~2019

Manufacturing Services

The Company provides manufacturing services in exchange primarily for fixed ~~fees.~~fees; however, the initial two MLSE units are subject to variable pricing under the $50 million purchase order from MTIX. Under the terms of the MLSE purchase order, the Company shall be entitled to cost plus $100,000 for the manufacture of the first two MLSE units. The Company has determined that the costs of manufacturing the MLSE units will decline over time because of a learning curve which will result in a greater amount of revenue being recognized for these initial two MLSE units.

For manufacturing services, which include revenues generated by Enertec and in certain instances revenues generated by DPL, the Company’s performance obligation for manufacturing services is satisfied over time as the Company creates or enhances an asset based on criteria that are unique to the customer and that the customer controls as the asset is created or enhanced. ~~The~~Generally, the Company recognizes revenue based upon proportional performance over time using a cost to cost method which measures progress based on the costs incurred to total expected costs in satisfying its performance obligation. This method provides a ~~faithful~~ depiction of the progress in providing the manufacturing service because there is a direct relationship between the costs incurred by the Company and the transfer of the manufacturing service to the customer. Manufacturing services that are recognized based upon the proportional performance method are included in the above table as services transferred over time and to the extent the customer has not been invoiced for these revenues, as accrued revenue in the accompanying consolidated balance sheets. Revisions to the Company’s estimates may result in increases or decreases to revenues and income and are reflected in the consolidated financial statements in the periods in which they are first identified.

The Company has elected the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing component to the extent that the period between when the Company transfers its promised good or service to the customer and when the customer pays is one year or less. ~~Therefore, the Company has elected the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing component.~~

The aggregate amount of the transaction price allocated to the performance obligation that is partially unsatisfied as of September 30, ~~2018~~2019, for the MLSE units was ~~$48,338. The~~approximately $48 million, representing 24 MLSE units. Based on our expectations regarding funding of the production process and our experience building the first machines, the Company expects to recognize the remaining revenue related to the partially unsatisfied performance obligation over the next two and a half years. The Company will be paid in installments for this performance obligation over the next two and a half years.

Lending Activities

DP Lending generates revenue from lending activities primarily through interest, origination fees and late/other fees. Interest income on these products is calculated based on the contractual interest rate and recorded as interest income as earned. The origination fees or original issue discounts are recognized over the life of the loan using the effective interest method.

Blockchain Mining

The Company ~~derives its revenue~~has entered into digital asset mining pools by executing contracts with the mining pool operators to provide computing power to the mining pool. The contracts are terminable at any time by either party and the Company’s enforceable right to compensation only begins when the Company provides computing power to the mining pool operator. In exchange for providing transaction verification services within the digital currency networks of cryptocurrencies, such as Bitcoin, Bitcoin Cash and Litecoin. The Company satisfies its performance obligation at the point in time that whichcomputing power, the Company is ~~awarded~~entitled to a ~~unit~~fractional share of the fixed digital currency ~~through its participation in~~award the ~~applicable network and network participants benefit from~~mining pool operator receives (less digital asset transaction fees to the ~~Company’s verification service. In consideration for these services, the Company receives digital currencies~~mining pool operator which are recorded as a component of cost of revenues), for successfully adding a block to the blockchain. The Company’s factional share is based on the proportion of computing power the Company contributed to the mining pool operator to the total computing power contributed by all mining pool participants in solving the current algorithm.

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, 2019

Providing computing power in digital asset transaction verification services is an output of the Company’s ordinary activities. The provision of providing such computing power is the only performance obligation in the Company’s contracts with mining pool operators. The transaction consideration the Company receives, if any, is noncash consideration, which the Company measures at fair value on the date received, which is not materially different than the fair value at contract inception or the time the Company has earned the award from the pools. The consideration is all variable. Because it is not probable that a significant reversal of cumulative revenue will not occur, the consideration is constrained until the mining pool operator successfully places a block (by being the first to solve an algorithm) and the Company receives confirmation of the consideration it will receive, at which time revenue is recognized. There is no significant financing component in these transactions.

Fair value of the digital currency award received is determined using the ~~closing U. S. dollar price~~market rate of the related ~~cryptocurrency~~digital currency at the time of receipt.

There is currently no specific definitive guidance under GAAP or alternative accounting framework for the accounting for digital currencies recognized as revenue or held, and management has exercised significant judgment in determining the appropriate accounting treatment. In the event authoritative guidance is enacted by the FASB, the Company may be required to change its policies, which could have an effect on the ~~date of receipt.~~ Company’s consolidated financial position and results from operations.

Expenses associated with running the cryptocurrency mining business, such as equipment deprecation and electricity cost are recorded as a component of cost of revenues.

We intend to use the digital assets primarily for operating expenses of Digital Farms. During 2018, we used digital assets for debt reduction, capital purchases, consulting fees, data center costs and other operating expenses.

Restaurant Operations

The Company records revenue from restaurant sales at the time of sale, net of discounts, coupons, employee meals and complimentary meals and gift cards. Restaurant cost of sales primarily includes the cost of ~~good,~~goods, beverages, and merchandise and disposable paper and plastic goods used in preparing and selling the Company’s menu items and exclude depreciation and amortization. Vendor allowances received in connection with the purchase of a vendor’s products are recognized as a reduction of the related food and beverage costs as earned.

~~Property and Equipment, Net~~

Property and equipment as well as an intangible asset are stated at cost, net of accumulated depreciation and amortization. Repairs and maintenance costs are expensed as incurred. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets, at the following annual rates:

		~~Useful lives (in years)~~
~~Cryptocurrency machines and related equipment~~		~~3 - 5~~
~~Computer, software and related equipment~~		~~3 - 5~~
~~Office furniture and equipment~~		~~5 - 10~~
~~Leasehold improvements~~		~~Over the term of the lease or the life of the asset, whichever is shorter.~~

~~Digital Currencies~~

Digital currencies consist of Bitcoin, Bitcoin Cash and Litecoin received from mining for the Company’s own account. Given that there is limited precedent regarding the classification and measurement of cryptocurrencies under current GAAP, the Company has determined to account for these digital currencies as indefinite-lived intangible assets in accordance with ASC No. 350,~~Intangibles – Goodwill and Other~~~~, for the period covered by this report and in future reports unless and until further guidance is issued by the Financial Accounting Standards Board (“FASB”).~~

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

Indefinite-lived intangible assets are recorded at cost and are not subject to amortization, but shall be tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. If, at the time of an impairment test, the carrying amount of an intangible asset exceeds its fair value, an impairment loss in an amount equal to the excess is recognized. Fair value of the digital currencies is based on the quoted market prices. The Company recorded an impairment charge in the amount of $3, which is reported as a component of operating expenses in the accompanying condensed consolidated statements of operations for both the three and nine months ended September 30, 2018.

Fair value of Financial Instruments

In accordance with ASC No. 820,Fair Value Measurements and Disclosures, fair value is defined as the exit price, or the amount that would be received for the sale of an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.

The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs ~~are inputs~~include those that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or model-derived valuations. All significant inputs used in our valuations are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. Level 2 inputs also include quoted prices that were adjusted for security-specific restrictions which are compared to output from internally developed models such as a discounted cash flow ~~models.~~model.

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, 2019

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts of financial instruments carried at cost, including cash and cash equivalents, accounts receivables and accounts and other receivable – related party, investments, notes receivable, trade payables and trade payables – related party approximate their fair value due to the short-term maturities of such instruments.

As of September 30, 2018 and December 31, 2017, the fair value of the Company’s investments were $3,663 and $9,563, respectively, and were concentrated in equity securities of Avalanche International Corp., which we refer to as AVLP, a related party (See Note 9), which are classified as available-for-sale investments. At September 30, 2018, the Company's investment in AVLP included marketable equity securities of $810 and warrants to purchase 12,814,440 shares of AVLP common stock at an exercise price of $0.50 per share of common stock. At December 31, 2017, the Company's investment in AVLP included marketable equity securities of $826 and warrants to purchase 8,248,440 shares of AVLP common stock at an exercise price of $0.50 per share of common stock. For investments in marketable equity securities, the Company took into consideration general market conditions, the duration and extent to which the fair value is above cost, and the Company’s ability and intent to hold the investment for a sufficient period of time to allow for recovery of value in the foreseeable future. As a result of this analysis, the Company has determined that its investment in AVLP’s marketable equity securities are valued based upon the closing market price of common stock at September 30, 2018 and December 31, 2017, which resulted in an unrealized gain of $163 and $550, respectively.

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

At September 30, 2018, the Company held shares of common stock in four companies that it had purchased at the market, for a total cost of $257. In accordance with ASC No. 320-10, these investments are accounted for based upon the closing market prices of the respective common stock at September 30, 2018 and December 31, 2017, resulting in an unrealized gain $109 and $133, respectively.

The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following table sets forth the Company’s financial instruments (see Note 4 and Note 7) that were measured at fair value on a recurring basis by level within the fair value hierarchy:

Fair Value Measurement at September 30, 2018
Total Level 1 Level 2 Level 3
Investments in common stock and warrants of AVLP – a related party $ 3,228 $ 810 $ — $ 2,418
Investments in marketable securities 366 366 — —
Investment in warrants 69 — — 69
Total Investments $ 3,663 $ 1,176 $ — $ 2,487

	Fair Value Measurement at September 30, 2019
	Total		Level 1		Level 2		Level 3
Investments in common stock and derivative instruments of AVLP – a related party	$	2,145,720	$	397,670	$	—	$	1,748,050
Investment in common stock of Alzamend – a related party		206,250		—		—		206,250
Investments in marketable equity securities		473,314		473,314		—		—
Investments in warrants of public companies		9,174		—		—		9,174
Total Investments	$	2,834,458	$	870,984	$	—	$	1,963,474

Fair Value Measurement at December 31, 2017
Total Level 1 Level 2 Level 3
Investments in common stock and warrants of AVLP – a related party $ 7,728 $ 826 $ — $ 6,902
Investments in marketable securities 1,835 1,835 — —
Total Investments $ 9,563 $ 2,661 $ — $ 6,902

	Fair Value Measurement at December 31, 2018
	Total		Level 1		Level 2		Level 3
Investments in common stock and derivative instruments of AVLP – a related party	$	3,043,499	$	812,858	$	—	$	2,230,641
Investments in marketable equity securities		178,597		178,597		—		—
Investments in warrants of public companies		34,372		—		—		34,372
Total Investments	$	3,256,468	$	991,455	$	—	$	2,265,013

We assess the inputs used to measure fair value using athe three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the ~~market:~~market.

Leases

Effective January 1, 2019, the Company accounts for its leases under ASC 842,Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases. As of January 1, 2019, we only had operating leases. Operating leases are recognized as Operating lease right-of-use (“ROU”) assets, Operating lease liabilities, current, and Operating lease liabilities, non-current on our consolidated balance sheets. Lease assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. In certain of our lease agreements, we receive rent holidays and other incentives. We recognize lease costs on a straight-line basis over the lease term without regard to deferred payment terms, such as rent holidays, that defer the commencement date of required payments. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the life of the lease, without assuming renewal features, if any, are exercised. We do not separate lease and non-lease components for our leases.

~~Level 1 – inputs include quoted prices for identical instruments and are the most observable.~~

~~Level 2 – inputs include quoted prices for similar assets and observable inputs such as interest rates, currency exchange rates and yield curves.~~

~~Level 3 – inputs are not observable in the market and include management’s judgments about the assumptions market participants would use in pricing the asset or liability.~~

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, 2019

The Company continues to account for leases in the prior period financial statements under ASC Topic 840.

Net Loss per Share

Net loss per share is computed by dividing the net loss to common stockholders by the weighted average number of common shares outstanding. The calculation of the basic and diluted earnings per share is the same for all periods presented, as the effect of the potential common stock equivalents is anti-dilutive due to the Company’s net loss position for all periods presented. The Company has included ~~317,460~~6,500 warrants, ~~with an exercise price~~which are exercisable for shares of ~~$.01,~~the Company’s common stock on a one-for-one basis, in its earnings per share calculation for the three and nine months ended September 30, ~~2018 and 2017.~~2019. Anti-dilutive securities, which are convertible into or exercisable for the Company’s Class A common stock, consist of the following at September 30, ~~2018~~2019 and ~~2017:~~2018:

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

					September 30,
	2018		2017		2019		2018
Stock options		7,570,000		2,891,000		2,906		9,463
Warrants¹		18,410,160		10,233,199
Warrants⁽¹⁾						72,921		23,410
Convertible notes		20,077,330		3,157,576		349,486		25,097
Conversion of preferred stock		1,785,714		4,606,131		2,232		2,232
Total		47,843,204		20,887,906		427,545		60,202

⁽¹⁾

The Company has excluded 6,500 warrants issued in April 2019, which may be exercised by means of a cashless exercise into 6,500 shares of the ~~317,460 warrants with an exercise price of $0.01 per share~~Company’s common stock, in its anti-dilutive securities but included the warrants in its weighted average shares outstanding.

Reclassifications

Certain prior year amounts have been reclassified for comparative purposes to conform to the current-year financial statement presentation. These reclassifications had no effect on previously reported results of operations. In addition, certain prior year amounts from the restated amounts have been reclassified for consistency with the current period presentation.

Recently Issued Accounting Standards

In ~~May 2014,~~February 2016, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~No. 2014-09,~~2016-02, ~~Revenue from Contracts with Customers~~Leases (Topic ~~606)~~842), ~~(“ASU 2014-09”). ASU 2014-09 supersedes~~in order to increase transparency and comparability among organizations by, among other provisions, recognizing lease assets and lease liabilities on the revenue recognition requirements in ASC 605 - Revenue Recognition (“ASC 605”) and most industry-specific guidance throughout ASC 605. The FASB has issued numerous updates that provide clarification on a number of specific issues as well as requiring additional disclosures. The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchangebalance sheet for those ~~goods~~leases classified as operating leases under previous U.S. GAAP. For public companies, ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption is permitted. In transition, entities may also elect a package of practical expedients that must be applied in its entirety to all leases commencing before the adoption date, unless the lease is modified, and permits entities to not reassess (a) the existence of a lease, (b) lease classification or ~~services.~~

(c) determination of initial direct costs, as of the adoption date, which effectively allows entities to carryforward accounting conclusions under previous U.S. GAAP. In July 2018, the FASB issued ASU 2018-11,Leases (Topic 842): Targeted Improvements, which provides entities an optional transition method to apply the guidance under Topic 842 as of the adoption date, rather than as of the earliest period presented. The Company adopted ~~ASC 606 effective~~Topic 842 on January 1, ~~2018 to all contracts~~2019, using the ~~modified retrospective approach. The~~optional transition method to apply the new guidance as of January 1, 2019, rather than as of the earliest period presented, and elected the package of practical expedients described above. Upon adoption the Company recognized cumulative operating lease liabilities and operating right-of-use assets of ~~ASU 2014-09 did not have a material impact on the Company’s consolidated financial position, results of operations, equity or cash flows.~~approximately $4.2 million.

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, 2019

In July 2017, the FASB issued ASU No. 2017-11,Earnings per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) (“ASU 2017-11”). ASU 2017-11 consists of two parts. The amendments in Part I of this update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (“EPS”) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common ~~shareholders~~stockholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this update re-characterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in Part II of this update do not require any transition guidance because those amendments do not have an accounting effect. The Company ~~is currently evaluating the impact of adopting~~adopted this standard on January 1, 2019, and the adoption did not have any impact on its ~~condensed~~ consolidated financial statements and related ~~disclosures but does not expect it to have a material impact.~~

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

disclosures.

In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, (“ASU 2018-07”). ASU 2018-07 simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under ASU 2018-07, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The changes take effect for public companies for fiscal years starting after ~~Dec.~~December 15, 2018, including interim periods within that fiscal year. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company ~~is currently evaluating the impact of adopting~~adopted this standard on January 1, 2019, and the adoption did not have any impact on its ~~condensed~~ consolidated financial statements and related ~~disclosures but does not expect it to have a material impact.~~

FASB, the Emerging Issues Task Force and the SEC have issued certain other accounting standards, updates, and regulations as of September 30, 2018 that will become effective in subsequent periods; however, management does not believe that any of those updates would have significantly affected our financial accounting measures or disclosures had they been in effect during 2018 or 2017, and it does not believe that any of those pronouncements will have a significant impact on our condensed consolidated financial statements at the time they become effective.disclosures.

4. ~~Digital Currencies~~

~~The following table presents additional information about digital currencies:~~

Digital
Currencies
Balance at January 1, 2017 $ —
Additions of digital currencies 1,505
Realized loss on sale of digital currencies (110 )
Impairment loss on digital currencies (3 )
Payment on convertible notes payable (726 )
Purchase of fixed assets (250 )
Payments to vendors (386 )
Balance at September 30, 2018 $ 30

At September 30, 2018, the Company’s digital currencies consisted of Bitcoin, Bitcoin Cash and Litecoin. Digital currencies are recorded at cost on the date they are received as revenues and are tested for impairment at each reporting date. Fair value is determined by taking the closing price from the most liquid exchanges.

5. Marketable Equity Securities

Marketable securities in equity securities with readily determinable market prices consisted of the following as of September 30, ~~2018~~2019 and December 31, ~~2017:~~2018:

Available-for-sale securities at September 30, 2018
Gross unrealized Gross realized
Cost gains gains (losses) Fair value
Common shares $ 257 $ 109 $ — $ 366

	Marketable equity securities at September 30, 2019
			Gross unrealized		Gross realized
	Cost		gains (losses)		gains (losses)		Fair value
Common shares	$	220,880	$	252,434	$	—	$	473,314

	Marketable equity securities at December 31, 2018
				Gross unrealized			Gross realized
		Cost		gains (losses)			gains (losses)		Fair value
Common shares	$	220,880	$	(42,283	)	$	—	$	178,597

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, ~~2018~~

~~U.S. dollars in thousands, except share and per share data~~2019

Available-for-sale securities at December 31, 2017
Gross unrealized Gross realized
Cost gains gains (losses) Fair value
Common shares $ 1,702 $ 133 $ — $ 1,835

The following table presents additional information about marketable equity securities:

Balance at January 1, 2018 $ 1,835
Purchases of marketable securities 858
Sales of marketable securities (2,159 )
Realized losses on marketable securities (168 )
Balance at September 30, 2018 $ 366

~~Available-for-sale Securities~~

	Marketable Equity Securities
Balance at January 1, 2018	$	1,834,570
Purchases of marketable equity securities		858,458
Sales of marketable equity securities		(2,188,292	)
Realized losses on marketable equity securities		(175,405	)
Unrealized gains on marketable equity securities		(150,734	)
Balance at December 31, 2018	$	178,597
Purchases of marketable equity securities on conversion of debt		485,000
Sales of marketable equity securities		(571,741	)
Realized gains on marketable equity securities		86,741
Unrealized gains on marketable equity securities		294,717
Balance at September 30, 2019	$	473,314

At September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company had invested in the marketable equity securities of certain publicly traded companies. AtDuring the three and nine months ended September 30, ~~2018~~2019, unrealized gains of $63,109 and $294,717 were included in net income as a component of change in fair value of equity securities. During the year ended December 31, ~~2017,~~2018, the Company recorded an unrealized loss of nil and $132, respectively, representing the difference between the cost basis and the estimated fair value, as accumulated other comprehensive income in the stockholder's equity section of the Company’s consolidated balance sheet and as a change in unrealized gains and losses on marketable securities in the Company’s consolidated statements of comprehensive income (loss).$42,283. The Company’s investment in marketable equity securities will be revalued on each balance sheet date. The fair value of the Company’s holdings in marketable equity securities at September 30, ~~2018~~2019 and December 31, ~~2017~~2018 is a Level 1 measurement based on quoted prices in an active market.

6.At September 30, 2019 and December 31, 2018, the Company also held equity investments in private companies and an investment in a limited partnership. These investments do not have readily determinable fair values and have been measured at cost less impairment, if any, and adjusted for observable price changes for identical or similar investments of the issuer.

5. PROPERTY AND EQUIPMENT, NET

At September 30, ~~2018~~2019 and December 31, ~~2017,~~2018 property and equipment consist of:

September 30, December 31,
2018 2017
Cryptocurrency machines and related equipment $ 9,326 $ —
Computer, software and related equipment 2,507 2,432
Restaurant equipment 1,089 —
Office furniture and equipment 295 289
Buildings and improvements 305 —
Leasehold improvements 1,258 788
14,780 3,509
Accumulated depreciation and amortization (3,890 ) (2,292 )
Property and equipment, net $ 10,890 $ 1,217

	September 30,			December 31,
	2019			2018
Cryptocurrency machines and related equipment	$	4,883,072		$	9,168,928
Computer, software and related equipment		2,512,515			2,495,470
Restaurant equipment		763,275			752,103
Office furniture and equipment		366,292			287,583
Leasehold improvements		1,289,308			1,274,865
		9,814,462			13,978,949
Accumulated depreciation and amortization		(7,304,568	)		(4,665,650	)
Property and equipment, net	$	2,509,894		$	9,313,299

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, 2019

Under the guidance of ASC 360, Impairment or Disposal of Long-lived Assets, a long-lived asset or asset group (including intangibles) will be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. Based upon the significant decline in the price of bitcoin during the nine months ended September 30, 2019 and the decline in projected cash flows over the life of the cryptocurrency machines, the Company performed an undiscounted cash flow test to determine if the cryptocurrency machines were impaired. The undiscounted cash flows were less than the carrying amount of the Company’s cryptocurrency machines and therefore, the carrying amount of the assets were compared to the fair value of the cryptocurrency machines, and the Company determined that there were impairment charges to be recorded on the cryptocurrency machines. Impairment charges for the nine months ended September 30, 2019 totaled approximately $4,315,856.

For the three and nine months ended September 30, 2019, depreciation expense amounted to $846,631 and $2,673,352, respectively. During the three and nine months ended September 30, 2018, depreciation expense amounted to ~~$884~~$883,793 and ~~$1,642, respectively. During the three and nine months ended September 30, 2017, depreciation expense amounted to $50 and $128,~~$1,642,422, respectively.

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

7.6. INTANGIBLE ASSETS, NET

At September 30, ~~2018~~2019 and December 31, ~~2017~~2018 intangible assets consist of:

Intangible Assets
Balance as of January 1, 2017 $ —
Trade name and trademark 1,740
Customer list 988
Non-competition agreements 150
Domain name 81
Accumulated amortization (61 )
Balance as of December 31, 2017 $ 2,898
Trade name and trademark 3
Start-up costs 51
Accumulated amortization (101 )
Balance as of September 30, 2018 $ 2,851

	September 30,			December 31,
	2019			2018
Trade name and trademark	$	1,562,332		$	1,562,332
Customer list		2,495,097			2,388,139
Non-competition agreements		150,000			150,000
Domain name and other intangible assets		808,016			762,807
		5,015,445			4,863,278
Accumulated depreciation and amortization		(937,002	)		(503,480	)
Intangible assets, net	$	4,078,443		$	4,359,798

~~During 2017, the Company acquired the~~The Company’s trade ~~name~~names and ~~trademark of Microphase, that was~~trademarks were determined to have an indefinite ~~life, for $1,740.~~life. The remaining definite lived intangible assets are primarily being amortized on a straight-line basis over their estimated useful lives. Amortization expense was ~~$33~~$101,199 and ~~$101,~~$400,661, respectively, for the three and nine months ended September 30, ~~2018~~2019 and $4$33,358 and ~~$6,~~$100,074, respectively, for the three and nine months ended September 30, ~~2017.~~2018.

~~8. GOODWILL~~

The Company’s goodwill relates to the acquisitions of a controlling interest in Microphase on June 2, 2017 and I. AM, Inc. (“I. AM”) on May 23, 2018, the acquisition of Enertec Systems 2001 Ltd. (“Enertec”) on May 22, 2018, and the acquisition of all of the outstanding membership interests in Power Plus on September 1, 2017.

9.7. INVESTMENTS – RELATED PARTIES

Investments in ~~AVLP~~Avalanche International Corp. (“AVLP”) and Alzamend Neuro, Inc. (“Alzamend”) at September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, are comprised of the following:

	September 30,			December 31,			September 30,			December 31,
	2018			2017			2019			2018
Investment in convertible promissory note of AVLP	$	6,407		$	4,124		$	9,476,979		$	6,943,997
Investment in warrants of AVLP		2,418			6,902
Accrued interest in convertible promissory note of AVLP								1,736,859			1,004,317
Total investment in convertible promissory note of AVLP – Gross								11,213,838			7,948,314
Less: original issue discount								(1,475,485	)		(2,336,693	)
Total investment in convertible promissory note of AVLP							$	9,738,353		$	5,611,621

Investment in derivative instruments of AVLP								1,748,050			2,230,641
Investment in common stock of AVLP		810			826			397,670			812,858
Accrued interest in convertible promissory note of AVLP		803			324
Total investment in AVLP – Gross		10,438			12,176
Less: original issue discount		(2,580	)		(2,115	)
Total investment in AVLP – Net	$	7,858		$	10,061
Investment in common stock of Alzamend								206,250			—
Investment in derivative instruments and common stock of AVLP and Alzamend							$	2,351,970		$	3,043,499

Total investment in AVLP and Alzamend – Net							$	12,090,323		$	8,655,120

Investment in warrants and common stock of AVLP and Alzamend							$	2,351,970		$	3,043,499
Investment in convertible promissory note of AVLP								9,738,353			5,611,621
Total investment in AVLP and Alzamend – Net							$	12,090,323		$	8,655,120

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, ~~2018~~

~~U.S. dollars in thousands, except share and per share data~~2019

The following table summarizes the changes in our investments in AVLP and Alzamend during the nine months ended September 30, ~~2018:~~2019:

Investment in Investment in
warrants and convertible Total
common stock promissory investment
of AVLP note of AVLP in AVLP – Net
Balance at January 1, 2018 $ 7,728 $ 2,333 $ 10,061
Investment in convertible promissory notes of AVLP — 1,474 1,474
Payment of convertible promissory notes of AVLP — (1,108 ) (1,108 )
Investment in common stock of AVLP 371 — 371
Fair value of warrants issued by AVLP 1,917 — 1,917
Unrealized loss in warrants of AVLP (6,401 ) — (6,401 )
Unrealized loss in common stock of AVLP (387 ) — (387 )
Accretion of discount — 1,452 1,452
Accrued Interest — 479 479
Balance at September 30, 2018 $ 3,228 $ 4,630 $ 7,858

	Investment in
	warrants and			Investment in		Total
	common stock			convertible		investment
	of AVLP and			promissory		in AVLP and
	Alzamend			note of AVLP		Alzamend – Net
Balance at January 1, 2019	$	3,043,499		$	5,611,621	$	8,655,120
Investment in convertible promissory notes of AVLP		—			1,501,912		1,501,912
Investment in common stock of AVLP and Alzamend		163,032			—		163,032
Fair value of derivative instruments issued by AVLP		1,031,070			—		1,031,070
Unrealized loss in derivative instruments of AVLP		(1,513,661	)		—		(1,513,661	)
Unrealized gain in common stock of AVLP and Alzamend		(371,970	)		—		(371,970	)
Accretion of discount		—			1,892,278		1,892,278
Accrued Interest		—			732,542		732,542
Balance at September 30, 2019	$	2,351,970		$	9,738,353	$	12,090,323

The ~~Company has made a strategic decision to invest~~Company’s investments in AVLP, a related party controlled by Philou Ventures, LLC, or Philou, ~~a significant stockholder~~an affiliate of the ~~Company. The Company’s investments in AVLP~~Company, consist of convertible promissory notes, ~~warrants~~derivative instruments and shares of common stock of AVLP. On September 6, 2017, the Company and AVLP entered into a Loan and Security Agreement (“AVLP Loan Agreement”) with an effective date of August 21, 2017 pursuant to which the Company will provide AVLP a non-revolving credit facility of up to $10,000 for a period ending on August 21, 2019, subject to the terms and conditions stated in the Loan Agreement, including that the Company having available funds to grant such credit. At September 30, ~~2018,~~2019, the Company has provided loans to AVLP in the principal amount ~~$6,407~~$9,476,979 and, in addition to the 12% convertible promissory notes, AVLP has issued to the Company warrants to purchase ~~12,814,440~~18,953,958 shares of AVLP common stock. ~~Under the terms of the AVLP Loan Agreement, any notes issued by AVLP to the Company are secured by the assets of AVLP.~~

The warrants entitle the Company to purchase up to ~~12,814,440~~18,953,958 shares of AVLP common stock at an exercise price of $0.50 per share for a period of five years. The ~~exercise price of $0.50 is subject~~warrants were determined by the issuer to ~~adjustment for customary stock splits, stock dividends, combinations or similar events. The warrant may~~ be ~~exercised for cash or on a cashless basis.~~financial derivative instruments. At September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company recorded an unrealized ~~gain (loss)~~loss on its investment in warrants of AVLP of ~~($1,888)~~$3,927,042 and ~~$4,513,~~$2,413,381, respectively, representing the difference between the cost basis and the estimated fair value of the warrants in the Company’s accumulated other comprehensive income in the stockholder's equity section of the Company’s consolidated balance ~~sheet and as a change in net unrealized gains on securities available-for-sale in the Company’s consolidated statements of comprehensive loss.~~sheet. During the three and nine months ended September 30, ~~2018,~~2019, the ~~Company’s investment~~Company recognized, in ~~warrants and common stock of AVLP represented $387 and $6,401, respectively, of the Company’s aggregate $1,339 and $6,787, respectively, in~~other comprehensive loss, net unrealized loss on derivative securities ~~available-for-sale.~~of related party of $1,152,480 and $1,513,661, respectively, which compares with a net unrealized loss on derivative securities of related party of $1,456,232 and $6,400,899, respectively during the three and nine months ended September 30, 2018. The Company’s investment in AVLP will be revalued on each balance sheet date. The fair value of the Company’s holdings in the AVLP warrants was estimated using the Black-Scholes option-pricing method. The risk-free rate, which ranged between ~~1.92%~~1.50% and ~~2.43%~~2.60%, was derived from the U.S. Treasury yield curve, matching the term of our investment, in effect at the measurement date. The volatility factor ~~of 80.4%~~which ranged between 68.7% and 89.4% was determined based on historical stock prices for similar technology companies with market capitalizations under $100 million. The warrant valuation is a Level 3 measurement.

