Ault Alliance Inc
For the period ended Jun 30, 2024. Filed Aug 16, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 16, 2024
GPUS$0.14-2.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-20.
0001214659-24-009647
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-16.
0001214659-24-014883
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 67 previous paragraphs and 113 current paragraphs.
26 unchanged; 29 reworded; 44 added; 12 removed; 0 previous and 14 current paragraphs rearranged.
Tables are not compared: 12 previous and 24 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (44)
Current report
On December 14, 2023, we, along with our wholly owned subsidiaries Sentinum, Third Avenue, ACS, BNI Montana, Ault Lending, Ault Aviation and AGREE (collectively with our company, Sentinum, Third Avenue, ACS, BNI Montana, Ault Lending and Ault Aviation, the “Guarantors”) entered into a Loan and Guaranty Agreement (the “2023 Loan Agreement”) with institutional lenders, pursuant to which Ault & Company, Inc. (“Ault & Company”), a related party, borrowed $36 million and issued secured promissory notes to the lenders in the aggregate amount of $38.9 million (collectively, the “Secured Notes”; and the transaction, the “Loan”). The 2023 Loan Agreement was amended as of April 15, 2024.
Current report
Pursuant to the 2023 Loan Agreement, the Guarantors, as well as Milton C. Ault, III, our Executive Chairman and the Chief Executive Officer of Ault & Company, agreed to act as guarantors for repayment of the Secured Notes. In addition, certain Guarantors entered into various agreements as collateral in support of the guarantee of the Secured Notes, including (i) a security agreement by Sentinum, pursuant to which Sentinum granted to the Lenders a security interest in (a) 19,226 Antminers (the “Miners”), (b) all of the digital currency mined or otherwise generated from the Miners and (c) the membership interests of ACS, (ii) a security agreement by the Company, Ault Lending, BNI Montana and AGREE, pursuant to which those entities granted to the lenders a security interest in substantially all of their assets, as well as a pledge of equity interests in Ault Aviation, AGREE, Sentinum, Third Avenue, Ault Energy, LLC, our wholly owned subsidiary (“Ault Energy”), ADTC, Eco Pack, and Circle 8 Holdco, (iii) a mortgage and security agreement by Third Avenue on the real estate property owned by Third Avenue in St. Petersburg, Florida (the “Florida Property”), (iv) a future advance mortgage by ACS on the real estate property owned by ACS in Dowagiac, Michigan (the “Michigan Property”), (v) an aircraft mortgage and security agreement by Ault Aviation on a private aircraft owned by Ault Aviation (the “Aircraft”), and (vi) deposit account control agreements over certain bank accounts held by certain of our subsidiaries.
Current report
In addition, pursuant to the 2023 Loan Agreement, we agreed to establish a segregated deposit account (the “Segregated Account”), which would be used as a further guarantee of repayment of the Secured Notes. $3.5 million of cash was paid into the Segregated Account on the closing date. We are required to have the minimum balance in the Segregated Account be not less than $7 million, $15 million, $20 million and $27.5 million on the five-month, nine-month, one-year and two-year anniversaries of the closing date, respectively. In addition, starting on March 31, 2024, we were required to deposit $0.3 million monthly into the Segregated Account, which increases to $0.4 million monthly starting March 31, 2025. Further, we agreed to deposit into the Segregated Account, (i) up to the first $7 million of net proceeds, if any, from the sale of the Hilton Garden Inn in Madison West, the Residence Inn in Madison West, the Courtyard in Madison West, and the Hilton Garden Inn in Rockford; (ii) 50% of cash dividends (on a per dividend basis) received from Circle 8 on or after June 30, 2024; (iii) 30% of the net proceeds from any bond offerings we conduct, which shall not exceed $9 million in the aggregate; and (iv) 25% of the net proceeds from cash flows, collections and revenues from loans or other investments made by Ault Lending (including but not limited to sales of loans or investments, dividends, interest payments and amortization payments), which shall not exceed $5 million in the aggregate. In addition, if we decide to sell certain assets, we further agreed to deposit funds into the Segregated Account from the sale of those assets, including, (i) $15 million from the sale of the Florida Property, (ii) $11 million from the sale of the Aircraft, (iii) $17 million from the sale of the Michigan Property, (iv) $350 per Miner, subject to a de minimis threshold of $1 million, and (v) $10 million from the sale of Circle 8.
Current report
On May 15, 2024, the 2023 Loan Agreement was amended to extend the date by which we were required to have a specified minimum balance in the Segregated Account from May 15, 2024 to July 22, 2024 and the specified minimum balance to be in the account as of such date was increased from $7 million to $7.4 million. On July 25, 2024, the 2023 Loan Agreement was further amended to extend the date by which we were required to have a specified minimum balance in the Segregated Account from July 22, 2024 to July 31, 2024 and to require that we deposit $600,000 in the Segregated account on July 25, 2024.
Current report
On August 16, 2024, we agreed to deposit, by no later than September 1, 2024, an additional $1.5 million into the Segregated Account as well as make a modification payment to the institutional lenders in the amount of $0.3 million by no later than September 15, 2024. As a result of the foregoing amendments, we are required to deposit additional incremental amounts such that at or prior to the nine-month anniversary, the one-year anniversary and the two-year anniversary of December 14, 2023, we shall have deposited the required funds such that the balance in the Segregated Account shall not be less than $15.0 million, $20.0 million and $27.5 million, respectively.
