BitNile Holdings, Inc.
Q2 2018 Earnings Call Transcript

Published: 16 Aug 2018

[Ron Parham:]

DPW Holdings Second Quarter Business Update. This is Ron Parham of LHA Investor Relations. On the call today are Chairman and CEO, Todd Ault III; and CFO, Will Horne. They will provide a business update and touch on the preliminary second quarter results that the company announced earlier today. You will find that press release in the Investor Relations section of the company's website at ir.dpwholdings.com. Before I turn the call over to Todd and Will, please be advised that this presentation and other written or oral statements made from time to time are representatives of DPW Holdings contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements reflect the current view about future events, statements that are not historical in nature such as forecast for the industry in which we operate, and which may be identified by the use of the words like expects, assumes, projects, anticipates, estimates we believe, could be, future or the negative these terms and other words of similar meaning are forward-looking statements. Such statements include, they are not limited to statements contained in this presentation relating to our business, business strategy, expansion, growth, products and services we may offer in the future, and the timing of their development, sales and marketing strategy, and capital outlook. Forward-looking statements are based on management's current expectations and assumptions regarding our business, the economy, and other future conditions and are subject to inherent risks and uncertainties and changes of circumstances that are difficult to predict and may cause actual results to differ materially from those contemplated or expressed. We caution you therefore against relying on any of these forward-looking statements. These risks and uncertainties include those risk factors discussed in Part I Item 1A, Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and other information contained in subsequently filed current and periodic reports each of which is available on our website, and on the Securities & Exchange Commission's website at www.sec.gov. Any forward-looking statements are qualified in their entirety by reference to the factors discussed in the 2017 annual report. Should one or more of these risks or uncertainties materialize, or in certain cases fail to materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned. Important factors that could cause actual results to differ materially from those in the forward-looking statements included decline in general economic conditions nationally and internationally, decreased demand of our products, for our products and services, market acceptance of our products, the ability to predict our intellectual property rights, impact of any litigation or infringement actions brought against us, competition from other providers and products, risks in product development, inability to raise capital to fund continuing operations, changes in government regulation, the ability to complete consumer transactions and capital raising transactions. Factors or events that could cause our actual results to differ may emerge from time to time and it is not possible for us to predict all of them, and not guarantee future results, levels of activity, performance or achievements, except as required by applicable law including the Securities Laws of the United States we do not intend to update any of the forward-looking statements to conform these statements to actual results. All forecasts are provided by management in this presentation and are based on information available to us at this time and management expects that internal projections and expectations may change overtime. The forecasts are entirely on management's best estimate of our future financial performance given our current contracts, current backlog of opportunities, and conversations with new and existing customers about our products. It is my pleasure now to turn the call over to Todd.

[Milton Todd Ault III:]

