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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



| ⌧ | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| | |
| | For the quarterly period ended March 31, 2024 |



| | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| | |
| | For the transition period from ________ to ________. | |



Commission file number 1-12711



AULT ALLIANCE, INC.

(Exact name of registrant as specified in its charter)



| Delaware | 94-1721931 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |



11411 Southern Highlands Parkway, Suite 240

Las Vegas, NV 89141

(Address of principal executive offices) (Zip code)



(949) 444-5464

(Registrant's telephone number, including area code)



| Securities registered pursuant to Section 12(b) of the Act: | | |
| | | | | |
| Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
| Class A Common Stock, $0.001 par value | | AULT | | NYSE American |
| 13.00% Series D Cumulative Redeemable Perpetual Preferred Stock, par value $0.001 per share | | AULT PRD | | NYSE American |



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding year (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No



Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer" "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.



| Large accelerated filer | Accelerated filer |
| Non-accelerated filer ⌧ | Smaller reporting company ⌧ |
| Emerging growth company | |



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ⌧



At November 17, 2023, the registrant had outstanding 68,742,947 shares of common stock.
At May 19, 2024, the registrant had outstanding 30,065,339 shares of Class A common stock.





| | | |
| |



AULT ALLIANCE, INC.

TABLE OF CONTENTS



| | | | Page |
| PART I - FINANCIAL INFORMATION | |
| | | | |
| Item 1. | | Financial Statements (Unaudited) | F-1 |
| | | | |
| | | Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 | F-1 |
| | | | |
| | | Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2023 and 2022 | F-3 |months ended March 31, 2024 and 2023 | F-3 |
| | | | |
| | | Condensed Consolidated Statements of Changes in Stockholders' Equity for the three and nine months ended September 30, 2023 and 2022 | F-4 |months ended March 31, 2024 and 2023 | F-4 |
| | | | |
| | | Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 | F-8 |three months ended March 31, 2024 and 2023 | F-6 |
| | | | |
| | | Notes to Condensed Consolidated Financial Statements | F-8 |
| | | | |
| Item 2. | | Management's Discussion and Analysis of Financial Condition and Results of Operations | 1 |
| | | | |
| Item 3. | | Quantitative and Qualitative Disclosures about Market Risk | 7 |
| | | | |
| Item 4. | | Controls and Procedures | 7 |
| | | | |
| PART II - OTHER INFORMATION | |
| | | | |
| Item 1. | | Legal Proceedings | 9 |
| Item 1A. | | Risk Factors | 9 |
| Item 2. | | Unregistered Sales of Equity Securities and Use of Proceeds | 9 |
| Item 3. | | Defaults Upon Senior Securities | 9 |
| Item 4. | | Mine Safety Disclosures | 9 |
| Item 5. | | Other Information | 9 |
| Item 6. | | Exhibits | 9 |



Forward-Looking Statements



This Quarterly Report on Form 10-Q contains forward-looking statements that involve a number of risks and uncertainties. Words such as "anticipates," "expects," "intends," "goals," "plans," "believes," "seeks," "estimates," "continues," "may," "will," "would," "should," "could," and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, uncertain events or assumptions, and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on management's expectations as of the date of this filing and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include those described throughout this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2023, particularly the "Risk Factors" sections of such reports. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements in this Quarterly Report on Form 10-Q do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that had not been completed as of the date of filing of this Quarterly Report on Form 10-Q. In addition, the forward-looking statements in this Quarterly Report on Form 10-Q are made as of the date of this filing, and we do not undertake, and expressly disclaim any duty to update such statements, whether as a result of new information, new developments or otherwise, except to the extent that disclosure may be required by law.



| | | |
| |



PART I - FINANCIAL INFORMATION



| | Item 1. | Financial Statements. |



AULT ALLIANCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

| | | | | | | | | |
| | | March 31, | | | December 31, | |
| | | 2024 | | | 2023 | |
| ASSETS | | | | | | | | |
| CURRENT ASSETS | | | | | | | | |
| Cash and cash equivalents | | $ | 9,430,000 | | | $ | 8,626,000 | |
| Restricted cash | | | 1,903,000 | | | | 732,000 | |
| Restricted cash | | | 5,463,000 | | | | 4,966,000 | |
| Cash and marketable securities held in trust account | | | - | | | | 118,193,000 | |
| Marketable equity securities | | | 9,426,000 | | | | 27,000 | |
| Accounts receivable, | | | 24,651,000 | | | | 19,322,000 | |
| Accounts receivable, net | | | 11,579,000 | | | | 10,839,000 | |
| Inventories | | | 22,482,000 | | | | 22,036,000 | |
| Inventories | | | 7,599,000 | | | | 8,384,000 | |
| Investment in promissory notes and other, related party | | | - | | | | 3,968,000 | |
| Loans receivable, current | | | 1,364,000 | | | | 1,234,000 | |
| Prepaid expenses and other current assets | | | 8,035,000 | | | | 9,450,000 | |
| Current assets of discontinued operations | | | 91,872,000 | | | | 90,991,000 | |
| TOTAL CURRENT ASSETS | | | 169,333,000 | | | | 196,309,000 | |
| TOTAL CURRENT ASSETS | | | 144,768,000 | | | | 138,485,000 | |
| | | | | | | | | |
| Cash and marketable securities held in trust account | | | 794,000 | | | | 2,200,000 | |
| Intangible assets, net | | | 5,482,000 | | | | 5,754,000 | |
| Goodwill | | | 8,973,000 | | | | 27,902,000 | |
| Goodwill | | | 6,010,000 | | | | 6,088,000 | |
| Property and equipment, net | | | 103,989,000 | | | | 108,829,000 | |
| Right-of-use assets | | | 10,419,000 | | | | 8,419,000 | |
| Right-of-use assets | | | 7,211,000 | | | | 6,315,000 | |
| Investments in common stock related parties | | | 2,712,000 | | | | 6,449,000 | |
| Investments in common stock and equity securities, related party | | | 2,768,000 | | | | 679,000 | |
| Investments in other equity securities | | | 20,077,000 | | | | 21,767,000 | |
| Other assets | | | 9,810,000 | | | | 5,841,000 | |
| Other assets | | | 8,678,000 | | | | 9,073,000 | |