Current report
On January 12, 2024, pursuant to the approval provided by our stockholders at the annual meeting of stockholders, we filed an Amendment to our Certificate of Incorporation with the State of Delaware to effectuate a reverse stock split of our common stock affecting both the authorized and issued and outstanding number of such shares by a ratio of one-for-twenty-five. The reverse stock split became effective on January 16, 2024. All share amounts in this report have been updated to reflect the reverse stock split.
Current report
On March 11, 2024, we entered into a note purchase agreement with two institutional investors (the “Buyers”) pursuant to which the Buyers purchased from the Company, on March 12, 2024 in a registered direct offering to the Buyers an aggregate of $2.0 million principal face amount convertible promissory notes (the “Notes”). The Notes were sold to the Buyers for an aggregate purchase price of $1.8 million, which reflects an original issue discount of $0.2 million. The Notes accrue interest at the rate of 6% per annum, unless an event of default (as defined in the Notes) occurs, at which time the Notes would accrue interest at 12% per annum. The Notes were subsequently converted in full into shares of common stock at a conversion price of $0.35 per share.
Current report
On March 26, 2024, pursuant to the January 2024 SPA, Ault Lending purchased 780 shares of ALZN Series B Preferred Stock and ALZN Series B Warrants to purchase 78,000 shares of Alzamend common, for a purchase price of $0.8 million. As of the date of this report, Ault Lending has purchased an aggregate of 2,000 shares of ALZN Series B Preferred and ALZN Series B Warrants to purchase an aggregate of 0.2 million shares of Alzamend common stock, for an aggregate purchase price of $2.0 million.
Current report
On March 25, 2024 we entered into an amendment to the (i) November 2023 SPA, (ii) the related Certificate of Designation of Preferences, Rights and Limitations of the Series C Preferred Convertible Stock and (iii) the number of Series C Warrants, to provide for (A) an increase in the dollar amount of the Series C Convertible Preferred Stock that Ault & Company may purchase from us from $50.0 million to $75.0 million and (B) extended the date of on which the final closing may occur to June 30, 2024, subject to Ault & Company’s ability to further extended such date for ninety days.
Current report
Effective April 29, 2024, we issued to an accredited investor a term note with a principal face amount of $1.7 million. The note bears interest at the rate of 15% per annum and the note was issued with an original issuance discount. The maturity date of the note was May 17, 2024. The note contained a standard and customary event of default for failure to make payments when due under the note. The purchase price for the note was $1.6 million. The term note was amended on May 16, 2024 to extend the maturity date to June 15, 2024 and further amended on June 18, 2024 to extend the maturity date to July 31, 2024.
Current report
On June 4, 2024, we entered into a Loan Agreement (the “2024 Credit Agreement”) with OREE Lending Company, LLC and Helios Funds LLC, as lenders. The 2024 Credit Agreement provides for an unsecured, non-revolving credit facility in an aggregate draw limit of up to $20.0 million, provided, however, that at no point will we be allowed to have outstanding loans under the 2024 Credit Agreement in a principal amount received of more than $2.0 million. The lenders made a loan to the Company of $1.5 million on June 4, 2024. The loans under the 2024 Credit Agreement are due December 4, 2024, provided, however, that if on such date, we have executed an equity line of credit agreement relating to the sale of shares of the Series D Preferred Stock, which was executed on June 20, 2024, have an effective registration statement relating thereto and are not currently in default under such agreement, then the maturity date shall be automatically extended until June 4, 2025. The lenders are not obligated to make any further loans under the 2024 Credit Agreement after the maturity date described above. Loans under the 2024 Credit Agreement will be evidenced by promissory notes (the “Promissory Notes”) and will include the addition of an original issuance discount of 20% to the amount of each loan and all loans will bear interest at the rate of 15.0% per annum and may be repaid at any time without penalty or premium.
Current report
On June 23, 2024, Ault Disruptive entered into an Agreement and Plan of Merger (as it may be amended, supplemented or otherwise modified from time to time, the “Merger Agreement”) by and among Ault Disruptive, ADRT Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Ault Disruptive (“Merger Sub”), and Gresham Worldwide, Inc., a California corporation (“GIGA”). The transactions contemplated by the Merger Agreement are referred to herein as the “Business Combination.”
Current report
Pursuant to the Merger Agreement and subject to the terms and conditions set forth therein, the Merger Sub was intended to merge with and into GIGA (the “Merger”), with GIGA being the surviving corporation and thereby becoming a wholly owned subsidiary of Ault Disruptive. Upon the Closing of the Business Combination (the “Effective Time”), it was expected that Ault Disruptive
Current report
would be renamed Gresham Worldwide, Inc., and thereafter remain listed on the NYSE American under a new ticker symbol, “GWWI.”
Current report
However, on August 14, 2024, GIGA filed a petition for reorganization under Chapter XI of the bankruptcy laws. Consequently, Ault Disruptive was required to terminate the Merger Agreement, which it did on August 15, 2024. Ault Disruptive does not presently intend to enter into a new agreement and plan of merger with a third party.