Thank you for joining us today everybody. I know it's been a really exciting seven or eight months since I took over on January 1 as the CEO or January 2, give or take. Today we're going to continue to update our progress we made from our strategic plan laid out in the prior calls, these results are for the second quarter. And midway through 2018 we continue to execute on our strategy that we articulated in our December 21 webinar. That webinar outlined there we're creating a portfolio of assets through strategic acquisitions and investments. We were going to provide the necessary capital to each company to fuel growth and continue to evaluate portfolio opportunities into new markets and return value to shareholders, and I want to emphasize that returning value to shareholders is a key component we're going to talk about today, given the dynamics of the company from where it started to where it is now six months ago. Please go to Slide number 4, please. There are key holdings we have and we outline them as our key holdings consisting of three subsidiaries which you see on the slide today. I'm going to focus my comments on Coolisys Technologies and Super Crypto portions of our business because we expect them to be big contributors for 2018, and most likely to our performance in 2019. However, the one caveat to that is that Digital Power Lending we expect to contribute in a big way going forward in 2019, and we will eventually talk about that. Slide number 5, please. Our Coolisys subsidiary holds our advanced technology and manufacturing business and remains the largest group of DPW Holdings portfolio. We see this to continue to be the case going forward, it's important to realize and I know we get a lot of questions about Bitcoin and a lot of other things we're doing, but Coolisys is made up of companies like Digital Power Core, Microphone, Power-Plus, Enertec, and the manufacturing contract and advanced technology contract to build and be the master contractor for MTIX International Machines made by MTIX Limited. These companies if you look at digital power, Microphase, Power-Plus and Enertec; range from being as old as 62 years to as little as Enertec which is approximately 23 years. And this is an important value creation, we have completed and I'm very excited to say that we've completed the acquisition we wanted to to build out Coolisys, and Coolisys is underway and now we've seen us announcing new contracts and let me get to that real quickly. Coolisys owns Digital Power Corp which we talked about, our legacy business. We completed the acquisition of Microphase acquiring control of that in June of 2017, we acquired control of Power-Plus in August of 2017 and we newly acquired and Enertec at the end of May; disappointing on timing, I wish we would have -- could buy Enertec quicker but we did close on Enertec. We've maintained a large manufacturing presence for MTIX Ltd., a division of MTIX International which we'll talk about. Coolisys has been partnering with really good really -- what I consider to be great leaders in the subsidiaries, and DPW is providing them with capital, we are providing them capital so they can innovate, open new markets, new products and unlock value for shareholders. This is a key component of the $71 million backlog and growing, and we gave you an estimate of that backlog of $71 million; however, we expect to revise that in the coming days ahead as we expect that backlog to be larger, we don't know the exact number that's why we gave you a preliminary number of $71 million, that's the minimum backlog we see at this time. Digital Power provides power supplies for the defense, aerospace, telecom, medical markets, in addition Digital Power provides advanced power solutions for cryptocurrency mining industry, our own Super Crypto brand of mining business, and I'll cover that in a few. Digital Power has made real progress in North America, what we call the Power Solutions Group. Amos's team along with a great hire from EMC, Russ [ph], our Chief Operating Officer at Coolisys, Vice President of Operations. Amos is building a team of sales in North America which includes aggression power in overseas and in England. The Power Solutions Group is coming together, they are building out longer term contracts, they are getting new design wins, and so we're pleased with that and an effort, and a little anecdote about this is that, they -- the largest customer Digital Power has inside the Coolisys Group is a medical company, that medical company is very fast growing, they have tripled their order internally with us for this year and next year. So the negative to that is they become a very dominant customer in terms of our total revenue for North America but the positive is they like what we're doing and they continue to make us a big part of their expansion. So that backlog is solid and Amos is trying very hard to bring his team together as an engineering team together. And let's go -- I'm going to skip over to Microphone for a second. Microphase which is a wholly-owned subsidiary got new defense order for $4.1 million to be sold over the next two years, and then Enertec, our recent acquisition got another order for $4.3 million to an aerospace contractor to build a computer-based commanded control missile defense system. These are two examples of the kind of things that they're executing now on that we've provided them capital. So one of the key measurements I hope that shareholders make is that if they look and they just -- I wouldn't be discounting Coolisys, if you look at what defense contractors trade at -- whether it be onetime sales or one and a half, or one in three quarters time sales; these guys are building a real backlog and with the acquisition of Enertec we add 60 engineers which by the way are lower cost than Silicon Valley and they're very talented group of dedicated people, and we think it's just a big component of what we're going to do going further. A recent acquisition as I talked about, added critical engineers in town to Coolisys, design and manufacturing capabilities for MTIX, and let me tell you how you connect those dots. A lot of people -- I get a lot of questions about no one is connecting the dots, this advanced technology that MTIX is building and deploying those machines require power supplies in the plasma units; one of the things that we do is advance power supplies, those engineers are now capable of