Hyperscale Data, Inc SC TO-I, filed Mar 31, 2023

Hyperscale Data, Inc. (GPUS)

SC TO-I 2023-03-31

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(a)(1)(A)*	Offer to Exchange, dated March 31, 2023

(a)(1)(B)*	Letter of Transmittal for Offer

(a)(1)(C)*	Notice of Guaranteed Delivery for Offer

(a)(1)(D)*	Letter to Broker for Offer

(a)(1)(E)*	Letter to Client for Offer

(a)(1)(F)*	Form of Certificate of Designations, Preferences, Rights and Limitations of Series H Cumulative Redeemable Perpetual Preferred Stock

(a)(5)(A)	Press Release issued by the Company, dated March 20, 2023 (incorporated herein by reference to the Company's Schedule TO-C filed on March 20, 2023)

(a)(5)(B)*	Press Release issued by the Company, dated March 31, 2023

(a)(6)(A)*	Ault Alliance Webpage

107*	Filing Fee Table

Ault Alliance, Inc.

By:	/s/ Henry Nisser
	Name:	Henry Nisser
	Title:	President and General Counsel

(a)(1)(A)*	Offer to Exchange, dated March 31, 2023

(a)(1)(B)*	Letter of Transmittal for Offer

(a)(1)(C)*	Notice of Guaranteed Delivery for Offer

(a)(1)(D)*	Letter to Broker for Offer

(a)(1)(E)*	Letter to Client for Offer

(a)(1)(F)*	Form of Certificate of Designations, Preferences, Rights and Limitations of Series H Cumulative Redeemable Perpetual Preferred Stock

(a)(5)(A)	Press Release issued by the Company, dated March 20, 2023 (incorporated herein by reference to the Company's Schedule TO-C filed on March 20, 2023)

(a)(5)(B)*	Press Release issued by the Company, dated March 31, 2023

(a)(6)(A)*	Ault Alliance Webpage

107*	Filing Fee Table

For Each:		Consideration to be Received:
200 shares of Common Stock		3 shares of Series H Preferred Stock, with a liquidation preference equal to $10.00 per share of Series H Preferred Stock

IMPORTANT NOTICE	1

DISCLAIMER REGARDING FORWARD-LOOKING STATEMENTS	1

SUMMARY OF THE OFFER	3

RISK FACTORS	11

THE OFFER	14

DESCRIPTION OF AULT ALLIANCE'S COMMON STOCK	29

DESCRIPTION OF SERIES H PREFERRED STOCK	30

COMPARISON OF RIGHTS BETWEEN THE COMMON STOCK AND THE SERIES H PREFERRED STOCK	40

CERTAIN MATERIAL INCOME TAX CONSIDERATIONS	42

PLAN OF DISTRIBUTION	49

HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA	50

PRICE RANGE OF THE COMMON STOCK; DIVIDENDS	53

WHERE TO FIND AVAILABLE INFORMATION	54

INCORPORATION OF DOCUMENTS BY REFERENCE	54

MISCELLANEOUS	55

Name		Position
Board of Directors
Milton C. Ault, III		Executive Chairman of the Board
William B. Horne		Chief Executive Officer and Vice Chairman
Henry Nisser		President, General Counsel and Director
Robert O. Smith		Lead Independent Director
Howard Ash		Director
Jeffrey A. Bentz		Director
Mordechai Rosenberg		Director
Executive Officers
Kenneth Cragun		Chief Financial Officer

	Amount and Nature		Current Percent of			Percent of
Name and Address⁽¹⁾	of Beneficial Ownership		Class⁽¹⁾			Class Post-Offering⁽²⁾

Philou Ventures, LLC. P.O. Box 3587 Tustin, CA 92705⁽³⁾		7,872		*			*
Ault Alpha LP⁽⁴⁾		50,000,000		12.03	%		60.67	%
Ault & Company, Inc.⁽⁵⁾		52,666,882		12.64	%		63.14	%

	Amount and Nature	Current Percent of	Percent of
Name and Address⁽¹⁾	of Beneficial Ownership	Class⁽¹⁾	Class Post-Offering⁽²⁾

Milton Ault, III⁽³⁾	53,960,007	12.93%	64.31%
William Horne⁽⁴⁾	1,086,639	*	1.31%
Henry Nisser⁽⁵⁾	1,089,583	*	1.31%
Ken Cragun⁽⁶⁾	426,042	*	*
Robert Smith⁽⁷⁾	392,500	*	*
Mordechai Rosenberg⁽⁸⁾	412,500	*	*
Jeffrey A. Bentz⁽⁹⁾	412,500	*	*
Howard Ash⁽¹⁰⁾	362,500	*	*
All directors and executive officers as a group (eight persons)	58,142,271	13.86%	67.49%

