Financial Performance - Total revenue for the three months ended June 30, 2024, was $28.4 million, a decrease of 40% compared to $47.4 million in the same period of 2023[139]. - Revenue from digital assets mining increased by 1% to $8.49 million, while revenue from lending and trading activities showed a significant decline of 202% to $(9.76) million[141]. - A loss on impairment of property and equipment related to AGREE's real estate assets was recorded at $8.0 million during the three months ended June 30, 2024[134]. - Operating expenses totaled $26.3 million for the three months ended June 30, 2024, down from $68.4 million in the same period of 2023[139]. - The net loss attributable to Ault Alliance, Inc. for the three months ended June 30, 2024, was $33.9 million, compared to a net loss of $60.7 million in the same period of 2023[139]. - Total revenue for the six months ended June 30, 2024, was $76.34 million, a decrease from $78.59 million in the same period in 2023[152]. - Net loss attributable to common stockholders for the six months ended June 30, 2024, was $32.78 million, compared to a net loss of $109.88 million in the same period in 2023[152]. - Revenue from crane operations decreased by 7% to $11.7 million, down from $12.6 million in the same period of 2023[141]. - Revenues from lending and trading activities were negative $9.8 million, primarily due to a $9.4 million unrealized loss on White River Energy Corp. common stock[144]. - Energy revenues from Circle 8 crane operations decreased by $0.9 million, or 7%, due to lower utilization of the crane fleet[143]. - Energy revenues from Circle 8 crane operations increased by $0.6 million, or 2%, for the six months ended June 30, 2024[156]. - Revenues from lending and trading activities were negative $0.7 million for the six months ended June 30, 2024, compared to $4.6 million for the same period in 2023[157]. - GIGA revenues increased by $1.9 million, driven by investments in force protection technologies amid global conflicts[146]. - TurnOnGreen's revenues increased by $0.5 million, attributed to higher sales from a single, higher-margin customer in the defense industry[147]. - Gross margins decreased to (2%) for the three months ended June 30, 2024, compared to 38% for the same period in 2023[148]. - Gross margins were 25% for the six months ended June 30, 2024, unchanged from the same period in 2023; adjusted gross margins improved to 26% from 22%[161]. Expenses and Cost Management - Research and development expenses decreased by $1.0 million due to lower expenditures on ROI's BitNile metaverse platform[148]. - Selling and marketing expenses decreased by $5.6 million, or 58%, primarily due to lower advertising and promotion costs[148]. - General and administrative expenses decreased by $7.8 million, or 37%, mainly due to lower professional fees and reduced expenses from SMC[148]. - Selling and marketing expenses decreased by $9.7 million, or 53%, to $8.7 million for the six months ended June 30, 2024[161]. - General and administrative expenses decreased by $17.2 million, or 39%, to $26.8 million for the six months ended June 30, 2024[161]. - Interest expense decreased to $12.3 million for the six months ended June 30, 2024, from $29.7 million for the same period in 2023[163]. Financing Activities - Ault Alliance, Inc. entered into a Loan and Guaranty Agreement on December 14, 2023, borrowing $36 million and issuing secured promissory notes totaling $38.9 million[130]. - The company is required to maintain a minimum balance in a segregated deposit account, starting at $7 million and increasing to $27.5 million over two years[130]. - The company entered into a $20 million unsecured credit facility, with an initial loan of $1.5 million made on June 4, 2024[133]. - Ault Lending purchased 1,220 shares of Series B convertible preferred stock and warrants for a total of $1.22 million from Alzamend Neuro, Inc. on January 31, 2024[131]. - The company sold an aggregate of $2.0 million principal face amount convertible promissory notes for $1.8 million, reflecting an original issue discount of $0.2 million[131]. - Ault Alliance distributed 25 million TurnOnGreen Securities to stockholders on April 29, 2024, entitling them to shares and warrants[131]. - The company has increased the dollar amount of Series C Convertible Preferred Stock that Ault & Company may purchase from $50 million to $75 million[131]. - The company has established a security interest in 19,226 Antminers and other assets as collateral for the secured notes[130]. Strategic Operations - Ault Alliance is involved in mining Bitcoin and providing colocation and hosting services for artificial intelligence ecosystems[129]. - The company operates a diverse range of businesses, including hotels and lending services, to support various industries[129]. - Ault Alliance's strategic investments include a data center and mission-critical products for sectors like defense, automotive, and medical[129]. - GIGA revenues increased by $2.7 million for the six months ended June 30, 2024, driven by investments in force protection technologies due to global conflicts[158]. - TurnOnGreen's revenues increased by $0.9 million for the six months ended June 30, 2024, primarily from higher sales to a single defense industry customer[160]. Legal and Compliance Issues - The company is involved in litigation with Arena Investors, LP, seeking damages in excess of $3.75 million related to a breach of contract[174]. - Another litigation involves claims against GIGA, with monetary damages sought in excess of $4.2 million for breach of contract and related issues[177]. - The company has recorded the unpaid portion of the notes related to the ongoing litigations, indicating potential financial implications[174][177]. - The company cannot reasonably estimate the potential loss from the ongoing litigations due to their preliminary stage[174][177]. Internal Controls and Remediation - The company is actively working to remediate material weaknesses in internal controls, particularly in user access and change management related to IT systems[171]. - Remediation actions include engaging a third-party specialist, implementing new applications, and increasing headcount with a focus on Sarbanes Oxley expertise[171]. - The company believes that its condensed consolidated financial statements fairly present its financial condition despite existing material weaknesses[171]. - The company continues to assess opportunities for remediation of internal controls on an ongoing basis[171]. - There were no significant changes in internal control over financial reporting during the fiscal quarter ended June 30, 2024[171]. - The company is focused on improving and simplifying internal processes to address material weaknesses in financial reporting[171].
Ault Alliance(AULT) - 2024 Q2 - Quarterly Report