Current report
On July 18, 2024, we entered into a note purchase agreement with an institutional investor pursuant to which the institutional investor agreed to acquire, and we agreed to issue and sell in a registered direct offering to the institutional investor, a $5.4 million 10% OID Convertible Promissory Note (the “OID Note”). The OID Note was sold to the institutional investor for a purchase price of $4.9 million, an original issue discount of $0.5 million. The OID Note will accrue interest at the rate of 15% per annum, unless an event of default occurs, at which time the OID Note would accrue interest at 18% per annum. The OID Note will mature on October 19, 2024. In addition, the OID Note is convertible at any time after NYSE American approval of a Supplemental Listing Application into shares of our common stock at a conversion price of $0.22 per share (the “OID Conversion Price”), subject to adjustment. However, we may not issue shares of common stock upon conversion of the OID Note to the extent such issuance would result in an aggregate number of shares of common stock exceeding 19.99% of the total shares of common stock issued and outstanding as of July 18, 2024, in accordance with the rules and regulations of the New York Stock Exchange (the “NYSE Limit”) unless we first obtain stockholder approval (“Stockholder Approval”).
Current report
If, on September 2, 2024 (the “Adjustment Date”), the closing bid price of our common stock is lower than the OID Conversion Price, then the OID Conversion Price will be reduced to 85% of the closing bid price of the common stock on September 2, 2024. However, if after July 19, 2024, and prior to the date on which Stockholder Approval is obtained, the holder of the OID Note has converted a portion of the outstanding amount under the OID Note into shares of our common stock in an aggregate amount equal to the NYSE Limit, then the Adjustment Date will be extended by such number of days between such date and the date on which we obtain Stockholder Approval.
Current report
Change in Plan of Sales of AGREE Hotel Properties
Current report
For presentation purposes, the assets and liabilities previously held for sale as of December 31, 2023, were reclassified in the December 31, 2023 balance sheet in the accompanying financial statements back to their original asset and liability groups at their previous carrying values. In connection with this change in plan of sale, we recorded a loss on impairment of property and equipment related to the real estate assets of AGREE of $8.0 million during the three months ended June 30, 2024.
Current report
Revenues from Sentinum’s digital assets mining operations increased $0.1 million due primarily to a $1.2 million increase in revenue from Sentinum digital mining equipment hosted at third-party facilities and a 134% increase in the average Bitcoin price, partially offset by a 71% increase in the average Bitcoin mining difficulty level and the estimated $4.4 million unfavorable impact of the April 19, 2024 Bitcoin halving event occurred on the Bitcoin network.
Current report
Energy revenues from the Circle 8 crane operations decreased by $0.9 million, or 7%, for the three months ended June 30, 2024. This decrease was primarily due to lower utilization of the crane fleet, as five cranes were out of service during the three months ended June 30, 2024.
Current report
Other Income (Expense), Net
Current report
Cumulative downward adjustments for impairments for our equity securities without readily determinable fair values held at were $6.3 million for the three months ended June 30, 2024.
Current report
Income Tax Provision
Current report
The income tax provision was $24,000 and $1.4 million during the three months ended June 30, 2024 and 2023, respectively. The effective income tax provision rate was 0.1% and 2.2% for the three months ended June 30, 2024 and 2023, respectively. The lower income tax provision during the three months ended June 30, 2024 related primarily to lower dividend income compared to the prior year period as a result of the decline in cash and marketable securities held in the trust account as a result of redemptions of Ault Disruptive common stock subject to possible redemption.
Current report
Results of Operations for the Six Months Ended June 30, 2024 and 2023
Current report
Revenues
Current report
Sentinum
Current report
Energy
Current report
Fintech
Current report
GIGA
Current report
SMC
Current report
TurnOnGreen
Current report
Gross Margins
Current report
Gross margins were 25% for the six months ended June 30, 2024, compared to 25% for the six months ended June 30, 2023. Our gross margins during the six months ended June 30, 2024 and 2023 were unfavorably impacted by margins from our lending and trading activities. Excluding the effects of margin from our lending and trading activities, our adjusted gross margins for the six months ended June 30, 2024 and 2023 would have been 26% and 22%, respectively. Our gross margins improved, in part, due to high margin revenue from Sentinum digital mining equipment hosted at third-party facilities.
Current report
Research and Development
Current report
Selling and Marketing
Current report
General and Administrative
Current report
Other Income (Expense), Net
Current report
Other expense, net was $3.5 million for the six months ended June 30, 2024, compared to other expense, net of $30.1 million for the six months ended June 30, 2023.
Showing the first 40 of 44 passages. Open the source sections for the rest.
Removed paragraphs (12)
Previous report
On January 31, 2024, Alzamend sold 1,220 shares of its Series A convertible preferred stock and warrants to purchase 1.2 million shares of its common stock to Ault Lending, for a total purchase price of $1.2 million. On March 26, 2024, Alzamend sold an additional 780 shares of its Series A convertible preferred stock and warrants to purchase 0.8 million shares of its common stock to Ault Lending, for a total purchase price of $0.8 million.
Previous report
On March 11, 2024, we entered into a note purchase agreement with two institutional investors pursuant to which the investors agreed to acquire, and we agreed to issue and sell in a registered direct offering to the investors, an aggregate of $2.0 million convertible promissory notes, bearing interest at 6%. The convertible promissory notes were issued at a discount, with net proceeds to us of $1.8 million. While the convertible promissory notes are scheduled to mature on June 12, 2024, we have the option to extend the maturity date to September 12, 2024, for which we will have to pay an additional increase in the principal amount of the notes of 5%. The notes are convertible into shares of Class A common stock at a conversion price of $0.35 per share.
Previous report
On March 25, 2024, the November 2023 SPA entered into with Ault & Company was amended to increase the amount of Series C Preferred Stock and Series C Warrants that may be purchase under the agreement from $50.0 million to $75.0 million and an extension of the date to closing the final tranche of the financing to June 30, 2024. On April 3, 2024, we filed a Certificate of Increase to the Series C Designation of Preferences, Rights and Limitations to increase the number of authorized shares of Series C Preferred Stock from 50,000 to 75,000.