helping MTIX with next-generation power supplies and next-generation plasma supplies that require high voltage power. And so there is a strategy of integration here and the ability for Coolisys to execute and grow independently of all the other value of the subsidiaries, and you're going to start to see that portfolio effect happen because it meaningfully has an effect on our entire business. Clearly, Coolisys is delivering on the manufacturing concept for MTIX, as you can see our revenues are ramping in manufacturing, when you see our financial style [ph], by next week you'll see an additional machine being delivered, we are on machines two and three -- excuse me, I apologize; my machines number 1 is completed in Italy, machine number 2 is being built, and machine number 3, 4 and 5 are on order. We have been told by MTIX that the cycle will change for them, they expect to speed up the delivery for them but that part's exciting and we'll update you as soon as we know more about it. So we've made some solid progress on getting engineering involved to support MTIX, and -- so machine 1 is built, machine 2 is -- I want to say it's most of the way done, I think it's like three quarters of the way done, and when there is something to report there we will let you know as the machines 3, 4 and 5 when they plan on coming online but we're very excited about the long-term nature of the contract for multiplex laser surface enhancement and the cost and the effectiveness of the friendly material and what they are delivering there. One of the things that is exciting about that business is MTIX continues to not only win patents around the world but they continue to get orders and they share with us the orders they have in fire return fee [ph], anti-microbial waterproofing, and the ability to deliver under multiple services; it's probably the single-best opportunity I think I've ever been part of, and DPW and it's subsidiaries are poised to make money from not only owning a big portion of the company and having an investment directly but that manufacturing contract has a long-term value. And I emphasize this as I transition out of Coolisys to focus on this, there is 100,000 textile plants around the world, 50,000 of them are in China; these machines are digitizing the treatment of fabric, and as these machines rollout, if you look at the number of analog digital printing machines that are out there for fabric -- you're looking at the demand for machines for generations to come, thousands of potential machines, and right now we only have orders for 25 of them. So you can see as orders expand for them and as they get bigger and you see key important dates about when MTIX International gets funding, when they get key funding for their growth and their customers come online and more and more machines continue to get built, this will ramp the revenue side of our Coolisys and this is one of the things I can't emphasize enough about the Company's future, it is truly fabulous to be part of the process there. And we see solid momentum in the business on the manufacturing side. I'm going to switch over now to Slide number 6, please. So this is about Super Crypto and I'm going to be very specific here. When we laid out in December our plans of Super Crypto and what we talked about in the December webinars; we laid out of a process of thinking about, like -- examples of like a company like Safeguard Scientific which matures a company from the venture stage eventually put it in a position to be independent, and we truly believe that the company that people want to peer play in crypto, one that's really clean and really focused on the group; so we went and -- spent a little time during the quarter, we relocated the bulk of our miners to our Midwest facility, and we completed where we were on our first generation AntEater which goes on sale in September. And we started installing AntEater's in our own facilities, and as we start to install those AntEaters in our own facilities, clearly there is a lot of headwinds with crypto pricing that's been -- to say it's a bear market is an understatement. Bitcoin pricing has -- I'll give my commentary in a second. So we completed the AntEater delivery, we have a new-generation power supply that's going to come out in September that is -- I think 1800-watt power supply from Coolisys that Super Crypto will sell, and so we're pretty excited about that. Our goal is still to put the 10,000 miners in place, and I want to emphasize that you've seen a pretty big decline in Crypto pricing and we sort of feel like we made the right decision here when we switched to Bitcoin from the Top Ten cryptocurrencies to the Top Three currencies to now we're pretty much exclusively in Bitcoin only mining. We basically eliminated the mining of the [indiscernible], so we don't -- we effectively other than having about less than 20 miners in the Thorium [ph] now, we effectively stopped Thorium [ph] mining a quarter ago. And there is no materiality Thorium [ph] on our balance sheet, the largest holding we have is pretty much just Bitcoin at this point we're mining. And I want to emphasize something because there is a lot of questions about Bitcoin, I mean we get inundated with this, I probably get personal taxes in a neighborhood of a couple of hundred a week for people that not get a hold of me or send me a message on Twitter. We have the capacity to go to 20,000 miners, this is really important because there's a lot of misnomers out here. We -- this is a double-edged sword right now, what's happening with Crypto and that is; imagine you're mining in place, you installed more miners, the difficulty gets harder, the price goes down. So even though your capacity goes up you're mining less Bitcoins, this is a constant issue we're dealing with, it's little different than -- it's a lot different than oil and gas which you -- you have this difficulty rate of changes etcetera. And then as we -- our thesis came out, it was purely a conversation of power and power is the key element here, it is the thing that drives the whole conversation for us. So with the capacity to go to 20,000 miners now in place, and we have that capacity in Indiana, we have it, we can pull a couple of levers and we can ramp right up. And with now having our own mining operation or my own miners that we have with our partners overseas, our collaboration with what happened with Samsung and who they took