Core Viewpoint - Ault Alliance, Inc. has returned a total of 101,362 shares of its 13% Series D cumulative redeemable perpetual preferred stock and 679,969 shares of common stock to treasury, which will reduce the company's annual dividend by $0.3 million, enhancing its financial health [1][2] Group 1: Share Retirement and Financial Impact - The retirement of the Preferred Shares, which accounted for nearly 24% of the outstanding shares of that series, will significantly reduce preferred dividends payable, thereby bolstering the company's financial stability [2] - The total stated value of the returned Preferred Shares is $2.5 million, contributing to a decrease in annual dividend obligations [1] Group 2: Bitcoin Mining Operations - Ault Alliance's subsidiary, Sentinum, has achieved its highest single monthly run rate from Bitcoin mining operations, attributed to focused operational strategies [2] - The company plans to strategically relocate approximately 6,500 mining rigs to Sentinum's self-managed facility in Montana, anticipating further achievements in 2024 driven by favorable Bitcoin market trends [2] Group 3: Company Overview - Ault Alliance, Inc. is a diversified holding company focused on acquiring undervalued businesses and disruptive technologies, operating in various sectors including Bitcoin mining, artificial intelligence, and mission-critical products [3] - The company also extends credit to select entrepreneurial businesses through its licensed lending subsidiary [3]

Business Operations - Ault Alliance, Inc. owns and operates a data center for Bitcoin mining and offers colocation and hosting services, supporting various industries including AI, metaverse, and medical sectors[180]. Financial Agreements - The company completed a Share Exchange Agreement on March 6, 2023, resulting in the issuance of Series B and Series C Preferred Stock with a combined stated value of $100 million, convertible into 13.3 million shares of ROI Common Stock[182]. - A securities purchase agreement was executed on March 28, 2023, to issue 100,000 shares of preferred stock, including Series E, F, and G, with a total stated value of $10 million[184]. - A loan agreement with Ault & Company was established on June 8, 2023, providing a credit facility of up to $10 million, with $4.7 million advanced as of the report date[189]. - An additional $8.8 million was borrowed under a Loan and Guarantee Agreement on July 19, 2023, with net proceeds of $7.5 million[192]. - A note purchase agreement was entered into on October 13, 2023, resulting in the sale of a senior secured convertible promissory note for $17.5 million, maturing on October 12, 2028[194]. - The Note issued has a conversion price adjustable based on stock performance, with a floor price of $0.10 per share[197]. - Ault & Company received warrants to purchase 47,685,988 shares of common stock at an exercise price of $0.1837, with a five-year term[198]. - The company has a senior security interest in its assets as collateral for the repayment of the Note, subordinated to other secured promissory notes[198]. Revenue and Profitability - Total revenue for the three months ended September 30, 2023, was $47.96 million, an increase of 8% from $44.27 million in the same period of 2022[208]. - Revenue from cryptocurrency mining operations increased by 95% to $7.56 million, up from $3.87 million year-over-year[210]. - Energy segment revenues rose by $12.93 million for the three months ended September 30, 2023, attributed to the acquisition of Circle 8 crane operations[217]. - Gross profit decreased to $9.67 million, with gross margins dropping to 20% compared to 43% in the prior year[208]. - Total revenue for the nine months ended September 30, 2023, was $119.93 million, a 38% increase from $87.16 million in the same period of 2022[229]. - Revenue from cryptocurrency mining surged to $23.27 million for the nine months ended September 30, 2023, compared to $11.40 million in the prior year, reflecting a 104% increase[230]. - GIGA segment revenue increased by $6.19 million, or 29%, for the nine months ended September 30, 2023, driven by defense-related investments[232]. Expenses - Research and development expenses increased by $1.2 million due to development work on ROI's BitNile metaverse platform[219]. - Selling and marketing expenses increased to $8.0 million for Q3 2023, up 8% from $7.4 million in Q3 2022, primarily due to higher advertising costs for the BitNile metaverse platform[220]. - General and administrative expenses rose to $17.8 million in Q3 2023, a 16% increase from $15.4 million in Q3 2022, driven by costs from new acquisitions totaling $4.9 million[221]. - Research and development expenses rose by $3.5 million for the nine months ended September 30, 2023, mainly due to development work on the BitNile metaverse platform[239]. - Selling and marketing expenses for the nine months ended September 30, 2023, were $26.4 million, a 26% increase from $20.9 million in the prior year[239]. - General and administrative expenses increased by $15.2 million, or 34%, to $59.5 million for the nine months ended September 30, 2023, compared to $44.4 million for the same period in 2022, primarily due to costs from new acquisitions[240]. Losses and Impairments - The net loss attributable to Ault Alliance, Inc. for the three months ended September 30, 2023, was $21.77 million, compared to a loss of $7.27 million in the same period of 2022[208]. - The company reported a loss from operations of $21.90 million for the three months ended September 30, 2023, compared to a loss of $7.01 million in the prior year[208]. - Net loss for the nine months ended September 30, 2023, was $141.52 million, compared to a net loss of $62.87 million in the same period of 2022[229]. - An impairment charge of $3.9 million was recognized in Q3 2023 related to property and equipment at Bitcoin mining operations that could not commence[222]. - The company recognized a non-cash impairment charge of $18.6 million for AVLP's goodwill during the nine months ended September 30, 2023, as the fair value did not exceed its carrying