Previous report
On April 29, 2024, we entered into a $1.7 million term note agreement with an institutional investor bearing interest of 15%. The term note was issued at a discount, with net proceeds to us of $1.6 million. The term note was scheduled to mature May 17, 2024. The term note was not paid on its scheduled maturity date and we are working with the institutional investor to obtain a waiver or amend the terms of the note.
Previous report
Presentation of AGREE as Discontinued Operations
Previous report
In September 2023, we committed to a plan for our wholly owned subsidiary AGREE to list for sale its four recently renovated Midwest hotels, the Hilton Garden Inn in Madison West, the Residence Inn in Madison West, the Courtyard in Madison West, and the Hilton Garden Inn in Rockford. The decision to sell the hotels follows the decision to also list the multifamily development site in St. Petersburg, Florida and was driven by our desire to focus on our core businesses, Energy, Fintech and Sentinum.
Previous report
In connection with the planned sale of AGREE assets, we concluded that the net assets of AGREE met the criteria for classification as held for sale. In addition, the proposed sale represents a strategic shift that will have a major effect on our operations and financial results. As a result, we have presented the results of operations, cash flows and financial position of AGREE as discontinued operations in the accompanying consolidated financial statements and notes for all periods presented.
Previous report
Other Expense, Net
Previous report
Income Tax Benefit
Previous report
Net provided by financing activities from discontinued operations was $1.1 million and $2.5 million for the three months ended March 31, 2024 and 2023, respectively.
Previous report
On April 29, 2024, we entered into a $1.7 million term note agreement with an institutional investor bearing interest of 15%. The term note was issued at a discount, with net proceeds to us of $1.6 million. The term note was scheduled to mature May 17, 2024. On May 16, 2024, the due date was extended to June 15, 2024.
Previous report
On May 16, 2024, we entered into a $0.5 million term note agreement with an institutional investor bearing interest of 15%. The term note is scheduled to mature June 15, 2024.
Reworded paragraphs (29)
Previous wording
On January 31, 2024, Ault Lending entered into a securities purchase agreement with Alzamend pursuant to which Alzamend agreed to sell Ault Lending up to 6,000 shares of Alzamend Series A convertible preferred stock and warrants to purchase shares of the Alzamend common stock. The Agreement provides that Ault Lending may purchase up to $6 million of Alzamend Series A Convertible Preferred Stock in one or more closings.
Current wording
On January 31, 2024, Ault Lending entered into a securities purchase agreement (the “January 2024 SPA”) with Alzamend Neuro, Inc. (“Alzamend”), pursuant to which Alzamend agreed to sell, in one or more closings, to Ault Lending up to 6,000 shares of Series B convertible preferred stock (the “ALZN Series B Preferred”) and warrants to purchase up to 6.0 million shares of Alzamend common stock (the “ALZN Series B Warrants”) for a total purchase price of up to $6.0 million. On January 31, 2024, Ault Lending purchased 1,220 shares of ALZN Series B Preferred and warrants to purchase 122,000 shares for a total purchase price of $1.22 million. The purchase price was paid by the cancellation of $1.22 million of cash advances made by Ault Lending to Alzamend between November 9, 2023 and January 31, 2023. Each share of ALZN Series B Preferred has a stated value of $1.00 per share and is convertible into a number of shares of Alzamend’s common stock determined by dividing the stated value by $10.00, subject to adjustment in the event of an issuance of Alzamend common stock at a price per share lower than the conversion price, as well as upon customary stock splits, stock dividends, combinations or similar events. The ALZN Series B Warrants are exercisable on the first business day after the six-month anniversary of issuance and have a five-year term, expiring on the fifth anniversary of the initial exercise date. The exercise price of the ALZN Series B Warrants is $12.00, subject to adjustment in the event of an issuance of Alzamend common stock at a price per share lower than the conversion price, as well as upon customary stock splits, stock dividends, combinations or similar events.
Previous wording
Oneach of March 7, 2024, March 8, 2024, March 18, 2024, March 19, 2024 and April 17, 2024, pursuant to the November 2023 SPA entered into with Ault & Company on November 6, 2023, we sold to Ault & Company 500 shares of Series C Preferred Stock and Warrants to purchase 147,820 shares of Class A common stock, for a total purchase price of $0.5 million. As of the date of filing of this Quarterly Report, Ault & Company has purchased an aggregate of 44,000 shares of Series C Convertible Preferred Stock and Series C Warrants to purchase an aggregate of 13,008,132 Warrant Shares, for an aggregate purchase price of $44.0 million. The November 2023 SPA provides that Ault & Company may purchase up to $75.0 million of Series C Convertible Preferred Stock and Series C Warrants in one or more closings.
Current wording
On each of March 7, 2024, March 8, 2024, March 18, 2024, March 19, 2024 and April 17, 2024 pursuant to the securities purchase agreement we entered into with Ault & Company, dated as of November 6, 2023 (the “November 2023 SPA”), we sold to Ault & Company 500 shares of Series C Convertible Preferred Stock and warrants to purchase 147,820 shares of common stock to the Purchaser, for a purchase price of $0.5 million. On August 2, 2024, pursuant to the November 2023 SPA, we sold to Ault & Company 300 shares of Series C Convertible Preferred Stock and warrants to purchase 88,692 shares of common stock to the Purchaser, for a purchase price of $500,000. As of the date of this report, Ault & Company has purchased an aggregate of 44,300 shares of Series C Convertible Preferred Stock and warrants to purchase an aggregate of 13,096,823 shares of common stock, for an aggregate purchase price of $44.3 million.