| Noncurrent assets of discontinued operations | | | - | | | | 92,535,000 | |

| TOTAL ASSETS | | $ | 378,456,000 | | | $ | 561,514,000 | |
| TOTAL ASSETS | | $ | 299,777,000 | | | $ | 299,190,000 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | |
| | | | | | | | | |
| CURRENT LIABILITIES | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 61,759,000 | | | $ | 66,443,000 | |
| Operating lease liability, current | | | 2,385,000 | | | | 2,119,000 | |
| Notes payable, net | | | 30,255,000 | | | | 39,621,000 | |
| Notes payable, current | | | 12,370,000 | | | | 12,866,000 | |
| Notes payable, related party, | | | 16,225,000 | | | | - | |
| Notes payable, related party, current | | | 293,000 | | | | 2,375,000 | |
| Convertible notes payable, current | | | 11,131,000 | | | | 11,763,000 | |
| Redeemable noncontrolling interests in equity of subsidiaries | | | - | | | | 117,993,000 | |
| Guarantee liability | | | 38,900,000 | | | | 38,900,000 | |
| Current liabilities of discontinued operations | | | 71,405,000 | | | | 70,361,000 | |
| TOTAL CURRENT LIABILITIES | | | 198,243,000 | | | | 204,827,000 | |





The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



| | F-1 | |
| |



AULT ALLIANCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

(Unaudited)



| | | March 31, | | | December 31, | |
| | | 2024 | | | 2023 | |
| LONG TERM LIABILITIES | | | | | | | | |
| Operating lease liability, non-current | | | 5,514,000 | | | | 4,402,000 | |
| Notes payable, | | | 21,211,000 | | | | 29,831,000 | |
| Notes payable, non-current | | | 17,314,000 | | | | 18,158,000 | |
| Convertible notes payable, non-current | | | 9,453,000 | | | | 9,453,000 | |
| Deferred underwriting commissions of Ault Disruptive Technologies Corporation ("Ault Disruptive") subsidiary | | | 3,450,000 | | | | 3,450,000 | |
| Noncurrent liabilities of discontinued operations | | | - | | | | 61,633,000 | |
| | | | | | | | | |
| TOTAL LIABILITIES | | | 257,218,000 | | | | 337,526,000 | |
| TOTAL LIABILITIES | | | 233,974,000 | | | | 240,290,000 | |
| | | | | | | | | |
| COMMITMENTS AND CONTINGENCIES | | | | | | | | |
| | | | | | | | | |
| Redeemable non-controlling interests in equity of subsidiaries | | | 784,000 | | | | 2,224,000 | |
| | | | | | | | | |
| STOCKHOLDERS' EQUITY | | | | | | | | |
| Series A Convertible Preferred Stock, $25 stated value per share, $0.001 par value - 1,000,000 shares authorized; 7,040 shares issued and outstanding at March 31, 2024 and December 31, 2023 (liquidation preference of $176,000 as of March 31, 2024 and December 31, 2023) | | | - | | | | - | |
| Series C Convertible Preferred Stock, $1,000 stated value per share, share, $0.001 par value - 50,000 shares authorized; 43,500 and 41,500 shares issued and outstanding at September 30, 2023 and December 31, 2022 (liquidation preference of $1,190,000 at September 30, 2023 and December 31, 2022) | | | - | | | | - | |March 31, 2024 and December 31, 2023, respectively (liquidation preference of $43,500,000 and $41,500,000 at March 31, 2024 and December 31, 2023, respectively) | | | - | | | | - | |
| Series D Cumulative Redeemable Perpetual Preferred Stock, $25 stated value per share, $0.001 par value - 2,000,000 shares authorized; shares authorized, 425,197 shares and 172,838 323,835 and 425,197 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively (liquidation preference of $10,630,000 and $4,321,000 as of September 30, 2023 and December 31, 2022, respectively) | | | - | | | | - | |$8,096,000 as of March 31, 2024 and December 31, 2023) | | | - | | | | - | |
| Class A Common Stock, $0.001 par value - 500,000,000 shares authorized; 30,065,339 and 4,483,459 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively | | | 30,000 | | | | 4,000 | |
| Class B Common Stock, $0.001 par value - 25,000,000 shares authorized; 0 shares issued and outstanding at March 31, 2024 and December 31, 2023 | | | - | | | | - | |
| Additional paid-in capital | | | 656,587,000 | | | | 644,852,000 | |
| Accumulated deficit | | | (467,088,000 | ) | | | (329,078,000 | ) |
| Accumulated deficit | | | (565,035,000 | ) | | | (567,469,000 | ) |
| Accumulated other comprehensive loss | | | (2,061,000 | ) | | | (2,097,000 | ) |
| Treasury stock, at cost | | | (30,571,000 | ) | | | (30,571,000 | ) |
| TOTAL AULT ALLIANCE STOCKHOLDERS' EQUITY | | | 58,950,000 | | | | 44,719,000 | |
| | | | | | | | | |
| Non-controlling interest | | | 6,069,000 | | | | 11,957,000 | |
| | | | | | | | | |
| TOTAL STOCKHOLDERS' EQUITY | | | 65,019,000 | | | | 56,676,000 | |
| | | | | | | | | |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | | $ | 299,777,000 | | | $ | 299,190,000 | |





