DESCRIPTION OF BUSINESS

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

DESCRIPTION OF BUSINESS

1. DESCRIPTION OF BUSINESS

Ault Alliance, Inc., a Delaware corporation which was then known as BitNile Holdings, Inc. (“BitNile” or the “Company”) was incorporated in September 2017. BitNile is a diversified holding company pursuing growth by acquiring undervalued businesses and disruptive technologies with a global impact. Through its wholly- and majority-owned subsidiaries and strategic investments, the Company owns and operates a data center at which it mines Bitcoin, and provides mission-critical products that support a diverse range of industries, including defense/aerospace, industrial, automotive, telecommunications, medical/biopharma, hotel operations and textiles. In addition, the Company extends credit to select entrepreneurial businesses through a licensed lending subsidiary. BitNile was founded by Milton “Todd” Ault, III, its Executive Chairman and is led by Mr. Ault, William B. Horne, its Chief Executive Officer and Vice Chairman and Henry Nisser, its President and General Counsel. Together, they constitute the Executive Committee, which manages the day-to-day operations of the Company. All major investment and capital allocation decisions are made for the Company by Mr. Ault and the Executive Committee. The Company has six reportable segments:

· BitNile, Inc. (“BNI”) – cryptocurrency mining operations,

· Ault Alliance, Inc. (“Ault Alliance”) – commercial lending, activist investing, media, and digital learning,

· Gresham Worldwide, Inc. (“GWW”) – defense solutions,

· TurnOnGreen, Inc. (“TurnOnGreen”) – commercial electronics solutions,

· Real Estate – hotel operations and other commercial real estate holdings, and

· Ault Disruptive Technologies Corporation (“Ault Disruptive”) – a special purpose acquisition company (“SPAC”).

1 A. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

This Amendment amends the Quarterly Report on Form 10-Q of the Company for the three months ended March 31, 2022, that was originally filed with the U.S. Securities and Exchange Commission on May 23, 2022. This Amendment only corrects an error in classification with respect to changes in fair value of financial instruments issued by a related party. The changes in fair value were erroneously recorded in other comprehensive income (loss) and have been reclassified to correct for the error within the statement of operations. The Company has restated its Condensed Consolidated Statements of Operations and Comprehensive Loss, Condensed Consolidated Statements of Changes in Stockholders’ Equity and Condensed Consolidated Statements of Cash Flows to correct this misclassification. Further, this Amendment also includes certain limited modifications to reflect the correct classification in disclosures in the Company’s Note 16 Net Income (Loss) per Share footnote in the Company’s Notes to Condensed Consolidated Financial Statements. Finally, the Company has modified its disclosures in Item 4 of Part I to reflect the identification of an additional material weakness.

As a result, the Condensed Consolidated Statements of Operations and Comprehensive Loss amounts of “Change in fair value of equity securities, related party” and “Net unrealized gain on derivative securities of related party” were adjusted pursuant to the schedule below:

	For the Three Months Ended
	March 31, 2021
	As Reported			Adjustment			As Restated
Revenue	$	7,905,000		$	-		$	7,905,000
Revenue, cryptocurrency mining, net		130,000						130,000
Revenue, lending and trading activities		5,210,000						5,210,000
Total revenue		13,245,000			-			13,245,000
Cost of revenue		5,108,000						5,108,000
Gross profit		8,137,000			-			8,137,000
Operating expenses
Research and development		602,000						602,000
Selling and marketing		1,242,000						1,242,000
General and administrative		5,092,000						5,092,000
Total operating expenses		6,936,000			-			6,936,000
Income from operations		1,201,000						1,201,000
Other income (expenses)
Interest and other income		37,000						37,000
Change in fair value of equity securities, related party		-			2,969,000			2,969,000
Interest expense		(314,000	)					(314,000	)
Change in fair value of marketable equity securities		1,960,000						1,960,000
Realized gain on marketable securities		397,000						397,000
Gain (loss) on extinguishment of debt		482,000						482,000
Change in fair value of warrant liability		(679,000	)					(679,000	)
Total other (expenses) income, net		1,883,000			2,969,000			4,852,000
(Loss) income before income taxes		3,084,000			2,969,000			6,053,000
Income tax (provision) benefit		(6,000	)					(6,000	)
Net (loss) income		3,078,000			2,969,000			6,047,000
Net loss (income) attributable to non-controlling interest		(1,081,000	)					(1,081,000	)
Net (loss) income attributable to BitNile Holdings, Inc.		1,997,000			2,969,000			4,966,000
Preferred dividends		(4,000	)					(4,000	)
Net (loss) income available to common stockholders	$	1,993,000		$	2,969,000		$	4,962,000
Basic net (loss) income per common share	$	0.05					$	0.13
Diluted net (loss) income per common share	$	0.05					$	0.12
Weighted average basic common shares outstanding		39,256,000						39,256,000
Weighted average diluted common shares outstanding		40,202,000						40,202,000
Comprehensive (loss) income
Net (loss) income available to common stockholders	$	1,993,000		$	2,969,000		$	4,962,000
Other comprehensive income (loss)
Foreign currency translation adjustment		(93,000	)					(93,000	)
Net unrealized gain on derivative securities of related party		2,969,000			(2,969,000	)		-
Other comprehensive (loss) income		2,876,000			(2,969,000	)		(93,000	)
Total comprehensive (loss) income	$	4,869,000		$	-		$	4,869,000