us to and how we're building our machines; we have the power to kind of turn that on and turn it off. So getting to 10,000 miners is not as herculean as it sounded before because if you look at the capital cost of first quarter of getting into crypto-mining space, that cost would have cost us something more like $40 million or $50 million in the first quarter and that cost has come down to under $10 million. So there is a trade-off; you got a negative pricing Bitcoin, you've got a really tough market, but you also have a CapEx that's way better, right. So our CapEx cost is coming way down, our internal development is helping us, and so we're focused on -- in this category, and so if you are looking at the slide, there is a really important slide that I want to emphasize and that is, when we became a holding company, we made it clear to everyone in December that we were going to look for opportunities. That first opportunity involves something happening with Super Crypto; there is -- so lots of conversations as you would expect us to make sure that people benefit, the shareholders benefit, there is lots of conversations with other parties about what's Super Crypto can do, our capacity to sell miners, our capacity to install them, and our capacity to get power. And so it's important to me, and to the company, and to our board that if something happens with crypto we would put those shares of crypto in the hands of DPW shareholders. So a spin-off of Super Crypto or some opportunity to benefit the shareholders is the most important thing on the category, and we really want that to be emphasized that this is still a focus for us, and we want to be able to benefit shareholders here and give them a pure crypto play when legally possible, and when it makes the most sense. So we're focused on manufacturing advanced power supplies, efficiency of miners, and in the crypto industry and a bunch of categories but we really think we're on the right track here because -- while we spent a lot of money we've saved a lot of money in CapEx and we've built out the facility in Indiana with expansion possibilities, and we didn't have to spin-off -- we didn't have to spin up all that power and have a tremendous cost. And I know if you look at competitors, they may have mined more coin than us but look at the CapEx they have to have expanded to do that versus the losses they're taking versus our ability of install our own liners and ramp up very quickly to 10,000. So we have that capability in place now, we continue to mine; I'm disappointed that the run rate obviously, it's under $4 million, it's very disappointing, I cannot stress enough to you that this has been one of the most stressful things in watching but the decline of the Bitcoin price -- but I do believe long-term the best thing for Super Crypto is to end up in their shareholders hands, and that if you want to share DPW you wake up one day with something from Super Crypto that belongs to you as a shareholder; because I still believe in the long-term nature of Bitcoin but there is expansion probability, there is a possibilities of roll ups and they're going to need their own balance sheet, they're going to need their own infrastructure, and quite frankly, the people at Super Crypto really want to have their own currency, their own ability to go buy things and deploy the capital how they see fit. So we're really bullish on an crypto long-term, and I would pay close attention to what we're doing there in the space over as we evaluate, as we should anyways -- you should expect me as the CEO and our Board to be evaluating as a holding company what's the best opportunity is for our assets and putting them in the best place to benefit the shareholders. I'm a large shareholder, we have a lot of Board members that are large shareholders, and there are companies in the crypto space that are trading for multiples that have less than we do, and bigger multiples than our whole market cap; so you clearly got to see that we're going to do something there to make sure that our shareholders benefit, this is one of our top priorities for the rest of 2018 and early 2019, and we are in active discussions on this part. I'm pretty comfortable here that I briefed you on the space we're really -- we're mining Bitcoin and I'm going to move on to the next category. We continue to invest in this area and add miners, and we will continue to update throughout the second half of the year. Clearly, you see us -- we saw that we repriced our numbers internally, it was very difficult to see the mining capabilities go up, and the amount of crypto we're mining go down, and we thought it was prudent to adjust for the second half and lower our numbers to 6,000, to 6,500. As all of you probably remember, when we started we were at 15,000, we lowered our numbers to 12,000, we lowered our numbers to 10,000, we lowered them to 8,500, and now we're lowering them to 6,500. There has been restoration [ph] of crypto market cap there, and that is -- if you look back in March, you had a market cap of about $860 billion, and now you have a market cap of under $200 billion, and we still think our strategy to stay in Bitcoin. Well, this is what it reminds me of and I'll move on from here. If you were in the market in 2000 when the Internet stocks boomed, there was a lot of pop-ups and I was quite into like different coins in different currency, a lot of Internet companies; but the ones that survive that bear market were the larger ones, the ones with big vision. And I kind of see as Bitcoin as the main survivor, there is going to be one's that pop-up later on, obviously; for Yahoo! as a search engine Google popped up later, right. There is going to be new currencies that pop-up but I think that Bitcoin is a survivor and we -- I have this analogy for you, I mean that is that -- if you think about this as a big trough, we've turned the boat into the wave and we're going with our head first into the wave and we're going to stay with it. And I think Darren supports this, the Board supports it and we have a more measured approach, so our CapEx spending is lower because the price of miners is lower and because we're doing stuff internally, but we're pleased with where we are. I'll come back to questions later on this. I'm going to turn over the call to Will Horne, our CFO; and Will -- with that he will take over and give you our financial update. Will, are you there?