Previous wording
On April 30, 2024, we had a change in plan of sale for our four hotels owned and operated by AGREE. As a result, as of April 30, 2024, the assets will no longer meet the held for sale criteria and will be required to be reclassified as held and used at the lower of adjusted carrying value or the fair value at the date of the subsequent decision not to sell.
Current wording
On April 30, 2024, we had a change in plan of sale for our four hotels owned and operated by AGREE. As a result, as of April 30, 2024, the assets no longer met the held for sale criteria and were required to be reclassified as held and used at the lower of adjusted carrying value or the fair value at the date of the not to sell.
Previous wording
In recent years, we have provided capital and relevant expertise to fuel the growth of businesses in metaverse platform, oil exploration, crane services, defense/aerospace, industrial, automotive, medical/biopharma, consumer electronics, hotel operations and textiles. We have provided capital to subsidiaries as well as partner companies in which we have an equity interest or may be actively involved, influencing development through board representation and management support.
Current wording
In recent years, we have provided capital and relevant expertise to fuel the growth of businesses in metaverse platform, oil exploration, crane services, defense/aerospace, industrial, automotive, medical/biopharma, hotel operations and textiles. We have provided capital to subsidiaries as well as partner companies in which we have an equity interest or may be actively involved, influencing development through board representation and management support.
Previous wording
On April 19, 2024, a Bitcoin halving event occurred on the Bitcoin network. Halving is a key part of the Bitcoin protocol and serves to control the overall supply and reduce the risk of inflation in digital assets using a proof-of-work consensus algorithm. The Bitcoin halving event reduced the block subsidy by half from 6.25 to 3.125 Bitcoin. Transaction fees are not directly impacted by the halving.
Current wording
Halving is a key part of the Bitcoin protocol and serves to control the overall supply and reduce the risk of inflation in digital assets using a proof-of-work consensus algorithm. The Bitcoin halving event reduced the block subsidy by half from 6.25 to 3.125 Bitcoin. Transaction fees were not directly impacted by the halving.
Previous wording
Revenues from our lending and trading activities were $9.1 million for the three months ended March 31, 2024. On February 14, 2024, ROI transferred 2.5 million shares of White River common stock with a recorded value of $0.5 million and a fair value of $7.5 million at the date of transfer to Ault Lending. As of March 31, 2024, the 2.5 million shares of White River common stock held by Ault Lending had a fair value of $9.4 million and Ault Lending recorded an unrealized gain of $8.9 million during the quarter ended March 31, 2024 included in revenue from lending and trading activities. Revenues from our lending and trading activities were negative for the three months ended March 31, 2023, due to a $2.0 million impairment related to investments in equity securities, a $1.5 million unrealized loss from our investment in Alzamend and $1.7 million of realized and unrealized losses from our investment portfolio.
Current wording
Revenues from our lending and trading activities were negative $9.8 million for the three months ended June 30, 2024, primarily due to a $9.4 million unrealized loss on 2.5 million shares of White River Energy Corp. (“White River”) common stock and a $0.5 million unrealized loss from our investment in Alzamend included in revenue from lending and trading activities. Revenues from our lending and trading activities were $9.5 million for the three months ended June 30, 2023, due to an aggregate $6.6 million of net realized gains and $1.5 million of net unrealized gains on our investments in marketable equity securities, and a $1.5 million unrealized gain from our investment in Alzamend.
Previous wording
Revenues from our trading activities for the three months ended March 31, 2024 included net losses on equity securities, including unrealized gains and losses from market price changes. These gains and losses have caused, and will continue to cause, significant volatility in our periodic earnings.
Current wording
Revenues from our trading activities for the three months ended June 30, 2024 included net gains on equity securities, including unrealized gains and losses from market price changes. These gains and losses have caused, and will continue to cause, significant volatility in our periodic earnings.
Previous wording
For the three-month period ending March 31, 2024, GIGA revenues increased by $0.9 million. This growth is driven by ongoing global conflicts and tensions, which have spurred investments in force protection technologies in the United States, U.K., Europe, Asia and the Middle East.
Current wording
For the three-month period ending June 30, 2024, GIGA revenues increased by $1.9 million. This growth is driven by ongoing global conflicts and tensions, which have spurred investments in force protection technologies in the United States, U.K., Europe, Asia and the Middle East.
Previous wording
Due to the significant change in our ownership and voting rights, we determined that we no longer met the criteria of the primary beneficiary and, accordingly, we deconsolidated SMC as of November 20, 2023. SMC revenues were $0 for the three months ended March 31, 2024, a decrease of $3.4 million compared to the corresponding period in 2023.
Current wording
Due to the significant change in our ownership and voting rights, we determined that we no longer met the criteria of the primary beneficiary and, accordingly, we deconsolidated SMC as of November 20, 2023. SMC revenues were $0 for the three months ended June 30, 2024, a decrease of $2.6 million compared to the corresponding period in 2023.
Previous wording
TurnOnGreen's revenues increased by $0.3 million for the three months ended March 31, 2024, compared to the corresponding period in 2023. This rise was primarily due to higher sales from a single, higher-margin customer in the defense industry during the period ended March 31, 2024.