amount[244]. - Impairment of AVLP's intangible assets amounted to $17.0 million during the same period, based on internally developed forecasts indicating the carrying amount was not recoverable[245]. - An impairment charge of $3.9 million was recognized related to property and equipment at ROI's Bitcoin mining operations due to their inability to commence operations[247]. Cash Flow - Net cash used in operating activities totaled $2.2 million for the nine months ended September 30, 2023, a significant decrease from $21.9 million net cash provided in the same period in 2022[253]. - Net cash used in investing activities was $22.9 million for the nine months ended September 30, 2023, compared to $115.4 million for the same period in 2022, reflecting reduced capital expenditures[254]. - Net cash provided by financing activities was $23.8 million for the nine months ended September 30, 2023, down from $86.1 million in the prior year[256]. - The company sold an aggregate of 10.8 million shares of common stock for gross proceeds of $21.2 million under the 2023 Common ATM Offering during the nine months ended September 30, 2023[254]. - Subsequent to September 30, 2023, the company sold 54.2 million shares of common stock for gross proceeds of $10.0 million under the 2023 Common ATM Offering[257]. Preferred Shares - The company purchased 603.44 shares of Series D Convertible Preferred Stock from ROI for a total of $15.1 million, with each share having a stated value of $25,000[264]. - The preferred shares are convertible into approximately 29.6 million shares of ROI common stock at a conversion price of $0.51 per share[264]. - Preferred shareholders are entitled to a 10% annual dividend until November 14, 2033, provided at least 25% of the preferred shares remain outstanding[264]. Business Combinations and Accounting - The company evaluates its business relationships with related parties to identify potential Variable Interest Entities (VIEs) under ASC 810, Consolidation[267]. - The company allocates the purchase price of acquired businesses to tangible and intangible assets based on estimated fair values, with any excess recorded as goodwill[269]. - Direct transaction costs associated with business combinations are expensed as incurred[269]. - If a business combination is achieved in stages, the previously held equity interest is re-measured to fair value at the acquisition date, with gains or losses recognized in profit or loss[270].

Business Operations - Ault Alliance, Inc. owns and operates a data center for Bitcoin mining and offers colocation and hosting services for AI ecosystems, supporting various industries including metaverse, oil exploration, and medical/biopharma [140]. - The company has provided capital and expertise to support growth in various sectors, including defense/aerospace and consumer electronics [145]. Financial Transactions - The company entered into a Share Exchange Agreement with BMI, acquiring approximately 92.4% of BMI's outstanding common stock through the issuance of Series B and Series C Preferred Stock valued at $100 million [141]. - A private placement raised $10 million through the issuance of 100,000 shares of preferred stock, including 83,000 shares of Series E Convertible Preferred Stock, with a conversion price set at 85% of the common stock's closing price [142]. - Ault Alliance has entered into a loan agreement with Ault & Company for an unsecured credit facility of up to $10 million, with $4.7 million advanced as of the report date [142]. - The company has sold 3.8 million shares of common stock for gross proceeds of $16.1 million through an At-the-Market Issuance Sales Agreement [142]. - The company established a record date for distributing TurnOnGreen securities, distributing 56.4 million shares in the second distribution [144]. - Ault Alliance's Series B and Series C Preferred Stock will yield dividends at a rate of 5% per annum, increasing to 12% if dividend payments are missed [141]. Revenue and Profitability - Total revenue for the three months ended June 30, 2023, was $47,408,000, a 173% increase from $17,366,000 in the same period of 2022 [148]. - Revenue from cryptocurrency mining increased by 110% to $8,368,000, up from $3,976,000 year-over-year [148]. - Revenue from lending and trading activities surged 910% to $9,525,000, compared to $943,000 in the prior year [148]. - Gross profit for the period was $17,885,000, with gross margins increasing to 38% from 29% year-over-year [154]. - Total revenue for the six months ended June 30, 2023, was $78,594,000, a 57% increase from $50,192,000 in the same period of 2022 [167]. - Revenue from cryptocurrency mining increased by $8,191,000, or 109%, reaching $15,715,000 compared to $7,524,000 in the prior year [167]. - Energy segment revenue rose by $25,782,000 due to the acquisition of Circle 8 crane operations in December 2022 [173]. - Gross profit decreased to $19,925,000, with gross margins dropping to 25% from 54% in the prior year [173]. Expenses - Research and development expenses rose by $1.1 million due to development work on the BMI metaverse platform [155]. - Selling and marketing expenses increased by 37% to $9.6 million, driven by higher advertising costs related to the BMI metaverse platform [156]. - General and administrative expenses were $21.3 million, a 12% increase attributed to costs from new acquisitions [157]. - Total operating expenses increased to $101,848,000, up from $50,018,000, reflecting a 103% rise [173]. - Research and development expenses increased by $2.2 million, primarily due to development work on the BMI metaverse platform [174]. - Selling and marketing expenses rose by $4.9 million, or 36%, totaling $18.4 million for the six months ended June 30, 2023 [174]. - General and administrative expenses increased by $11.3 million, or 34%, reaching $44.0 million, driven by costs from new acquisitions [174]. Impairments and Losses - The company recognized a non-cash impairment charge of $18.6 million for AVLP's goodwill due to indicators of impairment [161]. - Impairment charges recognized for AVLP goodwill and intangible assets