The Condensed Consolidated Statements of Changes in Stockholders’ Equity amounts of “Accumulated deficit” and “Accumulated other comprehensive loss” were adjusted pursuant to the schedules below: 

	January 1, 2021
	As Reported			Adjustment			As Restated
STOCKHOLDERS’ EQUITY
Common stock	$	28,000		$	-		$	28,000
Additional paid-in capital		171,396,000						171,396,000
Accumulated deficit		(121,396,000	)		(933,000	)		(122,329,000	)
Accumulated other comprehensive loss		(1,718,000	)		933,000			(785,000	)
TOTAL AULT ALLIANCE STOCKHOLDERS’ EQUITY		48,310,000			-			48,310,000
Non-controlling interest		822,000						822,000
TOTAL STOCKHOLDERS’ EQUITY	$	49,132,000		$	-		$	49,132,000

	March 31, 2021
	As Reported			Adjustment			As Restated
STOCKHOLDERS’ EQUITY
Common stock	$	49,000		$	-		$	49,000
Additional paid-in capital		292,763,000						292,763,000
Accumulated deficit		(119,404,000	)		2,036,000			(117,368,000	)
Accumulated other comprehensive loss		1,159,000			(2,036,000	)		(877,000	)
TOTAL AULT ALLIANCE STOCKHOLDERS’ EQUITY		174,567,000			-			174,567,000
Non-controlling interest		1,903,000						1,903,000
TOTAL STOCKHOLDERS’ EQUITY	$	176,470,000		$	-		$	176,470,000

Further, the reclassification also resulted in a corresponding increase in net income and an increase in unrealized gains on equity securities, related party within net cash used in operating activities, as reflected in the Company’s Condensed Consolidated Statements of Cash Flows, as follows:

	For the Three Months Ended
	March 31, 2021
	As Reported			Adjustment			As Restated
Cash flows from operating activities:
Net income	$	3,078,000		$	2,969,000		$	6,047,000
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation		162,000						162,000
Amortization		104,000						104,000
Amortization of right-of-use assets		229,000						229,000
Amortization, related party		8,000						8,000
Interest expense – debt discount		20,000						20,000
Gain on extinguishment of debt		(482,000	)					(482,000	)
Change in fair value of warrant liability		679,000						679,000
Accretion of original issue discount on notes receivable – related party		(4,000	)					(4,000	)
Accretion of original issue discount on notes receivable		(65,000	)					(65,000	)
Increase in accrued interest on notes receivable – related party		(1,000	)					(1,000	)
Stock-based compensation		20,000						20,000
Impairment of cryptocurrencies		-						-
Realized gains on sale of marketable securities		(4,892,000	)					(4,892,000	)
Unrealized gains on marketable securities		(2,260,000	)					(2,260,000	)
Unrealized gains on equity securities, related party		(154,000	)		(2,969,000	)		(3,123,000	)
Unrealized gains on equity securities		(58,000	)					(58,000	)
Loss from investment in unconsolidated entity		-						-
Changes in operating assets and liabilities:
Marketable equity securities		(8,870,000	)					(8,870,000	)
Accounts receivable		301,000						301,000
Accrued revenue		104,000						104,000
Inventories		(118,000	)					(118,000	)
Prepaid expenses and other current assets		(91,000	)					(91,000	)
Digital currencies		-						-
Other assets		(86,000	)					(86,000	)
Accounts payable and accrued expenses		(1,713,000	)					(1,713,000	)
Other current liabilities		78,000						78,000
Lease liabilities		(230,000	)					(230,000	)
Net cash used in operating activities	$	(14,241,000	)	$	-		$	(14,241,000	)