Current wording
TurnOnGreen's revenues increased by $0.5 million for the three months ended June 30, 2024, compared to the corresponding period in 2023. This rise was primarily due to higher sales from a single, higher-margin customer in the defense industry during the three months ended June 30, 2024.
Previous wording
Gross margins increased to 43% for the three months ended March 31, 2024, compared to 9% for the three months ended March 31, 2023. Our gross margins of 43% recognized during the three months ended March 31, 2024 and 2023 were impacted by margins from our lending and trading activities, with a positive impact during the three months ended March 31, 2024 and a negative impact during the three months ended March 31, 2023. Excluding the effects of margin from our lending and trading activities, our adjusted gross margins for the three months ended March 31, 2024 and 2023 would have been 29% and 25%, respectively. Our gross margins improved, in part, due to lower margin revenue from SMC during the three months ended March 31, 2023. We deconsolidated SMC as of November 20, 2023.
Current wording
Gross margins decreased to (2%) for the three months ended June 30, 2024, compared to 38% for the three months ended June 30, 2023. Our gross margins recognized during the three months ended June 30, 2024 and 2023 were impacted by margins from our lending and trading activities, with a negative impact during the three months ended June 30, 2024 and a positive impact during the three months ended June 30, 2023. Excluding the effects of margin from our lending and trading activities, our adjusted gross margins for the three months ended June 30, 2024 and 2023 would have been 24% and 22%, respectively. Our gross margins (excluding the effects of margin from our lending and trading activities) improved, in part, due to high margin revenue from Sentinum digital mining equipment hosted at third-party facilities.
Previous wording
Research and development expenses decreased by $0.8 million for the three months ended March 31, 2024, due to lower expenditures related to development work on ROI’s BitNile metaverse platform.
Current wording
Research and development expenses decreased by $1.0 million for the three months ended June 30, 2024, due to lower expenditures related to development work on ROI’s BitNile metaverse platform.
Previous wording
Selling and marketing expenses were $4.7 million for the three months ended March 31, 2024, compared to $8.8 million for the three months ended March 31, 2023, a decrease of $4.1 million, or 47%. The decrease was primarily the result of a $3.4 million decrease in sales and marketing expenses at ROI primarily due to lower advertising and promotion costs and a $0.8 million decrease in sales and marketing expenses from SMC due to thedeconsolidation of SMC as of November 20, 2023.
Current wording
Selling and marketing expenses were $4.0 million for the three months ended June 30, 2024, compared to $9.6 million for the three months ended June 30, 2023, a decrease of $5.6 million, or 58%. The decrease was primarily the result of a $4.8 million decrease in sales and marketing expenses at ROI primarily due to lower advertising and promotion costs and a $0.4 million decrease in sales and marketing expenses from SMC due to thedeconsolidation of SMC as of November 20, 2023.
Previous wording
General and administrative expenses were $13.4 million for the three months ended March 31, 2024, compared to $21.6 million for the three months ended March 31, 2023, a decrease of $8.2 million, or 38%. General and administrative expenses decreased from the comparative prior period, mainly due to the following:
Current wording
General and administrative expenses were $13.5 million for the three months ended June 30, 2024, compared to $21.3 million for the three months ended June 30, 2023, a decrease of $7.8 million, or 37%. General and administrative expenses decreased from the comparative prior period, mainly due to the following:
Previous wording
Other income, net was $11.3 million for the three months ended March 31, 2024, compared to other expense, net of $16.0 million for the three months ended March 31, 2023.
Current wording
Other expense, net was $12.8 million for the three months ended June 30, 2024, compared to other expense, net of $12.4 million for the three months ended June 30, 2023.
Previous wording
Interest and other income was $0.6 million for the three months ended March 31, 2024, compared to $1.1 million for the three months ended March 31, 2023. The decrease in interest and other income is primarily due to the decline in Ault Disruptive’s cash and marketable securities held in the trust account as a result of redemptions of Ault Disruptive common stock subject to possible redemption.
Current wording
Interest and other income was $0.8 million for the three months ended June 30, 2024, compared to $2.2 million for the three months ended June 30, 2023. The decrease in interest and other income is primarily due to the decline in Ault Disruptive’s interest income as a result of the decline in cash and marketable securities held in the trust account as a result of redemptions of Ault Disruptive common stock subject to possible redemption.
Previous wording
Interest expense was $4.9 million for the three months ended March 31, 2024, compared to $12.1 million for the three months ended March 31, 2023. Interest expense for the three months ended March 31, 2024 included contractual interest of $1.3 million, amortization of debt discount of $2.1 million, and forbearance and extension fees of $1.5 million. Interest expense for the three months ended March 31, 2023 included amortization of debt discount of $10.4 million, contractual interest of $1.1 million, and forbearance and extension fees of $0.6 million.
Current wording
Interest expense was $5.4 million for the three months ended June 30, 2024, compared to $15.9 million for the three months ended June 30, 2023. Interest expense for the three months ended June 30, 2024 included contractual interest of $3.3 million, amortization of debt discount of $1.3 million and forbearance and extension fees of $0.8 million. Interest expense for the three months ended June 30, 2023 included amortization of debt discount of $7.2 million, forbearance and extension fees of $6.2 million and contractual interest of $2.5 million.
Previous wording
During the three months ended March 31, 2024, ROI converted $2.3 million of ROI senior secured convertible notes that had a fair value of $0.9 million at the time of conversion and recognized a $1.4 million gain on extinguishment of debt.
Current wording
During the three months ended June 30, 2024, holders of our convertible notes converted $2.0 million of convertible notes that had a fair value of $2.7 million at the time of conversion and recognized a $0.7 million loss on extinguishment of debt.