Common Stock		Series H Preferred Stock
Ranking
In any liquidation or bankruptcy of the Company, Common Stock would rank below all claims against us by holders of any of our indebtedness and by holders of preferred stock. Holders of our Common Stock would not be entitled to receive any payment or other distribution of assets upon the liquidation or bankruptcy of the Company until after our obligations to creditors, and the liquidation preference of our preferred stock have been satisfied in full.		In any liquidation or bankruptcy of the Company, Series H Preferred Stock would rank below all claims against us by holders of any of our indebtedness and by the holders of any senior class of preferred stock. Holders of our Series H Preferred Stock would not be entitled to receive any payment or other distribution of assets upon the liquidation or bankruptcy of the Company until after our obligations to creditors and the liquidation preference of the senior classes of preferred stock have been satisfied in full.

Voting Rights
At every meeting of the stockholders of the Company in connection with the election of directors and all other matters submitted to a vote of stockholders, every holder of shares of Common Stock is entitled to one vote in person or by proxy for each share of Common Stock registered in the name of the holder on the transfer books of the Company.		The Series H Preferred Stock do not have voting rights, except as required by law.

Dividends/Distributions
Holders of Common Stock, are entitled to receive dividends if and when declared by our Board of Directors.		Dividends on the Series H Preferred Stock are cumulative from the date of initial issue and will be payable on the last day of each calendar quarter commencing on June 30, 2023 when, as and if declared by our Board of Directors. Dividends will be payable out of amounts legally available therefor at a rate equal to 10.00% per annum per $10.00 of stated liquidation preference per share, or $0.25 per share of Series H Preferred Stock per quarter. Dividends may be paid, at the option of the Company, in the form of Common Stock determined by dividing (x) the total aggregate dollar amount of dividends accrued and unpaid with respect to Series H Preferred Stock owned by such record holder on the record date for the applicable dividend payment date (rounded to the nearest whole cent) by (y) the ten-day VWAP per share of Common Stock prior to the dividend payment date. If the Company declares a dividend to holders of Common Stock in the form of shares of the stock of its subsidiaries, then holders of Series H Preferred Stock shall participate in such dividend as if the shares of Series H Preferred Stock were convertible into shares of Common Stock at a price of $0.15 per share. However, holders of Series H Preferred Stock will not otherwise participate in any dividends or distributions of cash or other property paid in respect of our Common Stock with holders of the Common Stock.

Listing
The Common Stock trades on the NYSE American, under the ticker symbol “AULT.”		We intend to file an application to list the Series H Preferred Stock on the NYSE American or the Nasdaq Capital Market under the symbol “AULT-PDH”.

	Year Ended						Nine Months Ended
	December 31,						September 30,
	2021			2020			2022			2021
Statement of Operations Data:
Revenue	$	52,400,000		$	23,871,000		$	99,970,000		$	44,580,000
Cost of revenue		23,858,000			16,357,000			51,541,000			16,657,000
Research and development, selling, general
and administrative expenses		46,500,000			15,547,000			71,499,000			30,773,000
Impairment of deposit due to vendor
bankruptcy filing		—			—			2,000,000			—
Impairment of mined cryptocurrency		403,000			—			2,930,000			—
Benefit for credit losses		—			(2,000,000	)		—			—
Operating loss		(18,361,000	)		(6,033,000	)		(28,000,000	)		(2,850,000	)
Other expense (income), net:
Interest expense, net		1,063,000			9,543,000			34,572,000			299,000
Change in fair value of marketable
equity securities		1,327,000			(919,000	)		(355,000	)		705,000
Realized gain on marketable securities		(1,924,000	)		—			(661,000	)		(428,000	)
(Gain) loss on extinguishment of debt		(929,000	)		18,706,000			—			(929,000	)
Other expense (income), net		5,943,000			49,000			951,000			(4,080,000	)
(Loss) income from continuing operations
before income taxes		(23,841,000	)		(33,412,000	)		(62,507,000	)		1,583,000
Income tax (provision) benefit		(130,000	)		24,000			(361,000	)		(144,000	)
Net (loss) income from continuing operations		(23,971,000	)		(33,388,000	)		(62,868,000	)		1,439,000
Net loss from discontinued operations, net of taxes		—			661,000			—			—
Net (loss) income		(23,971,000	)		(32,727,000	)		(62,868,000	)		1,439,000
Net (loss) income attributable to non-controlling interest		(213,000	)		—			1,061,000			(93,000	)
Net (loss) income attributable to BitNile Holdings		(24,184,000	)		(32,727,000	)		(61,807,000	)		1,346,000
Preferred dividends		(18,000	)		(18,000	)		(239,000	)		(13,000	)
Net (loss) income available to common stockholders	$	(24,202,000	)	$	(32,745,000	)	$	(62,046,000	)	$	1,333,000