The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



| | F-2 | |
| |



AULT ALLIANCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

| | | | | | | | | |
| | | For the Three Months Ended | | | For the Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | March 31, | |
| | | 2023 | | | 2022 | | | 2023 | || 2022 | |
| | | 2024 | | | 2023 | |
| Revenue | | $ | 28,164,000 | | | $ | 27,031,000 | | | $ | 54,594,000 | | | $ | 43,539,000 | |
| Revenue | | $ | 11,468,000 | | | $ | 13,889,000 | |
| Revenue, cryptocurrency mining | | | 7,558,000 | | | | 3,874,000 | | | | 23,273,000 | | | | 11,398,000 | |
| Revenue, digital assets mining | | | 11,447,000 | | | | 7,347,000 | |
| Revenue, crane operations | | | 12,490,000 | | | | - | | | | 37,726,000 | | | | - | |12,918,000 | | | | 12,646,000 | |
| Revenue, lending and trading activities | | | (249,000 | ) | | | 13,360,000 | | | | 4,337,000 | | | | 32,224,000 | |9,099,000 | | | | (4,939,000 | ) |
| Total revenue | | | 47,963,000 | | | | 44,265,000 | | | | 119,930,000 | | | | 87,161,000 | |
| Total revenue | | | 44,932,000 | | | | 28,943,000 | |
| Cost of revenue, products | | | 20,425,000 | | | | 20,193,000 | | | | 39,248,000 | | | | 30,985,000 | |9,164,000 | | | | 9,787,000 | |
| Cost of revenue, cryptocurrency mining | | | 10,228,000 | | | | 5,255,000 | | | | 28,057,000 | | | | 12,206,000 | |
| Cost of revenue, digital assets mining | | | 8,544,000 | | | | 8,103,000 | |
| Cost of revenue, crane operations | | | 7,715,000 | | - | | 7,388,000 | |
| Cost of revenue, lending and trading activities | | | - | | | | 1,180,000 | |
| Total cost of revenue | | | 38,295,000 | | | | 25,448,000 | | | | 91,156,000 | | | | 43,191,000 | |
| Total cost of revenue | | | 25,423,000 | | | | 26,458,000 | |
| Gross profit | | | 9,668,000 | | | | 18,817,000 | | | | 28,774,000 | | | | 43,970,000 | |
| Gross profit | | | 19,509,000 | | | | 2,485,000 | |
| Operating expenses | | | | | | | | |
| Research and development | | | 1,769,000 | | | | 521,000 | | | | 5,415,000 | | | | 1,945,000 | |1,072,000 | | | | 1,842,000 | |
| Selling and marketing | | | 8,034,000 | | | | 7,428,000 | | | | 26,405,000 | | | | 20,888,000 | |
| Selling and marketing | | | 4,660,000 | | | | 8,796,000 | |
| General and administrative | | | 17,760,000 | | | | 15,362,000 | | | | 59,540,000 | | | | 44,357,000 | |13,380,000 | | | | 21,571,000 | |
| Impairment of goodwill and intangible assets | | | - | | | | - | | | | 35,570,000 | | | | - | |
| Impairment of mined digital assets | | | - | | | | 139,000 | |
| Impairment of property and equipment | | | 3,895,000 | | | | - | | | | 3,895,000 | | | | - | |
| Impairment of deposit due to vendor bankruptcy filing | | | - | | | | 2,000,000 | | | | - | | | | 2,000,000 | |
| Impairment of mined cryptocurrency | | | 113,000 | | | | 515,000 | | | | 376,000 | | | | 2,930,000 | |
| Total operating expenses | | | 31,571,000 | | | | 25,826,000 | | | | 131,201,000 | | | | 72,120,000 | |19,112,000 | | | | 32,348,000 | |
| Loss from operations | | | (21,903,000 | ) | | | (7,009,000 | ) | | | (102,427,000 | ) | | | (28,150,000 | ) |
| Income (loss) from operations | | | 397,000 | | | | (29,863,000 | ) |
| Other income (expense): | | | | | | | | |
| Interest and other income | | | 309,000 | | | | 725,000 | | | | 3,888,000 | | | | 1,255,000 | |583,000 | | | | 1,197,000 | |
| Interest expense | | | (4,414,000 | ) | | | (2,367,000 | ) | | | (30,537,000 | ) | | | (32,063,000 | ) |
| Interest expense | | | (4,900,000 | ) | | | (12,100,000 | ) |
| Loss on extinguishment of debt | | | (1,546,000 | ) | | | - | | | | (1,700,000 | ) | | | - | |
| Gain on conversion of investment in equity securities to marketable equity securities | | | 17,900,000 | | | | - | |
| Realized and unrealized (loss) Gain on marketable securities | | | 74,000 | | | | 709,000 | | | | (170,000 | ) || | 1,016,000 | |
| Gain (loss) on extinguishment of debt | | | 1,405,000 | | | | (63,000 | ) |
| Loss from investment in unconsolidated entity | | | - | | | | - | || | - | | | | (924,000 | ) |(667,000 | ) | | | - | |
| Impairment of equity securities | | | - | | | | - | || | (9,555,000 | ) | | | - | |(9,555,000 | ) |
| Provision for loan losses, related party | | | (3,068,000 | ) | | | - | |