totaled $35.6 million during the six months ended June 30, 2023 [176][177]. - The net loss for the three months ended June 30, 2023, was $64,252,000, compared to a net loss of $26,085,000 in the same period of 2022 [148]. - Net loss for the six months ended June 30, 2023, was $113,081,000, compared to a net loss of $54,872,000 in the same period of 2022 [166]. Interest and Cash Flow - Interest expense for the period was $15.9 million, significantly up from $2.0 million in the prior year, primarily due to amortization of debt discount and fees [165]. - Interest and other income increased to $3.6 million for the six months ended June 30, 2023, from $0.5 million in the same period of 2022, primarily due to higher interest rates [179]. - Interest expense decreased to $29.7 million for the six months ended June 30, 2023, from $31.9 million in the same period of 2022, with $16.2 million attributed to amortization of debt discount [179]. - Net cash provided by operating activities totaled $12.9 million for the six months ended June 30, 2023, compared to $19.4 million for the same period in 2022 [181]. - Net cash used in investing activities was $21.8 million for the six months ended June 30, 2023, significantly lower than $87.1 million in the same period of 2022 [181]. - Net cash provided by financing activities was $12.8 million for the six months ended June 30, 2023, down from $75.5 million in the same period of 2022 [183]. - Cash and cash equivalents increased to $19.7 million as of June 30, 2023, from $10.5 million at December 31, 2022 [181]. Stock Transactions - The company sold an aggregate of 0.1 million shares of common stock for gross proceeds of $4.2 million during the 2022 Common ATM Offering [183]. - Subsequent to June 30, 2023, the company sold 3.9 million shares of common stock for gross proceeds of $15.6 million under the 2023 Common ATM Offering [183].

Financial Performance - Total revenue for Q1 2023 was $31,186,000, a decrease from $32,826,000 in Q1 2022, representing a decline of approximately 5%[101] - The company reported a net loss of $48,829,000 for Q1 2023, compared to a net loss of $28,787,000 in Q1 2022, indicating an increase in losses of approximately 69%[101] - Total operating expenses rose to $33,458,000 in Q1 2023, up from $21,302,000 in Q1 2022, reflecting an increase of approximately 57%[101] - Revenues from lending and trading activities were negative $4.9 million, attributed to significant unrealized losses from the investment portfolio[108] - Gross margins decreased to 7% for the three months ended March 31, 2023, down from 68% in the prior year, impacted by negative margins from lending and trading activities[109] Cryptocurrency Mining - Cryptocurrency mining revenue increased to $7,347,000 in Q1 2023 from $3,548,000 in Q1 2022, marking a growth of approximately 107%[101] - The cost of revenue for cryptocurrency mining was $8,103,000 in Q1 2023, compared to $2,497,000 in Q1 2022, an increase of approximately 225%[101] - Revenue from cryptocurrency mining operations increased by $3.8 million, despite lower Bitcoin prices and increased mining difficulty[106] Shareholder Initiatives - The company completed a share exchange agreement with BMI, which will result in the issuance of Series B and Series C Preferred Stock with a combined stated value of $100 million[94] - A reverse stock split was approved at a ratio of one-for-three hundred, effective May 17, 2023, aimed at increasing stockholder value[97] - The company sold 100,000 shares of preferred stock in a private placement, with a total stated value of $10 million, to institutional investors[95] - The company is focused on maximizing stockholder value through various initiatives, including potential public offerings and sales of partner companies[98] Expenses and Investments - Research and development expenses increased by $1.1 million due to expenditures related to the development of the BMI metaverse platform[109] - Selling and marketing expenses rose by $2.3 million, or 36%, to $8.8 million, driven by higher advertising costs related to the BMI metaverse platform[110] - General and administrative expenses increased by $9.0 million, or 66%, to $22.7 million, primarily due to costs from recent acquisitions and higher stock-based compensation[111] - The impairment of equity securities amounted to $9,555,000 in Q1 2023, indicating significant losses in investments[101] Revenue Sources - GIGA segment revenue increased by $1.5 million, including $0.4 million from the acquisition of Giga-tronics Incorporated, driven by increased military spending and improved economic conditions[104] - Energy revenues rose by $13.1 million, primarily due to the acquisition of Circle 8 crane operations in December 2022[109] Cash Flow - Cash and cash equivalents decreased to $9.2 million as of March 31, 2023, from $10.5 million at December 31, 2022, mainly due to debt payments and capital expenditures[113] Business Combinations - The purchase price of an acquired business is allocated to tangible and intangible assets based on estimated fair values, with any excess recorded as goodwill[118] - Direct transaction costs associated with business combinations are expensed as incurred, and the results of operations of acquired businesses are included in consolidated results from the acquisition date[118] - If a business combination is achieved in stages, the previously held equity interest is re-measured to fair value at the acquisition date, with any gains or losses recognized in profit or loss[120] - The company assesses whether it is the primary beneficiary of Variable Interest Entities (VIEs) based on its ability to direct activities that significantly impact the VIE's performance and its obligation to absorb losses[117]