Previous wording
Loss from investment in unconsolidated entity was $0.7 million for the three months ended March 31, 2024, representing our share of losses from our equity method investment in SMC.
Current wording
Loss from investment in unconsolidated entity was $1.3 million for the three months ended June 30, 2024, representing our share of losses from our equity method investment in SMC.
Previous wording
Revenues from Sentinum’s digital assets mining operations increased $4.1 million due primarily to a 134% increase in the average Bitcoin price, partially offset a 94% increase in the average Bitcoin mining difficulty level in the current quarter period.
Current wording
Revenues from Sentinum’s digital assets mining operations increased $4.2 million due primarily to a $3.7 million increase in revenue from Sentinum digital mining equipment hosted at third-party facilities and a 134% increase in the average Bitcoin price, partially offset by an 84% increase in the average Bitcoin mining difficulty level and the impact of the April 19, 2024 Bitcoin halving event occurred on the Bitcoin network.
Previous wording
Energy revenues from the Circle 8 crane operations increased by $0.3 million, or 2%, for the three months ended March 31, 2024.
Current wording
Energy revenues from the Circle 8 crane operations increased by $0.6 million, or 2%, for the six months ended June 30, 2024. This increase reflects higher crane service utilization from Circle 8’s largest customer during the six months ended June 30, 2024.
Previous wording
Gain on conversion of investment in equity securities to marketable equity securities of $17.9 million relates to ROI conversion of White River common stock. During the quarter ended March 31, 2024, ROI transferred 6.7 million shares of White River common stock with a fair value of $19.2 million at the date of transfer. In conjunction with the transfers, ROI converted a portion of their White River’s Series A Convertible Preferred Stock into common stock and recorded a noncash $17.9 million gain on conversion.
Current wording
Gain on conversion of investment in equity securities to marketable equity securities of $17.9 million relates to ROI conversion of White River common stock. During the six months ended June 30, 2024, ROI transferred 14.5 million shares of White River common stock with a fair value of $19.2 million at the date of transfer. In conjunction with the transfers, ROI converted a portion of their White River’s Series A Convertible Preferred Stock into common stock and recorded a noncash $17.9 million gain on conversion.
Previous wording
For the three months ended March 31, 2024, the provision for loan losses on the related party note receivable from Ault & Company was $3.1 million, due to uncertainties regarding collection. This compares to no provision for the same period in 2023.
Current wording
For the six months ended June 30, 2024, the provision for loan losses on the related party note receivable from Ault & Company was $3.1 million, due to uncertainties regarding collection. This compares to no provision for the same period in 2023.
Previous wording
The income tax benefit was $44,000 and $0.3 million during the three months ended March 31, 2024 and 2023, respectively. The effective income tax benefit rate was 0.4% and (0.6%) for the three months ended March 31, 2024 and 2023, respectively.
Current wording
The income tax provision (benefit) was ($20,000) and $1.1 million during the six months ended June 30, 2024 and 2023, respectively. The effective income tax (benefit) provision rate was (0.1%) and 1.0% for the six months ended June 30, 2024 and 2023, respectively. The lower income tax provision during the six months ended June 30, 2024 related primarily to lower dividend income compared to the prior year period as a result of the decline in cash and marketable securities held in the trust account as a result of redemptions of Ault Disruptive common stock subject to possible redemption.
Previous wording
On March 31, 2024, excluding cash and cash equivalents from discontinued operations, we had cash and cash equivalents of $9.4 million (excluding restricted cash of $5.5 million), compared to cash and cash equivalents of $8.6 million (excluding restricted cash of $5.0 million) at December 31, 2023. The increase in cash and cash equivalents was primarily due cash provided by financing activities related to the sale of common and preferred stock, as well as proceeds from notes payable and convertible notes, partially offset by the payment of debt, purchases of property and equipment and cash used in operating activities.
Current wording
On June 30, 2024, we had cash and cash equivalents of $9.6 million (excluding restricted cash of $7.3 million), compared to cash and cash equivalents of $9.7 million (excluding restricted cash of $5.7 million) at December 31, 2023. The decrease in cash and cash equivalents was primarily due to the payment of debt, purchases of property and equipment and cash used in operating activities, partially offset by cash provided by financing activities related to the sale of common and preferred stock, as well as proceeds from notes payable and convertible notes.
Previous wording
Net cash used in operating activities totaled $10.2 million for the three months ended March 31, 2024, compared to net cash provided by operating activities of $7.7 million for the three months ended March 31, 2023. Cash used in operating activities for the three months ended March 31, 2024 included $8.6 million proceeds from the sale of digital assets from our Sentinum Bitcoin mining operations, offset by operating losses and changes in working capital. Net cash used in operating activities for the three months ended March 31, 2024 included $1.7 million cash used in operating activities from discontinued operations.
Current wording
Net cash used in operating activities totaled $13.9 million for the six months ended June 30, 2024, compared to net cash provided by operating activities of $12.9 million for the six months ended June 30, 2023. Cash used in operating activities for the six months ended June 30, 2024 included $15.5 million proceeds from the sale of digital assets from our Sentinum Bitcoin mining operations, offset by operating losses and changes in working capital.
Previous wording
Net cash used in investing activities was $1.7 million for the three months ended March 31, 2024, compared to $2.8 million for the three months ended March 31, 2023. Net cash used in investing activities for the three months ended March 31, 2024 was primarily related to $0.9 million capital expenditures and $0.6 million cash used in investing activities from discontinued operations.