| (Loss) Gain on the sale of fixed assets | | | (33,000 | ) | | | - | | | | 2,728,000 | | | | - | |68,000 | | | | 4,515,000 | |
| Change in fair value of warrant liability | | | (562,000 | ) | | | (3,000 | ) | | | 2,655,000 | | | | (27,000 | ) |
| Total other expense, net | | | (6,172,000 | ) | | | (936,000 | ) | | | (32,691,000 | ) | | | (30,743,000 | ) |
| Total other income (expense), net | | | 11,321,000 | | | | (16,006,000 | ) |
| Loss before income taxes | | | (28,075,000 | ) | | | (7,945,000 | ) | | | (135,118,000 | ) | | | (58,893,000 | ) |
| Income (loss) before income taxes | | | 11,718,000 | | | | (45,869,000 | ) |
| Income tax (benefit) provision | | | (565,000 | ) | | | 144,000 | | | | 540,000 | | | | 361,000 | |
| Income tax benefit | | | (44,000 | ) | | | (263,000 | ) |
| Net income (loss) from continuing operations | | | (27,510,000 | ) | | | (8,089,000 | ) | | | (135,658,000 | ) | | | (59,254,000 | ) |11,762,000 | | | | (45,606,000 | ) |
| Net loss from discontinued operations | | | (929,000 | ) | | | 93,000 | | | | (5,862,000 | ) | | | (3,614,000 | ) |(1,801,000 | ) | | | (3,223,000 | ) |
| Net loss | | | (28,439,000 | ) | | | (7,996,000 | ) | | | (141,520,000 | ) | | | (62,868,000 | ) |
| Net income (loss) | | | 9,961,000 | | | | (48,829,000 | ) |
| Net (income) loss attributable to non-controlling interest | | | 6,668,000 | | | | 725,000 | | | | 10,420,000 | | | | 1,061,000 | |(6,244,000 | ) | | | 183,000 | |
| Net income (loss) attributable to Ault Alliance, Inc. | | | (21,771,000 | ) | | | (7,271,000 | ) | | | (131,100,000 | ) | | | (61,807,000 | ) |3,717,000 | | | | (48,646,000 | ) |
| Preferred dividends | | | (413,000 | ) | | | (190,000 | ) | | | (963,000 | ) | | | (239,000 | ) |
| Preferred dividends | | | (1,260,000 | ) | | | (229,000 | ) |
| Net income (loss) available to common stockholders | | $ | (22,184,000 | ) | | $ | (7,461,000 | ) | | $ | (132,063,000 | ) | | $ | (62,046,000 | ) |2,457,000 | | | $ | (48,875,000 | ) |
| | | | | | | | | |
| Basic and diluted net income (loss) per common share: | | | | | | | | |
| Continuing operations | | $ | 0.26 | | | $ | (971.32 | ) |
| | | | | | | |
| Continuing operations | | $ | (3.80 | ) | | $ | (7.71 | ) || $ | (47.66 | ) | | $ | (77.70 | ) || Discontinued operations | | | (0.11 | ) | | | (68.57 | ) |
| Basic net income (loss) per common share | | $ | 0.15 | | | $ | (1,039.89 | ) |

| Discontinued operations | | | (0.17 | ) | | | 0.10 | || | (2.21 | ) | | | (4.81 | ) |
| | | | | | | | | |
| Diluted net income (loss) per common share: | | | | | | | | |

| Net loss per common share | | $ | (3.97 | ) | | $ | (7.61 | ) || $ | (49.87 | ) | | $ | (82.51 | ) |
| Continuing operations | | $ | 0.14 | | | $ | (971.32 | ) |
| Discontinued operations | | | (0.05 | ) | | | (68.57 | ) |

| | | | | | | | | || Diluted net income (loss) per common share | | $ | 0.09 | | | $ | (1,039.89 | ) |
| | | | | | | | | |
| Weighted average basic and diluted common shares outstanding: | | | 5,587,000 | | | | 980,000 | || | 2,648,000 | | | | 752,000 | |
| || | | | | | | | | || | | | | |
| Comprehensive loss | | || | |
| | | | | |
| Basic | | | 16,116,000 | | | | 47,000 | |
| Diluted | | | 36,493,000 | | | | 47,000 | |
| | | | | | | | | |
| Comprehensive income (loss)
| | | | | | | | || |
| Net income (loss) available to common stockholders | | $ | (22,184,000 | ) | | $ | (7,461,000 | ) | | $ | (132,063,000 | ) | | $ | (62,046,000 | ) |2,457,000 | | | $ | (48,875,000 | ) |
| Foreign currency translation adjustment | | | (651,000 | ) | | | 306,000 | | | | (1,001,000 | ) | | | (1,452,000 | ) |36,000 | | | | 170,000 | |
| Other comprehensive loss | | | (651,000 | ) | | | 306,000 | | | |(1,001,000 | ) | | | (1,452,000 | ) |
| Other comprehensive income | | | 36,000 | | | | 170,000 | |
| Total comprehensive loss | | $ | (22,835,000 | ) | | $ | (7,155,000 | ) | | $ | (133,064,000 | ) | | $ | (63,498,000 | ) |
| Total comprehensive income (loss) | | $ | 2,493,000 | | | $ | (48,705,000 | ) |





The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



| | F-3 | |
| |



AULT ALLIANCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)