Financing Activities - The company raised approximately $177 million through the sale of about 317.9 million shares of common stock from the 2022 ATM Offering[688] - The company terminated the 2022 Sales Agreement after completing its capital raise, indicating a strategic shift in funding approach[688] - The company entered into a note purchase agreement for secured promissory notes totaling $11 million, with a 10% interest rate, secured by marketable securities and Bitcoin mining equipment[697] - The company entered a Securities Purchase Agreement for a secured promissory note totaling $17.5 million, with obligations to repay 80% of proceeds from future financings[705][707] - The company agreed to issue 11.6 million shares of common stock to an investor in exchange for the cancellation of outstanding warrants[707] - A private placement raised $10 million through the issuance of 100,000 shares of preferred stock, convertible into common stock at a price equal to 85% of the closing sale price[711][713] - The company executed a Share Exchange Agreement with BMI, resulting in the issuance of Series B and C Convertible Preferred Stock with a combined stated value of $100 million[709] - The Series B and C Preferred Stock are convertible into approximately 400 million shares of BMI common stock, representing about 92.4% of BMI's outstanding shares on a fully-diluted basis[709] - The company entered into a Securities Purchase Agreement on March 28, 2023, to issue 100,000 shares of preferred stock with a stated value of $100.00 each, including Series E, F, and G Convertible Preferred Stocks[768] - The principal face amount of the 3% Secured Promissory Notes issued on November 18, 2022, was $8,181,819, with a maturity date of May 18, 2023[764] - The Series E and F Preferred Stocks were purchased by canceling outstanding secured promissory notes totaling $8.4 million[769] - The company issued warrants to purchase approximately 9 million shares of common stock at prices of $0.45 and $0.75 per share as part of the loan agreement[763] - The company is required to make monthly payments starting at $0.6 million, increasing to $1.1 million by November 2023, as part of the loan repayment[763] Acquisitions and Partnerships - Ault Lending acquired a majority stake in The Singing Machine Company, a leader in consumer karaoke products, enhancing its portfolio[695] - Ault Energy was formed to partner with White River on drilling projects across 30,000 acres in Texas, Louisiana, and Mississippi, with an initial commitment of approximately $1 million[696] - Circle 8 acquired substantially all assets of Circle 8 Crane Services for Class D equity interests and potential cash earnout payments up to $2.1 million based on EBITDA targets over three years[704] Revenue and Financial Performance - Total revenue increased by $81.9 million, or 156%, to $134.3 million for the year ended December 31, 2022, compared to $52.4 million in 2021[728] - Revenue from cryptocurrency mining operations surged by $13.2 million, reaching $16.7 million in 2022, a 384% increase from $3.5 million in 2021[728] - Revenue from lending and trading activities rose to $36.6 million, an increase of $19.8 million or 117% compared to $16.9 million in 2021[728] - Gross profit for 2022 was $55.97 million, with gross margins decreasing to 41.7% from 54.5% in 2021[735] - Total operating expenses increased significantly to $196.1 million in 2022, up from $46.9 million in 2021, resulting in a loss from operations of $(140.2) million[728] - Loss from operations was $140.2 million for the year ended December 31, 2022, compared to a loss of $18.4 million for the year ended December 31, 2021, primarily due to increased operating expenses[747] - The company recorded a net loss of $189.8 million for the year ended December 31, 2022, compared to a net loss of $23.0 million in 2021[754] Cash Flow and Liquidity - Net cash provided by operating activities totaled $26.5 million for the year ended December 31, 2022, a significant improvement from net cash used of $61.7 million in 2021[756] - Net cash used in investing activities was $158.6 million for the year ended December 31, 2022, including $108.4 million for capital expenditures related to Bitcoin mining equipment[757] - The company had cash and cash equivalents of $10.5 million as of December 31, 2022, down from $15.9 million at the end of 2021[755] - The company anticipates that current cash on hand is insufficient to fund planned operations for at least one year after the issuance of the consolidated financial statements[768] Expenses and Impairments - Research and development expenses rose to $2.8 million in 2022, an increase of $0.7 million from $2.0 million in 2021, driven by product development efforts[736] - Selling and marketing expenses surged to $29.4 million, a 278% increase from $7.8 million in 2021, primarily due to higher advertising costs[737] - General and administrative expenses increased to $67.3 million, an 84% rise from $36.7 million in 2021, attributed to various acquisitions and increased operational costs[738] - A goodwill impairment charge of $3.2 million was recognized for SMC due to adverse changes in business climate and a decline in sales[740] - GIGA recognized a non-cash impairment charge of $9.9 million for goodwill during the year ended December 31, 2022, due to fair value not exceeding carrying amounts[743] - The company recorded an impairment charge of $79.6 million for Bitcoin mining equipment, reducing its net carrying value to estimated fair value as of December 31, 2022[745] Strategic Initiatives - The company is pursuing strategies to maximize stockholder value, including potential public offerings and sales of subsidiaries or partner companies[720][721] - The company plans to continue expanding its market presence through acquisitions and product development initiatives[729] - The company is actively conducting due diligence on third parties in the crypto asset space to mitigate potential liquidity or insolvency risks[700] - The company has not been materially impacted by recent bankruptcies in the crypto assets industry, maintaining its asset recovery and liquidity[700]