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

In accordance with ASC No. 310, Receivables (“ASC 310”), the Company accounts for its convertible promissory notes in AVLP at amortized cost, which represents the amount at which the convertible promissory notes were acquired, adjusted for accrued interest and accretion of original issue discount and discount attributed to the fair value of the ~~12,814,440~~18,953,958 warrants that the Company received in conjunction with its investment. Interest is accreted using the effective interest method. The Company records interest on an accrual basis and recognizes it as earned in accordance with the contractual terms of the convertible promissory notes, to the extent that such amounts are expected to be collected. ~~The~~An aggregate of $5,802,374 of original issue discount ~~of $165 on the New Note~~ and ~~the~~ discount attributed to the fair value of the warrants ~~of $4,306 are~~is being amortized as interest income through the maturity date. During the three and nine months ended September 30, ~~2018,~~2019, the Company recorded ~~$535~~$614,856 and ~~$1,454,~~$1,892,278, respectively, of interest income for the discount ~~accretion.~~accretion compared with $535,264 and $1,453,712, respectively, during the three and nine months ended September 30, 2018. During the three and nine months ended September 30, ~~2017, the Company recorded $18 and $38, respectively, of interest income for the discount accretion As of September 30, 2018 and December 31, 2017,~~2019, the Company recorded contractual interest ~~receivable~~ attributed to the AVLP Notes and AVLP Loan Agreement of ~~$803~~$268,428 and ~~$324,~~$732,542, respectively. During the three and nine months ended September 30, 2018, the Company recorded contractual interest attributed to the AVLP Notes and AVLP Loan Agreement of $176,946 and $478,119, respectively.

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, 2019

The Company evaluated the collectability of both interest and principal for the convertible promissory notes in AVLP to determine whether there was an impairment. Based on current information and events, the Company determined that it is probable that it will be able to collect amounts due according to the existing contractual terms. Impairment assessments require significant judgments and are based on significant assumptions related to the borrower’s credit risk, financial performance, expected sales, and estimated fair value of the collateral.

During the nine months ended September 30, ~~2018~~2019 and the year ended December 31, ~~2017,~~2018, the Company also acquired in the open market ~~389,391~~91,000 shares of AVLP common stock for ~~$371~~$53,032 and ~~221,333~~430,942 shares of AVLP common stock for ~~$192,~~$417,169, respectively. At September 30, ~~2018,~~2019, the closing market price of AVLP’s common stock was ~~$0.94,~~$0.40, a decline from ~~$1.75~~$0.90 at December 31, ~~2017.~~2018. The Company has determined that its investment in AVLP marketable equity securities are accounted for ~~pursuant to the fair value method~~in accordance with ASC No. 820,Fair Value Measurements and Disclosures and based upon the closing market price of AVLP common stock at September 30, ~~2018,~~2019, the Company’s investment in AVLP common stock had an unrealized loss of $348,891.

In aggregate, the Company has ~~recognized an unrealized gain of $163.~~

~~10. INVESTMENTS IN PREFERRED STOCK OF PRIVATE COMPANY AND OTHER INVESTMENTS~~

~~We hold a portfolio of investments in equity and debt securities in other entities that are accounted for under the cost method.~~

~~Investment in Preferred Stock of Private Company~~

On December 15, 2017, the Company and Sandstone Diagnostics, Inc. (“Sandstone”) entered into a Series A1 Preferred Stock Purchase Agreement (“Loan Agreement”) pursuant to which the Company purchased 976,286994,175 shares of Sandstone’s Series A1 Preferred Shares for $1,000. Sandstone is a medical device company focused on a data-driven approach to men’s reproductive health. Founded in 2012 in part by government scientists from Sandia National Laboratories, Sandstone’s mission is to provide innovative, data-driven tools to help men assess, manage, and improve their reproductive health. The funding from the Series A1 Preferred Stock financing will support sales growth and continued product development leveraging the company’s unique technology platform, Sandstone’s Trak™ Male Fertility Testing System.

~~The Company elected to follow the guidance~~AVLP common stock which represents 18.0% of ~~ASC No. 321,~~~~Equity Securities~~ (“ASC 321”), which provides a measurement alternative to the requirement to carry equity interests at fair value in accordance with ASC 820, Fair value measurement, for certain equity interests without readily determinable fair values. Equity interests measured in accordance with the measurement alternative in ASC 321 are not required to be included within the fair value hierarchy. The Company’s equity investment in Sandstone is recorded at cost. However, any change to the carrying amount will be subsequently adjusted up or down for observable price changes (i.e., prices in orderly transactions for the identical investment or similar investment of the same issuer) and any adjustments to the carrying amount shall be recorded in net income.

~~F-19~~

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

~~Other Investments~~

On November 1, 2017, the Company and I. AM, Inc. (“I. AM”) entered into a Loan and Security Agreement pursuant to which the Company provided I. AM with a non-revolving credit facility of up to $1,600 for a period ending on September 25, 2022. On May 23, 2018, DP Lending entered into and closed a securities purchase agreement with I. AM. At the date of the acquisition, I. AM owed DP Lending $1,715 inAVLP’s outstanding principal, pursuant to the loan and security agreement. The purchase agreement provides that as I. AM repays the outstanding loan to DP Lending in accordance with the loan agreement, DP Lending will on a pro rata basis transfer shares of common ~~stock~~stock. The Company has determined that AVLP is a variable interest entity (“VIE”) as it does not have sufficient equity at risk. The Company does not consolidate AVLP because the Company is not the primary beneficiary and does not have a controlling financial interest. To be a primary beneficiary, an entity must have the power to direct the activities of ~~I. AM~~a VIE that most significantly impact the VIE's economic performance, among other factors. Although the Company has made a significant investment in AVLP, the Company has determined that Philou, which controls AVLP through its equity investment and deemed to ~~David J. Krause, up to an aggregate~~be more closely associated with AVLP, is the primary beneficiary. As a result, AVLP’s financial position and results of ~~471 shares (see Note 13).~~operations are not consolidated in our financial position and results of operations.

The Company, primarily through DP Lending, has made additional investments in debt and equity securities of various entities. At September 30, 2018 and December 31, 2017, the outstanding balance of these investments was $2,140 and $1,637, respectively.

~~11.~~8. INVESTMENTS IN REAL ESTATE

On June 8, 2018, the Company entered into a limited partnership agreement, in which it agreed to become a limited partner in the partnership (the “NY Partnership”). The NY Partnership is a limited partner in the partnership that is responsible for the construction and related activities of a hotel in New York City. In connection with this transaction, the Company has agreed to finance a portion of the capital required by the NY Partnership. ~~The Company used $1,000 from the proceeds of the August 16, 2018 Notes as an additional capital contribution in the partnership.~~ As of September 30, ~~2018,~~2019, the Company had invested an aggregate of ~~$1,815~~$1,869,000 in the NY Partnership and ~~$100~~$100,000 in another real estate ~~investments Subject to the occurrence of certain events and other conditions over which the~~investment. The Company ~~has no control, it is~~was initially required to make monthly capital contributions of $500,000 every thirty days until ~~DPW’s~~the Company’s commitment isof $10 million was funded in ~~full, which is expected to occur in January 2020. If the~~full. The Company ~~fails~~had received a waiver for its obligation to make a monthly ~~contribution when due, then the other entities affiliated with the NY Partnership have the right to acquire fifty percent (50%) of the~~ capital contributions ~~that~~through September 30, 2019 and on June 12, 2019, the ~~Company will have made~~agreement was restructured whereby DPW no longer has any further funding obligations until the hotel is open for business to the ~~NY Partnership at that time.~~public.

~~12.~~9. OTHER INVESTMENTS, RELATED PARTIES

The Company’s other related party investments primarily consist of two investments.

MTIX, Ltd.

On December 5, 2017, the Company entered into an exchange agreement with WT Johnson pursuant to which the Company issued to WT Johnson two convertible promissory notes in the principal amount of ~~$600~~$600,000 (“Note A”) and ~~$1,668~~$1,667,766 (“Note B”), in exchange for cancellation of amounts due to WT Johnson by MTIX Ltd., a related party of the Company.

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, 2019

During December 2017, the Company issued ~~600,000~~750 shares of its common stock to WT Johnson & Sons upon the conversion of Note A and WT Johnson subsequently sold the ~~600,000~~750 shares. The proceeds from the sale of shares of common stock received upon the conversion of Note A were sufficient to satisfy the entire ~~$2,268~~$2,267,766 obligation as well as an additional ~~$400~~$400,500 of value added tax due to WT Johnson. Concurrent with entering into the exchange agreement, the Company received a promissory note in the amount of ~~$2,668~~$2,668,266 from MTIX and cancelled Note B. At September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company has valued the note receivable at ~~$600,~~$600,000, the carrying amount of Note A. The Company will recognize the remainder of the amount due from MTIX upon payment of the promissory note by MTIX.

Israeli Property

During the year ended December 31, 2017, our President, Amos Kohn, purchased certain real property that serves as a facility for the Company’s business operations in Israel. The Company made ~~$300~~$300,000 of payments to the seller of the property and received a 28% undivided interest in the real property ~~(“Property”~~(the “Property”). The Company’s subsidiary, Coolisys, entered into a Trust Agreement and Tenancy Inin Common Agreement with Roni Kohn, who owns a 72% interest in the Property, the daughter of Mr. Kohn and an Israeli citizen. The Property was purchased to serve as a residence/office facility for the Company in order to oversee its Israeli operations and to expand its business in the ~~hi-tech~~high-tech industry located in Israel. Pursuant to the Trust Agreement, Ms. Kohn will hold and manage Coolisys’ undivided 28% interest in the Property. The trust will be in effect until it is terminated by mutual agreement of the parties. During the term of the trust, Ms. Kohn will not sell, lease, sublease, transfer, grant, encumber, change or effect any other disposition with respect to the Property or Coolisys’ interest without the Company’s approval.

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

Under the Tenancy Inin Common Agreement, Coolisys and its executive officers shall have the exclusive rights to use the Property for the Company and its affiliates’ business operations. The Property shall be managed by Ms. Kohn. Further, pursuant to the Tenancy Inin Common Agreement, for each completed calendar month of employment of Mr. Kohn by the Company, Ms. Kohn shall have the right to purchase a portion of the Company’s interest in the Property. Such right shall fully vest at the end of five years of continuous employment and the Trustee shall have the right to purchase the Company’s 28% interest in the Property for a nominal value. The Company will amortize its ~~$300~~$300,000 investment over ten years, subject to a cliff vesting after five years. During the three and nine months ended September 30, ~~2018,~~2019, the Company recognized $8$7,500 and ~~$22,~~$22,500, respectively, in amortization expense. InAt September 30, 2019 and December 31, 2018, the ~~event that~~unamortized balance of the Israeli Property was $240,000 and $262,500, respectively. If Mr. Kohn is not employed by the Company, the Company shall have the right to demand that Ms. Kohn purchase the Company’s remaining interest in the Property that was not subject to vesting for the fair market value of such unvested Property interest.

~~Other investments and interest receivable~~

During the year ended December 31, 2017, DP Lending made loans to Alzamend Neuro, Inc. (“Alzamend”), in the amount of $44, these loans were repaid during the three months ended March 31, 2018. AVLP is a party to a management services agreement pursuant to which AVLP provides management, consulting and financial services to Alzamend. As additional consideration, the Company received a warrant to purchase 22,000 shares of Alzamend’s common stock at an exercise price of $0.30 per share of common stock. The warrants were determined to have a de minimis value.

~~13.~~10. ACQUISITIONS

~~Microphase Corporation and Power-Plus Technical Distributors~~

~~Enertec Systems 2001 Ltd.~~

On December 31, 2017, CooliSys entered into a share purchase agreement with Micronet Enertec Technologies, Inc. (“MICT”), a Delaware corporation, 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. (“Enertec”), an Israeli corporation and wholly owned subsidiary of EML, pursuant to which Coolisys acquired Enertec (the “Acquisition”). The Company believes that Enertec is Israel’s largest private manufacturer of specialized electronic systems for the military market. On May 23, 2018, Coolisys acquired Enertec for an aggregate cash purchase price of $4,851.

~~I. AM, Inc.~~

On May 23, 2018, DP Lending entered into and closed a securities purchase agreement with I. AM, David J. Krause and Deborah J. Krause. Pursuant to the securities purchase agreement, I. AM sold to DPL, 981 shares of common stock for a purchase price of $1, representing, upon the closing, 98.1% of I. AM’s outstanding common stock.

I. AM owns and operates the Prep Kitchen brand restaurants located in the San Diego area. I.AM owed DP Lending $1,715 in outstanding principal, pursuant to a loan and security agreement, between I. AM and DP Lending, which I. AM used to acquire the restaurants. The purchase agreement provides that, as I. AM repays the outstanding loan to DP Lending in accordance with the loan agreement, DP Lending will on a pro rata basis transfer shares of common stock of I. AM to David J. Krause, up to an aggregate of 471 shares.

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

~~The acquisition of Enertec and I. AM are being accounted for under the purchase method of accounting in accordance with ASC No. 805,~~ ~~Business Combinations~~. Under the purchase method, assets acquired and liabilities assumed are recorded at their estimated fair values. Goodwill is recorded to the extent the purchase price exceeds the fair value of the net identifiable tangible and intangible assets acquired less liabilities assumed at the date of acquisition. The initial accounting for the acquisition is not yet complete, and the Company is still performing procedures to determine the appropriate accounting.

~~Upon initial measurement, components of the preliminary purchase price are as follows:~~

Enertec I. AM
Accounts receivable $ 3,078 $ 29
Inventories 1,634 40
Prepaid expenses and other current assets 20 —
Property and equipment 649 1,054
Other assets 96 3
Accounts payable and accrued expenses (2,615 ) (104 )
Short term bank credit (4,236 ) —
Accrued severance pay (132 ) —
Net liabilities assumed (1,506 ) 1,022
Goodwill 6,357 576
Non-controlling interest — (33 )
Purchase price $ 4,851 $ 1,565

The following pro forma data for the ~~three and~~ nine months ended September 30, ~~2017~~2018, summarizes the results of operations for the period indicated as if the ~~Microphase, Power-Plus and~~ Enertec ~~acquisitions,~~acquisition, which closed on ~~June 2, 2017, September 1, 2017, and~~ May 23, 2018, ~~respectively,~~ had been completed as of the beginning of ~~each~~the period presented. The pro forma data gives effect to actual operating results prior to the acquisition. These pro forma amounts do not purport to be indicative of the results that would have ~~actually~~ been obtained if the acquisition occurred as of the beginning of ~~each~~the period presented or that may be obtained in future periods:

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, ~~2018~~

~~U.S. dollars in thousands, except share and per share data~~2019

	For the Three Months Ended						For the Nine Months Ended						For the Nine
	September 30,						September 30,						Months Ended
	2018			2017			2018			2017			September 30, 2018
Total Revenue	$	8,344		$	5,025		$	22,521		$	16,417		$	22,521,427
Net loss	$	(7,525	)	$	(2,669	)	$	(22,921	)	$	(8,854	)	$	(22,921,424	)
Less: Net loss attributable
to non-controlling interest		74			104			218			726			218,494
Net loss attributable to
common stockholders	$	(7,451	)	$	(2,565	)	$	(22,703	)	$	(8,128	)
Preferred deemed dividends		—			—			(108	)		(319	)
Net loss attributable to DPW Holdings														(22,702,930	)
Preferred dividends		—			(27	)		—			(35	)		(108,049	)
Loss available to common shareholders	$	(7,451	)	$	(2,592	)	$	(22,811	)	$	(8,482	)

Net loss available to common stockholders													$	(22,810,979	)
Basic and diluted net loss per common share	$	(0.11	)	$	(0.19	)	$	(0.43	)	$	(0.78	)	$	(346.54	)

Basic and diluted weighted average
common shares outstanding		67,869,778			13,745,540			52,977,059			10,884,948			65,824

Comprehensive Loss
Loss available to common shareholders	$	(7,451	)	$	(2,592	)	$	(22,811	)	$	(8,482	)	$	(22,810,979	)
Other comprehensive income (loss)
Change in net foreign currency
translation adjustments		(78	)		42			(210	)		141			(209,535	)
Net unrealized gain (loss) on
securities available-for-sale		(1,342	)		(43	)		(6,788	)		(43	)
Net unrealized loss on derivative
securities of related party														(6,787,902	)
Other comprehensive income (loss)		(1,420	)		(1	)		(6,998	)		98			(6,997,437	)
Total comprehensive loss	$	(8,871	)	$	(2,593	)	$	(29,809	)	$	(8,384	)
Total Comprehensive loss													$	(29,808,416	)

~~14.~~11. STOCK-BASED COMPENSATION

Under the Company's 2018 Stock Incentive Plan (the “2018 Plan”), 2017 Stock Incentive Plan (the “2017 Plan”), 2016 Stock Incentive Plan (the “2016 Plan”) and the 2012 Stock Option Plan, as amended (the “2012 Plan”) (collectively, the “Plans”), options may be granted to employees, officers, consultants, service providers and directors of the Company. On July 19, 2019, the Company’s stockholders approved an amendment to the 2018 Plan which increased the number of shares of the Company’s common stock that may be issued thereunder to a total of 175,000 shares. The Plans, as amended, provide for the issuance of a maximum of ~~7,372,630~~184,216 shares of the Company’s common stock. The Company also has 196,000 outstanding options that were granted between 2009 and 2011 pursuant to the terms of the Company's 2002 Stock Option Plan (the “2002 Plan”). Options granted pursuant to the 2002 Plan expire between September 2008 and February 2021.

Options granted under the Plans have an exercise price equal to or greater than the fair value of the underlying common stock at the date of grant and become exercisable based on a vesting schedule determined at the date of grant. Typically, options granted generally become fully vested after four years. Any options that are forfeited or cancelled before expiration become available for future grants. The options expire between 5 and 10 years from the date of grant. Restricted stock awards granted under the Plans are subject to a vesting period determined at the date of grant. As of September 30, ~~2018,~~2019, an aggregate of ~~55,773~~152,961 of the Company's options are still available for future grant.

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER~~During the nine months ended September 30, ~~2018~~

~~U.S. dollars in thousands, except share and per share data~~

2019, the Company did not grant any options. During the nine months ended September 30, 2018, the Company granted ~~1,000,000~~1,250 options to its employees from the Plans and also granted ~~2,897,500~~3,622 options outside of ~~the Plans. During the nine months ended September 30, 2017, the Company granted 560,000 options from~~ the Plans. These options become fully vested after four years. The Company estimated that the grant date fair value of options granted utilizing the Black-Scholes option pricing model during the nine months ended September 30, 2018 ~~and 2017~~ was ~~$514 and $251, respectively,~~$513,510, which is being recognized as stock-based compensation expense over the requisite four-year service period. During the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, the Company also issued ~~1,583,059~~29,375 and ~~1,336,798,~~1,979, respectively, shares of common stock to its consultants and service ~~providers pursuant to the Plans.~~providers. The Company estimated ~~that~~ the grant date fair value of these shares of common stock was ~~$2,640~~$305,019 and ~~$742,~~$2,640,102 respectively, which was determined from the closing price of the Company’s common stock on the date of issuance.

The Company has valued the options at their date of grant utilizing the Black-Scholes option pricing model. This model is dependent upon several variables such as the options’ term, exercise price, current stock price, risk-free interest rate estimated over the expected term and estimated volatility of our stock over the expected term of the options. The risk-free interest rate used in the calculations is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the expected life of the options as calculated using the simplified method. The estimated volatility was determined based on the historical volatility of our common stock.

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, 2019

During the nine months ended September 30, 2018, ~~and 2017,~~ the Company estimated the fair value of stock options granted using the Black-Scholes option pricing model with the following weighted average assumptions:

Nine Months Ended
September 30, 2018 September 30, 2017
Weighted average risk-free interest rate 2.41% — 2.80% 1.73% — 2.14%
Weighted average life (in years) 4.75 5.0
Volatility 124.7% — 131.7% 98.4% — 107.2%
Expected dividend yield 0% 0%
Weighted average grant-date fair value per share of
options granted
$ 0.92 $ 0.45

	Nine Months Ended
	September 30, 2018
Weighted average risk-free interest rate		2.41% — 2.80%
Weighted average life (in years)		4.75
Volatility		124.7% — 131.7%
Expected dividend yield		0%
Weighted average grant-date fair value per share of options granted		$624.33

The options outstanding as of September 30, ~~2018,~~2019, have been classified by exercise price, as follows:

Outstanding Exercisable
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life (Years) Price Exercisable Price
$0.57 - $0.80 3,340,000 7.74 $ 0.67 1,817,499 $ 0.67
$1.00 - $1.38 170,000 8.78 $ 1.37 51,250 $ 1.36
$1.51 - $1.69 62,500 3.96 $ 1.64 62,500 $ 1.64
$0.57 - $1.69 3,572,500 7.72 $ 0.72 1,931,249 $ 0.71

Issuances outside of Plans
$0.80 - $2.32 3,997,500 7.65 $ 1.30 325,694 $ 1.61

Total Options
$0.57 - 2.32 7,570,000 7.68 $ 1.03 2,256,943 $ 0.84

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

Outstanding				Exercisable
		Weighted
		Average	Weighted		Weighted
		Remaining	Average		Average
Exercise	Number	Contractual	Exercise	Number	Exercise
Price	Outstanding	Life (Years)	Price	Exercisable	Price
$480.00 - $560.00	1,306	6.32	$544.50	631	$543.76
$1,056.00 - $1,104.00	188	8.17	$1,104.00	86	$1,104.00
$1,208.00 - $1,352.00	38	3.99	$1,338.67	38	$1,338.67
$480.00 - $1,352.00	1,531	6.49	$632.46	755	$647.06

Issuances outside of Plans
$640.00 - $1,856.00		1,375		5.03		$827.64		281		$935.11

Total Options
$480.00 - 1,856.00		2,906		5.80		$724.80		1,036		$725.26

The total stock-based compensation expense related to stock options and stock awards issued pursuant to the Plans to the Company’s employees, consultants and directors, included in reported net loss for the three and nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, is comprised as follows:

Three Months Ended Nine Months Ended
Sept. 30, 2018 Sept. 30, 2017 Sept. 30, 2018 Sept. 30, 2017
Cost of revenues $ — $ 2 $ 5 $ 6
Engineering and product development — 6 14 20
Selling and marketing — 8 12 18
General and administrative 697 349 2,204 1,017
Stock-based compensation from Plans $ 697 $ 365 $ 2,235 $ 1,061
Stock-based compensation from
issuances outside of Plans
655 152 1,928 208
Total Stock-based compensation $ 1,352 $ 517 $ 4,163 $ 1,269

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, 2019

	Three Months Ended				Nine Months Ended
	Sept. 30, 2019		Sept. 30, 2018		Sept. 30, 2019		Sept. 30, 2018
Cost of revenues	$	—	$	—	$	—	$	4,874
Engineering and product development		—		—		—		13,650
Selling and marketing		—		—		—		11,922
General and administrative		206,289		697,252		531,379		2,204,433
Stock-based compensation from Plans	$	206,289	$	697,252	$	531,379	$	2,234,879
Stock-based compensation from issuances outside of Plans		155,490		655,388		822,683		1,929,301
Total Stock-based compensation	$	361,779	$	1,352,640	$	1,354,062	$	4,164,180

The combination of stock-based compensation of ~~$2,235~~$531,379 from the issuances of equity-based awards pursuant to the Plans and stock-based compensation attributed to stock awards of ~~$1,361 and warrants~~$253,019 and options of ~~$567,~~$569,664, which were issued outside of the Plans, resulted in aggregate stock-based compensation of ~~$1,352~~$361,779 and ~~$4,163~~$1,354,062 during the three and nine months ended September 30, 2018. During the nine months ended September 30, 2018, the Company issued 2,897,500 options to purchase shares of common stock at an average exercise price of $1.30 per share to its directors and officers. These shares were issued outside of the Plans and are subject to shareholder approval. During the nine months ended September 30, 2017, stock-based compensation was comprised of $1,061 from the issuances of equity-based awards pursuant to the Plans and stock-based compensation attributed to stock awards of $130 and warrants and options of $78, which were issued outside of the Plans.2019.

A summary of option activity under the Company's stock option plans as of September 30, ~~2018,~~2019, and changes during the nine months ended are as follows:

Weighted Average
Shares Average Remaining Aggregate
Available Number Exercise Contractual Intrinsic
for Grant of Shares Price Life (years) Value
January 1, 2018 2,538,832 2,742,500 $ 0.77 8.80 $ 6,688
Restricted stock awards (1,583,059 ) —
Granted (1,000,000 ) 1,000,000 $ 0.70
Forfeited¹ 100,000 (110,000 ) $ 1.33
Exercised — (60,000 ) $ 1.63
September 30, 2018 55,773 3,572,500 $ 0.72 7.72 $ 0

¹ ~~Includes 10,000 options that were issued pursuant to the Company’s 2002 Plan and are not available for future issuance.~~

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company's closing stock price on September 30, 2018 of $0.42 and the exercise price, multiplied by the number of in-the-money-options).

			Outstanding Options
						Weighted
					Weighted	Average
	Shares				Average	Remaining	Aggregate
	Available		Number		Exercise	Contractual	Intrinsic
	for Grant		of Shares		Price	Life (years)	Value
January 1, 2019	12,695		4,328		$576.40	7.52	$0
Amendment to 2018 SIP	162,500		—
Restricted stock awards	(25,000	)	—
Forfeited	2,766		(2,797	)	$377.70
September 30, 2019	152,961		1,531		$632.46	6.49	$0

As of September 30, ~~2018,~~2019, there was ~~$860~~$452,427 of unrecognized compensation cost related to non-vested stock-based compensation arrangements granted under the Plans. That cost is expected to be recognized over a weighted average period of ~~3.2~~2.6 years.

12. WARRANTS

During the nine months ended September 30, 2019, the Company issued a total of 759,443 warrants at an average exercise price of $10.28 per share.

(i)

On April 2, 2019, the Company issued warrants to purchase an aggregate of 388,888 shares of Common Stock at an initial exercise price of $18.00 per share and (the “Common Warrants”) and (b) pre-funded warrants to purchase up to 317,500 shares of our Common Stock at an initial exercise price of $0.40 per share (the “Pre-Funded Warrants”) in connection with an underwriting agreement with A.G.P./Alliance Global Partners (the “Underwriter”). In addition, the Company has also issued the Underwriter a warrant to purchase a maximum of 15,555 additional shares of common stock at an initial exercise price of $19.80 per share (See Note 20).

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, ~~2018~~

~~U.S. dollars in thousands, except share and per share data~~2019

~~15. WARRANTS~~

~~During the three months ended March 31, 2018, the Company issued a total of 2,450,000 warrants at an average exercise price of $1.16 per share.~~

~~(i)~~(ii)

On ~~January 23, 2018,~~May 20, 2019, the Company issued warrants to purchase an aggregate of ~~625,000~~12,500 shares of common stock at an exercise price equal to ~~$2.20~~$12.00 per share of common stock in connection with the issuance of a ~~10% senior convertible promissory note~~4% Original Issue Discount Convertible Promissory Note in the aggregate principal amount of ~~$1,250 (See Note 19c).~~$660,000.

~~(ii)~~(iii)

On January 25, 2018, the Company entered into three agreements for the Purchase and Sale of Future Receipt, pursuant to which the Company sold up to (i) $562 of the Company’s future receipts for a purchase price of $375, (ii) $337 in future receipts for a purchase price of $225 and (iii) $118 in future receipts for a purchase price of $100. Under the terms of these agreements,July 3, 2019, the Company issued warrants to purchase an aggregate of 112,500 shares of common stock at an exercise price of $2.25 per share of common stock and warrants to purchase 162,500 shares of common stock at an exercise price of $2.50 per share of common stock (See Note 16).

~~(iii)~~

~~On March 22, 2018, the Company issued warrants to purchase an aggregate of 1,250,000~~25,000 shares of common stock at an exercise price equal to ~~$1.15~~$8.80 per share of common stock in connection with the issuance of a~~promissory note in the principal amount of $1,750,000 with a term of two months, subject to the Company’s ability to prepay within one month (See~~ 12% Convertible Promissory Note ~~17a)~~.