Three Months Ended March 31, 2024

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | Preferred Stock | | | | | | | | | Additional | | | | | | Other | | | Non- | | | | | | Total | |
| | | Series A | | | Series C | | | Series D | | | Class A Common Stock | | | Paid-In | | | Accumulated | | | Comprehensive | | | Controlling | | | Treasury | | | Stockholders' | |
| | | Shares | | | Par Amount | | | Shares | | | Par Amount
| | | | | Accumulated | | | | | | | | | | |
| | | Series A, B & D | | | | | | | | | Additional || | | | | Other | | | Non- | | | | | | Total | |
| | | Preferred Stock | | | Common Stock | | | Paid-In | | | Accumulated | | | Comprehensive || | Controlling | | | Treasury | | | Stockholders' | |
|
| | | Shares | | | Par Amount | | | Shares | | | Amount | | | Capital | | | Deficit | | | Loss | | | Interest | | | Stock | | | Equity | |
| BALANCES, July 1, 2023 | | | 557,237 | | | $ | - | | | | 1,526,411 | | | $ | 2,000 | | | $ | 573,386,000 | | | $ | (444,371,000 | ) | | $ | (1,450,000 | ) | | $ | 23,853,000 | | | $ | (29,919,000 | ) | | $ | 121,501,000 | |
| Stock-based compensation | | | - | | | | - | | | | - | | | |- | | | | 959,000 |
| BALANCES, January 1, 2024 | | | 7,040 | | | $ | - | | | | 41,500 | - | | $ | - | | | | 425,197 | | | $ | - | | | | 4,483,459 | | | $ | 4,000 | | | $ | 644,852,000 | | | $ | (567,469,000 | ) | | $ | (2,097,000 | ) | | $ | 11,957,000 | | | $ | (30,571,000 | ) | | $ | 56,676,000 | |
| Issuance of Series C preferred stock, related party
| | | - | | | | - | | | | 2,000 | | | | - | | | | 2,581,000 | |
| Issuance of common stock for cash | | | - | | | | - | | | | 10,707,601 | | | | 11,000 | | | | 20,404,000 - | | | | - | | | | - | | | | - | | | | 1,818,000 | | | | - | | | | - | | | | - | | | | - | | | | 1,818,000 | |
| Financing cost in connection with sales of common stock,| Fair value of warrants issued in connection with Series C preferred stock, related party | | | - | | | | - | | | | - | | | | - | | | | (715,000 | ) | | | - | | | | - | | | | - | | | | - | | | | 182,000 |
| Issuance of common stock for conversion of preferred stock liabilities | | | - | | | | - | | | | - | | | | - | | | | 584,000 | || | -182,000 | |
| Stock-based compensation |
| | | | - | | | | - | | | | - | | | | 584,000 | |
| Common stock issued in connection with issuance of notes payable | | | - | | | | - | | | | | | | | 577,000 | | | | - | | | | - | | | | - | | | | - | | | | 577,000 | |
| Remeasurement of Ault Disruptive subsidiary temporary equity | Issuance of Class A common stock for cash | | | - | | | | - | | | | - | | | | - | | | | - | | | | (530,000 | ) | | | - | | | | - | | | | - | | | | (530,000 | ) | - | | | | 25,609,079 | | | | 26,000 | | | | 14,573,000 |
| Increase in ownership interest of subsidiary | | | - | | | | - | | | | - | | | | - | | | | - | || | - | | | | - | | | | (352,000 | ) | | | - | | | | (352,000 | ) |14,599,000 | |
| Financing cost in connection with sales of Class A common stock | | | - | | | | - | | | | - | | | | - |

| Sale of subsidiary stock to non-controlling interests | | | - | | | | - | | | | - | | | | - | | | | (513,000 | ) | | | - | | | | - | | | | - | | | | - | | | | (513,000 | ) |
| Purchase of treasury stock - Ault Alpha LP ("Ault Alpha") | Remeasurement of Ault Disruptive subsidiary temporary equity | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (621,000 | ) | | | (621,000 | ) |
- | | | | (23,000 | ) | | | - | | | | - | | | | - | | | | (23,000 | ) |
| Sale of subsidiary stock to non-controlling interests | | | - | | | | - | | | | - | | | | - | | | | - | | | | (21,771,000 | ) |
| Preferred dividends
- | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (413,000 | ) | | | - | | | | - | || | -1,485,000 | | | | - | | | | 1,469,000 | |
| Distribution to Circle 8 Crane |
| | - | | (413,000 | ) |
| Foreign currency translation adjustments
| | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (651,000 | ) |
(170,000 | ) | | | - | | | | (170,000 | ) |
| Net loss attributable to non-controlling interest | | | - | | | | - | || | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | - | | | | (6,668,000 | ) |
| Distribution of securities of Imperalis Holding Corp., d/b/a TurnOnGreen, Inc. ("TurnOnGreen") to Ault Alliance stockholders ($1.44 per share)
| | | | | | - | | | | - | | | | - | | | | - | | | | | | | | - | |
| Services, LLC ("Circle 8") non-controlling interest | | | | |
| | - | | | | 10,700,000 | | | | - | | | | 5,200,000 | |
| Other | | | - | | | | - | | | | - | | | | (1,000 | ) | | | (1,000 | ) | | | (3,000 | ) | | | (1,000 | ) | | | | | | | | | | | | | | | | - | | | | - | | | | | |
| BALANCES, September 30, 2023 | | | 557,237 | Conversion of RiskOn International, Inc. ("ROI") convertible note | | | - | | | $ | - | | | | 12,379,673 | | | $ | 12,000 | | | $ | 589,279,000 | | | $ | (467,088,000 | ) | | $ | (2,102,000 | ) | | $ | 29,498,000 | | | $ | (30,540,000 | ) | | $ | 119,059,000 | |
- | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 863,000 | | | | - | | | | 863,000 | |
| Net income | | | - | | | | - | | | | - | - |



The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



| | F-4 | |
| |



AULT ALLIANCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)

Three Months Ended September 30, 2022



| | | Series A, B & D | | | | | | | || Additional | | | | | | Other | | | Non- | | | | | | Total
| |
- | | | Preferred Stock | | | Common Stock | | | Paid-In | | | Accumulated | | | Comprehensive | | | Controlling | | | Treasury | | | Stockholders' | |
| | | Shares | | | Amount | | | Shares | | | Amount | | | Capital || | Deficit | | | Loss | | | Interest | | | Stock | | | Equity | |
| BALANCES, July 1, 2022 | | | 278,658 | | | $ | - | | | | 1,081,469 | | | $ | 1,000 | | | $ | 550,036,000 | | | $ | (200,184,000 | ) | | $ | (1,863,000 | ) | | $ | 18,048,000 | | | $ | (20,639,000 | ) | | $ | 345,399,000 | |
| - | | | | - | | | | - | | | | - | | | | - | | | | 3,717,000 | | | | - | | | | - | | | | - | | | | 3,717,000 | |
| Series A preferred dividends ($0.63 per share) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (4,000 | ) | | | | | | | | | | | | | | | (4,000 | ) |