Financing Activities - BitNile sold 256.7 million shares of common stock for gross proceeds of $168.0 million as of September 30, 2022, under the 2022 Common ATM Offering[128] - The company sold 14.8 million shares of common stock for gross proceeds of $2.6 million during the 2022 Common ATM Offering[183] - The company sold 8,933 shares of Series D Preferred Stock for gross proceeds of $124,000 during the 2022 Preferred ATM Offering[183] - A credit agreement with Fifth Third Bank provides a secured revolving credit facility of up to $15 million, maturing on October 14, 2025[184] - The company borrowed $18.9 million in term loans with an interest rate of 8.5% per annum, maturing in 18 months, with monthly payments starting at $0.6 million[185] - The company issued 3% Secured Promissory Notes with a principal amount of $8,181,819, maturing on May 18, 2023[186] - The company must maintain a minimum fixed charge coverage of 1.05 to 1 under the credit agreement[184] - As of November 18, 2022, the availability under the credit agreement was approximately $4.0 million[184] - The company used proceeds from the loans to purchase a private aircraft for a total price of $15.8 million[185] - The company believes its current cash and proceeds from the 2022 ATM Offering are sufficient to meet operating and capital requirements for at least the next twelve months[186] Revenue and Financial Performance - Total revenue for the three months ended September 30, 2022, was $49.8 million, an increase of $80.6 million from a loss of $30.8 million in the same period of 2021[140] - Revenue from cryptocurrency mining operations was $3.9 million for the three months ended September 30, 2022, compared to $0.3 million in the same period of 2021, reflecting a 1,324% increase[144] - Revenue from hotel operations was $5.5 million for the three months ended September 30, 2022, compared to $0 in the same period of 2021, following the acquisition of four hotel properties for $71.3 million[145] - GWW segment revenue increased by $1.4 million, or 22%, to $7.8 million for the three months ended September 30, 2022, driven by military market solutions[141] - TurnOnGreen revenues increased by $0.6 million, or 52%, to $1.7 million for the three months ended September 30, 2022, due to increased sales to defense customers[142] - SMC revenues were $17.1 million for the three months ended September 30, 2022, attributed to the acquisition of SMC in June 2022[143] - Total revenue for the nine months ended September 30, 2022, was $99.97 million, a 124% increase from $44.58 million in the same period of 2021[159] - Revenue from cryptocurrency mining reached $11.4 million for the nine months ended September 30, 2022, a significant increase of 1545% from $0.693 million in the same period of 2021[159] - Revenues from the GWW segment increased by 12% to $21.53 million for the nine months ended September 30, 2022, from $19.20 million in the same period of 2021[160] - TurnOnGreen revenues declined by 11% to $3.85 million for the nine months ended September 30, 2022, from $4.31 million in the same period of 2021, due to supply chain challenges[161] - SMC revenues increased by $17.1 million for the nine months ended September 30, 2022, compared to $0 for the same period in 2021, due to the acquisition of SMC in June 2022[162] - BNI's cryptocurrency mining revenues were $11.4 million for the nine months ended September 30, 2022, up from $0.7 million in the prior year, driven by increased mining activities and favorable market conditions[163] - AGREE revenues reached $12.8 million for the nine months ended September 30, 2022, compared to $0 in the same period of 2021, following the acquisition of four hotel properties for $71.3 million[163] - Ault Alliance's revenues from lending and trading activities increased to $32.2 million for the nine months ended September 30, 2022, from $19.6 million in the prior year, attributed to significant realized and unrealized gains[165] Expenses and Losses - Total cost of revenue for the three months ended September 30, 2022, was $28.7 million, compared to $5.3 million in the same period of 2021[138] - Net loss attributable to BitNile Holdings, Inc. for the three months ended September 30, 2022, was $7.3 million, compared to a net loss of $42.9 million in the same period of 2021[138] - Loss from operations for the three months ended September 30, 2022, was $5.3 million, a significant improvement from a loss of $49.9 million in the same period of 2021[138] - Gross margins were 42.4% for the three months ended September 30, 2022, down from 117.1% in the same period of 2021, with adjusted gross margins of 27.6% and 35.8% for 2022 and 2021, respectively[146] - Selling and marketing expenses rose to $7.4 million for the three months ended September 30, 2022, an increase of 273% from $2.0 million in the same period of 2021, primarily due to higher marketing costs[147] - General and administrative expenses increased by 41% to $15.9 million for the three months ended September 30, 2022, compared to $11.3 million in the same period of 2021, largely due to costs from acquired entities[148] - Interest expense surged to $4.0 million for the three months ended September 30, 2022, compared to $0.1 million in the same period of 2021, primarily due to interest on construction loans and secured promissory notes[151] - Gross margins decreased to 48.4% for the nine months ended September 30, 2022, down from 62.6% in the prior year, impacted by lower margins from cryptocurrency mining operations[166] - Research and development expenses rose by $0.3 million to $1.9 million for the nine months ended September 30, 2022, due to product development efforts[167] - Selling and marketing expenses surged to $20.9 million for the nine months ended September 30, 2022, an increase of 341% from $4.7 million in the prior year, primarily due to higher advertising costs[167] - General and administrative expenses doubled to $48.7 million for the nine months ended September 30, 2022, compared to $24.4 million in the prior year, driven by costs from acquisitions and increased operational expenses[168] Investments and Acquisitions - Ault Alliance's stalking horse bid for EYP's assets was based on an enterprise value of approximately $67.7 million, with a purchase price of $62.5 million[129] - BitNile's investment in Alzamend Neuro included a total of $10 million, with $4 million funded in April 2022 upon achieving a milestone[129] - The company increased its ownership of Avalanche International Corp. from less than 20% to approximately 92% by converting $20 million in convertible promissory notes into common stock[129] - Ault Lending made open market purchases of The Singing Machine Company, acquiring over 50% of its common stock for a total purchase price of $7.4 million[129] - BNI's hosting agreement with Compute North involves hosting approximately 6,500 Bitcoin miners for five years, with a deposit of approximately $2 million paid[131] - The company recorded an impairment of $2 million on a deposit related to the hosting of Bitcoin miners due to Compute North's bankruptcy[132] - The company allocates the purchase price of acquired businesses based on estimated fair values, with any excess recorded as goodwill[187]