~~(iv)~~

On March 23, 2018, the Company entered into a securities purchase agreement to sell and issue a 12% promissory note in the principal amount of $1,000 and a warrant to purchase 300,000 shares of common stock to an accredited investor~~if the promissory note is paid in full on or before May 23, 2018, or up to 450,000 shares of common stock, if the promissory note is paid by June 22, 2018(See Note 17b).~~

~~During the three months ended June 30, 2018, the Company issued a total of 12,252,758 warrants at an average exercise price of $0.71 per share.~~

~~(i)~~

On April 16, 2018, the Company issued warrants to purchase an aggregate of 993,588 shares of common stock at an exercise price equal to $1.30 per share of common stock in connection with the issuance of 12% secured convertible promissory notes in the aggregate principal amount of ~~$1,722 (See Note 19b).~~$1,492,000.

~~(ii)~~

On April 24, 2018, the Company issued warrants to purchase 357,143 shares of common stock, at an exercise price of $0.70 per share of common stock, in connection with the Preferred Stock Purchase Agreement to purchase 25,000 shares of Series B Preferred Stock by Philou (See Note 21).

~~(iii)~~

On October 5, 2017, Ault & Company purchased 75,000 shares of the Company’s common stock at $0.60 per share and a warrant to purchase up to 75,000 shares of the Company’s common stock at $0.60 per share for an aggregate purchase price of $45. The shares and warrants were issued by the Company on May 8, 2018, the date all necessary approvals to issue the shares were received. Ault & Company is controlled by Mr. Milton Ault, the Company’s Chairman and Chief Executive Officer (See Note 21).

~~(iv)~~

On May 15, 2018, the Company entered into securities purchase agreements with certain investors in which it sold an aggregate of 7,691,775 shares of its common stock for aggregate consideration of $6,000. In connection with this financing, the Company issued (i) five-year warrants to purchase 1,922,944 shares of the Company’s Class A common stock and (ii) five-year warrants to purchase 5,768,834 shares of the Company’s Class A common stock. The warrants were issued at an exercise price of $0.94 per share of common stock~~(See Note 21)~~.

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

~~(v)~~

On May 15, 2018, the Company entered into a securities purchase agreement with an institutional investor to sell and issue a senior secured convertible promissory note with a principal face amount of $6,000 and (i) a five-year warrant to purchase 1,111,111 shares of the Company’s Class A common stock at an exercise price of $1.35 per share of Class A common stock (the “Series A Warrant”) and (ii) a five-year warrant to purchase 1,724,138 shares of the Company’s Class B common stock at an exercise price of $0.87 per share of Class A common stock (See Note 19a). In connection with the financing, the Company issued the placement agent a warrant to purchase 150,000 shares of common stock with an exercise price of $1.00.

~~(vi)~~

Pursuant to the terms of a securities purchase agreement entered into on March 23, 2018, the Company issued an additional warrant to purchase 150,000 shares of common stock, at an exercise price of $1.15 per share of common stock, on May 23, 2018 (See Note 17b).

The following table summarizes information about common stock warrants outstanding at September 30, ~~2018:~~ 2019:

Outstanding Exercisable
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life (Years) Price Exercisable Price
$0.01 317,460 8.09 $ 0.01 277,774 $ 0.01
$0.55 283,636 4.11 $ 0.55 283,636 $ 0.55
$0.60 75,000 4.59 $ 0.60 75,000 $ 0.60
$0.66 148,133 4.09 $ 0.66 148,133 $ 0.66
$0.70 2,125,715 4.12 $ 0.70 1,768,572 $ 0.70
$0.75 135,909 3.62 $ 0.75 135,909 $ 0.75
$0.80 481,666 1.95 $ 0.80 481,666 $ 0.80
$0.87 1,724,138 4.62 $ 0.87 1,724,138 $ 0.87
$0.94 7,691,778 4.63 $ 0.94 7,691,778 $ 0.94
$1.00 280,000 4.19 $ 1.00 280,000 $ 1.00
$1.10 759,486 2.93 $ 1.10 759,486 $ 1.10
$1.15 1,700,000 4.49 $ 1.15 1,700,000 $ 1.15
$1.30 993,588 4.54 $ 1.30 993,588 $ 1.30
$1.35 1,111,111 4.62 $ 1.35 1,111,111 $ 1.35
$2.20 625,000 4.32 $ 2.20 625,000 $ 2.20
$2.25 112,500 4.32 $ 2.25 112,500 $ 2.25
$2.50 162,500 4.32 $ 2.50 162,500 $ 2.50
$0.01 - $2.50 18,727,620 4.43 $ 1.01 18,330,791 $ 1.02

Outstanding				Exercisable
		Weighted
		Average	Weighted		Weighted
		Remaining	Average		Average
Exercise	Number	Contractual	Exercise	Number	Exercise
Price	Outstanding	Life (Years)	Price	Exercisable	Price
$0.00	6,500	4.50	$0.00	6,500	$0.00
$8.00	397	7.09	$8.00	397	$8.00
$8.80	25,000	4.76	$8.80	25,000	$8.80
$12.00	12,500	4.61	$12.00	12,500	$12.00
$19.80	15,555	4.50	$19.80	15,555	$19.80
$440.00	355	3.11	$440.00	355	$440.00
$480.00	94	3.59	$480.00	94	$480.00
$528.00	186	3.09	$528.00	186	$528.00
$560.00	2,657	3.12	$560.00	2,657	$560.00
$600.00	170	2.62	$600.00	170	$600.00
$640.00	603	0.94	$640.00	603	$640.00
$752.00	9,614	3.63	$752.00	9,614	$752.00
$800.00	350	3.19	$800.00	350	$800.00
$880.00	947	1.92	$880.00	947	$880.00
$920.00	2,126	3.49	$920.00	2,126	$920.00
$1,040.00	1,243	3.54	$1,040.00	1,243	$1,040.00
$1,760.00	781	3.32	$1,760.00	781	$1,760.00
$1,800.00	140	3.32	$1,800.00	140	$1,800.00
$2,000.00	203	3.32	$2,000.00	203	$2,000.00
$8.00 - $2,000.00	79,421	3.95	$208.77	79,421	$208.77

The Company has valued the warrants at their date of grant utilizing the Black-Scholes option pricing model. This model is dependent upon several variables such as the warrants’ term, exercise price, current stock price, risk-free interest rate and estimated volatility of our stock over the contractual term of the warrants. The risk-free interest rate used in the calculations is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the contractual life of the warrants.

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, ~~2018~~

~~U.S. dollars in thousands, except share and per share data~~2019

The Company utilized the Black-Scholes option pricing model and the assumptions used during the nine months ended September 30, ~~2018~~2019 and ~~2017:~~2018:

					Nine Months Ended
	2018		2017		September 30, 2019		September 30, 2018
Weighted average risk-free interest rate		2.41% — 2.94%		1.42% — 2.01%	1.75% — 2.28%		2.41% — 2.94%
Weighted average life (in years)		4.8		4.9		5.0		4.8
Volatility		124.8% — 138.4%		98.5% — 107.5%		85.5% — 87.5%		124.8% — 138.4%
Expected dividend yield		0%		0%		0%		0%
Weighted average grant-date fair value per share of warrants granted	$	0.79	$	0.41		$10.34		$629.64

13. OTHER CURRENT LIABILITIES

At September 30, 2019 and December 31, 2018 other current liabilities consist of:

	September 30,		December 31,
	2019		2018
Accrued payroll and payroll taxes	$	1,561,671	$	1,497,470
Other accrued expenses		297,370		370,932
	$	1,859,041	$	1,868,402

14. LEASES

We have operating leases for office space and restaurant locations. Our leases have remaining lease terms of 7 months to 8 years, some of which may include options to extend the leases perpetually, and some of which may include options to terminate the leases within 1 year.

The following table provides a summary of leases by balance sheet location as of September 30, 2019:

	September 30, 2019
Operating right-of-use assets	$	3,433,794
Operating lease liability - current	$	741,433
Operating lease liability - non-current	$	2,781,345

~~16.~~

The components of lease expenses for the nine months ended September 30, 2019, were as follows:

	Nine
	Months Ended
	September 30, 2019
Operating lease cost	$	754,692
Short-term lease cost		-
Variable lease cost	$	351,491

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, 2019

The following tables provides a summary of other information related to leases for the nine months ended September 30, 2019:

	September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,020,499
Right-of-use assets obtained in exchange for new operating lease liabilities	$	-
Weighted-average remaining lease term - operating leases		5.7 years
Weighted-average discount rate - operating leases		10%

Maturity of lease liabilities under our non-cancellable operating leases as of September 30, 2019, are as follows:

Payments due by period
2019 (Remainder)	$	271,420
2020		1,039,687
2021		779,008
2022		501,411
2023		514,895
Thereafter		1,582,121
Total lease payments		4,688,542
Less interest		(1,165,764	)
Present value of lease liabilities	$	3,522,778

15. ADVANCES ON FUTURE RECEIPTS

During the ~~second half of 2017,~~nine months ended September 30, 2019, the Company received funding as a result of entering into multiple Agreements for the Purchase and Sale of Future Receipts pursuant to which the Company sold in the aggregate $4,068 in future receipts of the Company for $2,889. As of December 31, 2017, the Company had repaid $1,526.

~~During the three months ended March 31, 2018, the Company entered into a total of nine additional~~six Agreements for the Purchase and Sale of Future Receipts (collectively, the “Agreements on Future Receipts”) ~~pursuant to which~~. The Company sold in the aggregate $1,517,847 in future receipts of the Company ~~sold up to $5,632 in “future receipts”~~ for ~~a purchase price in~~$1,017,170. During 2019, the ~~amount of $4,100.~~Company had repaid $1,365,435. The term “future receipts” means cash, check, ACH, credit card, debit card, bank card, charge card or other form of monetary payment. The Agreements on Future Receipts have been personally guaranteed by the Company’s Chief Executive Officer and in one instance has also been guaranteed by Philou.

~~During the three months ended March 31, 2018, the~~ Company recorded a discount in the amount of ~~$1,651,~~$500,677 in connection with these ~~nine additional~~six agreements, based upon the difference between the amount of future receipts sold and the actual proceeds received by the Company. ~~Under~~The Company is currently in default on its payment obligations on certain of the ~~terms of these agreements, the Company also issued warrants to purchase~~Agreements on Future Receipts with an aggregate outstanding balance of ~~112,500 shares of common stock~~$1,650,862 at an exercise price of $2.25 per share of common stock and warrants to purchase 162,500 shares of common stock at an exercise price of $2.50 per share of common stock. The Company recorded an additional discount of $258 based on the estimated fair value of these warrants. The Company computed the fair value of these warrants using the Black-Scholes option pricing model. These discounts are reflected as a reduction on the outstanding liability and are being amortized as non-cash interest expense over the term of the agreement.September 30, 2019. During the three and nine months ended September 30, ~~2018,~~2019, non-cash interest expense of ~~$499~~$115,706 and ~~$2,152,~~$293,602, respectively, was recorded from the amortization of debt discounts.

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, ~~2018~~

~~U.S. dollars in thousands, except share and per share data~~2019

~~17.~~16. NOTES PAYABLE

Notes Payable at September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, are comprised of the following.

September 30, December 31,
2018 2017
12% short-term promissory note^(b) $ 1,000 $ —
Other short-term notes payable^(c) 1,143 —
Notes payable to Wells Fargo^(d) 295 300
Note payable to Dept. of Economic and Community Development^(e) 265 292
Power-Plus Credit Facilities^(f) — 171
Note payable to Power-Plus Member^(g) 34 130
Note payable to People's United Bank^(h) 18 19
8% short-term promissory note⁽ⁱ⁾ 1,212
12% September '18 short-term promissory note^(j) 789
10% short-term promissory notes^(k) — 15
Short term bank credit^(l) 1,800 —
Total notes payable 6,556 927
Less:
Unamortized debt discounts (482 ) —
Unamortized financing cost (41 ) —
Total notes payable, net of financing cost $ 6,033 $ 927
Less: current portion (5,539 ) (402 )
Notes payable – long-term portion $ 494 $ 525


	~~(a)~~	~~On February 20, 2018, the Company issued promissory note in the principal face amount of $900 to an accredited investor. This promissory noteincluded an original issue discount (“OID”) of $150 resulting in net proceeds of $750.~~The principal and OID on this note was due and payable on March 22, 2018. On March 23, 2018, the Company entered into a new promissory note in the principal amount of $2,100 for a term of two months, subject to the Company’ ability to prepay within one month. The new promissory note~~included an OID of $350 if paid within one month and $700 if paid within two months, resulting in net proceeds of $1,750.The Company also issued to the lender a warrant to purchase 1,250,000 shares of the Company’s common stock at an exercise price of $1.15 per share.~~ The principal amount of the new promissory note consisted of cash of $1,000 and the cancellation of principal of $750 from the February 20, 2018 promissory note. The interest on the February 20, 2018 note in the amount of $150 was paid to the lender prior to entering into the new promissory note. The warrants are exercisable commencing on issuance date for a term of three years. The exercise price of these warrants is subject to adjustment for customary stock splits, stock dividends, combinations and other standard anti-dilution events. The warrants may be exercised for cash or on a cashless basis. The Company recorded debt discount in the amount of $604 based on the estimated fair value of these warrants. The Company computed the fair value of these warrants using the Black-Scholes option pricing model. The debt discount was amortized as non-cash interest expense over the term of the debt. During the three and nine months September 30, 2018, non-cash interest expense of nil and $604, respectively, was recorded from the amortization of debt discount and interest expense of nil and $350 was recorded from the amortization of the OID on the new promissory note. On April 23, 2018, the Company paid~~the entire outstanding principal on the new promissory note of $2,100. The new promissory note had been guaranteed by our Chief Executive Officer and had also been guaranteed by Philou.~~

	September 30,			December 31,
	2019			2018
June 2019 short-term promissory note	$	2,510,173		$	—
12% short-term promissory note		—			1,000,000
15% May short-term promissory note		780,000			—
Other short-term notes payable		805,554			1,033,553
12% September short-term promissory notes		—			789,473
8% short-term promissory notes		318,150			1,272,600
October short-term promissory note		—			565,000
Notes payable to Wells Fargo		289,885			291,988
Note payable to Dept. of Economic and Community Development		237,069			260,169
Microphase short-term promissory note		—			200,000
Note payable to Power-Plus Member		13,250			13,250
Note payable to People's United Bank		18,379			18,589
Short term bank credit		1,677,196			1,586,864
Total notes payable		6,649,656			7,031,486
Less:
Unamortized debt discounts		(74,750	)		(151,499	)
Unamortized financing cost		(32,377	)		(7,541	)
Total notes payable, net of financing cost	$	6,542,529		$	6,872,446
Less: current portion		(6,077,720	)		(6,388,787	)
Notes payable – long-term portion	$	464,809		$	483,659

January 2019 Exchange Agreement

On August 16, 2018, as amended on November 29, 2018, the Company entered into a securities purchase agreement with four institutional investors providing for the issuance of 8% promissory notes, each in the principal amount of $318,150, for an aggregate principal face amount of $1,272,600, due February 15, 2019 (individually the “8% Short-Term Promissory Note” and collectively the “8% Short-Term Promissory Notes”).

On January 23, 2019, the Company entered into an Exchange Agreement (the “January Exchange Agreement”) with one of the institutional investors pursuant to which the Company issued to the investor two new 8% promissory notes in the aggregate principal amount of $1,043,799 (the “New Notes”) in exchange for one of the 8% Short-Term Promissory Notes in the aggregate principal amount of $318,150, the October short-term promissory note in the aggregate principal amount of $565,000 and accrued interest of $160,649.

Pursuant to the January Exchange Agreement, the investor received 10,918 shares of common stock of the Company issued under the Company’s Registration Statement on Form S-3 (File No. 333-222132) in satisfaction of the New Notes. Further, since the investor’s proceeds from the sale of all 10,918 shares of common stock received were not equal to the outstanding principal balance of the New Notes, the Company was required to pay to the investor the difference, which amounted to $244,898, in cash or through the delivery of free trading shares of common stock. The Company recognized additional interest expense for the difference of $244,898. On March 19, 2019, the Company issued to the investor an additional 2,551 shares of the Company’s common stock, with a value of $73,016, in partial satisfaction of the liability, resulting in a remaining balance due of $171,882 which was paid during June 2019.

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, ~~2018~~

~~U.S. dollars in thousands, except share and per share data~~2019

February 2019 Exchange Agreement

~~(b)~~

~~On March 23, 2018, the Company entered into a securities purchase agreement to sell and issue a 12% promissory note and a warrant to purchase 300,000 shares of common stock to an accredited investorif the promissory note is paid in full on or before May 23, 2018, or up to 450,000 shares of common stock, if the promissory note is paid by June 22, 2018.~~The promissory note was issued with a 10% OID. The promissory note is in the principal amount of $1,000 and was sold for $900, bears interest at 12% simple interest, and was due on June 22, 2018. The Company is in negotiations with the investor to amend the payment terms on this 12% promissory note, however, since payment was not made on the specified maturity date this unsecured 12% promissory note is currently in default. Interest only payments are due, in arrears, on a monthly basis commencing on April 23, 2018. The exercise price of the warrant is $1.15 per share. The Company recorded debt discount in the amount of $271 based on the estimated fair value of these warrants. The Company computed the fair value of these warrants using the Black-Scholes option pricing model. The debt discount was amortized as non-cash interest expense over the term of the debt. During the three and nine months ended September 30, 2018, non-cash interest expense of nil and $271, respectively, was recorded from the amortization of debt discount and interest expense of nil and $100, respectively, was recorded from the amortization of the OID on the 12% promissory note. The 12% promissory note is unsecured by any of the Company’s assets but is guaranteed by our Chief Executive Officer.

On February 20, 2019, the Company entered into an Exchange Agreement (the “February Exchange Agreement”) with another one of the institutional investors pursuant to which the Company issued to the investor a new 8% promissory note in the principal amount of $433,884 (the “New Note”) in exchange for principal and accrued interest on the 8% Short-Term Promissory Note (the “Old Note”).

Pursuant to the February Exchange Agreement, the investor received 4,520 shares of common stock of the Company issued under the Company’s Registration Statement on Form S-3 (File No. 333-222132) in satisfaction of the New Note. Further, since the investor’s proceeds from the sale of all 4,520 shares of common stock received were not equal to the outstanding principal balance of the New Note, the Company is required to pay the difference, which amounted to $289,954, to the investor in cash or through the delivery of free trading shares of common stock. The Company recognized additional interest expense for the difference of $289,954. On April 4, 2019, the Company issued to the investor an additional 9,375 shares of the Company’s common stock, with a value of $108,523, in partial satisfaction of the liability, resulting in a remaining balance due of $183,822 which was paid during June 2019.

Enertec Short-Term Promissory Note

On December 28, 2018, Enertec entered into a $500,000 secured promissory note (the “Enertec Short-Term Promissory Note”) whereby Enertec agreed to pay interest in an amount of 10% per annum in cash to the investor, until the Enertec Short-Term Promissory Note is paid in full. The proceeds from the Enertec Short-Term Promissory Note were received in January 2019 and repaid on April 2, 2019. In connection with the Enertec Short-Term Promissory Note, Milton C. Ault III provided a personal guarantee for the benefit of the investor.

Dominion June 2019 Short-Term Promissory Note

On June 18, 2019, the Company entered into a securities purchase agreement with the Investor to sell a 10% senior secured promissory note with a principal face amount of $2,800,000, plus an original issue discount in the amount of $100,000 and issue 12,500 shares of the Company’s common stock subject to the approval thereof by the NYSE American. In addition, Ault & Company has guaranteed to the Investor the prompt and complete payment and performance when of the obligations of the Company pursuant to this.

The June 2019 short-term promissory note has a principal face amount of $2,900,000 with a purchase price of $2,800,000, and bears interest at 10% per annum. Pursuant to the terms of the note, the Company was required to make six monthly amortization payments beginning on July 18, 2019. The Company has not made these payments and this note is currently in default. We are in negotiations with the investors to amend the payment terms on this Note.

~~(c)~~

~~During the nine months ended September 30, 2018, the Company entered into the following short-term promissory notes:~~

~~(i)~~

~~On February 7, 2018, the Company issued demand promissory notes in the aggregate principal face amount of $440 to accredited investors. These promissory notesincluded an aggregate OID of $40 resulting in net proceeds to the Company of $400.~~The principal and OID on these notes were due and payable on demand after April 24, 2018. These loans were paid on April 27, 2018. During the three and nine months ended September 30, 2018, the Company recognized nil and $40, respectively, from~~the amortization of OID on these demand promissory notes.~~

~~(ii)~~

~~On February 26, 2018, the Company issued a 10% promissory note in the principal amount of $330 to an accredited investor. This promissory noteincluded an OID of $30 resulting in net proceeds to the Company of $300.~~The principal and accrued interest on this note was due and payable on April 12, 2018, subject to a 30-day extension available to the Company. This 10% promissory note was paid on April 27, 2018. During the three and nine months ended September 30, 2018, the Company recognized nil and $36 from interest and~~the amortization of OID on this 10% promissory note.~~

~~(iii)~~

~~On March 27, 2018, the Company issued a 10% promissory note in the principal amount of $200 to an accredited investor~~.The principal and accrued interest on this note was due and payable on March 29, 2018. On March 29, 2018 and April 24, 2018, the Company paid $50 and $150, respectively, on this 10% promissory note of $200.

~~(iv)~~

~~On May 23, 2018, the Company issued a promissory note in the aggregate principal face amount of $81 to an accredited investor. The promissory noteincluded an aggregate OID of $6 resulting in net proceeds to the Company of $75.~~The principal and OID on this note were due and payable on August 20, 2018. This promissory note was paid on July 25, 2018. During the three and nine months ended September 30, 2018, the Company recognized $3 and $6, respectively, from~~the amortization of OID on this promissory note.~~

~~(v)~~

~~On May 23, 2018, the Company issued a promissory note in the aggregate principal face amount of $360 to an accredited investor. The promissory noteincluded an aggregate OID of $60 resulting in net proceeds to the Company of $300.~~The principal and OID on this note were due and payable on June 22, 2018. The outstanding balance on this note was paid on July 2, 2018. During the three and nine months ended September 30, 2018, the Company recognized nil and $60, respectively, from~~the amortization of OID on this promissory note.~~

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

~~(vi)~~

~~On June 5, 2018, the Company received loans in the aggregate amount of $75 from accredited investors. The principal and interest on these loans was paid on July 16, 2018~~.

~~(vii)~~

~~On June 8, 2018, the Company issued a promissory note in the aggregate principal face amount of $512 to an accredited investor. The promissory noteincluded an aggregate OID of $67 resulting in net proceeds to the Company of $445.~~The principal and OID on this note were due and payable on July 9, 2018. At September 30, 2018, the outstanding balance on this note was $137. Since payment was not made on the specified maturity date this unsecured promissory note is currently in default. During the three and nine months ended September 30, 2018, the Company recognized $19 and $67, respectively, from~~the amortization of OID on this promissory note.~~On August 3, 2018, the Company and lender of the June 8, 2018 promissory note in the principal amount of $512 entered into an agreement to extend the maturity date from July 9, 2018 to August 31, 2018. The Company agreed to pay the lender an extension fee of 100,000 shares of common stock.

~~(viii)~~

On July 13, 2018, the Company issued a 15% promissory note in the principal amount of $176 to an accredited investor. This promissory note included an OID of $16 and debt issuance costs of $5 resulting in net proceeds of $155.~~At September 30, 2018, the outstanding balance on this note was $156.The principal and accrued interest on this note is due and payable on October 11, 2018. Mr. Ault personally guaranteed the repayment of this note.~~

~~(ix)~~

On August 10, 2018, DP Lending issued a 12% promissory note in the principal amount of $550 to an accredited investor. This promissory note included an OID of $50 resulting in net proceeds of $500. The principal and accrued interest on this note is due and payable on August 10, 2019.

~~(x)~~

~~On August 16, 2018, the Company issued an 8% promissory note in the principal amount of $225 to an accredited investor. This promissory note included an OID of $25 resulting in net proceeds of $200.At September 30, 2018, the outstanding balance on this note was $215.~~The principal and accrued interest on this note is due and payable on October 5, 2018 subject to a 50-day cure period available to the Company. Mr. Ault personally guaranteed the repayment of this note.

~~(xi)~~

~~On August 23, 2018, DP Lending issued a promissory note in the principal amount of $85 to an accredited investor. This promissory note included an OID of $10 resulting in net proceeds of $75.At September 30, 2018, the outstanding balance on this note was $85.~~The principal and accrued interest on this note was due and payable on September 24, 2018, subject to a 28-day extension available to DP Lending. However, since payment was not made on the specified maturity date this unsecured promissory note is currently in default.

~~(xii)~~

On August 28, 2018, DP Lending issued a promissory note in the principal amount of $115 to an accredited investor. This promissory note included an OID of $15 resulting in net proceeds of $100. The principal and accrued interest on this note was due and payable on September 14, 2018, subject to a 10-business day cure period available to DP Lending. This promissory note was paid on September 21, 2018.

~~(d)~~

At September 30, 2018, Microphase had guaranteed the repayment of two equity lines of credit in the aggregate amount of $300 with Wells Fargo Bank, NA (“Wells Fargo”) (collectively, the “Wells Fargo Notes”). These loans originated prior to the Company’s acquisition of Microphase and Microphase was the recipient of the actual proceeds from the loans. Microphase had previously guaranteed the payment under the first Wells Fargo equity line during 2008, the proceeds of which Microphase had received from a concurrent loan from Edson Realty Inc., a related party owned real estate holding company. As of September 30, 2018, the first line of credit, which is secured by residential real estate owned by a former officer, had an outstanding balance of $212, with an annual interest rate of 4.00%. Microphase had guaranteed the payment under the second Wells Fargo equity line in 2014. Microphase had received working capital loans from the former CEO from funds that were drawn against the second Wells Fargo equity line. As of September 30, 2018, the second line of credit, secured by the former CEO’s principal residence, had an outstanding balance of $83, with an annual interest rate of 3.00%. During the three and nine months ended September 30, 2018, Microphase incurred $3 and $15, respectively, of interest on the Wells Fargo Notes.

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

~~(e)~~

In August 2016, Microphase received a $300 loan, of which $35 has been repaid, pursuant to the State of Connecticut Small Business Express Job Creation Incentive Program which is administered through the Department of Economic and Community Development (“DECD”) (the “DECD Note”). The DECD Note bears interest at a rate of 3% per annum and is due in August 2026. Payment of principal and interest was deferred during the initial year and commencing in September 2017, payable in equal monthly installments over the remaining term. During the three and nine months ended September 30, 2018, Microphase incurred $3 and $8 of interest on the DECD Note. In conjunction with the DECD Note, Microphase was awarded and received a Small Business Express Matching Grant of $100 by the State of Connecticut. State grant funding requires Microphase to spend an equal amount of cash on eligible expense. The Company has utilized $18 of the grant and the balance of $82 is reported within deferred revenue and classified in accounts payable and accrued in the accompanying consolidated balance sheet at September 30, 2018.

~~(f)~~

At December 31, 2017, Power-Plus had guaranteed the repayment of two lines of credit in the aggregate amount of $169 with Bank of America NA and Wells Fargo (collectively, the “Power-Plus Lines”). During the three months ended June 30, 2018, the Power-Plus Lines had been paid.

~~(g)~~

Pursuant to the terms of the Purchase Agreement with Power-Plus, the Company entered into a two-year promissory note in the amount of $255 payable to the former owner as part of the purchase consideration. The $255 note is payable in 24 equal monthly installments. On October 18, 2017, for cancellation of debt, the Company entered into a subscription agreement with the former owner under which the Company sold 138,806 shares of common stock at $0.67 per share for an aggregate purchase price of $93. The outstanding balance on this note was $130 at December 31, 2017. During the three and nine months ended September 30, 2018, the Company paid $32 and $96, respectively, in principal payments.

~~(h)~~

In December 2016, Microphase utilized a $20 overdraft credit line at People’s United Bank with an annual interest rate of 15%. As of September 30, 2018, the balance of that overdraft credit line was $18.

~~(i)~~

On August 16, 2018, the Company entered into a securities purchase agreement with certain institutional investors providing for the issuance of (i) secured promissory notes in the aggregate principal face amount of $1,212 due February 15, 2019, at an interest rate of eight percent (8%) per annum for which the Company received an aggregate of $1,010, and (ii) an aggregate of 400,000 shares of common stock to be issued by the Company. During October 2018, the 400,000 shares of common stock was issued to the investors.

~~(j)~~

During September 2018, we issued to institutional investors 12% term promissory notes in the principal face amount of $789, with an interest rate of 12% for a purchase price of $750. The outstanding principal face amount, plus any accrued and unpaid interest, is due by December 31, 2018, or as otherwise provided in accordance with the terms set forth therein. During October 2018, in accordance with the notes, the Company issued 450,000 shares of its common stock to the investors. The notes contain standard and customary events of default.