| Series C preferred dividends ($25.53 per share) | | | | | | | - | | | | - | | | | - | | | | 207,000 | | | | - | | | | - | | | | - | | | | - | | | | 207,000 | |
| Preferred stock offering costs
(992,000 | ) | | | | | - | | | | - | | | | - | | (992,000 | ) |
| Series D preferred dividends ($0.81 per share) | | | |
| |- | | | | (65,000 | ) | | | - | | | | - | | | | - | | | | - | | | | (65,000 | ) |
| Stock-based compensation
| | | | | | - | | | | - | | | | - | | (264,000 | ) | | | | | | | | | - | | | | - | | (264,000 | ) |
| Foreign currency translation adjustments | | | - | | | | - | |
| |479,000 | | | | - | | | | 2,042,000 | |
| Issuance of Gresham Worldwide, Inc. common stock for acquisition of Giga-tronics Incorporated ("GIGA") |
| | - | | | | - | | | | - | | | | - | | | | 1,669,000 | | | | - | | | | - | | | | - | | | | - | | | | 1,669,000 | |
36,000 | | | | - | | | | - | | | | 36,000 | |
| Net income attributable to non-controlling interest | | | -
| Issuance of common stock for cash | | | - | | | | - | | | | 56,688 | || | - | | | | 4,557,000 | | | | - | | | | - | | | | - | | | | - | | | | 4,557,000 | |
| Financing cost in connection with sales of common stock | | | - | | | | - | | | | - | | | | - | | | | (79,000 | ) | | | - | | | | - | | | | - | | | | - | | | | (79,000 | ) | - | | | | - | | | | 6,244,000 | | | | - | | | | 6,244,000 | |
| Increase in ownership interest of subsidiary | Distribution of securities of TurnOnGreen, Inc. ("TurnOnGreen") to Ault Alliance Class A common stockholders ($2.02 per share) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,539,000 | ) | | | - | | | | (1,671,000 | ) |
- | | | | (4,900,000 | ) | | Non-controlling interest from GIGA acquisition | | | - | | | | - | | | | 4,900,000 | | | | - | | | | - | |
| Distribution of ROI investment in White River Energy Corp ("White River") | | | - | | | | - | | | | -
| | - | | | | - | | | | 2,735,000 | | | | - | | | | 2,735,000 | |
| Purchase of treasury stock - Ault Alpha | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (8,148,000 | ) | | | (8,148,000 | ) |(19,210,000 | ) | | | - | | | | (19,210,000 | ) |

| Net loss | | | - | | | | - | || | - | | | | - | | | | - | | | | | | | | - | | | | - | | | | - | | | | (7,271,000 | ) |
| Preferred dividends
| | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (190,000 | ) || | - | |
| to ROI stockholders |
| | | | - | | | | - | | | | (190,000 | ) |
| Foreign currency translation adjustments
| | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 306,000 | | | | - | | | | - | | | | 306,000 | |
| Net loss attributable to non-controlling interest | Other | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (725,000 | ) | | | - | | | | (725,000 | ) |
(101,362 | ) | | | - | | | | (27,199 | ) | | | - | | | | (2,000 | ) | | | - | | | | - | | | | - | | | | - | | | | 2,000 | | | | (2,000 | ) || | - | | | | (2,000 | ) | | | (1,000 | ) | | | (3,000 | ) |
| BALANCES, September 30, 2022 | | | 286,968 | | | $ | - | | | | 1,138,157 | | | $ | 1,000 | | | $ | 557,758,000 | | | $ | (207,647,000 | ) | | $ | (1,557,000 | ) | | $ | 18,996,000 | | | $ | (28,788,000 | ) | | $ | 338,763,000 | |
(2,000 | ) |
| BALANCES, March 31, 2024 | | | 7,040 | | | $ | - | | | | 43,500 | - | | $ | - | | | | 323,835 | | | $ | - | | | | 30,065,339 | | | $ | 30,000 | | | $ | 656,587,000 | | | $ | (565,035,000 | ) | | $ | (2,061,000 | ) | | $ | 6,069,000 | | | $ | (30,571,000 | ) | | $ | 65,019,000 | |






The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



| | F-4 | |
| |



AULT ALLIANCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)

Three Months Ended March 31, 2023

| | | Series A, B & D | | | | | | | | | Additional | | | | | | Other | | | Non- | | | | | | Total | |
| | | Preferred Stock | | | Common Stock | | | Paid-In | | | Accumulated | | | Comprehensive | | | Controlling | | | Treasury | | | Stockholders' | |
| | |Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Deficit | | | Loss | | | Interest | | | Stock | | | Equity | |
| BALANCES, January 1, 2023 | | | 304,878 | | | $ | - | | | | 1,274,157 | | |$ | 1,000 | | | $ | 565,904,000 | | | $ | (329,078,000 | ) | | $ | (1,100,000 | ) | | $ | 17,496,000 | | | $ | (29,235,000 | ) | | $ | 223,988,000 | |
| Issuance of common stock for restricted stock awards | | | - | | || - | | | | 4,974 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | || - | |
| Preferred stock issued for cash | | | 252,359 | | | | - | | | | - | | | | - | | | | 6,309,000 | | | | - | | | | - | | | | - | | | | - | | | | 6,309,000 | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated | | | | | | | | | | |
| | | Preferred Stock | | | | | | | | | Additional | | | | | | Other | | | Non- | | | | | | Total | |
| | | Series A | | | Series B | | | Series D | | | Class A Common Stock | | | Paid-In | | | Accumulated | | | Comprehensive | | | Controlling | | | Treasury | | | Stockholders' | |
| | | Shares | | | Par Amount | | | Shares | | | Par Amount | | | Shares | | | Par Amount | | | Shares | | | Amount | | | Capital | | | Deficit | | | Loss | | | Interest | | | Stock | | | Equity | |