[Will Horne:]

I am, thank you Todd. So we're moving to Slide 7. And this is to remind you the figures we're sharing today are preliminary, and we expect to report final results on Monday, August 20, with a timely submission of our Form 10-Q to the SEC. A quick review of the key preliminary financial and non-financial metrics. On the income statement, preliminary gross Q2 revenues are between $7.1 million to $7.4 million, that's compared to $1.8 million in the second quarter of 2017. Gross margins during -- expected during the current quarter just ended, are approximately 18.2%, and that compares with 40.1% in Q2 of 2017. Obviously, Todd spend a significant amount of time discussing the cryptocurrency mining business and that had an impact coming back on our overall [indiscernible] and it was real simple; as revenues decreased and your cost of operating costs maintained, we ended up in a situation where we actually had negative gross margins. Our operating costs in crypto are primarily co-location costs and depreciation costs. Our net loss we anticipate between $7.0 million to $7.3 million, which includes a significant amount of non-cash charges of approximately $4.1 million to $4.3 million, this comes to the prior quarter compared to 2017, the net loss of $1.9 million with non-cash charges of $1.1 million. On the balance sheet, the company has made significant strides, one of our goals was to increase shareholders equity, that was one of our obligations, our requirements just [indiscernible] with the exchange, so as of June 30 we expect that our assets increased by about $14.9 million to $52.9 million and that's compared to $38.5 million at March 31, 2018. Obviously, when Todd first got involved with the company it was significantly less, total assets in total actually were really on the verge of being delisted. Stockholders equity were upto $30.8 million which is up approximately $9 million from $21.8 million at March 31, 2018. Again, the forward indicators; Coolisys order backlog, it stands at approximately $71 million. A with that I will turn it back over to Todd. Thank you.