Financial Performance - Total revenue decreased by $44.8 million, or 72%, to $17.4 million for the three months ended June 30, 2022, from $62.1 million for the same period in 2021 [129]. - Revenue from cryptocurrency mining operations increased to $4.0 million for the three months ended June 30, 2022, compared to $0.3 million for the same period in 2021, representing a 1266% increase [132]. - Revenue from lending and trading activities decreased to $0.9 million for the three months ended June 30, 2022, from $53.3 million for the same period in 2021, a decline of 98% [134]. - Total revenue for the six months ended June 30, 2022, was $50.2 million, a decrease of $25.2 million or 33% compared to $75.4 million for the same period in 2021 [150]. - Revenue from cryptocurrency mining operations increased to $7.5 million, up 1687% from $421,000 in the prior year [151]. - Revenue from lending and trading activities decreased to $18.9 million, down 68% from $58.5 million in the prior year, primarily due to significant unrealized gains in the previous period [156]. Expenses and Losses - Gross margins decreased to 28.8% for the three months ended June 30, 2022, compared to 89.9% for the same period in 2021 [137]. - Research and development expenses increased by $0.2 million to $0.7 million for the three months ended June 30, 2022, from $0.5 million for the same period in 2021 [138]. - Selling and marketing expenses rose to $7.0 million for the three months ended June 30, 2022, compared to $1.5 million for the same period in 2021, an increase of 364% [139]. - General and administrative expenses increased to $19.0 million for the three months ended June 30, 2022, from $8.0 million for the same period in 2021, a rise of 138% [140]. - The company recorded a loss from operations of $23.7 million for the three months ended June 30, 2022, compared to a gain of $45.8 million for the same period in 2021 [141]. - Net loss for the three months ended June 30, 2022 was $25.8 million, compared to net income of $42.2 million for the same period in 2021 [146]. - General and administrative expenses rose to $32.7 million, a 150% increase from $13.1 million in the prior year, mainly due to costs associated with hotel operations and stock compensation [162]. - The company recorded a loss from operations of $22.7 million for the six months ended June 30, 2022, compared to a gain of $47.0 million in the prior year [163]. - Net loss for the six months ended June 30, 2022 was $54.6 million, compared to net income of $44.2 million for the same period in 2021 [169]. Investments and Acquisitions - BitNile sold 239.7 million shares of common stock for gross proceeds of $163.4 million as part of the 2022 Common ATM Offering [119]. - Ault Alliance's stalking horse bid for EYP's assets was based on an enterprise value of approximately $67.7 million, with a purchase price of $62.5 million [119]. - Digital Power Lending made a $4 million investment in Alzamend Neuro, bringing total investment to $10 million, contingent on achieving specific milestones [120]. - BNI acquired the remaining 30% interest in Alliance Cloud Services for $1.8 million, making it a wholly-owned subsidiary [120]. - The company converted $20 million in convertible promissory notes into approximately 51.9 million shares of Avalanche International Corp., increasing ownership to about 92% [120]. - Revenue from hotel operations was $7.3 million for the six months ended June 30, 2022, compared to $0 for the same period in 2021, following the acquisition of four hotel properties for $71.3 million [155]. Cash Flow and Financial Position - Cash and cash equivalents increased to $24.1 million as of June 30, 2022, up from $15.9 million at December 31, 2021 [171]. - Net cash provided by operating activities totaled $15.0 million for the six months ended June 30, 2022, compared to a net cash used of $21.7 million for the same period in 2021 [171]. - Net cash used in investing activities was $82.8 million for the six months ended June 30, 2022, compared to $29.7 million for the same period in 2021 [171]. - Cash provided by financing activities was $75.5 million for the six months ended June 30, 2022, down from $138.1 million for the same period in 2021 [171]. - The company believes current cash on hand and proceeds from the 2022 ATM Offering are sufficient to meet operating and capital requirements for at least the next twelve months [171]. Other Financial Metrics - Other comprehensive loss was $1.5 million for the three months ended June 30, 2022, compared to other comprehensive income of $5.8 million for the same period in 2021 [146]. - Other comprehensive loss was $1.8 million for the six months ended June 30, 2022, an improvement from a loss of $2.9 million for the same period in 2021 [170]. - Realized gain on marketable securities was $0.1 million for the six months ended June 30, 2022, down from $0.4 million for the same period in 2021 [168]. - Loss from investment in unconsolidated entity was $0.9 million for the six months ended June 30, 2022, compared to $3,000 for the same period in 2021 [168]. - Interest expense increased significantly to $31.9 million for the six months ended June 30, 2022, compared to $0.3 million in the prior year, primarily due to the issuance of Senior Notes [166].