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

~~(k)~~

In December 2016, Microphase issued $705 in 10% short-term promissory notes to nineteen accredited investors which, after deducting $71 of placement fees to its selling agent, Spartan Capital Securities, LLC (“Spartan”), resulted in $634 in net proceeds to Microphase (the “10% Short-Term Notes”). The 10% Short-Term Notes were due one year from the date of issuance. The amount due pursuant to the 10% Short-Term Notes is equal to the entire original principal amount multiplied by 125% (the “Loan Premium”) plus accrued interest. On December 5, 2017, in exchange for the cancellation of $690 of outstanding principal and $250 of accrued interest owed to the investors by Microphase Corporation, the Company entered into an Exchange Agreement pursuant to which the Company issued an aggregate of 1,523,852 shares of common stock and warrants to purchase 380,466 shares of common stock with an exercise price of $1.10 per share of common stock. During the three months ended March 31, 2018, the Company paid the remaining balance of principal and accrued interest of $15 and $6, respectively.

~~(l)~~

At September 30, 2018, Enertec had short term bank credit of $1,800 that bears interest of prime plus 0.7% through 3.85% paid either on a monthly or weekly basis. Further, the Company has undertaken to comply with certain covenants under its bank loan. During the three and nine months ended September 30, 2018, the Company recorded interest expense of $21 and $31, respectively, from Enertec’s short term bank credit.

~~(m)~~

On January 25, 2018, the Company issued two 5% promissory notes, each in the principal face amount of $2,500, for an aggregate debt of $5,000 to two institutional investors. The entire unpaid balance of the principal and accrued interest on each of the 5% promissory notes was due and payable on February 23, 2018, subject to a 30-day extension available to the Company.~~The proceeds from these two 5%promissory notes were used to purchase~~1,000 Antminer S9s manufactured by Bitmain Technologies, Inc. in connection with our crypto mining operations. Between March 23 and March 27, 2018, the Company paid the entire outstanding principal and accrued interest on the~~5% promissory notesof $5,101.~~

~~18.~~17. NOTES PAYABLE – RELATED PARTIES

Notes Payable – Related parties at September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, are comprised of the ~~following:~~following.

	September 30,			December 31,			September 30,			December 31,
	2018			2017			2019			2018
Notes payable to former officer and employee	$	309		$	309
Notes payable to Microphase former officers and employees							$	284,317		$	308,984
Total notes payable		309			309			284,317			308,984
Less: current portion		(166	)		(134	)		(168,589	)		(166,925	)
Notes payable – long-term portion	$	143		$	175		$	115,728		$	142,059

Microphase is a party to several notes payable agreements with seven of its past officers, employees and their family members. As of September 30, 2018, the aggregate outstanding balance pursuant to these notes payable agreements, inclusive of $55 of accrued interest, was $364, with annual interest rates ranging between 3.00% and 6.00%. During the three and nine months ended September 30, 2018, Microphase incurred $11 and $18 of interest on these notes payable agreements. In July 2016, one of these noteholders initiated litigation to collect the balance owed under the terms of his respective agreement. In October 2017, Microphase and the noteholder entered into a settlement agreement whereby Microphase agreed to pay the outstanding principal and interest of $122 and $43, respectively, by issuing to the noteholder 95,834 shares of Microphase common stock valued at $115 and paying $25 in cash. The value of the Microphase common stock was derived from the Company’s recent acquisition of a majority interest in Microphase. Further, the parties agreed a final $25 would be paid within 18 months of the settlement agreement or Microphase would be required to pay the noteholder an additional $25.

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, ~~2018~~

~~U.S. dollars in thousands, except share and per share data~~2019

~~19.~~18. CONVERTIBLE NOTES

Convertible Notes Payable at September 30, ~~2018~~2019 and December 31, ~~2017,~~2018 are comprised of the ~~following:~~

September 30, December 31,
2018 2017
10% Convertible secured notes^(a) $ 8,031 $ —
5% Convertible secured notes^(b) — 550
12% Convertible secured note^(c) — 202
Total convertible notes payable 8,031 752
Less:
Unamortized debt discounts (670 ) (351 )
Unamortized financing cost (167 ) (3 )
Total convertible notes payable, net of financing cost $ 7,194 $ 398

~~(a)~~

On May 15, 2018, the Company entered into a securities purchase agreement to sell (i) a 10% convertible note (the “10% Convertible Note”), (ii) a five-year warrant to purchase 1,111,111 shares of the Company’s common stock at an exercise price of $1.35 per share; (iii) a five-year warrant to purchase 1,724,138 shares of the Company’s Class A common stock at an exercise price of $0.87 per share; and (iv) 344,828 shares of the Company’s common stock to an institutional investor. Initially, the 10% Convertible Note was convertible into the Company’s common stock at $0.75 per share, but could only be converted if an event of default thereunder had occurred and not been cured on a timely basis. On September 25, 2018, the Company entered into an agreement to amend the maturity date on the 10% Convertible Note, pursuant to which amendment the amortization schedule of the 10% Convertible Note provides for 13 monthly payments in the amount of $309, and for the fourteenth payment to be in the amount of $1,011, plus accrued and unpaid interest. Each such amortization payment shall be made in cash or Bitcoin. The Company has not made the monthly amortization payments due during September 2018 and October 2018 and this secured 10% convertible note is currently in default. The Company is in negotiations with the investor to amend the payment terms on this secured 10% convertible note.

The 10% Convertible Note is in the principal amount of $6,000 and bears interest at 10% simple interest on the principal amount with 50% of the total interest due on the principal payable at the closing and the remaining 50% payable over the term of the 10% Convertible Note. In connection with the financing, the Company agreed to pay the placement agent, Alliance Global Partners, a cash fee of $300,000 and a warrant to purchase 150,000 shares of the Company’s common stock with an exercise price of $1.00 per share.following.

The Company computed the fair value of the warrants using the Black-Scholes option pricing model and, as a result of this calculation, recorded debt discount in the amount of $1,398 based on the estimated fair value of the warrants. The Company estimated that the grant date fair value of the shares of common stock was $405, which was determined from the closing price of the Company’s common stock on the dates of issuance. In aggregate, the Company recorded debt discount in the amount of $2,170 based on the relative fair values of the warrants, common stock and debt issuance costs of $367. During the three and nine months ended September 30, 2018, non-cash interest expense of $1,053 and $1,504, respectively, was recorded from the amortization of debt discounts. The fair value of the warrants was estimated using the Black-Scholes option-pricing method. The risk-free rate of 2.94% was derived from the U.S. Treasury yield curve, matching the term of the warrant, in effect at the measurement date. The volatility factor of 127.9% was determined based on the Company’s historical stock prices.

	September 30,			December 31,
	2019			2018
10% Convertible secured notes	$	—		$	7,997,126
4% Convertible promissory note		660,000			—
12% Convertible promissory note		622,000			—
8% Convertible promissory note		815,218			—
Total convertible notes payable		2,097,218			7,997,126
Less:
Unamortized debt discounts		(666,793	)		(1,189,276	)
Unamortized financing cost		—			(65,356	)
Total convertible notes payable, net of financing cost	$	1,430,425		$	6,742,494
Less: current portion		(1,146,141	)		(6,742,494	)
Convertible notes payable, net of financing cost – long-term portion	$	284,284		$	—

On ~~July 2,~~May 15, 2018, the Company entered into a securities purchase agreement ~~with the institutional investor providing for the issuance of (i)~~to sell a ~~second~~ 10% convertible note (the ~~“Second 10%~~“10% Convertible Note”) ~~with a~~in the principal ~~face~~ amount of ~~$1,000 which Second 10% Convertible Note was convertible into the Company’s common stock at $0.75 per share~~$6,000,000. On July 2, 2018 and ~~(ii) an additional 400,000 of the Company’s common stock to be issued in connection with the 10% Convertible Note. The Second 10% Convertible Note matures on January 1, 2019.~~

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

On August 31, 2018, the Company entered into a securities purchase ~~agreement~~agreements with the institutional investor providing for the issuance of a second 10% convertible note with a principal face amount of $1,000,000 (the “Second 10% Convertible Note”) and a third 10% convertible note with a principal face amount of $2,000,000 (the “Third 10% Convertible Note” and with the ~~10% Convertible Note and the~~ Second 10% Convertible Note, the ~~“10%~~“Additional 10% Convertible Notes”) ~~with a principal face amount of $2,000, which Third~~, respectively.

On January 9, 2019, the 10% Convertible Note ~~is convertible into 5,000,000 shares~~was amended to revise the amortization schedule such that the conversion price on eleven monthly amortization payments in the principal amount $309,193 each, at the request of the ~~Company’s common stock at $0.40 per share and (ii) an additional 620,000~~holder, shall be satisfied by the issuance of shares of the Company’s common stock. The ~~shares~~conversion price on these monthly amortization payments was reduced from $8.00 per share of common stock ~~issuable pursuant~~to a price equal to the ~~Third 10% Convertible Note will not be issued to the institutional investor until the Company shall have obtained approval~~greater of ~~the NYSE American and the Company’s stockholders. The Third 10% Convertible Note matures on February 15, 2019.~~

~~At the time of issuance of the Third 10% Convertible Note, the~~(i) $2.40 per share (the closing price of the Company’s common stock ~~was in excess~~on January 9, 2019) or (ii) 80% of the ~~conversion price, resulting in a beneficial conversion feature (“BCF”). The BCF embedded~~lowest daily VWAP in the ~~Third 10% Convertible Note is accounted for under ASC No.~~~~470, De~~~~bt (“ASC 470”). At issuance,~~three days prior to the ~~intrinsic value of the BCF totaled $827, based on the difference between the effective conversion price and the fair value of the Company’s common stock at the commitment~~ date of the transaction, and the relative fair value of the 400,000 shares of common stock was $177. The Company, however, is prohibited from issuing the 400,000 shares of common stock or the shares of common stock issuable pursuantissuance, but not to the Third 10% Convertible Note unless stockholder approval of such issuance of securities is obtained as required by applicable NYSE American listing rules. The Company has not yet received stockholder approval of such share issuances. This provision resulted in a contingent beneficial conversion feature that shall be recognized once the contingency is resolved.

The Company recorded debt issuance costs of $200 from the Third 10% Convertible Note. The debt issuance costs are being amortized as non-cash interest expense over the term of the debt. During the three months ended September 30, 2018, non-cash interest expense of $33 was recorded from the amortization of the debt issuance costs.

~~Pursuant to an amendment dated as of August 31, 2018 to the 10% Convertible Note and the Second 10% Convertible Note,~~exceed $8.00 per share. Further, the Company ~~reduced~~shall have the right to pay the monthly amortization payment in cash within 72 hours by advising the investor within two hours of receipt of any conversion ~~price to $0.40 from $0.75.~~notice. The amendment to the embedded conversion ~~options~~option of the ~~10% Convertible Note and the Second~~ 10% Convertible Note caused a material change in the fair value of the embedded conversion options ~~on these two notes~~ and resulted in a loss on extinguishment of ~~$666. At~~$807,784.

Between January 4, 2019 and February 21, 2019, the ~~time~~Company issued to the investor 8,412 shares of its common stock upon the conversion of $1,053,351 in principal and accrued interest. The investor received $660,337 from the sale of these shares of common stock. In accordance with the January 9, 2019 amendment, the closing price of the Company’s common stock was in excess of the conversion price, resulting in a BCF. The intrinsic value of the BCF was $1,132 on the 10% Convertible Note and $225 on the Second 10% Convertible Note based onCompany is required to pay the difference between the ~~effective~~ conversion ~~price~~amount and the fair value of the Company’s common stock. The Company, however, is only allowed to issue 8 million shares of common stock pursuant to the 10% Convertible Note and is prohibited from issuing any shares of common stock pursuant to the Second 10% Convertible Note unless stockholder approval of such issuance of securities is obtained as required by applicable NYSE American listing rules. The Company has not yetproceeds received stockholder approval of such share issuances. This provision resulted in a contingent beneficial conversion feature that shall be recognized once the contingency is resolved. During the three months ended September 30, 2018, non-cash interest expense of $51 was recorded from the ~~amortization of debt discounts attributed to the portion~~subsequent sale of the shares ~~currently issuable from~~by the investor, which amounted to $393,014. The Company recognized additional interest expense in the amount of $393,014.

On April 2, 2019, the Company repaid principal of $3,000,000 and accrued interest of $1,125,000 on the Additional 10% Convertible Notes and between April 2, 2019 and June 18, 2019 repaid the balance due on the 10% Convertible Note.

~~(b)~~

On December 4, 2017, the Company entered into a securities purchase agreement to sell a 5% Convertible Note (the “5% Convertible Note”) and 150,000 shares of restricted common stock to an institutional investor. The principal of the 5% Convertible Note and interest thereon was convertible into shares of common stock at $0.60 per share of common stock, subject to adjustments for lower priced issuances, stock splits, stock dividends, combinations or similar events. The 5% Convertible Note was in the principal amount of $550, included an OID of $50 resulting in net proceeds to the Company of $500, accrued interest at 5% simple interest on the principal amount, and was due on August 13, 2018. Interest only payments were due on a quarterly basis and the principal was due on June 3, 2018.

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, ~~2018~~

~~U.S. dollars in thousands, except share and per share data~~

��

At the time of issuance of the 5% Convertible Note, the closing price of the Company’s common stock was in excess of the conversion price, resulting in a BCF accounted for under ASC 470. At issuance, the intrinsic value of the BCF totaled $244 based on the difference between the effective conversion price and the fair value of the Company’s common stock at the commitment date of the transaction. The intrinsic value of the BCF exceeded the proceeds allocated to the relative fair value of the 5% Convertible Note. The BCF was amortized to interest expense over the term of the 5% Convertible Note using the effective interest method. The valuation of the BCF was calculated based on the effective conversion price compared with the market price of the Company’s common stock on the date of issuance of the 5% Convertible Note.

In the aggregate, the Company recorded debt discount in the amount of $550 based on the relative fair values of the 150,000 shares of common stock of $256, BCF of $244 and OID of $50. The debt discount is being amortized as non-cash interest expense over the term of the debt. During the year ended December 31, 2017, non-cash interest expense of $381 was recorded from the amortization of debt discounts. In January 2018, the 5% Convertible Note was converted into 921,645 shares of the Company’s common stock based upon the contractual rights included in the 5% Convertible Note (See Note 21).

~~(c)~~

On August 3, 2017, the Company entered into a securities purchase agreement to sell a 12% Convertible Note (the “12% Convertible Note”) and a warrant to purchase 666,666 shares of common stock to an accredited investor. The principal of the 12% Convertible Note may be converted into shares of common stock at $0.55 per share and under the terms of the Warrant, up to 666,666 shares of common stock may be purchased at an exercise price of $0.70 per share.

The 12% Convertible Note was in the principal amount of $400, included an OID of $40 resulting in net proceeds to the Company of $360, accrued interest at 12% simple interest on the principal amount, and was due on August 13, 2018. Interest only payments were due on a quarterly basis and the principal was due on August 3, 2018. The principal may be converted into shares of the Company’s common stock at $0.55 per share.

The Company computed the fair value of the 666,666 warrants using the Black-Scholes option pricing model and, as a result of this calculation, recorded debt discount in the amount of $167 based on the estimated fair value of the 666,666 warrants.

The BCF embedded in the 12% Convertible Note is accounted for under ASC 470. At issuance, the intrinsic value of the BCF totaled $187. The Company, however, was prohibited from issuing shares of common stock pursuant to the 12% Convertible Note until stockholder approval of such issuance of securities was obtained as required by applicable NYSE American listing rules. The Company received stockholder approval for the share issuances on December 28, 2017. The intrinsic value of the BCF was amortized to interest expense over the term of the 12% Convertible Note using the effective interest method. The valuation of the BCF was calculated based on the effective conversion price compared with the market price of the Company’s common stock on the date of issuance of the 12% Convertible Note. In aggregate, the Company recorded debt discount in the amount of $394 based on the relative fair values of the 666,666 warrants, BCF and OID of $40. During the year ended December 31, 2017, non-cash interest expense of $212 was recorded from the amortization of debt discounts.

On December 28, 2017, principal and accrued interest of $198 and $5, respectively, on the 12% Convertible Note was satisfied through the issuance of 368,760 shares of the Company’s common stock and the remaining balance was converted into 377,678 shares of the Company’s common stock on January 10, 2018 (See Note 21). The fair value of the warrants was estimated using the Black-Scholes option-pricing method. The risk-free rate of 1.79% was derived from the U.S. Treasury yield curve, matching the term of the warrant, in effect at the measurement date. The volatility factor of 107.3% was determined based on the Company’s historical stock prices.

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~2019

Exchange Agreements

~~(d)~~

~~On April 16, 2018, the Company entered into securities purchase agreements to sell (i) a 12%~~

On July 2, 2019, we entered into an exchange agreement with an institutional investor pursuant to which, in exchange for a term promissory note issued by us to the investor on September 21, 2018, in the principal face amount of $526,316, we sold to the investor a new convertible promissory note (the “12% April 2018 Convertible Note”), (ii) a five-year warrant to purchase 993,588 shares of the Company’s common stock at an exercise price of $1.30 per share; and (iii) 200,926 shares of the Company’s common stock to three institutional investors. The 12% April 2018 Convertible Note is convertible into common stock at $0.70 per share, but may only be converted if an event of default thereunder has occurred and not been cured on a timely basis.

~~The 12% April 2018 Convertible Note is~~ in the principal amount of ~~$1,722, included~~$783,031 with an ~~OID~~interest rate of ~~$172 resulting in net proceeds~~12% per annum and a maturity date of December 31, 2019. Subject to the ~~Company~~approval by the NYSE American, this note shall be convertible into shares of ~~$1,550~~common stock, commencing on July 15, 2019, at conversion price equal to the greater of (A) $8.80 or (B) 80% of the lowest daily VWAP in the three trading days prior to the date of conversion.

On July 2, 2019, we entered into an exchange agreement with an institutional investor pursuant to which, in exchange for (i) a term promissory note issued by DP Lending to the investor on August 10, 2018 in the principal face amount of $550,000 and (ii) a term promissory note issued by us on August 16, 2018, as amended on November 29, 2018, in the principal face amount of $318,150, we sold to the investor a new convertible promissory note in the principal amount of $1,250,000 (subject to adjustments) with an interest rate of 8% per annum and a maturity date of December 31, 2019. Subject to the approval by the NYSE American, this note shall be convertible into shares of our common stock at conversion price of $8.80.

On July 3, 2019, we entered into an exchange agreement with an institutional investor pursuant to which, in exchange for a term promissory note issued by us to the investor on March 23, 2018 in the principal face amount of $1,000,000, we sold a convertible promissory note in the principal face amount of $1,292,000 plus a default premium of $200,000, and (ii) a five-year warrant to purchase of 25,000 shares of our common stock at an exercise price of $8.80 per share, subject to the approval thereof by the NYSE American.

This convertible promissory note is in the aggregate principal amount of $1,492,000 and bears interest at 12% ~~simple~~per annum, which principal and all accrued and unpaid interest are due on January 22, 2020, and which interest shall be payable in cash, in arrears, on the first business day of each month, with the first payment of interest due on August 1, 2019. Commencing on July 15, 2019, subject to certain beneficial ownership limitations, the investor may convert the principal ~~amount. The Company is required to make monthly principal and interest payments until the 12% April 2018 Convertible Note is satisfied in full on October 16, 2018.~~

~~The Company computed the fair value of the warrants using the Black-Scholes option pricing model and, as a result~~amount of this calculation, recorded debt discount in the amount of $539 based on the estimated fair value of the warrants. The Company estimated that the grant date fair value of the shares of common stock was $129, which was determined from the closing price of the Company’s common stock on the date of issuance.

In aggregate, the Company recorded debt discount in the amount of $885 based on the relative fair values of the warrants, common stock, OID and debt issuance costs of $45. During the three and nine months ended September 30, 2018, non-cash interest expense of $522 and $885, respectively, was recorded from the amortization of debt discounts. The fair value of the warrants was estimated using the Black-Scholes option-pricing method. The risk-free rate of 2.94% was derived from the U.S. Treasury yield curve, matching the term of the warrant, in effect at the measurement date. The volatility factor of 127.9% was determined based on the Company’s historical stock prices. Beginning on May 16, 2018, the Company was required to make six monthly cash payments in the aggregate amount of $304. On August 31, 2018, the Company made its final payment and in aggregate paid principalnote and accrued interest earned thereon at any time into shares of ~~$1,722 and $103, respectively, on the 12% April 2018 Convertible Note.~~our common stock at $8.80 per share.

~~(e)~~

On January 23, 2018, we entered into a securities purchase agreement with an institutional investor to sell, for an aggregate purchase price of $1,000, a 10% senior convertible promissory note (the “January 2018 10% Convertible Note”) with an aggregate principal face amount of $1,250, a warrant to purchase an aggregate of 625,000 shares of our common stock and 543,478 shares of our common stock. The transactions contemplated by the securities purchase agreement closed on February 8, 2018. The January 2018 10% Convertible Note was convertible into 625,000 shares of the Company’s common stock, a conversion price of $2.00 per share. The exercise price of the warrant to purchase 625,000 shares of the Company’s common stock is $2.20 per share. On February 9, 2018, in addition to the 543,478 shares of common stock provided for pursuant to the securities purchase agreement, the Company issued to the investor an aggregate of 691,942 shares of the Company’s common stock upon the conversion of the entire outstanding principal and accrued interest on the January 2018 10% Convertible Note of $1,384 (See Note 21).

~~20.~~19. COMMITMENTS AND CONTINGENCIES

On July 31, 2018, a ~~shareholder~~stockholder derivative complaint was filed in the United States District Court for the Central District of California against the Company as the nominal defendant, as well as its current directors and a former director styledEthan Young and Greg Young, Derivatively on Behalf of Nominal Defendant, DPW Holdings, Inc. v. Milton C. Ault, III, Amos Kohn, William B. Horne, Jeff Bentz, Mordechai Rosenberg, Robert O. Smith, and Kristine Ault and DPW Holdings, Inc., as the nominal defendant (Case No.~~: 2:~~18-cv-6587) (the “~~Complaint~~”“Complaint”). ~~No hearings have been scheduled as of the date hereof.~~

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

The Complaint alleges violations of state law and breaches of fiduciary duty, unjust enrichment and gross mismanagement by the individual defendants as, in the view of the plaintiffs, the Company has entered into poorly advised loan transactions and related party transactions. The Company and the individual defendants believe that these claims are without merit and intend to vigorously defend themselves. The Company and the individual defendants moved to dismiss the Complaint and on February 25, 2019, the Court granted the motion to dismiss but granted plaintiffs leave to amend their Complaint. On March 11, 2019, plaintiffs filed their amended complaint asserting violations of breaches of fiduciary duties and unjust enrichment claims based on the previously pled transactions. On March 25, 2019, the Company and the individual defendants filed a motion to dismiss the amended complaint. On May 21, 2019, the Court granted in part and denied in part the Motion to Dismiss the Amended Complaint. Specifically, the May 21, 2019 Order granted so much of Defendants’ Motion to Dismiss the Amended Complaint that sought to dismiss Directors Robert O. Smith, Jeff Bentz, and Mordechai Rosenberg as parties. Plaintiffs did not further amend the complaint and proceeded with the operative complaint and forewent any claims against Messrs. Smith, Bentz, and Rosenberg.

On July 8, 2019, the Court held a scheduling conference wherein the Court set a trial date of August 25, 2020.

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, 2019

On October 21, 2019, the parties mediated the matter before JAMS in Manhattan, New York. At that mediation, the matter was tentatively settled with respect to all claim against the Company and the remaining defendants, Milton C. Ault III, Amos Kohn, and William Horne. The tentative settlement included certain changes to the policies of the Company. The tentative settlement agreement did not have a monetary component. Furthermore, the parties settled any dispute over the attorneys’ fees, which will be paid by AIG, the Company’s insurance carrier. The parties are currently working on finalizing the settlement agreement, and expect to have a finalized settlement agreement prior to end of the calendar year. Upon execution of the finalized settlement agreement, Plaintiff will file a notice of dismissal with prejudice with the Court.

On November 28, 2018,Blockchain Mining Supply and Services, Ltd, a vendor who sold computers to the Company’s subsidiary, filed in the United States District Court for the Southern District of New York against Super Crypto Mining, Inc. and the Company (Case No. 18-cv-11099). The Complaint asserted claims for breach of contract and promissory estoppel against the Company and its subsidiary arising from the subsidiary’s failure to satisfy a purchase agreement. The Complaint seeks damages in the amount of $1,388,495, which approximates the amount of the reserve established.

On February 4, 2019, pursuant to the Court’s Rules, the Company requested a pre-motion Conference with the Court. On April 16, 2019, the Court held a pre-motion Conference in connection with the Company’s anticipated motion to dismiss. To date, however, the Court has not set a briefing schedule in connection with the Company’s anticipated motion to dismiss.

Based on the Company’s assessment of the facts underlying the claims, the uncertainty of litigation, and the preliminary stage of the case, the Company cannot estimate the reasonably possible loss or range of loss that may result from this action. However, anthe Company has established a reserve in the amount of the unpaid portion of the purchase agreement. An unfavorable outcome may have a material adverse effect on ~~our~~the Company’s business, financial condition and results of operations.

~~21.~~The Company received a subpoena from the Commission for the voluntary production of documents. The Company is fully cooperating with this non-public, fact-finding inquiry and believe that the Company has operated our business in compliance with all applicable laws. The subpoena expressly provides that the inquiry is not to be construed as an indication by the Commission or its staff that any violations of the federal securities laws have occurred, nor should it be considered a reflection upon any person, entity or security. However, there can be no assurance as to the outcome of this matter.

20. STOCKHOLDERS’ EQUITY

Amendments to Certificate of Incorporation

On January 3, 2019, the Company filed a certificate of amendment (the “Certificate of Amendment”) to its Certificate of Incorporation, with the Secretary of State of the State of Delaware, to effectuate an increase to the number of authorized shares of common stock of the Company. Pursuant to the Certificate of Amendment, the Company increased the number of authorized shares of its Class A common stock to 500,000,000 from 200,000,000 (the “Authorized Increase”). The number of authorized shares of the Company’s Class B common stock remains at 25,000,000 and the number of authorized shares of the Company’s preferred stock remains at 25,000,000. As a result of the increase of authorized shares of the Company’s Class A common stock, the aggregate number of the Company’s authorized shares is 550,000,000. The Authorized Increase was approved by the Company’s Board of Directors (the “Board”) as of December 28, 2018, and approved by a vote of the stockholders of the Company at the December 28, 2018 Annual Meeting of Stockholders. The Certificate of Amendment became effective upon filing with the State of Delaware on January 3, 2019.

On March 14, 2019, pursuant to the authorization provided by the Company’s stockholdersat a Special Meeting of Stockholders, the Company’s Board approved the Certificate of Incorporation Amendment (the “COI Amendment”) to effectuate a reverse stock split of the common stock of the Company’s issued and outstanding number of such shares by a ratio of one-for-twenty (the “Reverse Stock Split”). The Company filed the COI Amendment to its Certificate of Incorporation with the State of Delaware effectuating the Reverse Stock Split on March 14, 2019. As a result of the Reverse Stock Split, each twenty (20) shares of common stock issued and outstanding prior to the Reverse Stock Split were converted into one (1) share of common stock, with no change in authorized shares or par value per share.

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, 2019

At the Company’s reconvened 2019 Annual Meeting of Stockholders, the Company’s stockholders approved a proposal permitting the Board to effectuate a second reverse stock split (the “Second Reverse Stock Split”) of the Company’s issued and outstanding common stock. Thereafter, on July 23, 2019, the Board approved the Second Reverse Stock Split with a ratio of one-for-forty. As a result of the Second Reverse Stock Split, each forty (40) shares of common stock issued and outstanding prior to the Second Reverse Stock Split were converted into one (1) share of common stock, with no change in authorized shares or par value per share. The Second Reverse Stock Split became effective in the State of Delaware on August 5, 2019.

Preferred Stock

The Company is authorized to issue 25,000,000 shares of Preferred Stock $0.001 par value. The Board ~~of Directors~~ has designated 1,000,000 shares as Series A Convertible Preferred Stock (the “Series A Preferred Stock”), 500,000 shares as Series B Convertible Preferred Stock (the “Series B Preferred Stock”)~~, 460,000~~ and 2,500 shares as Series C Convertible Redeemable Preferred Stock (the “Series C ~~Preferred Stock”), 378,776 shares as Series D Convertible Preferred Stock (the “Series D Preferred Stock”) and 10,000 shares as Series E Convertible Preferred Stock (the “Series E~~ Preferred Stock”). The rights, preferences, privileges and restrictions on the remaining authorized ~~23,651,224~~23,497,500 shares of Preferred Stock have not been determined. The ~~Company’s~~ Board ~~of Directors~~ is authorized to ~~create~~designate a new series of preferred shares and determine the number of shares, as well as the rights, preferences, privileges and restrictions granted to or imposed upon any series of preferred shares.As of September 30, ~~2018,~~2019, there were 7,040 shares of Series A Preferred Stock, 125,000 shares of Series B Preferred Stock and no other shares of Preferred Stock issued or outstanding.