Statement of Comprehensive Loss Data:
Net (loss) income available to common stockholders	$	(24,202,000	)	$	(32,745,000	)	$	(62,046,000	)	$	1,333,000
Foreign currency translation adjustment		85,000			482,000			(1,452,000	)		(141,000	)
Net unrealized gain (loss) on derivative securities
of related party		(7,773,000	)		3,312,000			—			(7,773,000	)
Impairment of debt securities, related party		9,300,000			—			—			—
Total comprehensive loss	$	(22,590,000	)	$	(28,951,000	)	$	(63,498,000	)	$	(6,581,000	)

	As of September 30, 2022
	Actual		Adjustment		As Adjusted
Balance Sheet Data:
Cash and cash equivalents	$	10,126,000	$	—	$	10,126,000
Marketable equity securities		8,561,000		—		8,561,000
Total assets		610,905,000		—		610,905,000
Long-term debt, net of current maturities		72,188,000		—		72,188,000
Total liabilities		155,028,000		—		155,028,000
Redeemable noncontrolling interests
in equity of subsidiaries		117,114,000		—		117,114,000
Total stockholders’ equity	$	338,763,000	$	—	$	338,763,000

	For the nine months ended September 30, 2022
	Actual			Adjustment			As Adjusted
Statement of Comprehensive Loss and EPS
Net loss available to common stockholders	$	(62,046,000	)	$	(3,750,000	)	$	(65,796,000	)
Foreign currency translation adjustment		(1,452,000	)		—			(1,452,000	)
Total comprehensive loss	$	(63,498,000	)	$	(3,750,000	)	$	(67,248,000	)
Basic net loss per common share	$	(0.27	)		nm⁽¹⁾			nm⁽¹⁾
Diluted net loss per common share	$	(0.27	)		nm⁽¹⁾			nm⁽¹⁾

	For the year ended December 31, 2021
	Actual			Adjustment			As Adjusted
Statement of Comprehensive Loss and EPS
Net (loss) income available to common stockholders	$	(24,202,000	)	$	(5,000,000	)	$	(29,202,000	)
Foreign currency translation adjustment		85,000			—			85,000
Net unrealized gain (loss) on derivative securities
of related party		(7,773,000	)		—			(7,773,000	)
Impairment of debt securities, related party		9,300,000			—			9,300,000
Total comprehensive loss	$	(22,590,000	)	$	(5,000,000	)	$	(27,590,000	)
Basic net loss per common share	$	(0.44	)		nm⁽¹⁾			nm⁽¹⁾
Diluted net loss per common share	$	(0.44	)		nm⁽¹⁾			nm⁽¹⁾

Period	Low		High
First Quarter 2021	$	2.97	$	7.84
Second Quarter 2021	$	2.09	$	3.32
Third Quarter 2021	$	2.18	$	2.83
Fourth Quarter 2021	$	1.21	$	2.47
First Quarter 2022	$	0.53	$	1.34
Second Quarter 2022	$	0.24	$	0.84
Third Quarter 2022	$	0.18	$	0.38
Fourth Quarter 2022	$	0.09	$	0.15
First Quarter 2023 (through March 28, 2023)	$	0.08	$	0.16

Name(s) and Addresses of Registered Holder(s) (Please fill-in)	Shares of Common Stock Tendered*




Total
* Common Stock may only be tendered in increments of 200 shares, with each 200 shares of Common Stock being exchangeable in the Offer for three shares of Series H Preferred Stock having a liquidation preference of $10.00 per share of Series H Preferred Stock

Name of Tendering Institution:

Account Number:			Transaction Code Number:

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Address:

Daytime Area Code and Telephone Number: Dated: , 2023

By Overnight Courier:		By Registered or Certified Mail:

Computershare Trust Company, N.A. Attn: Corporate Actions Voluntary Offer 150 Royall Street Suite V Canton, MA 02021		Computershare Trust Company, N.A. Attn: Corporate Actions Voluntary Offer P.O. Box 43011 Providence, RI 02940-3011

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