Revenue Performance - Total revenue for Q1 2022 was $32.83 million, a significant increase of 147% compared to $13.25 million in Q1 2021[125] - Cryptocurrency mining revenue reached $3.55 million in Q1 2022, up from $130,000 in Q1 2021[125] - Revenue from lending and trading activities surged to $17.92 million in Q1 2022, compared to $5.21 million in Q1 2021[125] - Total revenue increased by $19.6 million, or 148%, to $32.8 million for the three months ended March 31, 2022, compared to $13.2 million for the same period in 2021[126] - Revenue from cryptocurrency mining operations surged to $3.5 million, a 2,629% increase from $0.1 million in the prior year[130] - Revenues from lending and trading activities rose to $17.9 million, up 244% from $5.2 million for the same period in 2021[132] Profitability and Loss - Gross profit for Q1 2022 was $22.33 million, representing a gross margin of approximately 68%[125] - The company reported a net loss of $28.77 million in Q1 2022, compared to a net income of $1.99 million in Q1 2021[125] - The company reported a net loss of $28.8 million for the three months ended March 31, 2022, compared to a net income of $2.0 million in the same period in 2021[146] - Gross margins improved to 68.0% for the three months ended March 31, 2022, compared to 61.4% in the prior year[134] Operating Expenses - Operating expenses increased to $21.30 million in Q1 2022, up from $6.94 million in Q1 2021[125] - Selling and marketing expenses increased by $5.2 million, or 422%, to $6.5 million, primarily due to higher marketing costs at Ault Alliance[136] - General and administrative expenses rose by $8.6 million, or 169%, to $13.7 million, driven by non-cash stock compensation and costs from hotel operations[137] Cash Flow and Investments - Net cash provided by operating activities totaled $25.0 million for the three months ended March 31, 2022, compared to a net cash used of $14.2 million in the prior year[148] - Net cash used in investing activities was $24.4 million, including $35.4 million for capital expenditures related to Bitcoin mining equipment[149] - Cash and cash equivalents increased to $39.4 million as of March 31, 2022, up from $15.9 million at the end of 2021[148] Strategic Acquisitions and Investments - The company fully paid off $66 million in senior secured notes on March 30, 2022[112] - BitNile acquired the remaining 30% interest in Alliance Cloud Services for $1.8 million, making it a wholly-owned subsidiary[119] - Ault Alliance's stalking horse bid for EYP's assets is based on an enterprise value of approximately $67.7 million[114] - The company plans to continue pursuing growth through acquisitions and strategic investments in various sectors, including cryptocurrency and defense[123] Variable Interest Entity (VIE) and Technology Development - AVLP is classified as a Variable Interest Entity (VIE) and is not consolidated due to the company not being the primary beneficiary[154] - As of March 31, 2022, the company's ownership percentage in AVLP was less than 20%[155] - The company advanced a total of $3.6 million to AVLP under existing loan agreements[155] - AVLP has developed a novel cost-effective and environmentally friendly material synthesis technology for textile applications[156] - AVLP's technology includes Multiplex Laser Surface Enhancement, which enhances functionalities such as dyeability, hydrophilicity, and fire retardancy[156] - The new technology significantly reduces the use of water, harmful chemicals, and energy compared to conventional textile treatment methods[156]

Financial Performance - Total revenue for the year ended December 31, 2021, was $52,400,000, a 120% increase from $23,871,000 in 2020[604]. - Revenue from cryptocurrency mining was $3,450,000, while revenue from lending and trading activities surged to $16,854,000, up 6864% from $242,000 in the previous year[604]. - Gross profit for 2021 was $28,542,000, compared to $7,514,000 in 2020[602]. - The company reported a loss from continuing operations of $(23,971,000) for 2021, compared to $(33,388,000) in 2020[602]. - GWW segment revenues increased by $7,368,000, or 40%, to $25,581,000 in 2021, driven by improved liquidity and increased military market solutions[605]. - TOGI revenues slightly declined by $70,000, or 1%, to $5,346,000 in 2021[606]. - The net loss for the year ended December 31, 2021, was $24.2 million compared to a net loss of $32.7 million for the year ended December 31, 2020[627]. Investments and Acquisitions - The company acquired a 617,000 square foot energy-efficient facility for $4.0 million, funded by its working capital[575]. - The company invested $10 million in Alzamend Neuro, Inc., with $6 million funded as of the report date, for a total of 6,666,667 shares at $1.50 per share[576]. - The company executed contracts to purchase 4,000 Bitcoin miners for a gross purchase price of $27.3 million, with 1,000 units received by September 30, 2021[579]. - The company invested approximately $11.5 million for Series A preferred stock of Earnity Inc., acquiring about 19.99% of its common stock[580]. - The company entered into construction loan agreements totaling $68.75 million for the acquisition of four hotel properties, with a purchase price of $69.2 million[583]. - The company purchased 129,363,756 shares of IMHC's common stock for $200,000, resulting in a change in control of IMHC[582]. - The company entered into a Share Exchange Agreement with Giga-tronics Incorporated, which includes the issuance of 2,920,085 shares of GIGA's common stock[584]. - The company acquired a property for $15,500,000, with $1,500,000 previously funded and $14,000,000 paid on the closing date, intended for a high-rise multi-family project development[588]. - The real estate segment acquired four hotel properties for $71.3 million on December 22, 2021[630]. Revenue Streams - Revenues from