On April 24, 2018, pursuant to the terms of the Preferred Stock Purchase Agreement, Philou purchased an additional 25,000 shares of Series B Preferred Stock in consideration of the cancellation of short-term advances due to Philou in the aggregate amount of $250. In addition, Philou received warrants to purchase 357,143 shares of common stock at an exercise price of $0.70 per share of common stock, which have been classified as equity instruments. The Company determined that the estimated relative fair value of these warrants, which are classified as equity, was $142 using the Black-Scholes option pricing model. Since the warrants were classified as equity securities, the Company allocated the $250 purchase price based on the relative fair values of the Series B Preferred Stock and the warrants following the guidance in ASC No. 470,~~Debt~~.

The Series B Convertible Preferred Stock is convertible at any time, in whole or in part, at the option of Philou, into shares of common stock at a fixed conversion price, which is subject to adjustment for stock splits, stock dividends, combinations or similar events, of $0.70 per share. As the effective conversion price of the Series B Convertible Preferred Stock on a converted basis was below the market price of the Company’s common stock on the date of issuance, it was determined that these discounts represent beneficial conversion features, which were valued at $108 based on the difference between the effective conversion price and the market price of the Company’s common stock on the date of issuance. These features are analogous to preference dividends and are recorded as a non-cash return to preferred shareholders through accumulated deficit.

Common Stock

Common stock confers upon the holders the rights to receive notice to participate and vote ~~in the general~~at any meeting of ~~shareholders~~stockholders of the Company, to receive dividends, if and when declared, and to participate in a distribution of surplus of assets upon liquidation of the Company. The Class B common stock carries the voting power of 10 shares of Class A common stock.

~~F-38~~

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

2019 Issuances

Issuance of Common Stock pursuant to the At the Market Offering

On ~~February 27,~~October 10, 2018, the Company entered into ~~a sales agreement~~an At-The-Market Issuance Sales Agreement (the “Sales Agreement”) with ~~H.C. Wainwright~~Wilson-Davis & Co., ~~LLC (“HCW”~~Inc., as sales agent (the “Agent”) to sell shares of ~~the Company’s~~its common stock, having an aggregate offering price of up to ~~$50 million~~$25,000,000 (the “Shares”) from time to time, through an “at the market offering” program (the ~~“HCW~~“WDCO ATM Offering”) ~~under which HCW acts as sales agent. Between February 27, 2018 and~~. During the nine months ended September 30, ~~2018,~~2019, the Company had received ~~net~~gross proceeds of ~~$18,059~~$4,656,051 through the sale of ~~21,241,911~~119,791 shares of the Company’s common stock through the ~~HCW~~WDCO ATM Offering. The offer and sale of the shares through the ~~HCW~~WDCO ATM Offering were made pursuant to ~~the Company’s~~our then effective “shelf” registration statement on Form S-3 and an accompanying base prospectus contained therein (Registration Statement No. 333-222132) filed with the SEC on December 18, 2017, amended on January 8, 2018, and declared effective by the SEC on January 11, 2018, and a prospectus supplement related to the ~~HCW~~WDCO ATM Offering, dated ~~February 27, 2018. The HCW ATM Offering was terminated effective September 23,~~October 15, 2018.

~~In connection~~DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, 2019

Public Offering

On March 29, 2019, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with ~~the termination of the HCW ATM Offering, HCW released DPW from the right of first refusal provisions set forth in the sales agreement. In consideration for the release,~~A.G.P./Alliance Global Partners (the “Underwriter”), pursuant to which the Company agreed to issue ~~HCW 500,000~~and sell an aggregate of (a) 71,388 shares of its common stock (the “Shares”) together with warrants to purchase 71,388 shares of common stock (the “Common Warrants”) and (b) pre-funded warrants to ~~pay HCW~~purchase up to 317,500 shares of its common stock (the “Pre-Funded Warrants”) together with a ~~fee until February 28, 2020~~number of ~~three percent fee~~Common Warrants to purchase 317,500 shares of common stock (the “Offering”). The Shares were sold to the purchasers at the public offering price of $17.60 per share (the “Offering Price”). The Common Warrants were sold at a public offering price of $0.40 per Common Warrant. The Pre-Funded Warrants were offered to each purchaser whose purchase of the Shares and the Common Warrant in the Offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of the Company’s outstanding common stock immediately following the consummation of the Offering. The purchase price of each Pre-Funded Warrant equaled the Offering Price at which the Shares were sold to the public in the Offering, minus $0.40, and the exercise price of each Pre-Funded Warrant equaled $0.40 per share.In addition, the Company has also issued the Underwriter a warrant to purchase a maximum of 15,550 additional shares of common stock at an initial exercise price of $19.80 per share, with a term of five years (the “Underwriter Warrants”).

The Common Warrants are exercisable at any time after the date of issuance at an exercise price of $0.45 per share. However, since the volume weighted average price of the Company’s common stock on or after May 2, 2019, was less than $0.45 per share, the Common Warrant is exercisable by means of a cashless exercise such that the holder of the Common Warrant shall receive one common share for each warrant held.

Upon issuance, the Common Warrants, Pre-Funded Warrants and Underwriter Warrants (the “Offering Warrants”) were recorded at fair value and classified as a liability. Since the fair value of the Offering Warrants exceeded the proceeds from the Offering the Company recognized a loss on issuance of warrants of $1,763,481. The fair value of the Offering Warrants was re-measured at each financial reporting period and immediately before exercise, with any changes in fair value recorded as change in fair value of warrant liability in the Condensed Consolidated Statements of Operations and Comprehensive Loss. The fair value at issuance was calculated using a Black-Scholes option pricing model using a risk-free interest rate of 2.28%, an expected life of 5 years, expected dividends of zero and expected volatility of 87.51%.

The Company received net proceeds from the Offering of $6,204,717, after deducting underwriting discounts and commissions and offering expenses. The Company used the net proceeds from the Offering primarily for the repayment of debt.

The Offering closed on April 2, 2019 and as of September 30, 2019, the Company had issued a total of 771,275 shares of its common stock, inclusive of shares issued pursuant to the exercise of 317,500 Pre-Funded Warrants and 382,387 shares issued pursuant to the cashless exercise of the Common Warrants.

Ascendiant ATM Offering

On August 6, 2019, the Company entered into an At-The-Market Issuance Sales Agreement with Ascendiant Capital Markets, LLC, as sales agent to sell shares of the Company’s common stock having an aggregate offering price of up to $5,500,000 (the “ATM Offering”). The offer and sale of the Company’s common stock will be made pursuant to the Company’s effective “shelf” registration statement on Form S-3 and an accompanying base prospectus contained therein (Registration Statement No. 333-222132) filed with the Securities and Exchange Commission (the “Commission”) on December 18, 2017, amended on January 8, 2018, and declared effective by the SEC on January 11, 2018, and a prospectus supplement related to the ATM Offering, dated August 6, 2019. Through September 30, 2019, the Company had received gross proceeds ~~received on future financings by~~of $4,416,765 through the ~~Company and a one percent fee~~sale of ~~aggregate gross proceeds received on future financings by~~1,140,330 shares of the Company’s ~~subsidiaries.~~common stock from the ATM Offering.

Issuance of Common Stock for Services

During the ~~three and~~ nine months ended September 30, ~~2018,~~2019, the Company issued to its consultants a total ~~of 1,000,000~~29,375 shares ~~and 3,683,059 shares, respectively,~~ of its common stock with an aggregate value of ~~$4,158,~~$305,019, an average of ~~$1.13~~$10.38 per share for services rendered.

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, 2019

Issuance of common stock for conversion of debt

~~On January 3, 2018,~~During the nine months ended September 30, 2019, principal and accrued interest of ~~$23~~$4,238,878 and $497,417, respectively, on the ~~10% Convertible Notes~~Company’s debt securities was satisfied through the issuance of ~~38,750~~370,473 shares of the Company’s common stock.

On January 10, 2018, principal and accrued interest of $202 and $6, respectively, on the 12% Convertible Note was satisfied through the issuance of 377,678 shares of the Company’s common stock (See Note 19d).

On January 12, 2018, principal and accrued interest of $550 and $3, respectively, on the 5% Convertible Note was satisfied through the issuance of 921,645 shares of the Company’s common stock (See Note 19c).

On February 9, 2018, principal and accrued interest of $1,250 and $134, respectively, on the January 2018 10% Convertible Note was satisfied through the issuance of 691,942 shares of the Company’s common stock (See Note 19e).

~~Issuances of Common Stock upon Exercise of Stock Options~~

During January 2018, the Company issued a total of 60,000 shares of its common stock upon the cash exercise of options. These options were issued pursuant to the Company’s Plans. The Company received cash of $98 as a result of these option exercises.

~~Issuances of Common Stock upon Exercise of Warrants~~

During January 2018, the Company issued a total of 1,866,471 shares of its common stock upon the cash and cashless exercise of warrants to purchase an aggregate of 2,187,646 shares of its common stock. These warrants were issued between August 2017 and December 2017 in conjunction with various common stock and debt financings. The Company received cash of $867 as a result of these warrant exercises.

On May 8, 2018, the Company issued 279,170 shares of common stock pursuant a cashless exercise of warrants issued to Divine Capital Markets, LLC, its Placement Agent (the “Placement Agent”) for the 2017 private placement of the Series C Preferred Stock and warrants. For its services, the Placement Agent received, a warrant to purchase 182,003 shares of the Company’s common stock at $0.72 per share and a second warrant to purchase 182,003 shares of the Company’s common stock at $1.00 per share.

~~F-39~~

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

~~Issuances~~Issuance of common stock in ~~connection with convertible notes~~payment of accrued liability

On February 9, 2018, in conjunction with the securities purchase agreement to sell the January 2018 10% Convertible Note in the principal amount of $1,250, the Company issued 543,478 shares of restricted common stock to the institutional investor (See Note 19c).

On April 16, 2018, in conjunction with the securities purchase agreements to sell the 12% April 2018 Convertible Note in the principal amount of $1,722, the Company issued 200,926 shares of restricted common stock to the institutional investor (See Note 19d).

On May 15, 2018, in conjunction with the securities purchase agreements to sell the 10% Convertible Note in the principal amount of $6,000, the Company issued 344,828 shares of restricted common stock to the institutional investor (See Note 19a). On August 10, 2018, pursuant to an amendment to 10% Convertible Note entered into on July 2, 2018, the Company issued an additional 400,000 shares of restricted common stock to the holder of the note.

~~Issuances of Common Stock upon Conversion of Series D Preferred Stock~~

During the nine months ended September 30, ~~2018, pursuant to the conversion terms of the Series D Preferred Stock, 378,776 shares of the Series D Preferred Stock was converted into 757,552 shares of the Company’s common stock.~~

~~Issuances of Common Stock for cash and cancellation of short-term advances~~

On October 5, 2017, Ault & Company purchased 75,000 shares of the Company’s common stock at $0.60 per share and a warrant to purchase up to 75,000 shares of the Company’s common stock at $0.60 per share for an aggregate purchase price of $45. The shares and warrants were issued by2019, the Company ~~on May 8, 2018. Ault & Company is controlled by Mr. Milton Ault, the Company’s Chairman and Chief Executive Officer.~~

~~On May 15, 2018, the Company entered into securities purchase agreements with certain investors in which the Company sold an aggregate of 7,691,775~~issued 9,375 shares of its common stock ~~and five-year warrants to purchase such number~~in satisfaction of ~~shares~~an accrued liability of common stock equal to the shares of common stock purchased by the investors. The Company received aggregate consideration of $6,000, consisting of cash and the cancellation of short-term advances of $3,225 and $2,775, respectively. These securities were issued pursuant to our registration statement filed with the Securities and Exchange Commission (File No. 333-222132) which became effective on January 11, 2018.$108,521.

~~Treasury Stock~~

The Company utilizes the cost method of accounting for treasury stock. The cost of reissued shares is determined under the last-in, first-out method. The Company purchased 54,998 shares for $55 during the nine months ended September 30, 2018.

~~22.~~21. RELATED PARTY TRANSACTIONS

The Company has made a strategic investment in AVLP in expectation of future business generated by the Company from MTIX Ltd., an advanced materials and processing technology company located in Huddersfield, West Yorkshire, UK (“MTIX”), a wholly-owned subsidiary of AVLP. The Company’s investments in AVLP consist of convertible promissory notes, warrants and shares of common stock of AVLP. On September 6, 2017, the Company and AVLP entered into a Loan and Security Agreement (“AVLP Loan Agreement”) with an effective date of August 21, 2017, pursuant to which the Company will provide AVLP a non-revolving credit facility of up to ~~$10,000~~$10,000,000 for a period ending on August 21, 2019, subject to the terms and conditions stated in the Loan Agreement, including that the Company having available funds to grant such credit. At September 30, ~~2018,~~2019, the Company has provided loans to AVLP in the principal amount ~~$6,407~~$9,476,979 and, in addition to the 12% convertible promissory notes, AVLP has issued to the Company warrants to purchase ~~12,814,440~~18,953,958 shares of AVLP common stock. Under the terms of the AVLP Loan Agreement, any notes issued by AVLP are secured by the assets of AVLP. As of September 30, ~~2018 and December 31, 2017,~~2019, the Company recorded contractual interest receivable attributed to the AVLP Loan Agreement of ~~$803 and $324, respectively.~~$1,736,859.

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

During the nine months ended September 30, ~~2018~~2019 and the year ended December 31, ~~2017,~~2018, the Company also acquired in the open market ~~389,391~~91,000 shares of AVLP common stock for ~~$371~~$53,032 and ~~221,333~~430,942 shares of AVLP common stock for ~~$192,~~$417,169, respectively. At September 30, ~~2018,~~2019, the ~~closing market price of AVLP’s common stock was $0.94, a decline from $1.75 at December 31, 2017. The Company has determined that its~~Company’s investment in AVLP ~~marketable equity securities are accounted for pursuant to the fair value method and based upon the closing market price of~~ common stock ~~at September 30, 2018, the Company has recognized~~had an unrealized ~~gain~~loss of ~~$163.~~$348,891.

Philou is AVLP’s controlling shareholder. Mr. Ault is Chairman of AVLP’s Board of Directors and the Chairman of the ~~Company’s Board of Directors.~~Board. Mr. William B. Horne is the Chief Financial Officer and a director of AVLP and the ~~Chief Financial Officer and a director of the~~ Company.

During the three and nine months ended September 30, 2018, the Company recognized $353 and $3,912 in revenues resulting from its relationship with MTIX, which was acquired by AVLP on August 22, 2017 and is therefore deemed to be a related party. In March 2017, the Company was awarded a ~~3-year,~~ $50 million purchase order by MTIX to manufacture, install and service the Multiplex Laser Surface Enhancement (“MLSE”) plasma-laser system. ~~Management believes that~~At June 30, 2019, the ~~MLSE purchase order will be~~Company had recorded a ~~source~~receivable from MTIX of ~~revenue~~$1,238,856 and ~~generate significant cash flows for~~during the ~~Company. However, at September~~six months ended June 30, ~~2018, $3,887 in~~2019, the Company had received payments from MTIX of $2,676,219. The receivable was primarily the result of revenues recognized during the ~~nine months ended September 30, 2018 and~~ year ended December 31, ~~2017, had not yet been received~~2018, and ~~was~~ reflected on the financial statements as accounts receivable, related party.

~~On April 13, 2018,~~During the Company entered into an amended and restated consulting agreement with Mr. Ault pursuant to which the parties thereto agreed to amend and restate that certain independent contractor agreement dated September 22, 2016, by and between the Company and Mr. Ault. In accordance with the terms set forth in the Agreement, Mr. Ault shall continue to serve as the Company’s Chief Executive Officer and Chairman of the Board of Directors in consideration of a monthly fee of $33, effective November 15, 2017. On June 17, 2018, the Company entered into a ten-year executive employment agreement with Mr. Ault. For his services, Mr. Ault will be paid a base salary of $400 per annum. For his services, Mr. Ault was paid $100 and $300 during the three and nine months ended September 30, ~~2018~~2019, the Company acquired 137,500 shares of common stock of Alzamend from a third party for $110,000 consisting of the cancellation of principal and ~~$208 during~~interest due the ~~year ended December 31, 2017.~~Company of $91,483 and cash of $18,517. AVLP provides management, consulting and financial services to Alzamend.

~~On March 9, 2017,~~During the nine months ended September 30, 2019, Ault & Company, ~~entered into a Preferred Stock Purchase Agreement with Philou. Pursuant to~~Inc. (“Ault & Company”) has provided $625,500 in short-term advances. Ault and Company is the ~~terms~~Manager of Philou which presently owns 125,000 shares of the ~~Preferred Stock Purchase Agreement, Philou may invest up to $5,000 in the Company through the purchase of~~Company’s Series B Preferred ~~Stock over 36 months.Philou has purchased 125,000 shares~~Stock. Mr. Ault and Mr. Horne serve as the Chief Executive Officer and Chief Financial Officer, respectively, of ~~Series B Preferred Stock pursuant to the terms of the Purchase Agreement, the most recent purchase having occurred on April 24, 2018 for the purchase of 25,000 shares of Series B Preferred Stock~~.Ault & Company.

~~Between July 6, 2017 and September 30, 2018, Milton C.~~ Ault ~~III, the Company’s Chairman and Chief Executive Officer, personally~~& Company guaranteed the ~~repayment of (i) $8,218 from the sale of Advances on Future Receipts (ii)~~prompt and ~~$4,781 from the sale~~complete payment and performance of the June 2019 short-term promissory notes. These personal guarantees were necessary to facilitate the consummation of these financing transactions. Mr. Ault’s payment obligations would be triggered if the Company failed to perform under these financing obligations. Our board of directors has agreed to compensate Mr. Ault for his personal guarantees. Thenote with a principal face amount of ~~annual compensation for each of these guarantees, which will be in the form of non-cash compensation, is approximately 1.5% of the amount of the obligation.~~$2,900,000.

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, ~~2018~~

~~U.S. dollars in thousands, except share and per share data~~2019

During the year ended December 31, 2017, DP Lending made loans to Alzamend Neuro, Inc. (“Alzamend”), in the amount of $44. AVLP is a party to a management services agreement pursuant to which AVLP provides management, consulting and financial services to Alzamend. At June 30, 2018, the outstanding principal under these loans had been repaid. As additional consideration, the Company received a warrant to purchase 22,000 shares of Alzamend’s common stock at an exercise price of $0.30 per share of common stock.

~~23.~~22. SEGMENT, CUSTOMERS AND GEOGRAPHICAL INFORMATION

The Company has five reportable segments as of September 30, ~~2018~~2019, and had two reportable segments as of September 30, ~~2017;~~2018; see Note 1 for a brief description of the Company’s business.

The following data presents the revenues, expenditures and other operating data of the Company’s geographic operating segments and presented in accordance with ASC No. 280.

	Three Months ended September 30, 2019
	DPC			DPL			Enertec			SC Mining			I.AM			Total
Revenue	$	2,773,707		$	341,529		$	1,853,204		$	—		$	—		$	4,968,440
Revenue, cryptocurrency
mining		—			—			—			307,172			—			307,172
Revenue, restaurant operations		—			—			—			—			1,036,834			1,036,834
Revenue, lending activities		69,217			—			—			—			—			69,217
Total revenues	$	2,842,924		$	341,529		$	1,853,204		$	307,172		$	1,036,834		$	6,381,663
Depreciation and
amortization expense	$	140,278		$	36,403		$	222,337		$	1,433,145		$	280,412		$	2,112,575
Loss from operations	$	(206,509	)	$	(84,780	)	$	(212,585	)	$	(5,049,622	)	$	(284,167	)	$	(5,837,663	)
Capital expenditures for
segment assets, as of
September 30, 2019	$	26,081		$	12,252		$	12,883		$	—		$	4,501		$	55,717
Identifiable assets as of
September 30, 2019	$	32,186,830		$	1,301,273		$	11,184,088		$	850,984		$	1,902,803		$	47,425,978

Nine Months ended September 30, 2018
DPC DPL Enertec SC Mining I.AM Eliminations Total
Revenue $ 8,532 $ 1,339 $ 3,374 $ — $ — $ — $ 13,245
Revenue,
cryptocurrency
mining — — — 1,546 — — 1,546
Revenue, related party 3,912 — — — — — 3,912
Revenue, restaurant
operations
— — — — $ 2,087 — 2,087
Revenue, lending
activities 194 — — — — — 194
Inter-segment revenues 30 — — — — (30 ) —
Total revenues $ 12,668 $ 1,339 $ 3,374 $ 1,546 $ 2,087 $ (30 ) $ 20,984

Depreciation and
amortization expense $ 127 $ 44 $ 37 $ 1,434 $ — $ — $ 1,642

Loss from operations $ (1,862 ) $ (498 ) $ 47 $ (3,020 ) $ (5 ) $ — $ (5,338 )
Capital expenditures for
segment assets, as of
September 30, 2018 $ 349 $ 1 $ 38 $ 9,051 $ 129 $ — $ 9,568

Identifiable assets as of
September 30, 2018 $ 30,113 $ 1,517 $ 11,025 $ 8,245 $ 2,204 $ — $ 53,104

	Three Months ended September 30, 2018
	DPC			DPL			Enertec			SC Mining			I.AM			Eliminations			Total
Revenue	$	2,974,216		$	601,679		$	2,156,107		$	—		$	—		$	—		$	5,732,002
Revenue, cryptocurrency
mining		—			—			—			590,165			—			—			590,165
Revenue, related party		352,496			—			—			—			—			—			352,496
Revenue, restaurant operations		—			—			—			—			1,584,891			—			1,584,891
Revenue, lending activities		85,368			—			—			—			—			—			85,368
Inter-segment revenues		25,168			—			—			—			—			(25,168	)		-
Total revenues	$	3,437,248		$	601,679		$	2,156,107		$	590,165		$	1,584,891		$	(25,168	)	$	8,344,922
Depreciation and
amortization expense	$	74,018		$	12,643		$	27,538		$	802,952		$	—		$	—		$	917,151
Loss from operations	$	(792,092	)	$	(47,128	)	$	(99,201	)	$	(1,169,739	)	$	(3,829	)	$	—		$	(2,111,989	)
Capital expenditures for
segment assets, as of
September 30, 2018	$	5,838		$	—		$	6,791		$	241,725		$	106,074		$	—		$	360,428
Identifiable assets as of
September 30, 2018	$	30,113,607		$	1,516,710		$	11,024,505		$	8,245,136		$	2,204,303		$	—		$	53,104,261

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, ~~2018~~

~~U.S. dollars in thousands, except share and per share data~~2019

	Nine Months ended September 30, 2017												Nine Months ended September 30, 2019
	DPC			DPL			Eliminations			Total			DPC			DPL			Enertec			SC Mining			I.AM			Total
Revenue	$	5,206		$	1,464		$	—		$	6,670		$	7,110,243		$	1,423,971		$	6,527,075		$	—		$	—		$	15,061,289
Inter-segment revenues		43			—			(43	)		—
Revenue, cryptocurrency
mining														—			—			—			592,092			—			592,092
Revenue, restaurant operations														—			—			—			—		$	3,371,465			3,371,465
Revenue, lending activities														443,927			—			—			—			—			443,927
Total revenues	$	5,249		$	1,464		$	(43	)	$	6,670		$	7,554,170		$	1,423,971		$	6,527,075		$	592,092		$	3,371,465		$	19,468,773

Depreciation and
amortization expense	$	75		$	53		$	—		$	128		$	210,424		$	56,200		$	377,259		$	2,149,717		$	280,413		$	3,074,013

Loss from operations	$	(3,277	)	$	(272	)	$	—		$	(3,549	)	$	(1,169,851	)	$	(87,468	)	$	(372,691	)	$	(6,538,493	)	$	(716,637	)	$	(8,885,140	)
Capital expenditures for
segment assets, as of
September 30, 2018	$	8		$	13		$	—		$	21

September 30, 2019													$	34,899		$	81,319		$	21,045		$	—		$	12,060		$	149,323
Identifiable assets as of
September 30, 2018	$	12,315		$	1,666		$	—		$	13,981
September 30, 2019													$	32,186,830		$	1,301,273		$	11,184,088		$	850,984		$	1,902,803		$	47,425,978

Three Months ended September 30, 2018
DPC DPL Enertec SC Mining I.AM Eliminations Total
Revenue $ 2,974 $ 601 $ 2,156 $ — $ — $ — $ 5,731
Revenue,
cryptocurrency
mining — — — 590 — — 590
Revenue, related party 353 — — — — — 353
Revenue, restaurant
operations — — — — $ 1,585 — 1,585
Revenue, lending
activities 85 — — — — — 85
Inter-segment revenues 25 — — — — (25 ) —
Total revenues $ 3,437 $ 601 $ 2,156 $ 590 $ 1,585 $ (25 ) $ 8,344

Depreciation and
amortization expense $ 40 $ 13 $ 28 $ 803 $ — $ — $ 884

Loss from operations $ (792 ) $ (47 ) $ (99 ) $ (1,170 ) $ (4 ) $ — $ (2,112 )
Capital expenditures for
segment assets, as of
September 30, 2018 $ 5 $ — $ 7 $ 242 $ 106 $ — $ 360

Identifiable assets as of
September 30, 2018 $ 30,113 $ 1,517 $ 11,025 $ 8,245 $ 2,204 $ — $ 53,104

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

Three Months ended September 30, 2017
DPC DPL Eliminations Total
Revenue $ 2,877 $ 343 $ — $ 3,220
Inter-segment revenues 6 — (6 ) —
Total revenues $ 2,883 $ 343 $ (6 ) $ 3,220

Depreciation and
amortization expense $ 32 $ 16 $ — $ 48

Loss from operations $ (1,137 ) $ (181 ) $ — $ (1,318 )
Capital expenditures for
segment assets, as of
September 30, 2018 $ — $ — $ — $ —

Identifiable assets as of
September 30, 2018 $ 12,315 $ 1,666 $ — $ 13,981

	Nine Months ended September 30, 2018
	DPC			DPL			Enertec		SC Mining			I.AM			Eliminations			Total
Revenue	$	8,532,029		$	1,339,413		$	3,373,977	$	—		$	—		$	—		$	13,245,419
Revenue, cryptocurrency
mining		—			—			—		1,546,418			—			—			1,546,418
Revenue, related party		3,911,263			—			—		—			—			—			3,911,263
Revenue, restaurant operations		—			—			—		—			2,087,383			—			2,087,383
Revenue, lending activities		194,120			—			—		—			—			—			194,120
Inter-segment revenues		29,681			—			—		—			—			(29,681	)		—
Total revenues	$	12,667,093		$	1,339,413		$	3,373,977	$	1,546,418		$	2,087,383		$	(29,681	)	$	20,984,603
Depreciation and
amortization expense	$	226,639		$	43,667		$	37,257	$	1,434,932		$	—		$	—		$	1,742,495
Loss from operations	$	(1,861,923	)	$	(498,536	)	$	46,961	$	(3,019,856	)	$	(4,838	)	$	—		$	(5,338,192	)
Capital expenditures for
segment assets, as of
September 30, 2018	$	349,190		$	1,301		$	38,460	$	9,048,503		$	128,732		$	—		$	9,566,186
Identifiable assets as of
September 30, 2018	$	30,113,607		$	1,516,710		$	11,024,505	$	8,245,136		$	2,204,303		$	—		$	53,104,261

Concentration Risk:

The following ~~table provides~~tables provide the percentage of total revenues for the three and nine months ended September 30, 2019 and 2018 attributable to a single customer from which 10% or more of total revenues are ~~derived:~~derived.

For the Three Months Ended For the Nine Months Ended
September 30, 2018 September 30, 2018

Total Revenues Total Revenues
by Major Percentage of by Major Percentage of
Customers Total Company Customers Total Company
(in thousands) Revenues (in thousands) Revenues
Customer A $ — — $ 3,911 19 %

For the Three Months Ended For the Nine Months Ended
September 30, 2017 September 30, 2017

Total Revenues Total Revenues
by Major Percentage of by Major Percentage of
Customers Total Company Customers Total Company
(in thousands) Revenues (in thousands) Revenues
Customer B $ 433 13 % $ 1,062 16 %

Revenue from Customer A is related party revenue attributable to Coolisys and revenue from Customer B is also attributable to Coolisys. At September 30, 2018, MTIX represented all of the Company’s accounts and other receivable, related party.

DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, ~~2018~~

~~U.S. dollars in thousands, except share and per share data~~2019

For the Three Months Ended

For the Nine Months Ended

September 30, 2019

Total Revenues

Percentage of

Total Revenues

Percentage of

by Major

Total Company

by Major

Total Company

Customers

Revenues

Customers

Revenues

Customer A

1,424,982

4,270,523

For the Three Months Ended

For the Nine Months Ended

September 30, 2018

Total Revenues

Percentage of

Total Revenues

Percentage of

by Major

Total Company

by Major

Total Company

Customers

Revenues

Customers

Revenues

Customer B

—

3,911,263

Revenue from Customer A is attributable to Enertec. Revenue from Customer B relates to MTIX, a related party, and is attributable to Coolisys. Further, at September 30, 2019, MTIX represented all the Company’s accounts and other receivable, related party.

