Business context and reporting period
Filing identity: The supplied filing is Ault Alliance, Inc.’s Form 10-K for the fiscal year ended December 31, 2023—not a Hyperscale Data, Inc. filing. It reports full-year results, not standalone 2023 Q4 results. The company is a diversified holding company with businesses in Bitcoin mining and data centers, crane services, defense electronics, consumer products, lending and trading, and other sectors. Some business descriptions and financing updates cover events through April 2024.
Financial performance and position
| Metric | FY2023 | FY2022 |
|---|---|---|
| Total revenue | $156.4 million | $117.6 million |
| Gross profit / margin | $31.1 million / 20% | $50.7 million / 43% |
| Operating loss | $153.7 million | $139.5 million |
| Net loss | $256.3 million | $189.8 million |
| Net loss available to common stockholders | $232.4 million | $182.2 million |
| Net cash used in operating activities | $5.4 million | Net cash provided: $26.5 million |
| Net cash used in investing activities | $29.5 million | $158.6 million |
| Net cash provided by financing activities | $37.0 million | $124.1 million |
- Revenue growth was driven mainly by crane operations, which contributed $49.2 million versus $2.7 million in 2022, and Bitcoin mining, which contributed $33.1 million versus $16.7 million. Acquisitions and changes in consolidation also affect comparability.
- Lending and trading revenue was negative $2.0 million, compared with positive $36.6 million in 2022, reflecting investment impairments and market-value changes. TurnOnGreen revenue declined 24% to $4.2 million.
- Gross margin fell to 20% from 43%. Management attributes the decline largely to negative margins in mining and lending/trading; excluding those activities, the company reported adjusted gross margins of 30% in 2023 and 29% in 2022.
- Operating expenses were $184.8 million, including $47.6 million of goodwill and intangible-asset impairment, $18.2 million of property-and-equipment impairment, and $33.5 million of selling and marketing expense. Other significant items included $35.4 million of guarantee expense, $36.6 million of interest expense, and $12.9 million of debt-extinguishment losses.
- At year-end, cash and cash equivalents were $8.6 million, with a further $5.0 million restricted. Total assets were $299.2 million, down from $561.5 million; total liabilities were $240.3 million, and total stockholders’ equity was $56.7 million. Management reported a $66.3 million working-capital deficit.
- Year-end balance-sheet debt included $31.0 million of notes payable, net, and $21.2 million of convertible notes payable, net; related-party notes payable were $2.4 million. The company also reported a $38.9 million guarantee liability tied to a financing borrowed by related party Ault & Company. These categories have different underlying terms and should not be treated as a simple measure of consolidated funded debt.
Material changes versus the prior year
- Total revenue increased 33%, but losses widened and gross margin declined sharply. Higher mining revenue was partly offset by greater mining difficulty; crane revenue rose substantially following Circle 8’s acquisition.
- Impairment charges shifted in composition: 2023 included substantial impairments at AVLP and Microphase, while 2022 included a $79.6 million impairment of mining equipment and a $2.0 million vendor-deposit impairment.
- The company deconsolidated The Singing Machine Company (SMC) in November 2023 after its ownership was diluted to approximately 28%; it recorded a $3.0 million deconsolidation loss and retained an equity-method investment. AGREE’s hotels and real estate were classified as discontinued operations and held for sale.
- Assets, equity, and unrestricted cash declined year over year. Operating cash flow moved from positive to negative, while financing cash flow fell from $124.1 million to $37.0 million.
Outlook, financing, risks, and unusual items
- Liquidity and going concern: The auditor included a going-concern explanatory paragraph, and management disclosed substantial doubt about the company’s ability to continue as a going concern. Management said existing resources were insufficient to fund anticipated operations for one year after issuance and that additional capital, asset sales, or both would be needed; financing availability and terms are not assured.
- Secured financing and related-party exposure: Ault & Company’s December 2023 institutional financing was supported by company and subsidiary guarantees and broad collateral, including mining equipment and mined digital currency, real estate, aircraft, subsidiary equity, and other assets. A segregated account was funded with $3.5 million and is subject to minimum-balance targets, monthly deposits, and specified proceeds contributions. The filing reports an April 2024 amendment to the loan agreement.
- Equity financing and dilution: The 2023 at-the-market common-stock program raised $35.3 million gross during 2023. The filing reports additional gross proceeds of $14.6 million from 25.6 million shares sold through March 2024. Ault & Company’s Series C preferred-stock and warrant financing had reached $43.5 million by April 15, 2024, with an authorized maximum increased to $75 million. Conversion and exercise are subject to approvals and ownership limits; the filing describes substantial potential dilution if restrictions are removed. A 1-for-25 reverse split took effect January 16, 2024.
- Bitcoin and data centers: Sentinum reported $33.1 million of mining revenue and a $2.6 million net loss in 2023; it held 16.7 Bitcoin with a $0.5 million carrying value at year-end. Management estimated direct mining cost of approximately $51,000 per Bitcoin, while warning that the April 2024 block-reward halving, Bitcoin price, network difficulty, power costs, and planned Michigan HPC/AI conversion make profitability uncertain. Montana capacity was expected to reach 20 MW when build-out is completed; the first 10 MW was connected in March 2024.
- Controls and accounting: Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end because of material weaknesses involving accounting resources and segregation of duties, IT access and change management, and revenue and digital-asset controls. Remediation was ongoing. The auditor did not audit or opine on ICFR. The auditor identified Bitcoin-mining revenue accounting as a critical audit matter.
- Other exposures: Risks include volatile Bitcoin prices and mining economics, regulatory and energy-use changes, dependence on external financing, highly leveraged subsidiaries, related-party conflicts, and possible dilution or listing issues. The company reported a $2.3 million litigation accrual and stated that other reasonably possible losses were not expected to be material based on current knowledge, while noting outcomes are uncertain. Michigan Facility environmental remediation was estimated at approximately $0.4 million.
Most important facts for investors to verify
- Confirm the issuer: this filing is for Ault Alliance, Inc.; the request metadata names Hyperscale Data, Inc.
- Review the full audited statements, debt notes, and subsequent-event disclosures to understand near-term maturities, defaults, the guarantee, collateral, and segregated-account requirements.
- Assess actual liquidity and financing availability after year-end, including ATM proceeds, related-party preferred financing, and any asset-sale proceeds.
- Evaluate dilution under the Series C preferred stock and warrant terms, including required stockholder or exchange approvals and the effects of the reverse split.
- Track remediation of the disclosed material weaknesses and the reliability of mining-revenue and digital-asset reporting.
- Test whether mining economics and the Michigan AI/HPC and Montana data-center plans are progressing as described; management provides no assured profitability timeline.