cryptocurrency mining operations were $3.5 million for the year ended December 31, 2021, compared to nil for the year ended December 31, 2020[607]. - Revenues from lending and trading activities increased to $16.9 million for the year ended December 31, 2021, from $0.2 million for the year ended December 31, 2020[608]. Expenses - Research and development expenses increased by $0.2 million to $2.0 million for the year ended December 31, 2021[612]. - Selling and marketing expenses were $7.8 million for the year ended December 31, 2021, compared to $1.2 million for the year ended December 31, 2020, an increase of 560%[613]. - General and administrative expenses were $36.7 million for the year ended December 31, 2021, compared to $12.5 million for the year ended December 31, 2020, an increase of 193%[614]. Cash Flow and Financing - Cash and cash equivalents and restricted cash increased to $21.2 million as of December 31, 2021, from $18.7 million at December 31, 2020[629]. - Net cash provided by financing activities was $419.9 million for the year ended December 31, 2021, compared to $37.3 million for the year ended December 31, 2020[635]. - The 2021 ATM Offering raised gross proceeds of $200 million through the sale of 52,552,353 shares of common stock[635]. - Secured promissory notes issued on December 30, 2021, had an aggregate principal amount of approximately $66 million, bearing interest at 8% per annum[636]. - The outstanding balance under AGREE Madison Construction Loan Agreements was $55.1 million as of December 31, 2021, with loans due on January 1, 2025[637]. - The initial public offering of ADTC in December 2021 generated gross proceeds of $112.1 million[638]. - As of March 31, 2022, the company had sold 140.7 million shares under the 2022 ATM Offering for gross proceeds of $110.4 million at an average price of $0.78 per share[639]. - The company believes its current cash on hand and proceeds from the 2022 ATM Offering are sufficient to meet operating and capital requirements for at least the next twelve months[640]. Future Plans - The company plans to fund property improvement plans of $13.7 million for the acquired hotel properties[583]. - The company plans to pursue monetization opportunities and maximize stockholder value through various initiatives, including public offerings and sales of subsidiary interests[597]. Technology Investment - The investment in AVLP is based on its novel technology for textile applications, which significantly reduces the use of water, harmful chemicals, and energy compared to conventional methods[646].

Financial Data and Key Metrics Changes - For the nine months ended, the company reported $44 million in revenue, a dramatic increase from the previous year, indicating significant growth [9][12] - Net income for the period was $1.3 million, a substantial improvement compared to a dramatic loss in the prior year [12] - The company's assets grew to $225 million, although this figure was volatile due to mark-to-market adjustments [13] Business Line Data and Key Metrics Changes - The lender's contribution to revenue increased by almost $20 million for the year, highlighting its importance in future plans [10] - Revenue from trading activities saw a dramatic increase, with a reported gain of about $6.4 million on Alzamend, although this was misleading as no shares were sold [10] - Crypto revenue experienced a significant increase, with the company expecting a dramatic escalation in Bitcoin mined due to new machines being delivered [11] Market Data and Key Metrics Changes - Gresham Worldwide, a subsidiary, reported a 47% increase in performance compared to the previous year, benefiting from additional capital allocation [20] - The company noted volatility in its portfolio due to market fluctuations, particularly with positions in Alzamend and Mullen Technology [14][17] Company Strategy and Development Direction - The company plans to split into two separate entities, BitNile and Ault Alliance, to better reflect their distinct business models and growth trajectories [7][29] - BitNile will focus on cryptocurrency mining and data center operations, while Ault Alliance will manage other subsidiaries and seek stable, mature companies for acquisition [48][46] - The company is exploring the possibility of issuing Bitcoin as a dividend to shareholders, indicating a forward-thinking approach to capital distribution [49] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting the potential for significant revenue growth in the coming years, particularly with BitNile's mining operations [60] - The company acknowledged the volatility in quarterly earnings but emphasized the long-term growth story driven by blockchain technology [62] - Management noted that the current structure creates volatility but is necessary for the company's transformation and growth [13][21] Other Important Information - The company has secured the new symbol NILE for its upcoming name change to BitNile Holdings, which will take effect before the end of the year [48] - The management team emphasized the importance of transparency, committing to biweekly updates on mining activities and Bitcoin production [42] Q&A Session Summary Question: What is the outlook for the company's growth? - Management highlighted that 2021 has been a successful year with significant capital raised and a strong balance sheet, positioning the company for future growth [58] Question: How does the company plan to manage its debt? - The company reported less than $2 million in total debt, indicating a strong balance sheet and no immediate need for financing to service debt obligations [22] Question: What are the expectations for revenue from mining operations? - Management projected that with the ramp-up of mining operations, the company could achieve a run rate of approximately $300 million in revenue, depending on market conditions [36]