| Preferred stock offering costs | | | - | BALANCES, January 1, 2023 | | | 7,040 | | | $ | - | | | | 125,000 | | | $ | - | | | | 172,838 | | | $ | - | | | | 50,966 | | | $ | - | | | $ | 565,905,000 | | | $ | (329,078,000 | ) | | $ | (1,100,000 | ) | | $ | 17,496,000 | | | $ | (29,235,000 | ) | | $ | 223,988,000 | | | - | | | | (3,431,000 | ) |
| Stock-based compensation | | | | | | | | | | | | | | | | | | | 5,642,000 | | | | - | | | | - | | | | 3,546,000 | | | | - | | | | 9,188,000 | |

| Issuance of Class A common stock for restricted stock awards | | | - | | | | - | | | | 10,917,388 | | | | 11,000 | | | | 25,316,000 | | | | - | | | | - | | | | - | | | | - | | | | 25,327,000 | |
199 | | | Financing cost in connection with sales of common stock | | | - | | | | - | | | | - | | | | - | | | | (847,000 | ) | | | - | | | | - | | | | - | || | - | | | | (847,000 | ) |
| Issuance of common stock for conversion of preferred stock liabilities | Preferred stock issued for cash | | | - | | | | - | | | | 143,402 | | | | - | | | | 912,000 | | | | - | | | | - - | | | | - | | | | 90,184 | | | | - | | | | - | | | | 912,000 | |
| Common stock issued in connection with issuance of notes payable | | | - | | | | - | | | | 39,752 | | | | - | | | | 162,000 - | | | | 2,255,000 | | | | - | | | | - | | | | - | | | | - | | | | 2,255,000 | |
| Remeasurement of Ault Disruptive subsidiary temporary equity | Preferred stock offering costs | | | - | | | | - | | | | - | | | | - | | | | - | | | | (5,945,000 | ) | | | - | | | | - | | | | - | | | | (5,945,000 | ) |
(1,079,000 | ) | | Increase in ownership interest of subsidiary | | | - | | | | - | | | | - | | | | - | | | | 13,000 | | | |- | | | | - | | | | (1,597,000 | ) | | | - | | | | (1,584,000 | ) |(1,079,000 | ) |
| Stock-based compensation | | | - | | | | - | | | | - | | | | - |

| Non-controlling position at RiskOn International, Inc. ("ROI") subsidiary acquired | | | - | | | | - | | | | - | | | | - | | | | 3,931,000 | | | | - | | | | - | | | | 617,000 | | | | - | | | | 4,548,000 | |
| Sale of subsidiary stock to non-controlling interests | | | - | | | | - | | | | - | | Issuance of Class A common stock for cash | | | - | | | | - | | | | - | | | | - | | | | 3,915,000 | | | | - | | | | 3,915,000 | | - | | | | - | | | | 4,268 | | | | - | | | | 4,158,000
| Distribution to Circle 8 Crane Services, LLC ("Circle 8") non-controlling interest | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (500,000 | ) | | | - | | | | (500,000 | ) | - | | | | 4,157,000 | |
| Financing cost in connection with sales of Class A common stock | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (105,000 | ) | | |
| Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (131,100,000 | ) || | - | (105,000 | ) |
| Remeasurement of Ault Disruptive subsidiary temporary equity
| | | - | | | | - | | | | (131,100,000 | ) |
| Preferred dividends | | | | | | | - | | | | - | | | | - | | | | - | | | | (963,000 | ) | | | - | | | | - | | | | - | | | | (963,000 | ) |
(679,000 | ) | | Foreign currency translation adjustments | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,001,000 | ) | | | - | | | | - | | | | (1,001,000 | ) |(679,000 | ) |
| Net loss attributable to non-controlling | Increase in ownership interest | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (10,420,000 | ) | | | - | | | | (10,420,000 | ) | - | | | | 11,000 |
| Distribution of securities of TurnOnGreen to Ault Alliance stockholders ($2.02 per share) | | | - | | | | - | | | | - | | | | - | | | | (10,700,000 | ) || | - | | | | - | | | | 10,700,000 | | | | - | | | | - | |(22,000 | ) | | | - | | | | (11,000 | ) |
| Other | | | - | | | | - | | | | - | | | | - | | | | (1,000 | ) | | | (2,000 | ) | | | (1,000 | ) | | | 1,000 | | | | 1,000 | | | | (2,000 | ) |
| BALANCES, September 30, 2023 | | | 557,237 | | | $ | - | | | | 12,379,673 | | | $ | 12,000 | | | $ | 589,279,000 | | | $ | (467,088,000 | ) | | $ | (2,102,000 | ) | | $ | 29,498,000 | | | $ | (30,540,000 | ) | | $ | 119,059,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



| | F-6 | |
| |



AULT ALLIANCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS of CHANGES IN STOCKHOLDERS' EQUITY
of subsidiary


(Unaudited)