For the three and nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, total revenues from external customers divided on the basis of the Company’s product lines are as follows:

For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2018 2017 2018 2017
Revenues:
Commercial products $ 5,073 $ 1,342 $ 13,874 $ 3,362
Defense products 3,271 1,878 7,110 3,308
Total revenues $ 8,344 $ 3,220 $ 20,984 $ 6,670

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Revenues:
Commercial products	$	3,326,936	$	5,073,698	$	10,221,209	$	13,874,921
Defense products		3,054,727		3,271,224		9,247,564		7,109,682
Total revenues	$	6,381,663	$	8,344,922	$	19,468,773	$	20,984,603

Financial data relating to geographic areas:

The Company’s total revenues are attributed to geographic areas based on the location. The following table presents total revenues for the three and nine months ended September 30, ~~2018~~2019 and ~~2017.~~2018. Other than as shown, no foreign country or region contributed materially to revenues or long-lived assets for these periods:

	For the Three Months Ended				For the Nine Months Ended				For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2018		2017		2018		2017		2019		2018		2019		2018
Revenues:
North America	$	5,167	$	2,671	$	15,599	$	4,746	$	4,040,664	$	5,166,899	$	11,110,035	$	15,599,219
Middle East										1,869,647		2,156,106		6,358,200		3,373,976
Europe		693		342		1,338		1,244		253,747		693,725		1,283,312		1,338,313
Middle East		2,156		—		3,374		—
Other		328		207		673		680		217,605		328,192		717,226		673,095
Total revenues	$	8,344	$	3,220	$	20,984	$	6,670	$	6,381,663	$	8,344,922	$	19,468,773	$	20,984,603

~~24.~~DPW HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)

SEPTEMBER 30, 2019

23. SUBSEQUENT EVENTS

In accordance with FASB ASC 855-10, the Company has analyzed its operations subsequent to September 30, ~~2018~~2019, and thru the date of this report being issued and has determined that it does not have any material subsequent events to disclose in these financial statements except for the following.

On October 5, 2018, I.AM entered into a management agreement (the “Management Agreement”) with 876CO LLC (the “Manager”). David J. Krause and Deborah J. Krause are the sole members of the Manager. Pursuant to the Management Agreement, I.AM engaged the Manager to manage the operations of four “Prep Kitchen” restaurants, and such other hospitality venues that I.AM acquires through the efforts of the Manager or David Krause. I.AM agreed to pay the Manager a management fee for each restaurant, (a) for each month that such restaurant is not profitable, $5 per month, or (b) for each month that such restaurant achieves a gross profit, the greater of 6% of the gross revenue for such month, or $5, provided that in the event that payment of the 6% management fee would cause such restaurant to become unprofitable, the Manager will only be entitled to receive as much of the 6% management fee, if greater than $5, as would cause such restaurant to break even. Pursuant to the Management Agreement, if I.AM terminates the Management Agreement without cause, I.AM will be required to pay to the Manager the sum of $1,000. DP Lending entered into a guarantee of payments solely with respect to this termination provision.Ascendiant ATM Offering

OnDuring October 11, 2018, we entered into a Securities Purchase Agreement with a certain institutional investor providing for the issuance of (i) an Original Issue Discount Promissory Note in the principal face amount of $565 due December 8, 2018, for a purchase price of $510, and (ii) 400,000 shares of common stock to be issued by2019 the Company ~~subject to approval of the NYSE American.~~

~~DPW HOLDINGS AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Unaudited (Continued)~~

~~SEPTEMBER 30, 2018~~

~~U.S. dollars in thousands, except share and per share data~~

On October 15, 2018, the Company entered into an At-The-Market Issuance Sales Agreement with Wilson-Davis & Co., Inc., (“Wilson-Davis”) to sell shares of the Company’s common stock, having an aggregate offering price of up to $25 million from time to time, through an “at the market offering” program (the “ATM Offering”) under which Wilson-Davis acts as sales agent. Between October 23, 2018 and November 12, 2018, the Company had received ~~net~~gross proceeds of ~~$771~~$1,083,234 through the sale of ~~3,001,322~~679,496 shares of the Company’s common stock through the ATM Offering. The offer and sale of the shares through the ATM Offering were made pursuant to the Company’s effective “shelf” registration statement on Form S-3 and an accompanying base prospectus contained therein (Registration Statement No. 333-222132) filed with the SEC on December 18, 2017, amended on January 8, 2018, and declared effective by the SEC on January 11, 2018, and a prospectus supplement related to the ATM Offering, dated October 15, 2018.

Issuance of common stock in payment of accrued liability

~~During October 2018, in accordance with the terms of 12% term promissory notes in the principal face amount of $789,~~

On November 1, 2019, the Company issued ~~450,000~~25,602 shares of its common stock in satisfaction of an accrued liability of $30,722.

Exchange Agreements

On November 4, 2019, the Company entered into an exchange agreement with a certain investor (the “Investor”) pursuant to which, in exchange for an original issue discount promissory note issued by the Company for the benefit of the Investor on July 25, 2019, as amended, the Company sold to the ~~investors.~~Investor a new convertible promissory note in the principal amount of $350,000 with an interest rate of 12% per annum. Subject to the approval by the NYSE American, this note shall be convertible into shares of the Company’s common stock at conversion price of $1.20 per share, subject to adjustments.

On November 15, 2019, the Company entered into an exchange agreement with a lender (the “Lender”) pursuant to which the Company issued to the Lender a convertible promissory note in the principal amount of $935,772 with an interest rate of 8% per annum, in exchange for those certain promissory notes (i) in the original principal amount of $575,000 issued on May 10, 2019, and (ii) in the original principal amount of $230,000 issued on May 21, 2019 held by the Lender. Subject to the approval by the NYSE American, this note shall be convertible into shares of the Company’s common stock at conversion price of $1.80.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In this quarterly report, the “Company,” “DPW Holdings,” “we,” “us” and “our” refer to DPW Holdings, Inc., a Delaware corporation, our wholly-owned subsidiaries, Coolisys Technologies, Inc., Power-Plus Technical Distributors, LLC, Digital Power Lending, LLC, ~~Super Crypto Mining,~~Digital Farms, Inc., Digital Power Limited, Enertec Systems 2001 Ltd. and our majority owned subsidiaries, Microphase Corporation and I.AM, LLC.

Recent Developments

On ~~February 27, 2018,~~May 13, 2019, we filed an Offering Statement on Form 1-A pursuant to Regulation A promulgated by the Securities and Exchange Commission (the “Commission”), pursuant to which up to $50 million of 3-year, non-convertibles promissory notes (“Promissory Notes”) will be offered and sold once the Commission has qualified the Offering Statement. The Promissory Notes will accrue annualized interest of 12% that will be paid rata monthly and will be offered on a continuous basis, in each case as determined by us in our sole discretion. The Company cannot provide any assurance that any Promissory Notes will be sold pursuant this Offering Statement.

At our reconvened 2019 Annual Meeting of Stockholders, our stockholders approved a proposal permitting our Board of Directors (the “Board”) to effectuate a second reverse stock split (the “Second Reverse Stock Split”) of our issued and outstanding common stock. Thereafter, on July 23, 2019, the Board approved the Second Reverse Stock Split with a ratio of one-for-forty. As a result of the Second Reverse Stock Split, each forty (40) shares of common stock issued and outstanding prior to the Second Reverse Stock Split were converted into one (1) share of common stock, with no change in authorized shares or par value per share. The Second Reverse Stock Split became effective in the State of Delaware on August 5, 2019.

On August 6, 2019, we entered into aan At-The-Market Issuance Sales Agreement with ~~H.C. Wainwright & Co.,~~Ascendiant Capital Markets, LLC, ~~(“HCW”) to sell~~as sales agent in which we sold shares of our common stock having an aggregate offering price of ~~up to $50 million from time to time, through an “at the market offering” program~~$5,500,000 (the ~~“HWC ATM~~“ATM Offering”) ~~under which HCW acted as sales agent.~~. The offer and sale of our common stock was made pursuant to our effective “shelf” registration statement on Form S-3 and an accompanying base prospectus contained therein (Registration Statement No. 333-222132) filed with the ~~SEC on December 18, 2017, amended on January 8, 2018,~~Securities and ~~declared effective by the SEC on January 11, 2018, and a prospectus supplement related to the HCW ATM Offering, dated February 27, 2018.The HCW ATM Offering was terminated effective September 23, 2018~~

~~On October 15, 2018, we entered into an At-The-Market Issuance Sales Agreement with Wilson-Davis & Co., Inc., (“Wilson-Davis”~~Exchange Commission (the “Commission”) as sales agent to sell shares of our common stock, having an aggregate offering price of up to $25 million from time to time, through an “at the market offering” program. The offer and sale of our common stock will be made pursuant to the Company’s effective “shelf” registration statement on Form S-3 and an accompanying base prospectus contained therein (Registration Statement No. 333-222132) filed with the SEC on December 18, 2017, amended on January 8, 2018, and declared effective by the SEC on January 11, 2018, and a prospectus supplement related to the ATM Offering, dated October 15, 2018. Subject to the terms and conditions of the At-The-Market Issuance Sales Agreement, Wilson-Davis will use its commercially reasonable efforts to sell shares of our common stock, based upon our instructions, consistent with its normal trading and sales practices and applicable state and federal laws, rules and regulations and rules of the NYSE American. We will pay to Wilson-Davis a commission in an amount equal to 4.0% of the gross sales price per share of common stock sold through the ATM Offering as sales agent under the At-The-Market Issuance Sales Agreement.August 6, 2019.

GENERAL

We are a growth company seeking to increase our revenues through acquisitions. ~~Our strategy reflects our management~~We continually assess acquisition opportunities and ~~Board’s current philosophy~~are exploring acquisitions in the financial sector.

Over the recent past we have provided capital and relevant expertise to fuel the growth of businesses in defense/aerospace, industrial, telecommunications, medical, crypto-mining, textiles and a select portfolio of commercial hospitality properties. We have provided capital to subsidiaries as well as partner companies in which we ~~began implementing upon~~have an equity interest or may be actively involved, influencing development through board representation and management support.

Through our lending subsidiary, DP Lending, we have launched an online fintech portal, MonthlyInterest.com, that facilitates investments that pay monthly interest. As a holding company, we have been developing DP Lending to enable the ~~change~~capacity to fund entrepreneurs, our subsidiaries and partner companies. We believe MonthlyInterest.com will provide investors the opportunity to invest directly into companies and technology that will have a global impact, bypassing traditional banking and lending institutions.

Realizing Value

As a holding company, our business strategy is designed to increase shareholder value. Under this strategy, we are focused on managing and financially supporting our existing subsidiaries and partner companies, with the goal of pursuing monetization opportunities and maximizing the value returned to shareholders. We have, are and will consider initiatives including, among others: public offerings, the sale of individual partner companies, the sale of certain or all partner company interests in ~~control~~secondary market transactions, or a combination thereof, as well as other opportunities to maximize shareholder value. We anticipate returning value to shareholders after satisfying our debt obligations and working capital needs.

From time to time, we engage in discussions with other companies interested in our subsidiaries or partner companies, either in response to inquiries or as part of a process we initiate. To the extent we believe that ~~was completed on September 22, 2016. Our acquisition~~a subsidiary partner company’s further growth and development ~~target strategy include companies that have developed~~can best be supported by a ~~“new way~~different ownership structure or if we otherwise believe it is in our shareholders’ best interests, we will seek to sell some or all of doing business” in mature, well-developed industries experiencing changes due to new technology; companies that may become profitable or more profitable through efficiency and reduction of costs; companies that are related to our ~~core business~~position in the ~~commercial~~subsidiary or partner company. These sales may take the form of privately negotiated sales of stock or assets, mergers and ~~defense industries;~~acquisitions, public offerings of the subsidiary or partner company’s securities and, ~~companies that will enhance our overall revenues. It is our goal to substantially increase our gross revenues~~ in the ~~near future.~~

~~We were originally a solution-driven organization that designed, developed, manufactured~~case of publicly traded partner companies, sales of their securities in the open market. Our plans may include taking subsidiaries or partner companies public through rights offerings and ~~sold high-grade customized and flexible power system solutions for the medical, military, telecom and industrial markets. Although we intend to seek growth through acquisitions, we~~directed share subscription programs. We will continue to ~~focus on high-grade~~consider these (or similar) programs and ~~custom product designs for~~ the ~~commercial, medical and military/defense markets, where customers demand high density, high efficiency and ruggedized products to meet the harshest and/~~sale of certain subsidiary or ~~military mission critical operating conditions.~~

We have operations located in Europe through our wholly-owned subsidiary, Digital Power Limited (“DP Limited”), Salisbury, England, which operates under the brand name of “Gresham Power Electronics” (“Gresham”). DP Limited designs, manufactures and sells power products and system solutions mainly for the European marketplace, including power conversion, power distribution equipment, DC/AC (Direct Current/Active Current) inverters and UPS (Uninterrupted Power Supply) products. Our European defense business is specialized in the field of naval power distribution products.

On November 30, 2016, DPW Holdings formed Digital Power Lending, LLC (“DP Lending”), a wholly-owned subsidiary. DP Lending is engaged in providing commercial loans to companies throughout the United States to provide them with operating capital to finance the growth of their businesses. The loans will primarily be short-term, ranging from six to twelve months, but may be of longer duration.

On June 2, 2017, DPW Holdings purchased 56.4% of the outstanding equity interests of Microphase Corporation (“Microphase”). Microphase is a design-to-manufacture original equipment manufacturer (“OEM”) industry leader delivering world-class radio frequency (“RF”) and microwave filters, diplexers, multiplexers, detectors, switch filters, integrated assemblies and detector logarithmic video amplifiers (“DLVA”) to the military, aerospace and telecommunications industries. Microphase is headquartered in Shelton, Connecticut.

On April 25, 2017, DPW Holdings formed Coolisys Technologies, Inc. (“Coolisys”), a wholly-owned subsidiary. The Company intends to operate its existing businesses in the customized and flexible power system solutions for the medical, military, telecom and industrial markets, other than the European markets which are primarily served by DP Limited, in Coolisys.

~~Further, on September 1, 2017, Coolisys acquired all of the outstanding membership~~partner company interests in ~~Power-Plus Technical Distributors, LLC, a California limited liability company (“Power-Plus”). Power-Plus is an industrial distributor of~~secondary market transactions to maximize value ~~added power supply solutions, UPS systems, fans, filters, line cords, and other power-related components. In addition to its current business, Power-Plus will serve as an extended sales organization~~ for ~~the Company’s overall flexible power system solutions.~~

On December 31, 2017, Coolisys entered into a share purchase agreement with Micronet Enertec Technologies, Inc. (“MICT”), a Delaware corporation, 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. (“Enertec”), an Israeli corporation and wholly owned subsidiary of EML, pursuant to which Coolisys acquired Enertec (the “Acquisition”). Enertec is Israel’s largest private manufacturer of specialized electronic systems for the military market. On May 23, 2018, Coolisys acquired Enertec for an aggregate cash purchase price of $4,851.

On May 23, 2018, DP Lending entered into and closed a securities purchase agreement to acquire 98.1% of I.AM, Inc. (“I.AM”), for a purchase price of $1. I.AM owns and operates the Prep Kitchen brand restaurants located in the San Diego area. I.AM owed DP Lending $1,715 in outstanding principal, pursuant to a loan and security agreement, between I.AM and DP Lending, that I.AM used to acquire the restaurants. The purchase agreement provides that, as I.AM repays the outstanding loan to DP Lending in accordance with the loan agreement, DP Lending will on a pro rata basis transfer shares of common stock of I.AM to David J. Krause, up to an aggregate of 471 shares.our shareholders.

We are a Delaware corporation with our corporate office located at 201 Shipyard Way, Suite E, Newport Beach, California 92663. Our phone number is ~~510-657-2635~~949-444-5464 and our website address is www.dpwholdings.com.

Results of Operations

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, ~~2018~~2019 AND ~~2017~~2018

The following table summarizes the results of our operations for the three months ended September 30, ~~2018~~2019 and ~~2017.U.S dollar amounts are in thousands, except shares and per share data.~~2018.

For the Three Months Ended
September 30,
2018 2017

Revenue $ 5,731 $ 3,220
Revenue, cryptocurrency mining 590 —
Revenue, related party 353 —
Revenue, restaurant operations 1,585 —
Revenue, lending activities 85 —
Total revenue 8,344 3,220
Cost of revenue 6,317 2,124
Gross profit 2,027 1,096
Total operating expenses 6,216 2,414

Loss from operations (4,189 ) (1,318 )
Interest expense (3,359 ) (753 )
Loss before income taxes (7,548 ) (2,071 )
Income tax benefit 23 —
Net loss (7,525 ) (2,071 )
Less: Net loss attributable to non-controlling interest 74 104
Net loss attributable to DPW Holdings $ (7,451 ) $ (1,967 )
Preferred deemed dividends on Series B and Series C Preferred Stock - -
Preferred dividends on Series C Preferred Stock — (27 )
Net loss available to common stockholders $ (7,451 ) $ (1,994 )

Basic and diluted net loss per common share $ (0.11 ) $ (0.15 )

Basic and diluted weighted average common shares outstanding 67,869,778 13,745,540

Comprehensive Loss
Loss available to common stockholders $ (7,451 ) $ (1,994 )
Other comprehensive income (loss)
Foreign currency translation adjustment (78 ) 42
Net unrealized loss on securities available-for-sale (1,342 ) (43 )
Other comprehensive income (loss) (1,420 ) (1 )
Total Comprehensive loss $ (8,871 ) $ (1,995 )

	For the Three Months Ended
	September 30,
	2019			2018

Revenue	$	4,968,440		$	5,732,002
Revenue, cryptocurrency mining		307,172			590,165
Revenue, related party		—			352,496
Revenue, restaurant operations		1,036,834			1,584,891
Revenue, lending activities		69,217			85,368
Total revenue		6,381,663			8,344,922
Cost of revenue		4,642,526			6,317,754
Gross profit		1,739,137			2,027,168
Operating expenses
Engineering and product development		481,902			333,555
Selling and marketing		392,725			790,603
General and administrative		4,519,641			5,088,312
Impairment of property and equipment		4,315,856			—
(Gain) loss on digital currency		(951	)		2,543
Total operating expenses		9,709,173			6,215,013
Loss from operations		(7,970,036	)		(4,187,845	)
Interest income		898,646			712,262
Interest expense		(2,954,843	)		(4,072,539	)
Change in fair value of marketable equity securities		(330,150	)		—
Loss on extinguishment of convertible debt		(155,448	)		—
Loss on issuance of warrants		—			—
Change in fair value of warrant liability		165,840			—
Loss before income taxes		(10,345,991	)		(7,548,122	)
Income tax benefit		5,140			23,737
Net loss		(10,340,851	)		(7,524,385	)
Less: Net loss attributable to non-controlling interest		—			74,414
Net loss attributable to DPW Holdings	$	(10,340,851	)	$	(7,449,971	)
Preferred dividends		(5,284	)		—
Net loss available to common stockholders	$	(10,346,135	)	$	(7,449,971	)
Basic and diluted net loss per common share	$	(6.47	)	$	(88.23	)
Basic and diluted weighted average common shares outstanding		1,599,306			84,441
Comprehensive Loss
Loss available to common stockholders	$	(10,346,135	)	$	(7,449,971	)
Other comprehensive income (loss)
Foreign currency translation adjustment		67,166			(77,686	)
Net unrealized loss on derivative securities of related party		(1,152,480	)		(1,341,977	)
Other comprehensive income (loss)		(1,085,314	)		(1,419,663	)
Total Comprehensive loss	$	(11,431,449	)	$	(8,869,634	)

Revenues

Our revenues ~~increased~~decreased by ~~$5,124,~~$1,963,259, or ~~159%~~23.5%, to ~~$8,344~~$6,381,663 for the three months ended September 30, ~~2018,~~2019, from ~~$3,220~~$8,344,922 for the three months ended September 30, ~~2017. The increase in revenue was primarily due to our acquisition of 98.1% of~~2018. As discussed below the outstanding equity interests of I.AM on May 23, 2018, combined with our acquisitions of all of the outstanding equity interests of Power-Plus on September 1, 2017 and Enertec on May 23, 2018. Revenues generated by these three acquisitions duringdecrease from the three months ended September 30, 2018, represented $3,877 of our increase in revenues. Excluding the increase in revenues that were generated by our recent acquisitions, the Company generated revenues of $4,468, which represented an increase of $1,248. As discussed below, the increase of $944 from the three months ended September 30, 2017, was ~~primarily~~ due to ~~our cryptocurrency mining operations and on~~a decrease in revenue from our restaurant operations, the manufacture of the Multiplex Laser Surface Enhancement (“MLSE”) plasma-laser ~~system.~~system and from our cryptocurrency mining operations and, to a lesser extent, a decrease in revenue from customized solutions for the military markets caused by temporary shortages in components required for the manufacture of these solutions.

Revenues, cryptocurrency mining

In January 2018, we formed ~~Super Crypto Mining,~~Digital Farms, Inc. (“~~SC Mining”~~Digital Farms”), a wholly-owned ~~subsidiary. SC~~subsidiary formerly known as Super Crypt Mining, Inc. Digital Farms was established to operate our ~~newly formed~~ cryptocurrency business, which is pursuing a variety of digital currencies. We are mining the top three cryptocurrencies for our own ~~account. These cryptocurrencies include~~account, consisting of Bitcoin, Litecoin and Ethereum. ~~During~~Although the market prices of digital currencies were significantly higher during the three months ended September 30, ~~2018,~~2019 compared to the prior-year period, due to power cost considerations, we ~~recognized $590~~reduced the number of active miners from 1,512 in the prior year period to 978 during the current quarter. These factors, coupled with a significant increase in the difficulty factor, which increases when market prices of digital currencies are increasing as more computational power is added to the network, resulted in a decrease in revenues ~~generated by SC Mining.~~of $282,993.

Revenues, related party

During the three months ended September 30, 2018, we recognized ~~$353~~$352,496 in revenues ~~resulting~~ from our ~~relationship~~purchase order with MTIX Limited, a company formed under the laws of England and Wales (“MTIX”). Due to working capital constraints discussed below, we did not recognize any revenues from MTIX during the three months ended September 30, 2019. MTIX was acquired by AVLP on August 22, 2017, and is therefore ~~deemed to be~~ a related party. In March 2017, the Company was awarded a ~~3-year, $50 million~~ purchase order by MTIX to manufacture, install and service ~~the Multiplex Laser Surface Enhancement (“MLSE”)~~MLSE plasma-laser system. ~~Management~~Over the next several years, management believes that the MLSE purchase order will be a source of revenue and generate significant cash ~~flows for~~flows. The lack of revenue during the ~~Company. However, at~~three months ended September 30, 2019, was due to an emphasis on reducing the debt obligations incurred in May 2018 ~~$3,888~~to acquire Enertec. Payments, and the related manufacturing services, that otherwise would have gone to subcontractors of the MLSE plasma-laser system have been delayed in order to enable us to restructure and reduce our overall debt obligations.

Revenues, restaurant operations

During the three months ended September 30, 2019, we recognized a decrease in revenues from our restaurant operations of $548,057 compared to the prior-year period. The decrease was ~~reflected on the financial statements as accounts receivable, related party.~~primarily due to significant construction projects that hampered access to our restaurant locations and, to a lesser extent, competition from restaurants recently opened near two of our locations.

Gross Margins

Gross margins ~~decreased~~increased to 27.3% for the three months ended September 30, 2019 compared to 24.3% for the three months ended September 30, ~~2018 compared to 34.0% for~~2018. The Company’s gross margins have typically ranged between 33% and 37%, with slight variations depending on the overall composition of our revenue. Our gross margins during the three months ended September 30, ~~2017. The decrease in gross margins was partially attributable to~~2018, of 24.3%, were affected by the ~~lower margin revenue of $353 from MTIX, a related party, with gross margins of22.6% combined with~~ negative margins ~~of (158.9%)~~ on revenues of ~~$590~~$307,172 at ~~SC Mining.~~Digital Farms. The negative gross margins at ~~SC Mining are attributed to~~Digital Farms resulted from monthly recurring fixed costs at our colocation facilities which temporarily exceed the revenues from our mining ~~operations while we place our miners in service. If we had not recognized revenue, and~~operations. Excluding the ~~related cost~~effects of ~~revenue, from SC Mining and our contract with MTIX,~~Digital Farms, then our adjusted gross margins for the three months ended September 30, 2018, would have been 38.9%., slightly higher than our historical range. The increase ~~in gross margins from 34.0% to 38.9%~~ is mainly attributable to higher gross margins related to our restaurant operations.

Our gross margin of 27.3% recognized during the three months ended September 30, 2019, was also impacted by the negative margins at Digital Farms. Excluding the effects of Digital Farms, our adjusted gross margin for the three months ended September 30, 2019, would have been 39.7%. which is consistent with our historical average.

Engineering and Product Development

Engineering and product development expenses increased by ~~$28~~$148,347 to ~~$334~~$481,902 for the three months ended September 30, ~~2018~~2019, from ~~$306~~$333,555 for the three months ended September 30, ~~2017.~~2018. The increase ~~is primarily attributed to our acquisition of Enertec. Due to the timing of the acquisition of Enertec, May 23, 2018, during the three months ended September 30, 2018 Enertec reported $58~~ in engineering and product development expenses ~~and was excluded from~~is attributed to an increase in spending at Enertec as it pursues additional contracts in the ~~prior-year period.~~defense industry.

Selling and Marketing

Selling and marketing expenses were ~~$791~~$392,725 for the three months ended September 30, 2019, compared to $790,603 for the three months ended September 30, 2018, ~~compared to $423 for~~a decrease of $397,878. This increase was the ~~three months ended September 30, 2017, an increase~~result of $368. Our acquisition of Power-Plus, Enertec and I.AM accounted for $131, $133 and $85, respectively, of the increase in selling and marketing expenses. The remaining increase of $19 is attributed to an increasedecreases in personnel costs directly attributed to a reduction in sales and marketing personnel atthroughout our ~~UK based~~ operations.

General and Administrative

General and administrative expenses were ~~$5,088~~$4,519,641 for the three months ended September 30, 2019, compared to $5,088,312 for the three months ended September 30, 2018, ~~compared to $1,685 for the three months ended September 30, 2017, an increase~~a decrease of ~~$3,403. Our acquisitions of Enertec and I.AM accounted for $1,399 of the increase in general~~$568,671. General and administrative ~~expenses. The adjusted increase of $2,004~~expenses decreased from the comparative prior period, ~~was~~ mainly due to ~~higher stock-based~~lower stock compensation ~~expenses,~~expense and legal fees partially offset by an ~~increase in legal and audit costs, an increase in investor relationship costs and hiring of additional consultants to build an infrastructure in anticipation of our future growth and the~~ increase in cost attributed to the hiring of a ~~new~~ Chief ~~Financial Officer.~~Accounting Officer and Senior Vice President of Finance. The remaining increase in general and administrative expenses is due to various costs, none of which are significant individually.

In aggregate, we incurred $1,352 of stock-based compensation during the three months ended September 30, 2018. Of this amount, $697 was from issuances of equity-based awards pursuant to our Plans and $655 was from stock, options and warrants which were issued outside the Plans. It has been our policy to allocate the majority of stock-based compensation to general and administrative expense. During the three months ended September 30, 2018 and 2017, and inclusive of equity-based awards issued outside the Plans, we recorded $1,352 and $517, respectively, of stock-based compensation in general and administrative expense.

Beginning during the quarter ended December 31, 2016, we spent significant effort on expanding our investor base and on hiring additional consultants to assist building an infrastructure to support our anticipated growth. These efforts were continued during the three months ended September 30, 2018 and resulted in an increase of $113 in costs attributed to investor relations and other consulting fees.

During January 2018 we hired a new Chief Financial Officer and in September 2017 we hired a senior executive to assist in management at Coolisys. These two hires resulted in an overall increase in payroll expense of approximately $98 during the three months ended September 30, 2018.

Finally, in January 2018 we established SC Mining, our digital currency blockchain mining subsidiary and DP Lending, our commercial lending subsidiary. During the three months ended September 30, 2018, general and administrative costs attributed to these subsidiaries were $534.

~~Interest (expense) income, net~~Asset Impairment Charges

~~Interest expense was $3,359~~Asset impairment charges of $4,315,856 were recognized during the three months ended September 30, 2019. The impairment charges related to impairments of our cryptocurrency equipment.

Operating Loss

The Company recorded an operating loss of $7,970,036 for the three months ended September 30, ~~2018~~2019, compared to ~~$753~~an operating loss of $4,187,845 for the three months ended September 30, ~~2017.~~2018. The increase in operating loss is mostly attributable to the impairment of property and equipment coupled with a higher gross profit and lower selling and marketing expenses, partially offset by an increase in general and administrative expenses.

Interest Income

Interest income was $898,646 for the three months ended September 30, 2019 compared to $712,262 for the three months ended September 30, 2018. The increase in interest income for the three months ended September 30, 2019 is related to an increase in interest income pursuant to the Loan and Security Agreement entered into on September 6, 2017, with AVLP, a related party.

