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].
Ault Alliance(AULT) - 2023 Q3 - Quarterly Report