[Milton Todd Ault III:]

Thanks, Will, I appreciate it. Obviously, Will covered some important parts that I want to say that are really important for the future and that is the $53 million in assets, up $14 million, continue to strengthen that balance sheet. Our shareholder equity is now 5x the requirement we need to be listed on the New York Stock Exchange. I frequently get questions like are we going to be delisted? I wish that whoever raised these things could actually read or maybe -- don't know how to read a balance sheets, but unfortunately, some people can't. So we have 5x the required equity to be listed on the NYSE America. The $53 million in assets; you're going to want to start seeing return in 2019 on those assets and that's something we're super focused on, and I see that backlog increasing. That backlog is the results in delivery and we've clearly been aggressive in deploying capital over the 18 months and let me talk about that aggressive behavior in front of where we are here; and that is our current run rate as of today for this quarter going forward is $40 million. We're encouraged by the progress we believe the advanced technology group, the designs of manufacturing the Coolisys is substantial potential for continued growth. We lowered our outlines only for 2018 because of Bitcoin to $34 million to $39 million from our previous guidance of $44 million to $49 million; this reduction was primarily due to softening of cryptocurrency markets that began in 2018, and our decision to pace our expansion in crypto mining platform as the market stabilizes. As we said, we have the capacity to go to 20,000. In addition, the acquisitions of Enertec and IM closed later in the second quarter than anticipated in our prior guidance. The later closings only allowed us to include a portion of their revenue, so as Will -- as I emphasized to you as a run rate, that run rate is near $10 million a quarter now, and so we're very pleased that that is happening. It's important to see -- it's important to understand too from a transition that the company went from $10 million last year in revenue to now on a $40 million run rate. As of right now, there is a lot of changes happening there. As this does, we really thought like it's validating our strategy, I know that people see us as a Bitcoin company, unfortunately we'd like them to see the whole pie of exactly what we're doing. We continue to evaluate the portfolio, look for new opportunities to add growth, as well as monetize for the benefit of shareholders; and I can't stress enough to you that as a shareholder myself if something were to get sold or spun-off, it would be very important to us and that's part of a key strategy as we deploy capital. You can think of DPW to some extent not only as a holding company, but as a publicly-traded like Safeguard Scientific, a publicly-traded venture fund, and you have a lot of opportunity in there for several of us to get rewarded down the road. I get a lot of questions about dilution, and I just do not understand why people do not focus on the creation of assets and the potential value of them, but we're steering the course, and for those of you who don't like it -- I suggest you sell. So let me move on to the question-and-answer section now. And we do have a lot of questions and so I'm excited about answering them.

[Milton Todd Ault III:]