Interest Expense

Interest expense was $2,954,843 for the three months ended September 30, 2019 compared to $4,072,539 for the three months ended September 30, 2018. The decrease in interest expense for the three months ended September 30, ~~2018~~2019 is primarily related to ~~the~~a reduction of amortization of debt discount ~~in the aggregate amount of $3,034,~~ resulting from original issue discount from the issuance of warrants in conjunction with the sale of debt ~~instruments in the aggregate amount of $27,673.~~instruments. During the three months ended September 30, 2019 and 2018, as a result of these issuances, non-cash interest expense of ~~$3,034~~$1,357,845 and $3,033,864, respectively, was recorded from the amortization of debt discount and debt financing costs. ~~The remaining increase~~

Change in ~~interest expense was due to an increase in the amount~~fair value of the Company’s total borrowings and which was primarily offset by interest income and the accretion of original issue discount pursuant to the Loan and Security Agreement entered into on September 6, 2017, between the Company and AVLP (“AVLP Loan Agreement”) of $712.warrant liability

~~Operating Loss~~

~~The Company recorded an operating loss of $4,189 for~~During the three months ended September 30, ~~2018 compared to an operating loss~~2019, the fair value of ~~$1,318 for~~ the ~~three months ended September 30, 2017.~~warrants that were issued in our Offering decreased by $165,840. The ~~increase~~fair value of these warrants is re-measured at each financial reporting period and immediately before exercise, with any changes in ~~operating loss is mostly attributable from~~fair value recorded as change in fair value of warrant liability in the ~~increase~~Condensed Consolidated Statements of ~~general~~Operations and ~~administrative expenses.~~Comprehensive Loss.

Net Loss

For the foregoing reasons, our net loss for the three months ended September 30, ~~2018,~~2019, was ~~$7,525~~$10,340,851 compared to a net loss of ~~$2,071~~$7,524,385 for the three months ended September 30, ~~2017.~~2018. After taking into consideration the loss attributable to the non-controlling interest of the minority shareholders of Microphase during the three months ended September 30, 2019 and 2018, of nil and ~~2017, of $74 and $104,~~$74,414, respectively, and preferred dividends of ~~nil~~$5,284 and ~~$27 during the three months ended September 30, 2018 and 2017,~~nil, respectively, the net loss available to common shareholders during the three months ended September 30, 2019 and 2018, was $10,346,135 and ~~2017, was $7,451 and $1,994,~~$7,449,971, respectively.

~~As reflected in our consolidated statement of cash flows for~~

During the three months ended September 30, ~~2018~~2019 and ~~2017,~~2018, our reported net loss ~~is comprised of~~included non-cash charges of ~~$4,710~~$6,390,242 and ~~$1,206,~~$4,709,663, respectively. A summary of these non-cash charges is as follows:

For the Three Months Ended
September 30,
2018 2017
Interest expense – debt discount $ 3,034 $ 652
Stock-based compensation 1,352 517
Depreciation and amortization 918 54
Interest expense on conversion of promissory notes to common stock — 0
Accretion of original issue discount on notes receivable – related party (594 ) (17 )
Non-cash items included in net loss $ 4,710 $ 1,206

	For the Three Months Ended
	September 30,
	2019			2018
Interest expense – debt discount	$	1,357,845		$	3,033,864
Stock-based compensation		361,779			1,352,640
Depreciation and amortization		947,830			917,152
Impairment of property and equipment		4,315,856			—
Amortization of right-of-use assets		199,260			—
Accretion of original issue discount on notes receivable – related party		(607,356	)		(593,993	)
Accretion of original issue discount on notes receivable		(19,132	)		—
Change in fair value of warrant liability		(165,840	)		—
Non-cash items included in net loss	$	6,390,242		$	4,709,663

Other comprehensive ~~loss~~income (loss)

Other comprehensive loss was ~~$1,420~~$11,431,449 and ~~$1,~~8,869,634, respectively, for the three months ended September 30, ~~2018~~2019 and ~~2017.~~2018. Other comprehensive loss for the three months ended September 30, ~~2018,~~2019, which decreased our equity, ~~reflects the impact of the weakening of the British Pound on the equity of DP Limited combined with~~was primarily due to unrealized ~~losses in our investments in marketable securities, primarily~~loss in the ~~warrants~~warrant derivative securities that we received as a result of our investment in Avalanche International, Corp., or AVLP, a related party. During the three months ended September 30, ~~2017, the effect of the foreign currency adjustment of the British Pound was offset by~~2018, unrealized losses in ~~our investments in marketable securities.~~

the warrant derivative securities of AVLP was the primary component of other comprehensive loss.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, ~~2018~~2019 AND ~~2017~~2018

The following table summarizes the results of our operations for the nine months ended September 30, ~~2018~~2019 and ~~2017. U.S dollar amounts are in thousands, except shares and per share data.~~2018.

For the Nine Months Ended
September 30,
2018 2017

Revenue $ 13,245 $ 6,670
Revenue, cryptocurrency mining 1,546 —
Revenue, related party 3,912 —
Revenue, restaurant operations 2,087 —
Revenue, lending activities 194 —
Total revenue 20,984 6,670
Cost of revenue 16,204 4,136
Gross profit 4,780 2,534
Total operating expenses 16,036 6,083

Loss from operations (11,256 ) (3,549 )
Interest expense (9,378 ) (1,367 )
Loss before income taxes (20,634 ) (4,916 )
Income tax benefit 17 —
Net loss (20,617 ) (4,916 )
Less: Net loss attributable to non-controlling interest 218 216
Net loss attributable to DPW Holdings $ (20,399 ) $ (4,700 )
Preferred deemed dividends on Series B and Series C Preferred
Stock (108 ) (319 )
Preferred dividends on Series C Preferred Stock — (35 )
Net loss available to common stockholders $ (20,507 ) $ (5,054 )

Basic and diluted net loss per common share $ (0.39 ) $ (0.46 )

Basic and diluted weighted average common shares outstanding 52,977,059 10,884,948

Comprehensive Loss
Loss available to common stockholders $ (20,507 ) $ (5,054 )
Other comprehensive income (loss)
Foreign currency translation adjustment (210 ) 141
Net unrealized loss on securities available-for-sale (6,788 ) (43 )
Other comprehensive income (loss) (6,998 ) 98
Total Comprehensive loss $ (27,505 ) $ (4,956 )

	For the Nine Months Ended
	September 30,
	2019			2018

Revenue	$	15,061,289		$	13,245,419
Revenue, cryptocurrency mining		592,092			1,546,418
Revenue, related party		—			3,911,263
Revenue, restaurant operations		3,371,465			2,087,383
Revenue, lending activities		443,927			194,120
Total revenue		19,468,773			20,984,603
Cost of revenue		14,350,041			16,204,388
Gross profit		5,118,732			4,780,215
Operating expenses
Engineering and product development		1,408,848			1,043,993
Selling and marketing		1,293,181			2,290,934
General and administrative		14,584,758			12,697,909
Impairment of property and equipment		4,315,856			—
(Gain) loss on digital currency		(6,933	)		2,543
Total operating expenses		21,595,710			16,035,379
Loss from operations		(16,476,978	)		(11,255,164	)
Interest income		2,647,110			1,955,885
Interest expense		(5,586,639	)		(11,335,069	)
Change in fair value of marketable equity securities		(173,503	)		—
Loss on extinguishment of convertible debt		(963,232	)		—
Loss on issuance of warrants		(1,763,481	)		—
Change in fair value of warrant liability		1,112,665			—
Loss before income taxes		(21,204,058	)		(20,634,348	)
Income tax benefit		93,284			17,480
Net loss		(21,110,774	)		(20,616,868	)
Less: Net loss attributable to non-controlling interest		32,416			218,494
Net loss attributable to DPW Holdings	$	(21,078,358	)	$	(20,398,374	)
Preferred dividends		(12,437	)		(108,049	)
Net loss available to common stockholders	$	(21,090,795	)	$	(20,506,423	)
Basic and diluted net loss per common share	$	(24.62	)	$	(311.53	)
Basic and diluted weighted average common shares outstanding		856,689			65,824
Comprehensive Loss
Loss available to common stockholders	$	(21,090,795	)	$	(20,506,423	)
Other comprehensive income (loss)
Foreign currency translation adjustment		259,671			(209,535	)
Net unrealized loss on derivative securities of related party		(1,513,661	)		(6,787,902	)
Other comprehensive income (loss)		(1,253,990	)		(6,997,437	)
Total Comprehensive loss	$	(22,344,785	)	$	(27,503,860	)

Revenues

Our revenues ~~increased~~decreased by ~~$14,314~~$1,515,830, or ~~215%~~7.2%, to ~~$20,984~~$19,468,773 for the nine months ended September 30, ~~2018,~~2019, from ~~$6,670~~$20,984,603 for the nine months ended September 30, ~~2017. The increase in revenue was primarily due to~~2018. During the nine months ended September 30, 2019 and 2018, our ~~four~~ acquisitions ~~completed during 2017~~of Enertec and ~~2018. Revenues generated by~~I.AM represented $9,898,540 and $5,461,360, respectively, of our revenues. Excluding revenues from these ~~four~~ acquisitions, we would have recognized revenues of $9,570,233 and $15,523,243, respectively, during the nine months ended September 30, 2019 and 2018, ~~represented $8,783~~a decrease of ~~our increase in revenues. Excluding the increase in revenues that were generated by our recent acquisitions, the Company generated revenues of $12,202, which represented an increase of $5,532.~~$5,953,010. As discussed below, the ~~increase~~decrease of ~~$5,532~~$5,953,010 from the nine months ended September 30, ~~2017,~~2018, was primarily due to a decrease in revenue from our ~~cryptocurrency mining~~restaurant operations, ~~and on revenue~~ from the manufacture of the ~~Multiplex Laser Surface Enhancement (“MLSE”)~~MLSE plasma-laser ~~system.~~system and from our cryptocurrency mining operations. The following table shows revenue for the nine months ended September 30, 2019 and 2018, generated from acquisitions completed during the year ended December 31, 2018.

		For the Nine Months Ended September 30,
Company acquired	Date of Acquisition	2019		2018

Enertec Systems 2001 Ltd.	May 22, 2018	$	6,527,075	$	3,373,977
I.AM, Inc.	May 23, 2018		3,371,465		2,087,383
		$	9,898,540	$	5,461,360

Revenues, cryptocurrency mining

In January 2018, we formed ~~SC Mining. During~~Digital Farms, a wholly-owned subsidiary. Digital Farms was established to operate our cryptocurrency business, which is pursuing a variety of digital currencies. We are mining the top three cryptocurrencies for our own account, consisting of Bitcoin, Litecoin and Ethereum. The market prices of digital currencies were slightly lower during the nine months ended September 30, ~~2018,~~2019 compared to the prior-year period. Further, due to power cost considerations, we ~~recognized $1,546~~reduced the number of active miners from 1,512 in the prior year period to 978 during the current quarter. These factors, coupled with a significant increase in the difficulty factor during the current quarter resulted in a decrease in revenues ~~generated by SC Mining.~~$954,326.

Revenues, related party

During the nine months ended September 30, 2018, we recognized ~~$3,912~~$3,911,263 in revenues resulting from our ~~relationship~~purchase order with MTIX. ~~In March~~Conversely, we did not recognize any revenues from MTIX during the nine months ended September 30, 2019. MTIX was acquired by AVLP on August 22, 2017, and is therefore a related party. The lack of revenue during the ~~Company~~nine months ended September 30, 2019, was ~~awarded a 3-year, $50 million purchase order by MTIX~~due to ~~manufacture, install~~an emphasis on reducing the debt obligations incurred in May 2018 to acquire Enertec. Payments, and ~~service~~the related manufacturing services, that otherwise would have gone to subcontractors of the MLSE plasma-laser ~~system.~~system have been delayed in order to enable us to restructure and reduce our overall debt obligations.

Gross Margins

Gross margins ~~decreased~~increased to 26.3% for the nine months ended September 30, 2019, compared to 22.8% for the nine months ended September 30, ~~2018 compared to 38.0% for~~2018. Our gross margins during the nine months ended September 30, ~~2017. The decrease in gross margins was partially attributable to~~2018, of 22.8%, were affected by the lower margin related party revenue of ~~$3,912~~$3,911,263 from MTIX ~~a related party, with gross margins of 21.6%~~ combined with negative margins ~~of (118.8%)~~ on revenues of ~~$1,546~~$1,546,418 at ~~SC Mining. The negative gross margins at SC Mining are attributed to monthly recurring fixed costs at our colocation facilities which temporarily exceed~~Digital Farms. Excluding the ~~revenues from our mining operations while we place our miners in service. If we had not recognized revenue, and the related cost~~effects of ~~revenue, from SC Mining~~Digital Farms and our contract with MTIX, then our adjusted gross margins for the nine months ended September 30, 2018, would have been 38.6%. ~~The increase in~~

Our gross margin of 26.3% recognized during the nine months ended September 30, 2019, was also impacted by the negative margins ~~from 38.0% to 38.6%~~at Digital Farms. Excluding the effects of Digital Farms, our adjusted gross margin for the nine months ended September 30, 2019 would have been 37.9%. which is ~~mainly attributable to an increase in costs~~consist with our historical average which has typically ranged between 33% and 37%, with slight variations depending on the overall composition of our ~~commercial products sold in our U.S. operations, which historically have had much greater gross margins, offset by higher gross margins related to restaurant operations.~~revenue.

Engineering and Product Development

Engineering and product development expenses increased by ~~$246~~$364,855 to ~~$1,044~~$1,408,848 for the nine months ended September 30, ~~2018~~2019, from ~~$798~~$1,043,993 for the nine months ended September 30, ~~2017.~~2018. The increase is primarily attributed to our acquisition of Microphase. Due to the timing of the acquisitions of Microphase, June 2, 2017, and Enertec, May 23, 2018. Enertec engineering and product development costs for the nine months ended September 30, 2018 were $58. During the prior-year period, Microphase reported $173 in engineering and product development expenses ~~as opposed~~is attributed to ~~$354 during~~our acquisition of Enertec, which due to the ~~nine months ended September 30, 2018.~~

timing of the acquisition was partially excluded from the prior period amount.

Selling and Marketing

Selling and marketing expenses were ~~$2,291~~$1,293,181 for the nine months ended September 30, 2019, compared to $2,290,934 for the nine months ended September 30, 2018, ~~compared to $1,045 for the nine months ended September 30, 2017,~~a decrease of $997,753. Our acquisition of Enertec and I.AM resulted in an increase of ~~$1,246. Our acquisition of Microphase, Power-Plus, Enertec and I.AM accounted for $95, $559, $231 and $99, respectively, of the~~$196,962. This increase ~~in selling and marketing expenses. The remaining increase of $262 is attributed to an increase~~was offset by decreases in personnel costs directly attributed to a reduction in sales and marketing personnel atthroughout our U.S. and UK based operations. Throughout the quarter ended March 31, 2017, we augmented our sales and marketing team in the U.S. with the addition of a Vice President of Business Development and two regional sales managers. The increase in selling and marketing expenses is partially attributed to the increase in salaries and benefits and travel related costs for the three new sales and marketing positions. Due to the timing of these personnel additions, the full cost was only partially realized during the three months ended March 31, 2017. Further, during December 2017, we hired a Sales Director at our UK operations.

General and Administrative

General and administrative expenses were ~~$12,698~~$14,584,758 for the nine months ended September 30, 2019 compared to $12,697,909 for the nine months ended September 30, 2018, ~~compared to $4,240 for the nine months ended September 30, 2017,~~ an increase of ~~$8,458.~~$1,886,849. Our acquisitions of ~~Microphase,~~ Enertec and I.AM accounted for ~~$2,294~~$2,119,118 of the increase in general and administrative expenses. The adjusted ~~increase~~decrease of ~~$6,164~~$232,269 from the comparative prior period was mainly due to ~~higher stock-based~~the lower stock compensation ~~expenses,~~expense and legal fees partially offset by an ~~increase in legal and audit costs, an increase in investor relationship costs and hiring of additional consultants to build an infrastructure in anticipation of our future growth and the~~ increase in cost attributed to the hiring of a ~~new~~ Chief ~~Financial Officer. The remaining increase in general~~Accounting Officer and ~~administrative expenses is due to various costs, none~~Senior Vice President of ~~which are significant individually.~~

In aggregate, we incurred $4,163 of stock-based compensation during the nine months ended September 30, 2018. Of this amount, $2,235 was from issuances of equity-based awards pursuant to our Plans and $1,928 was from stock, options and warrants which were issued outside the Plans. It has been our policy to allocate the majority of stock-based compensation to general and administrative expense. During the nine months ended September 30, 2018 and 2017, and inclusive of equity-based awards issued outside the Plans, we recorded $4,133 and $1,225, respectively, of stock-based compensation in general and administrative expense.

We experienced an aggregate increase of $284 in audit and legal fees due to an overall increase in the operations conducted and the level of complexity and significant number of the transactions entered into during the nine months ended September 30, 2018.

Beginning during the quarter ended December 31, 2016, we spent significant effort on expanding our investor base and on hiring additional consultants to assist building an infrastructure to support our anticipated growth. These efforts were continued during the nine months ended September 30, 2018 and resulted in an increase of $848 in costs attributed to investor relations and other consulting fees.

During January 2018 we hired a new Chief Financial Officer and in September 2017 we hired a senior executive to assist in management at Coolisys. These two hires resulted in an overall increase in payroll expense of approximately $330 during the nine months ended September 30, 2018.

Finally, we recently established SC Mining, our digital currency blockchain mining subsidiary, and DP Lending, our commercial lending subsidiary. During the nine months ended September 30, 2018, general and administrative costs attributed to these subsidiaries were $1,050.

~~Interest (expense) income, net~~Finance.

~~Interest expense was $9,378~~Asset Impairment Charges

Asset impairment charges of $4,315,856 were recognized during the nine months ended September 30, 2019. The impairment charges related to impairments of our cryptocurrency equipment.

Operating Loss

The Company recorded an operating loss of $16,476,978 for the nine months ended September 30, ~~2018~~2019, compared to ~~$1,367~~an operating loss of $11,255,164 for the nine months ended September 30, ~~2017.~~2018. The increase in ~~interest expense~~operating loss is mostly attributable to the impairment of property and equipment coupled with an increase of general and administrative expenses, partially offset by higher gross profit and lower selling and marketing expenses.

Interest Income

Interest income was $2,647,110 for the nine months ended September 30, ~~2018 is primarily related~~2019 compared to $1,955,885 for the ~~amortization of debt discount,~~three months ended September 30, 2018. The increase in ~~the aggregate amount of $8,813 resulting from original issue discount on the issuance of warrants in conjunction with the sale of debt instruments in the aggregate amount of $27,673. During~~interest income for the nine months ended September 30, 2018, as a result of these issuances, non-cash interest expense of $8,813 was recorded from the amortization of debt discount and debt financing costs. The remaining increase in interest expense was due2019 is primarily related to an increase in ~~the amount of the Company’s total borrowings and which was primarily offset by~~ interest income ~~and the accretion of original issue discount~~ pursuant to the Loan and Security Agreement entered into on September 6, 2017, ~~between the Company and~~with AVLP, ~~(“AVLP Loan Agreement”) of $1,931.~~a related party.

~~Operating Loss~~Interest expense

~~The Company recorded an operating loss of $11,326~~Interest expense was $5,586,639 for the nine months ended September 30, ~~2018~~2019, compared to ~~an operating loss of $3,549~~$11,335,069 for the nine months ended September 30, ~~2017.~~2018. The ~~increase~~decrease in ~~operating loss~~interest expense for the nine months ended September 30, 2019 is ~~mostly attributable~~primarily related to a reduction of amortization of debt discount resulting from original issue discount from the ~~increase~~issuance of ~~general~~warrants in conjunction with the sale of debt instruments. During the nine months ended September 30, 2019 and ~~administrative expenses.~~2018, as a result of these issuances, non-cash interest expense of $3,034,454 and $8,812,972, respectively, was recorded from the amortization of debt discount and debt financing costs.

Loss on issuance of warrants

We recognized a loss on issuance of warrants of $1,763,481 for the nine months ended September 30, 2019, based upon the fair value of the warrants issued in our Offering in excess of the proceeds received from the Offering.

Change in fair value of warrant liability

During the nine months ended September 30, 2019, the fair value of the warrants that were issued in our Offering decreased by $1,112,665. The fair value of these warrants is re-measured at each financial reporting period and immediately before exercise, with any changes in fair value recorded as change in fair value of warrant liability in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

Net Loss

For the foregoing reasons, our net loss for the nine months ended September 30, ~~2018,~~2019, was ~~$20,617~~$21,110,774 compared to a net loss of ~~$4,916~~$20,616,868 for the nine months ended September 30, ~~2017.~~2018. After taking into consideration the loss attributable to the non-controlling interest of the minority shareholders of Microphase ~~of $218 and $216 and preferred dividends of $108 and $319~~ during the nine months ended September 30, 2019 and 2018, of $32,416 and ~~2017,~~$218,494, respectively, and preferred dividends of $12,437 and $108,049, respectively, the net loss available to common shareholders during the nine months ended September 30, 2019 and 2018, was $21,090,795 and ~~2017, was $20,507 and $5,054,~~$20,506,423, respectively.

As reflected in our consolidated statement of cash flows for the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, our reported net loss is comprised of non-cash charges of ~~$13,195~~$10,742,817 and ~~$2,619,~~$13,195,207, respectively. A summary of these non-cash charges is as follows:

For the Nine Months Ended
September 30,
2018 2017
Interest expense – debt discount $ 8,813 $ 1,239
Stock-based compensation 4,163 1,269
Depreciation and amortization 1,743 134
Interest expense on conversion of promissory notes to common stock — 13
Accretion of original issue discount on notes receivable – related party (1,524 ) (36 )
Non-cash items included in net loss $ 13,195 $ 2,619

	For the Nine Months Ended
	September 30,
	2019			2018
Interest expense – debt discount	$	3,034,454		$	8,812,972
Stock-based compensation		1,354,062			4,164,180
Depreciation and amortization		3,074,013			1,742,496
Impairment of property and equipment		4,315,856			—
Amortization of right-of-use assets		260,549			—
Accretion of original issue discount on notes receivable – related party		(1,869,778	)		(1,524,441	)
Accretion of original issue discount on notes receivable		(77,155	)		—
Fair value in excess of proceeds upon issuance of warrants		1,763,481			—
Change in fair value of warrant liability		(1,112,665	)		—
Non-cash items included in net loss	$	10,742,817		$	13,195,207

Other comprehensive ~~income (loss)~~loss

Other comprehensive ~~income (loss)~~loss was ~~($6,998)~~$22,344,785 and ~~$98,~~$27,503,860, respectively, for the nine months ended September 30, ~~2018~~2019 and ~~2017.~~2018. Other comprehensive loss for the nine months ended September 30, ~~2018,~~2019, which decreased our equity, ~~reflects the impact of the weakening of the British Pound on the equity of DP Limited combined with~~was primarily due to unrealized losses in ~~our investments in marketable~~the warrant derivative securities ~~primarily in the warrants~~ that we received as a result of our investment in AVLP, a related party. During the nine months ended September 30, ~~2017, the effect of the foreign currency adjustment from the weakening of the British Pound was partially offset by~~2018, unrealized losses in ~~our investments in marketable securities.~~the warrant derivative securities of AVLP was also the primary component of other comprehensive loss.

LIQUIDITY AND CAPITAL RESOURCES

On September 30, ~~2018,~~2019, we had cash and cash equivalents of ~~$703.~~$756,652. This compares with cash and cash equivalents of ~~$1,478~~$902,329 at December 31, ~~2017.~~2018. The ~~increase~~decrease in cash and cash equivalents was primarily due to cash provided by financing activities being slightly in excess of the amount of cash used in operating and investing ~~activities.~~activities with the remaining variance attributed to the effect of exchange rates caused by a decrease in exchange rates between the U.S. dollar and the Israeli Shekel.

Net cash used in operating activities totaled ~~$9,430~~$8,377,278 for the nine months ended September 30, ~~2018,~~2019, compared to ~~net cash used by operating activities of $1,577~~$9,430,055 for the nine months ended September 30, ~~2017.~~2018. During the nine months ended September 30, ~~2018,~~2019, the ~~increase~~decrease in net cash used in operating activities compared to the nine months ended September 30, ~~2017~~2018, was mainly due to ~~the~~a reduction in our net loss for the nine months ended September 30, ~~2018 of $20,617.~~2019 compared to the nine months ended September 30, 2018. The net loss was partially offset by ~~a number of~~several non-cash charges, ~~the~~a decrease in amortization of debt discount of ~~$8,813~~$5,778,518 and stock-based compensation of ~~$4,163,~~$2,810,118, an increase in depreciation and amortization of $1,331,517and a decrease in accounts receivable, related party due to a payment of ~~$3,517 and accounts payable and accrued expenses of $1,923 and decreases~~$2,676,219 in ~~our accounts receivable of $876.~~

April 2019.

Net cash used in investing activities was ~~$19,916~~$2,686,506 for the nine months ended September 30, ~~2018~~2019, compared to ~~$4,384 of net cash used in investing activities~~$19,915,693 for the nine months ended September 30, ~~2017.~~2018. The ~~increase~~decrease of the net usage of cash from investing activities was primarily attributed to the purchase of property and equipment at ~~SC Mining, the investment in AVLP, the~~Digital Farms and our acquisition of Enertec ~~and investments in debt and equity securities.~~during the nine months ended September 30, 2018.

Net cash provided by financing activities was ~~$28,791~~$11,083,232 and ~~$5,194~~$28,791,362 for the nine months ended September 30, 2019 and 2018, ~~and 2017,~~ respectively. ~~The financing~~Financing activities during the nine months ended September 30, 2019, primarily related to the sale of ~~21,241,911~~shares of our common stock through an “at the market offering” program and through an underwriting agreement with A.G.P./Alliance Global Partners. The proceeds that we received from the sale of our shares of common stock ~~through a registered direct offering and from our ATM Offering for net proceeds of $18,059, net proceeds from the Company’s debt financings and from advances of future receipts of $27,673 which~~ was partially offset by ~~payments on~~net cash outflows of $3,706,679 associated with our debt ~~instruments of $20,088 and proceeds from the exercise of options and warrants of $965.~~arrangements.

Historically, we have financed our operations principally through issuances of convertible debt, promissory notes and equity securities. During ~~2018,~~2019, as reflected below, we continued to successfully obtain additional equity and debt financing and in restructuring existing debt.

On ~~January 23,~~October 15, 2018, we entered into ~~a securities purchase agreement~~an At-The-Market Issuance Sales Agreement with ~~an institutional investor~~WDCO (the “WDCO ATM Offering”) to sell ~~for an aggregate purchase price~~shares of ~~$1,000, a 10% senior convertible promissory note (the “Note”) with an aggregate principal face amount~~our common stock. Between January 1, 2019 and April 1, 2019, the date the WDCO ATM Offering was terminated, the Company received gross proceeds of ~~$1,250, a warrant to purchase an aggregate~~$4,656,050 through the sale of ~~625,000~~119,791 shares of our common stock ~~and 543,478 shares of our common stock. The transactions contemplated by~~through the securities purchase agreement closed on February 8, 2018. The Note is convertible into 625,000 shares of our common stock, a conversion price of $2.00 per share, subject to adjustment. The exercise price of the warrant to purchase 625,000 shares of our common stock is $2.20 per share, subject to adjustment. On February 9, 2018, in addition to the 543,478 shares of common stock provided for pursuant to the securities purchase agreement, we issued to the investor an aggregate of 691,942 shares of our common stock upon the conversion of the entire outstanding principal and accrued interest on the Note of $1,384.

On January 25, 2018, we issued two 5% promissory notes, each in the principal face amount of $2,500 for an aggregate debt of $5,000 to two institutional investors. The proceeds from the two promissory notes was used to purchase 1,000 Antminer S9s manufactured by Bitmain Technologies, Inc. in connection with our mining operations. We received delivery of the Miners on February 1, 2018. On March 27, 2018, we paid the principal and accrued interest on each of the 5% promissory notes.WDCO ATM Offering.

On February 20, 2018, we issued a promissory note in the principal face amount of $900 to an accredited investor. This promissory note included an original issue discount (“OID”) of $150 resulting in net proceeds of $750. The principal and OID on this note was due and payable on March ~~22, 2018. On March 23, 2018,~~29, 2019, we entered into ~~a new promissory note in the principal amount of $1,750 for a term of two months, subject~~an underwriting agreement pursuant to our ability to prepay within one month. The interest rate payable on this new promissory note was twenty percent per thirty calendar days, payable in a lump sum on the maturity date. We also issued to the lender a warrant to purchase 1,250,000which we sold 71,388 shares of our common stock, ~~at an exercise price~~warrants to purchase 388,888 shares of ~~$1.15 per share, pursuant~~our common stock and pre-funded warrants to ~~a consulting agreement. The principal amount~~purchase 317,500 shares of our common stock on April 2, 2019. We received gross proceeds from this offering of $6,999,555 and used approximately $6,000,000 of the ~~new promissory note consisted~~proceeds from this offering for the repayment of net proceeds of $1,000 and the cancellation of the principal of $750 from the February 20, 2018 promissory note. The interest on the February 20, 2018 note in the amount of $150 was paid to the lender prior to entering into the new promissory note. On April 23, 2018, we paid the entire outstanding principal and accrued interest on the new promissory note of $2,100.debt.