Current wording
Net cash used in investing activities was $3.8 million for the six months ended June 30, 2024, compared to $18.9 million for the six months ended June 30, 2023. Net cash used in investing activities for the six months ended June 30, 2024 was primarily related to $3.9 million capital expenditures.
Previous wording
Net cash provided by financing activities was $13.0 million for the three months ended March 31, 2024, compared to net cash used in financing activities of $8.1 million for the three months ended March 31, 2023, and primarily reflects the following transactions:
Current wording
Net cash provided by financing activities was $18.8 million for the six months ended June 30, 2024, compared to $12.8 million for the six months ended June 30, 2023, and primarily reflects the following transactions:
Previous wording
On April 17, 2024, we sold to Ault & Company 500 shares of Series C Preferred Stock and Warrants to purchase 0.1 million shares of Class A common stock, for a total purchase price of $0.5 million.
Current wording
On August 2, 2024, we sold to Ault & Company 300 shares of Series C Preferred Stock and Warrants to purchase 0.1 million shares of Class A common stock, for a total purchase price of $0.3 million.
Rearranged current paragraphs (14)
Current report — wording carried from elsewhere
The following table summarizes the results of our operations for the six months ended June 30, 2024 and 2023.
Current report — wording carried from elsewhere
Revenues by segment for the six months ended June 30, 2024 and 2023 were as follows:
Current report — wording carried from elsewhere
Revenues from our lending and trading activities were negative $0.7 million for the six months ended June 30, 2024, primarily due to a $0.4 million unrealized loss from our investment in Alzamend included in revenue from lending and trading activities. Revenues from our lending and trading activities were $4.6 million for the six months ended June 30, 2023, due to an aggregate $6.8 million of net realized and unrealized gains on our investments in marketable equity securities, a $0.6 million unrealized loss from our investment in Alzamend, and a $2.0 million impairment related to investments in equity securities.
Current report — wording carried from elsewhere
Revenues from our trading activities for the six months ended June 30, 2024 included net gains on equity securities, including unrealized gains and losses from market price changes. These gains and losses have caused, and will continue to cause, significant volatility in our periodic earnings.
Current report — wording carried from elsewhere
For the six-month period ending June 30, 2024, GIGA revenues increased by $2.7 million. This growth is driven by ongoing global conflicts and tensions, which have spurred investments in force protection technologies in the United States, U.K., Europe, Asia and the Middle East.
Current report — wording carried from elsewhere
Due to the significant change in our ownership and voting rights, we determined that we no longer met the criteria of the primary beneficiary and, accordingly, we deconsolidated SMC as of November 20, 2023. SMC revenues were $0 for the six months ended June 30, 2024, a decrease of $6.0 million compared to the corresponding period in 2023.
Current report — wording carried from elsewhere
TurnOnGreen's revenues increased by $0.9 million for the six months ended June 30, 2024, compared to the corresponding period in 2023. This rise was primarily due to higher sales from a single, higher-margin customer in the defense industry during the six months ended June 30, 2024.
Current report — wording carried from elsewhere
Research and development expenses decreased by $1.7 million for the six months ended June 30, 2024, due to lower expenditures related to development work on ROI’s BitNile metaverse platform.
Current report — wording carried from elsewhere
Selling and marketing expenses were $8.7 million for the six months ended June 30, 2024, compared to $18.4 million for the six months ended June 30, 2023, a decrease of $9.7 million, or 53%. The decrease was primarily the result of an $8.2 million decrease in sales and marketing expenses at ROI primarily due to lower advertising and promotion costs and a $1.3 million decrease in sales and marketing expenses from SMC due to thedeconsolidation of SMC as of November 20, 2023.
Current report — wording carried from elsewhere
General and administrative expenses were $26.8 million for the six months ended June 30, 2024, compared to $44.0 million for the six months ended June 30, 2023, a decrease of $17.2 million, or 39%. General and administrative expenses decreased from the comparative prior period, mainly due to the following:
Current report — wording carried from elsewhere
Interest and other income was $1.4 million for the six months ended June 30, 2024, compared to $3.3 million for the six months ended June 30, 2023. The decrease in interest and other income is primarily due to the decline in Ault Disruptive’s interest income as a result of the decline in cash and marketable securities held in the trust account as a result of redemptions of Ault Disruptive common stock subject to possible redemption.
Current report — wording carried from elsewhere
Interest expense was $12.3 million for the six months ended June 30, 2024, compared to $29.7 million for the six months ended June 30, 2023. Interest expense for the six months ended June 30, 2024 included contractual interest of $6.6 million, amortization of debt discount of $3.4 million, and forbearance and extension fees of $2.3 million. Interest expense for the six months ended June 30, 2023 included amortization of debt discount of $16.2 million, forbearance and extension fees of $7.5 million, and contractual interest of $5.9 million.
Current report — wording carried from elsewhere
During the three months ended March 31, 2024, ROI converted $2.3 million of ROI senior secured convertible notes that had a fair value of $0.9 million at the time of conversion and recognized a $1.4 million gain on extinguishment of debt. During the three months ended June 30, 2024, holders of our convertible notes converted $2.0 million of convertible notes that had a fair value of $2.7 million at the time of conversion and recognized a $0.7 million loss on extinguishment of debt.
Current report — wording carried from elsewhere
Loss from investment in unconsolidated entity was $2.0 million for the six months ended June 30, 2024, representing our share of losses from our equity method investment in SMC.