And the first question that came in is, why are you delayed in the submission of your 10-Q? And I will answer this for Will. Will works till midnight pretty crazily, he works very hard. With two acquisitions completed in the last quarter, our quarterly reports require more processing time, our reporting is more complex; we're a global company now with operations in England, operations in Israel. As we approach our filings, we want to take the 5-day grace period to make sure that the new integration of our Israeli subsidiary is done correctly and is reviewed in a little bit of a heavier manner. So with that in mind, I support Will 100% in his decision along with the audit committee's decision to take the 5-day grace period. I think Will has more than demonstrated to the shareholders that he's able to report complex issues and this makes sense for us to be cautious here. One of the factors that led to the trimming of your full year 2018 guidance. The primary factors -- let's see here, let me think about this; were a combination of decline of Bitcoin, our positive deploying of miners, and our existing -- with our existing platform, and we're generating less revenue in Super Crypto because of market factors that no one can deny, it's clear as day to the market, everyone is doing that, I'm sure if you look at competitors they're bleeding worse than we are. So that's one of the primary factors. I really -- I want to emphasize that I'm happy with the Enertec acquisition, I'm disappointed it took so long to close in the quarter; so we weren't able to benefit from their revenue for the second quarter except marginally, the same with IM. But now that those are done, they are fully integrated for the third quarter, those will be in our third quarter numbers in a 100% way. I'm proud of our run rate, it's $40 million up from $10 million, I'm not going to apologize for that. I think we're doing a great job there and I just don't think we should apologize, and I think we're deploying capital in right way, we have the potential to be a much bigger company, and so it's important to note that the non-cash charges -- other non-cash charges and we're going to continue to incur them as we grow the company. I have a goal of getting the company as I stated in December to $100 million in revenue, and we don't see a need and our Board doesn't see a need to change that at this time. This is a question about the ATM. See here; how much are you tapping the ATM to raise capital, especially when the stock is trading at depressed levels? Well, we said we'd use this for acquisition purposes. We sold 21 million shares at $0.89. I don't know if that doesn't speak for itself, I get a lot of questions about this. If you continue to grow your asset base and you continue to grow your ability to make money, especially for the future, this as if you're listening to the call in December this is not a 1-day event, it's not a 6-day event, it's a 20-year plan for me, it's a 5-year roll up plan for us to become a manufacturer. As you know, I just signed a 10-year contract with the company, so I'm not going anywhere, I'm the largest shareholder with my wife, and we just believe in the future of the business. So when I sell on the ATM, I not only sell more shares, I sell more shares that affect me too. And it would be unlogical for me to continue to sell at these levels. I can tell you that -- while I'm not going to comment on day-to-day this has almost been little to no activity down here, especially below $0.50, especially below $0.60 that's gotten very thin end to it, that I know of right now. I'm only going to come to say that we are not significantly adding to the ATM as anything, and -- while the ATM is there for us to use if we want to, at these levels we're very unhappy with the price and so it's unlikely that that's going to be anything material. And you'll see that with the slowdown in the number of shares that go out because there is -- this doesn't make sense down here. What can you do to revive Digital Power's business? Digital Power is being revived with the sales initiatives that the team is handling in North America, with the acquisition of the engineering team from Enertec, and I'm pleased with that, there is advanced R&D going on, they are exploring the markets. Keep in mind one thing too, none of the numbers we gave you forecast on -- not one of them include the sales of the new miners that go on sale September 1, not any of our numbers. So there is just no minor estimates included, we specifically decided to explit them from our forecast and hope that whatever happens there ends up being upside. Why are you hedging and having 10,000 miners in operation by 12/31/18? Initial 10,000 miner goal we shared in early 2018 was a projection based on the current value of Bitcoin, other cryptocurrencies and are subject to available financing. We're not hedging, we have the capacity to go to 20,000 and that is still our goal, none of that's changed. How should we model cryptocurrency for mining portion of your business? We should -- you should model it out that we're going to get eventually to 10,000 miners, we are using 17.2 tear-ash [ph] miners going forward that are made by us and our partner in China, with the Samsung chip. But we're internally modeling the price of 6,000 to 6,500 for the remainder of 2018. Are you going to reverse the stock split because of the dollar threshold? We are not reversing the stock at this time, there is no need for that because we're on the New York American, and they don't have the same rule that the NASDAQ does for a dollar. And so I've said this many times, there is no point in reversing the stock at this time. If something materially changed, I would let you know but there is no chance that I want to do that, and I would resist that with all that I could. And in fact, quite honestly, under my current contract and agreement, I have the ability to buy more stock, and when I legally can buy stock, I will be buying stock except these levels, I'll be buying all I can. So I don't frankly want it to reverse at all. Are you considering spin-offs, divestitures of subsidiaries and assets? As we said earlier, we are definitely looking at Super Crypto to be a standalone business. We're a diversified holding company, we're always going to evaluate portfolio opportunities and look at things to see if they can't be monetized or operated in a way that's better -- that they are independent. And so we're definitely not getting away from that idea that we will be -- I expect that we will be doing something over the next six months, and that's important here. So this is a question; do you believe today that DPW had made a mistake in getting into the crypto-related fields? I don't believe we made a mistake. I really think that Bitcoin is here to stay. I think it's just in a bear market but it's not going away. However, I do believe it's a mistake for shareholders to not pay attention to the manufacturing operations of this business and to focus only on Bitcoin when we have a real manufacturing business growing, it's growing substantially, we're getting new contracts, and quite honestly, in some cases and some military contracts we've been approved for single source. So in order for you to be approved for single source by the Department of Defense or for projects that are important, that are top secret; you need to go through a lot of background to get that done, and in some cases we're a single source supplier for companies. We have big contracts, one of them with the U.S. Air Force. And so -- I think that shareholders and -- I do not believe DPW has made a mistake with getting into crypto business. I believe that other people are making a mistake by not realizing what we own. And I'm going to stay with the crypto business and ultimately end up in a different form but we're staying with it. When will the Coolisys backlog be complete? In theory with the manufacturer, we don't think it will ever be complete because we -- as you noticed, we keep adding new contracts and what that will ultimately show up as is revenue, right. As that revenue ramps and the contracts we deliver as customers want more in this and the defense budget continues to grow, our backlog should continue. Now I categorized you that MTIX machines -- there are five under construction right now for MTIX and DPW, and they need a lot of machines. So that theoretically backlog should continue to grow and grow and grow and grow and grow. So I don't think that -- if you look at the cycle, it's about an 18-month to 24-month cycle for a backlog. So it doesn't go away unless we stop winning contracts. Sorry, I'm getting -- presented new questions. When is it expected that AVLP will get current? We want to we want to uplift AVLP to the NASDAQ, that is a hot topic, one I can't answer today. We're trying very hard to get a current -- there is complications there but we're very close. How is the non-cash expenses going to be reduced? Well, clearly M&A is going to slow down, and as M&A slows down, the non-cash should be reduced. We are looking at various strategic ways and one of the things that I think that people have not asked about is Digital Power Lending, and I'll end on that note in this. Digital Power Lending is an important part of our business, we continue to make loans in that category, and we are financing at the subsidiary level. So in order to avoid dilution of apparent [ph] when we can, I'm not saying we're always going to avoid it; we are allowing the subsidiaries to raise capital that allows them for expansion but that doesn't dilute shareholders. So for example, Digital Power Lending which are borrows money and lends it at a different rate, like it's not a traditional bank, it's a California lender right; so it takes in money and it lends it out, and it works on a spread, it's paid some -- for small businesses a warrant things like that, participates in those loans. It restarted raising capital at the subsidiary level and you should see next week and in coming weeks ahead more information on Digital Power Lending. I think Digital Power Lending contributes in a big way for 2019, I think it's -- as I've shared with a lot of people on this call, it's something that is a permanent holding of ours and our lending business which by the way did contribute -- well, Digital Power Lending contributed for this quarter -- Will, I don't know if you're still there, I know you're busy working but do you recall or can you give any guidance to them on what Digital Power Lending contributed for the quarter so far? Do you have any preliminary numbers there on what the total contribution is?