On ~~February 26, 2018,~~May 13, 2019, we ~~issued~~filed an Offering Statement on Form 1-A pursuant to Regulation A promulgated by the Commission, pursuant to which up to $50 million of 3-year, non-convertibles promissory notes (“Promissory Notes”) will be offered and sold once the Commission has qualified the Offering Statement. We anticipate that the Promissory Notes will accrue annualized interest of between 5% and 15% that will be paid rata monthly and will be offered on a ~~10% promissory note~~continuous basis, in ~~the principal face amount of $330 to an accredited investor. This promissory note included an OID of $30 resulting~~each case as determined by us in ~~net proceeds to us of $300.~~our sole discretion. The ~~principal and accrued interest on~~Company cannot provide any assurance that any Promissory Notes will be sold pursuant this ~~note was due and payable on April 12, 2018, subject to a 30-day extension available to us.This 10% promissory note was paid on April 27, 2018.~~Offering Statement.

On ~~February 27, 2018,~~August 6, 2019, we entered into aan At-The-Market Issuance Sales Agreement with ~~H.C. Wainwright & Co.,~~Ascendiant Capital Markets, LLC, ~~(“HCW”) to sell~~as sales agent in which we sold shares of our common stock having an aggregate offering price of ~~up to $50,000~~$5,500,000 (the ~~“Shares”) from time to time, through an “at the market offering” program (the “HCW ATM~~“ATM Offering”) ~~under which HCW acted as sales agent.~~. The offer and sale of ~~the Shares~~our common stock was made pursuant to our effective “shelf” registration statement on Form S-3 and an accompanying base prospectus contained therein (Registration Statement No. 333-222132) filed with the ~~SEC on December 18, 2017, amended on January 8, 2018, and declared effective by the SEC on January 11, 2018, and a prospectus supplement related to the HCW ATM Offering, dated February 27, 2018.The HCW ATM Offering was terminated effective September 23, 2018.~~

On March 23, 2018, we entered into a securities purchase agreement to sell and issue a 12% promissory note and a warrant to purchase 300,000 shares of common stock to an accredited investor if the promissory note is paid in full on or before May 23, 2018, or up to 450,000 shares of common stock, if the promissory note is paid by June 22, 2018. The promissory note was issued with a 10% OID. The promissory note is in the principal amount of $1,000 and was sold for $900, bears interest at 12% simple interest on the principal amount, and is due on June 22, 2018. Interest only payments are due, in arrears, on a monthly basis commencing on April 23, 2018. The exercise price of the warrant is $1.15 per share. The promissory note is unsecured by any of our assets but is guaranteed by our Chief Executive Officer.

On March 27, 2018, we issued a 10% promissory note in the principal face amount of $200 to an accredited investor. The principal and accrued interest on this note was due and payable on March 29, 2018. Between March 29 and April 24, 2018, we paid the entire outstanding principal on this 10% promissory note of $200.

On April 16, 2018, we entered into securities purchase agreements with three institutional investors to sell, for an aggregate purchase price of $1,550, 12% secured convertible promissory notes (“Convertible Notes”) with an aggregate principal face amount of $1,722, warrants to purchase an aggregate of 993,588 shares of our common stock, and an aggregate of 200,926 shares of our common stock. The Convertible Notes bear simple interest at 12% on the principal amount with a guarantee of interest during the initial six months in the amount of $103. Beginning on May 16, 2018, we were required to make six monthly cash payments in the aggregate amount of $304 until the Convertible Notes are satisfied in full, which was to occur on October 16, 2018. On August 31, 2018, the Company made its final payment and in aggregate paid principal and accrued interest of $1,722 and $103, respectively, on the 12% April 2018 Convertible Notes. The warrants entitle the holders to purchase, in the aggregate, up to 993,588 shares of our common stock at an exercise price of $1.30 per share for a period of five years subject to certain beneficial ownership limitations.

On May 15, 2018, we entered into securities purchase agreements with certain investors for the sale and issuance of an aggregate of 7,691,775 shares of our Class A common stock, and five-year warrants to purchase such number of shares of common stock equal to the shares of common stock purchased by the investors. We received aggregate consideration of $6,000, consisting of cash and the cancellation of short-term advances of $3,225 and $2,775, respectively. These securities were issued pursuant to our registration statement filed with the Securities and Exchange Commission ~~(File No. 333-222132) which became effective on January 11, 2018.~~

On May 15, 2018, we entered into a securities purchase agreement with an institutional investor providing for the issuance of (i) a 10% senior secured convertible promissory note (the “10% Convertible Note”) with a principal face amount of $6,000, (ii) a five-year warrant to purchase 1,111,111 shares of the Company’s common stock (the “Series A Warrant Shares”) at an exercise price of $1.35 (the “Series A Warrant”), (iii) a five-year warrant to purchase 1,724,138 shares of the Company’s common stock (the “Series B Warrant Shares” and with the Series A Warrant Shares, the “Warrant Shares”) at an exercise price of $0.87 per share (the “Series B Warrant” and together with the Series A Warrant, the “Warrants”), and (iv) 344,828 shares of our common stock. Initially, the 10% Convertible Note was convertible into our common stock at $0.75 per share, but could only be converted if an event of default thereunder had occurred and not been cured on a timely basis. Pursuant to an amendment dated as of August 31, 2018, we reduced the conversion price to $0.40 from $0.75. Further, on September 25, 2018, we entered into an agreement to amend the maturity date on the 10% Convertible Note, pursuant to which amendment the amortization schedule of the 10% Convertible Note provides for 13 monthly payments in the amount of $309, and for the fourteenth payment to be in the amount of $1,011, plus accrued and unpaid interest. Each such amortization payment shall be made in cash or Bitcoin

In connection with the financing, pursuant to an engagement agreement with Alliance Global Partners (“AGP”), a licensed broker-dealer with FINRA, we agreed to pay to AGP a cash fee, or placement agent fee, equal to 5% of the aggregate gross proceeds raised. Such fee was paid at the closing of the offering. In addition, AGP shall receive a cash fee equal to 5% of such cash exercise price proceeds received by us, payable within 48 hours of our receipt of any cash exercise price proceeds from the exercise of any warrants sold, provided that no such fee is due and payable hereunder in the event the warrants are not exercised for cash. AGP is also entitled to receive a warrant to purchase 150,000 shares of common stock with an exercise price of $1.00, which warrant shall be exercisable for 5-years via cashless exercise until registered and via cash thereafter.

On July 2, 2018, we entered into a securities purchase agreement with an institutional investor providing for the issuance of (i) a second 10% senior secured convertible promissory note (the “Second 10% Convertible Note”) with a principal face amount of $1,000, which Second 10% Convertible Note was initially convertible into our common stock at $0.75 per share and (ii) an additional 400,000 of the Company’s common stock to be issued in connection with the 10% Convertible Note. Pursuant to an amendment dated as of August 31, 2018, we reduced the conversion price to $0.40 from $0.75. The Second 10% Convertible Note matures on January 1, 2019.

On August 31, 2018, we entered into a securities purchase agreement with the institutional investor providing for the issuance of (i) a third 10% convertible note (the “Third 10% Convertible Note” and with the 10% Convertible Note and the Second 10% Convertible Note, the “10% Convertible Notes”) with a principal face amount of $2,000, which Third Convertible Note is convertible into 5,000,000 shares of our common stock at $0.40 per share and (ii) an additional 620,000 of our common stock. The shares of common stock issuable pursuant to the Third 10% Convertible Note will not be issued to the institutional investor until we shall have obtained approval of the NYSE American and our stockholders. The Third 10% Convertible Note matures on February 15, 2019.

On August 16, 2018, we entered into a securities purchase agreement with certain institutional investors providing for the issuance of (i) secured promissory notes (the “Notes”) in the aggregate principal face amount of $1,212 due February 15, 2019, at an interest rate of eight percent (8%) per annum for which we received an aggregate of $1,010, and (ii) an aggregate of 400,000 shares of common stock to be issued by us, subject to approval of the NYSE American.

On August 23, 2018, DP Lending issued a promissory note in the principal amount of $85 to an accredited investor. This promissory note included an OID of $10 resulting in net proceeds of $75. The principal and accrued interest on this note was due and payable on September 24, 2018, subject to a 28-day extension available to DP Lending.

During September 2018, we issued to institutional investors 12% term promissory notes in the principal face amount of $789, with an interest rate of 12% for a purchase price of $750. The outstanding principal face amount, plus any accrued and unpaid interest, is due by December 31, 2018, or as otherwise provided in accordance with the terms set forth therein. In accordance with the notes, we also agreed to issue 450,000 shares of our common stock to the investors. The notes contain standard and customary events of default.

On October 11, 2018, we entered into a Securities Purchase Agreement with a certain institutional investor providing for the issuance of (i) an Original Issue Discount Promissory Note in the principal face amount of $565 due December 8, 2018, for a purchase price of $510, and (ii) 400,000 shares of common stock to be issued by the Company, subject to approval of the NYSE American.

On October 15, 2018, we entered into an At-The-Market Issuance Sales Agreement with Wilson-Davis & Co., Inc. (“Wilson-Davis”) to sell shares of our common stock, having an aggregate offering price of up to $25 million from time to time, through an “at the market offering” program (the “ATM Offering”) under which Wilson-Davis acts as sales agent. The offer and sale of the shares through the ATM Offering will be made pursuant to our effective “shelf” registration statement on Form S-3 and an accompanying base prospectus contained therein (Registration Statement No. 333-222132) filed with the SEC on December 18, 2017, amended on January 8, 2018, and declared effective by the SEC on January 11, 2018, and a prospectus supplement related to the ATM Offering, dated ~~October 15, 2018.~~

August 6, 2019.

We expect to continue to incur losses for the foreseeable future and will be required to raise additional capital to continue to support our working capital requirements. We ~~believe that the MLSE purchase order contract of $50 million and revenue generated by SC Mining will generate meaningful revenue and corresponding cash in 2018. In addition, we~~ have been successful over the last 12 months in raising capital to support our working capital requirements. We anticipate that we will continue to raise capital through public and private equity offerings, debt financings, or other means. If we are unable to secure additional capital, we may be required to curtail our current operations and take additional measures to reduce costs expenses, including reducing our workforce, eliminating outside consultants, ceasing or reducing our due diligence of potential future acquisitions, including the associated legal fees, in order to conserve cash in order to sustain operations and meet our obligations.

Based on the above, these matters raise substantial doubt about ~~the Company’s~~our ability to continue as a going concern and amounts reported in our financial statements do not reflect the effects of any adjustments to the carrying amounts of our assets and liabilities should we be unable to continue as a going concern.

CRITICAL ACCOUNTING POLICIES

In our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, we identified the critical accounting policies which affect our more significant estimates and assumptions used in preparing our consolidated financial statements. The basis for developing the estimates and assumptions within our critical accounting policies is based on historical information and known current trends and factors. The estimates and assumptions are evaluated on an ongoing basis and actual results have been within our expectations. We have not changed these policies from those previously disclosed in our Annual Report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable for a smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

Our principal executive officer and principal financial officer, with the assistance of other members of the Company's management, have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly ~~report~~report. Based upon our evaluation, our principal executive officer and principal financial officer has ~~determined~~concluded that ~~our disclosure controls and procedures were~~the Company’s internal control over financial reporting was not effective as of ~~September 30,~~the end of the period covered by this Quarterly Report on Form 10-Q because the Company has not yet completed its remediation of the material weakness previously identified and disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, ~~due~~the end of its most recent fiscal year.

Specifically, management has determined that we do not have sufficient resources to ensure an appropriate level of segregation of duties in our accounting function, we have inadequate controls to ensure that information necessary to properly record transactions is adequately communicated and we did not design or maintain effective general information technology controls over certain ~~material weaknesses as described herein.~~information systems that are relevant to the mitigation of the risk pertaining to the misappropriation of assets.

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. ~~Management has identified the following two material weaknesses:~~

~~(i)~~

a lack of sufficient internal accounting resources to provide reasonable assurance that information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure and

~~(ii)~~

~~a lack of segregation of duties to ensure adequate review of financial statement preparation.~~

Planned Remediation

Management, in coordination with the input, oversight and support of our ~~Board of Directors,~~Audit Committee, has identified the measures below to strengthen our control environment and internal control over financial reporting.

~~During~~In January 2018, we hired a new Chief Financial Officer and engaged the services of a financial accounting advisory firm. ~~During~~In September 2018, we hired a Chief Accounting Officer toand in January 2019, we hired a Senior Vice President of Finance. Finally, in May 2019, we hired an Executive Vice President and General Counsel. We have tasked these individuals with expanding and monitoring the Company’s internal controls, to provide an additional level of review of complex financial issues and to assist with financial reporting. Further, ~~until~~as we continue to expand our internal accounting department, the Chairman of the Audit Committee shall perform the following:

assists with documentation and implementation of policies and procedures and monitoring of controls,

reviews all anticipated transactions that are not considered in the ordinary course of business to assist in the early identification of accounting issues and ensure that appropriate disclosures are made in ~~the Company’s~~our financial ~~statements.~~statements

We are currently working to improve and simplify our internal processes and implement enhanced controls, as discussed above, to address the material weaknesses in our internal control over financial reporting and to remedy the ineffectiveness of our disclosure controls and procedures. These material weaknesses will not be considered to be remediated until the applicable remediated controls are operating for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Despite the existence of these material weaknesses, the Company believes that the consolidated financial statements included in the period covered by this Quarterly Report on Form 10-Q fairly present, in all material respects, the Company's financial condition, results of operations and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles.

Changes in Internal Controls over Financial Reporting.

Except as detailed above, during the most recent fiscal quarter ~~2018~~2019 there were no significant changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On July 8, 2019, the Court held a scheduling conference wherein the Court set a trial date of August 25, 2020.

ITEM 1A. RISK FACTORS

The risks described in Part I, Item 1A, “Risk Factors,” in our ~~2017~~2018 Annual Report on Form 10-K, could materially and adversely affect our business, financial condition and results of operations, and the trading price of our common stock could decline. These risk factors do not identify all risks that we face - our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods. ~~The~~Other than the additional risk factor identified below, the Risk Factors section of our ~~2017~~2018 Annual Report on Form 10-K remains current in all material respects.

We received a subpoena from the Commission.

We received a subpoena from the Commission for the voluntary production of documents. We are fully cooperating with this non-public, fact-finding inquiry and believe that we have operated our business in compliance with all applicable laws. The subpoena expressly provides that the inquiry is not to be construed as an indication by the Commission or its staff that any violations of the federal securities laws have occurred, nor should it be considered a reflection upon any person, entity or security. However, there can be no assurance as to the outcome of this matter.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the nine months ended September 30, ~~2018, pursuant~~2019, we issued to ~~the Company’s 2017 Stock Incentive Plan, the Company issued an aggregate of 1,583,059~~our consultants a total 29,375 shares of ~~its common stock as payment for services to its consultants. The shares were valued at $2,640, an average of $1.67 per share.~~

~~On October 5, 2017, Ault & Company purchased 75,000 shares of~~ our ~~common stock at $0.60 per share~~

and a warrant to purchase up to 75,000 shares of our common stock at $0.60 per share for an aggregate purchase price of $45. These shares and warrants were issued by the Company on May 8, 2018. Ault & Company is controlled by Mr. Milton Ault, our Chairman and Chief Executive Officer.

The Company engaged Divine Capital Markets, LLC (“Divine”) to act as Placement Agent (the “Placement Agent”) for the 2017 private placement of the Series C Preferred Stock and warrants. For its services, the Placement Agent received, in addition to a 10.0% commission on the sale of each Unit and a 3.0% non-refundable expense allowance, warrants to purchase 10% of the Units sold at 120% of the Unit purchase price. The warrants to purchase 2.1 Units equates to a warrant to purchase 182,003 shares of the Company’s common stock at $0.72 per share and a second warrant to purchase 182,003 shares of the Company’s common stock at $1.00 per share. On May 8, 2018, the Company issued 279,170 shares of common stock pursuant a cashless exercise of these warrants.

On September 9, 2017, the Company approved the issuance of 100,000 shares of our common stock to Spartan Capital for capital advisory services. On February 2, 2018, the Company amended the terms of the consulting agreement with Spartan Capital and agreed to issue an additional 200,000 shares of the Company’s common stock. Spartan Capital is an accredited investor. The shares of common stock were issued by the Company on May 8, 2018.

~~On May 8, 2018, the Company issued to its consultant 400,000 shares of its~~ common stock with an aggregate value of ~~$328~~$305,019, an average of $10.38 per share for services rendered.

~~On August 10, 2018,~~During the ~~Company issued to its consultant 1,000,000~~nine months ended September 30, 2019, principal and accrued interest of $4,238,878 and $497,416, respectively, on our debt securities was satisfied through the issuance of 370,473 shares of ~~its~~our common ~~stock with an aggregate value of $400 for services rendered.~~stock.

~~On October 5, 2017, Ault & Company purchased 75,000~~During the nine months ended September 30, 2019, we issued 9,375 shares of our common stock ~~at $0.60 per share and a warrant to purchase up to 75,000 shares~~in satisfaction of ~~our common stock at $0.60 per share for~~ an ~~aggregate purchase price~~accrued liability of ~~$45. These shares and warrants were issued by the Company on May 8, 2018. Ault & Company is controlled by Mr. Milton Ault, our Chairman and Chief Executive Officer.~~

~~During October 2018, in accordance with the terms of 12% term promissory notes in the principal face amount of $789, the Company issued 450,000 shares of its common stock to the investors.~~$108,523.

The foregoing issuances ~~and sales and purchases~~ were exempt from registration upon reliance of Section 4(a)(2) and Regulation D promulgated thereunder.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

On ~~May 15, 2018,~~June 18, 2019, we issued a promissory note in the ~~Company entered into a securities purchase agreement~~principal face amount of $2,900,000. Pursuant to ~~sella 10% convertible note (the “10% Convertible Note”), On September 25, 2018,~~ the ~~Company entered into an agreement to amend the maturity date on the 10% Convertible Note, pursuant to which amendment the amortization schedule~~terms of the ~~10% Convertible Note provides for 13 monthly payments in the amount of $309, and for the fourteenth payment~~note, we were required to ~~be in the amount of $1,011, plus accrued and unpaid interest. Each such amortization payment shall be made in cash or Bitcoin. The Company has not made the~~make six monthly amortization payments ~~due during September 2018 and October 2018~~beginning on July 18, 2019. We have not made these payments and this ~~10% Convertible Note~~note is currently in default. ~~The Company is~~We are in negotiations with the ~~investor~~investors to amend the payment terms on this ~~10% Convertible~~ Note.

ITEM 4. MINE SAFETY DISCLOSURES

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

Exhibit Number		Description
1.1		Underwriting Agreement with A.G.P/Alliance Global Partners, dated March 29, 2019. Incorporated by reference to the Current Report on Form 8-K filed on April 1, 2018 as Exhibit 1.1 thereto.

3.1		Certification of Incorporation, dated September 22, 2017. Incorporated herein by reference to the Current Report on Form 8-K filed on December 29, 2017 as Exhibit 3.1 thereto.

3.2		Bylaws, dated September 25, 2017. Incorporated herein by reference to the Current Report on Form 8-K filed on December 29, 2017 as Exhibit 3.2 thereto.

3.3		~~Amended and Restated Articles~~Certificate of Amendment to Certificate of Incorporation, ~~of the Company,~~ dated ~~September 29, 1992.~~January 2, 2019. Incorporated by reference to the Current Report on Form 8-K filed on January 3, 2019 as Exhibit 3.1 ~~of the Company’s Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on October 16, 1996.~~thereto.

3.4		Certificate of Amendment to Certificate of Incorporation (1-for-20 Reverse Stock Split of Common Stock), dated March 14, 2019. Incorporated herein by reference to the Current Report on Form 8-K filed on March 14, 2019 as Exhibit 3.1 thereto.

3.5		Certificate of Designations of Rights and Preferences of 10% Series A Cumulative Redeemable Perpetual Preferred Stock, dated September 13, 2018. Incorporated herein by reference to the Current Report on Form 8-K filed on September 14, 2018 as Exhibit 3.1 thereto.

3.6		Form of Certificate of Determination of Preferences, Rights and Limitations of Series B Convertible Preferred Stock, dated March 3, 2017. Incorporated by reference to the Current Report on Form 8-K filed on March 9, 2017 as Exhibit 3.1 thereto.
~~3.5~~
3.7		~~Form of~~ Certificate of ~~Determination~~Designations of ~~Preferences,~~ Rights and ~~Limitations~~Preferences of Series C Convertible Redeemable Preferred Stock, dated ~~May 15, 2017.~~February 27, 2019. Incorporated herein by reference to the Current ~~Report~~report on Form 8-K filed on ~~May 31, 2017~~February 28, 2019 as Exhibit 3.1 thereto.
~~3.6~~		Form of Certificate of Determination of Preferences, Rights and Limitations of Series D Convertible Preferred Stock. Incorporated by reference to the Current Report on Form 8-K filed on May 3, 2017 as Exhibit 3.1 thereto.
~~3.7~~		Form of Certificate of Determination of Preferences, Rights and Limitations of Series E Convertible Preferred Stock. Incorporated by reference to the Current Report on Form 8-K filed on May 3, 2017 as Exhibit 3.2 thereto.
4.1		Form of Common Stock Purchase Warrant, dated April ~~16, 2018.~~2, 2019. Incorporated by reference to the Current Report on Form 8-K filed on April ~~16,~~1, 2018 as Exhibit 4.1 thereto.

4.2		Form of ~~Series A~~Pre-Funded Common Stock Purchase Warrant, dated ~~May 17, 2018. Incorporated by reference to the Current Report on Form 8-K filed on May 16, 2018 as Exhibit 4.1 thereto.~~
~~4.3~~		~~Form of Series B Common Stock Purchase Warrant, dated May 17, 2018. Incorporated by reference to the Current Report on Form 8-K filed on May 16, 2018 as Exhibit 4.2 thereto.~~
~~4.4~~		~~Form of Senior Secured Convertible Promissory Note, dated May 15, 2018. Incorporated by reference to the Current Report on Form 8-K filed on May 16, 2018 as Exhibit 4.1 thereto.~~
~~4.5~~		~~Form of Series A Common Stock Purchase Warrant, dated May 15, 2018. Incorporated by reference to the Current Report on Form 8-K filed on May 16, 2018 as Exhibit 4.2 thereto.~~
~~4.6~~		~~Form of Series B Common Stock Purchase Warrant, dated May 15, 2018. Incorporated by reference to the Current Report on Form 8-K filed on May 16, 2018 as Exhibit 4.3 thereto.~~
~~4.7~~		~~Form of Registration Rights Agreement, dated May 15, 2018. Incorporated by reference to the Current Report on Form 8-K filed on May 16, 2018 as Exhibit 4.4 thereto.~~
~~10.1~~		~~Form of Securities Purchase Agreement, dated~~ April ~~16, 2018.~~2, 2019. Incorporated by reference to the Current Report on Form 8-K filed on April ~~16,~~1, 2018 as Exhibit ~~10.1~~4.2 thereto.
~~10.2~~
4.3		Form of ~~Secured Convertible Promissory Note,~~Underwriter’s Common Stock Purchase Warrant, dated April ~~16, 2018.~~2, 2019. Incorporated by reference to the Current Report on Form 8-K filed on April ~~16,~~1, 2018 as Exhibit ~~10.2~~4.3 thereto.
~~10.3~~		~~Form of Security Agreement, dated April 16, 2018. Incorporated by reference to the Current Report on Form 8-K filed on April 16, 2018 as Exhibit 10.3 thereto.~~
~~10.4~~		~~Form of Securities Purchase Agreement, dated May 15, 2018. Incorporated by reference to the Current Report on Form 8-K filed on May 16, 2018 as Exhibit 10.1 thereto.~~
~~10.5~~		~~Form of Securities Purchase Agreement, dated May 15, 2018. Incorporated by reference to the Current Report on Form 8-K filed on May 16, 2018 as Exhibit 10.1 thereto.~~
~~10.6~~		~~Form of Security Agreement, dated May 15, 2018. Incorporated by reference to the Current Report on Form 8-K filed on May 16, 2018 as Exhibit 10.2 thereto.~~
~~10.7~~		~~Form of Security and Pledge Agreement, dated May 15, 2018. Incorporated by reference to the Current Report on Form 8-K filed on May 16, 2018 as Exhibit 10.3 thereto.~~
~~10.8~~		~~Form of Intellectual Property Security Agreement, dated May 15, 2018. Incorporated by reference to the Current Report on Form 8-K filed on May 16, 2018 as Exhibit 10.4 thereto.~~

~~Exhibit~~ ~~Number~~		~~Description~~
~~10.9~~		~~Form of Subsidiary Guarantee, dated May 15, 2018. Incorporated by reference to the Current Report on Form 8-K filed on May 16, 2018 as Exhibit 10.5 thereto.~~
~~10.10~~		~~Form of Lock-Up Agreement, dated May 15, 2018. Incorporated by reference to the Current Report on Form 8-K filed on May 16, 2018 as Exhibit 10.6 thereto.~~
31.1*		Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)

31.2*		Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)

32.1**		Certification of Chief Executive and Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code
101.INS*		~~XBRL Instance Document~~
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

** Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: November~~15, 2018~~ 19, 2019

		DPW HOLDINGS, INC.

		By:	/s/ Milton C. Ault, III
			Milton C. Ault, III
			Chief Executive Officer
			(Principal Executive Officer)


		By:	/s/ William B. Horne
			William B. Horne
			Chief Financial Officer
			(Principal Accounting Officer)

1917

	For the Nine Months Ended September 30,
	2018		2017

Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	695	$	69

Non-cash investing and financing activities:
Cancellation of convertible note payable into shares of common stock	$	2,168	$	145
Cancellation of short term advances into shares of common stock	$	2,775	$	—
Cancellation of short term advances, related party into shares of common stock	$	45	$	—
Cancellation of short term advances, related party into shares of Series B Preferred Stock	$	250	$	—
Issuance of common stock for prepaid services	$	794	$	—
Cancellation of notes payable – related party into shares of common stock	$	—	$	100
Cancellation of notes payable into shares of common stock	$	—	$	648
Cancellation of note payable – related party into series B convertible preferred stock	$	—	$	500

Fair value of assets acquired	$	8,275
Equity instruments issued		(1,451	)
Non-controlling interest		(945	)
Liabilities assumed	$	5,879

	Digital Currencies
Balance at January 1, 2017	$	—
Additions of digital currencies		1,505
Realized loss on sale of digital currencies		(110	)
Impairment loss on digital currencies		(3	)
Payment on convertible notes payable		(726	)
Purchase of fixed assets		(250	)
Payments to vendors		(386	)
Balance at September 30, 2018	$	30

Balance at January 1, 2018	$	1,835
Purchases of marketable securities		858
Sales of marketable securities		(2,159	)
Realized losses on marketable securities		(168	)
Balance at September 30, 2018	$	366

	Intangible Assets
Balance as of January 1, 2017	$	—
Trade name and trademark		1,740
Customer list		988
Non-competition agreements		150
Domain name		81
Accumulated amortization		(61	)
Balance as of December 31, 2017	$	2,898
Trade name and trademark		3
Start-up costs		51
Accumulated amortization		(101	)
Balance as of September 30, 2018	$	2,851

	Enertec			I. AM
Accounts receivable	$	3,078		$	29
Inventories		1,634			40
Prepaid expenses and other current assets		20			—
Property and equipment		649			1,054
Other assets		96			3
Accounts payable and accrued expenses		(2,615	)		(104	)
Short term bank credit		(4,236	)		—
Accrued severance pay		(132	)		—
Net liabilities assumed		(1,506	)		1,022
Goodwill		6,357			576
Non-controlling interest		—			(33	)
Purchase price	$	4,851		$	1,565

	Nine Months Ended
	September 30, 2018		September 30, 2017
Weighted average risk-free interest rate	2.41% — 2.80%		1.73% — 2.14%
Weighted average life (in years)		4.75		5.0
Volatility		124.7% — 131.7%		98.4% — 107.2%
Expected dividend yield		0%		0%
Weighted average grant-date fair value per share of options granted	$	0.92	$	0.45

Issuances outside of Plans
$0.80 - $2.32			3,997,500			7.65		$	1.30			325,694		$	1.61

	Three Months ended September 30, 2017
	DPC			DPL			Eliminations			Total
Revenue	$	2,877		$	343		$	—		$	3,220
Inter-segment revenues		6			—			(6	)		—
Total revenues	$	2,883		$	343		$	(6	)	$	3,220

Depreciation and
amortization expense	$	32		$	16		$	—		$	48

Loss from operations	$	(1,137	)	$	(181	)	$	—		$	(1,318	)
Capital expenditures for
segment assets, as of
September 30, 2018	$	—		$	—		$	—		$	—

Identifiable assets as of
September 30, 2018	$	12,315		$	1,666		$	—		$	13,981