[Will Horne:]

Yes, it was really really preliminary for DP Lending only because we just doubled or went to these loans and -- but because of some the warrants that were issued in conjunction with the loans, with public companies, the current quarter was about 100,000 topline from DPW. And it's important to keep in mind, historically DP Lending primarily was facilitating financing in our company, originally.

[Milton Todd Ault III:]

So they just started making external loans in the last quarter. One of the things that started out as a subsidiary as we made an external loan to IM for $1.7 million, and then we got equity for that loan too; and as they pay us back the $1.7 million, our equity which is at 98% goes down to 51% and their equity goes to 49% but only when our $1.7 million gets paid back. And so that's going to start to meaningfully contribute to top line and bottom line, and that was -- that originated out of a loan from Digital Power Lending, so we see it is an important part of what we're doing. All right, with that in mind, Ron, are there any other questions? Joe, are there any other questions? Otherwise we're going to wrap it up.

[Ron Parham:]

I don't see any others.

[Milton Todd Ault III:]

All right, everybody, thank you so much for listening. We appreciate you being shareholders, those of you who want to contact me you know how to get a hold of me. Hopefully, next quarter we have a better quarter for Bitcoin and cryptocurrency. We continue to grow our manufacturing business and look for us to update you later on this quarter early in middle of September about where we are in terms of making progress with Super Crypto and any new developments. We appreciate all your time. Thank you so much.