Nine Months Ended September 30, 2022



| | | | | | | | | | | | | | | | | | | | | Accumulated | | | | | | | | | | |
| | | Series A, B & D | | | | | | | | | Additional | | | | | | Other | | | Non- | | | | | |Total | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Preferred Stock | | | Common Stock | | | Paid-In | | | Accumulated | | | Comprehensive | | | Controlling | | | Treasury | | | Stockholders' | |
| Non-controlling position at ROI subsidiary acquired | | | - | | | | - | | | | - | | | | - | | | |
| | | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Deficit | | | Loss | | | Interest | | | Stock | | | Equity | |
| BALANCES, January 1, 2022 | | | 132,040 | | | $ | - | | | | 281,149 | | | $ | - | | | $ | 385,728,000 | | | $ | (145,600,000 | ) | | $ | (106,000 | ) | | $ | 1,613,000 | | | $ | (13,180,000 | ) | | $ | 228,455,000 | |
| Issuance of common stock for restricted stock awards | | | - | | | | - | | | | 1,473 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Preferred stock issued for cash | | | 154,928 | | | | - | | | | - | | || - | | | | 3,873,000
| | 6,357,000 | | | | - | | | | 6,357,000 | |
| Purchase of treasury stock - Ault Alpha, LP
| | | | - | | | | - | | | | - | | | | - | | | | 3,873,000 | |
| Preferred stock offering costs | | | - | | | | - | | | | - | | | | - | | | | (602,000 | ) | | | - | | | | - | | | | - | | | | - | | | | (602,000 | ) |
(197,000 | ) | | | (197,000 | ) || Stock-based compensation | | | | | | | | | | | | | | | | | | | 5,190,000 | | | | - | | | | - | | | | 556,000 | | | | - | | | | 5,746,000 | |
| Issuance of Gresham Worldwide, Inc. common stock for acquisition of GIGA | Net loss | | | - | | | | - | | | | - | | | | - | | | | 1,669,000 | | | | - | | | | - | | | | - | | | | - | | | | 1,669,000 | |
| Issuance of common stock for cash | | | - | | | | - | | | | 855,535 | | | | 1,000 | | | | 167,982,000 | - | | | | (48,645,000 | ) | | | - | | | | - | | | | - | | | | (48,645,000 | ) |
| Financing cost in connection with sales of common stock | Series A preferred dividends ($0.63 per share) | | | - | | | | - | | | | - | | | | - | | | | (4,103,000 | ) | | | - | | | | - | | | | - | | | | - | | | | (4,103,000 | ) |
| Increase in ownership interest of subsidiary | | | - | | | | - | | | | - | | | | - | | | | (1,980,000 - | | | | (4,000 | ) | | | - | | | | - | | | | (1,921,000 | ) | | | - | | | | (3,901,000 | ) | - | | | | (4,000 | ) |
| Non-controlling interest from AVLP acquisition | Series D preferred dividends ($0.81 per share) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 6,738,000 | | | | - | | | | 6,738,000 | | - | | | | - | | | | (162,000 | )
| Non-controlling interest from SMC acquisition | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 10,336,000 | | | | - | | | | 10,336,000 | |(162,000 | ) |
| Non-controlling interest from GIGA acquisition | Foreign currency translation adjustments | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 2,735,000 | | | | - | | | | 2,735,000 | | - | | | | - | | | | - | | | | 170,000
| Purchase of treasury stock - Ault Alpha | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | || | (15,607,000 | ) | | | (15,607,000 | ) |170,000 | |
| Net loss attributable to non-controlling interest | | | - | | | | - | | | | - | | | | - | | | | - | | | | (61,807,000 | ) | | | - | | | | - | | | | - | | | | (61,807,000 | ) |
| Preferred dividends | | | | | | | - | | | | - | | | | - | | | | - | | | | (239,000 | ) | | | - | | | | - | | | | - | | | | (239,000 | ) |(183,000 | ) | | | - | | | | (183,000 | ) |
| Foreign currency translation adjustments | Other | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,452,000 | ) | | | - | | | | - | | | | (1,452,000 | ) |
| Net loss attributable to non-controlling interest | | | - | | | | - |
- | | | | - | | | | (2,000 | ) | | | (65,000 | ) | | | (1,000 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,061,000 | ) | | | - | | | | (1,061,000 | ) |(68,000 | ) |
| Other | | | - | | | | - | | | | - | BALANCES, March 31, 2023 | | | 7,040 | | | $ | - | | | | 1,000 | | | | (1,000 | ) | | | 1,000 | | | | - | | | | (1,000 | ) | | | - | |125,000 | | | $ | - | | | | 263,022 | | | $ | - | | | | 55,433 | | | $ | - | | | $ | 575,074,000.00 | | | $ | (378,633,000 | ) | | $ | (931,000 | ) | | $ | 24,265,000 | | | $ | (29,432,000 | ) | | $ | 190,343,000 | |
| BALANCES, September 30, 2022 | | | 286,968 | | | $ | - | | | | 1,138,157 | | | $ | 1,000 | | | $ | 557,758,000 | | | $ | (207,647,000 | ) | | $ | (1,557,000 | ) | | $ | 18,996,000 | | | $ | (28,788,000 | ) | | $ | 338,763,000 | |





The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



| | F-5 | |
| |



AULT ALLIANCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

| | | | | | | | | |
| | | For the Nine Months Ended September 30, | |
| | | For the Three Months Ended March 31, | |
| | | 2024 | | | 2023 | |
| Cash flows from operating activities: | | | | | | | | |
| Net loss | | $ | (141,520,000 | ) | | $ | (62,868,000 | ) |
| Net income (loss) | | $ | 9,961,000 | | | $ | (48,829,000 | ) |
| Net loss from discontinued operations | | | (1,801,000 | ) | | | (3,223,000 | ) |
| Net income (loss) from continuing operations | | | (135,658,000 | ) | | | (59,254,000 | ) |11,762,000 | | | | (45,606,000 | ) |
| Adjustments to reconcile net loss to net cash| Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 5,935,000 | | | | 5,325,000 | |
| Amortization of debt discount | | | 3,653,000 | | | | 10,302,000 | |
| Amortization of right-of-use assets | | | 583,000 | | | | 877,000 | |
| Impairment of goodwill and intangible assets | | | 35,570,000 | | | | - | |
| Impairment of property and equipment | | | 3,895,000 | | | | - | |
| Stock-based compensation | | | 577,000 | | | | 4,548,000 | |
| Impairment of deposit due to vendor bankruptcy filing | | | - | | | | 2,000,000 | |
| Gain on the sale of fixed assets | | | (68,000 | ) | | | (4,515,000 | ) |
| Impairment of equity securities | | | - | | | | 11,555,000 | |
| Impairment of cryptocurrencies | | | 376,000 | | | | 2,930,000 | |
| Impairment of digital assets | | | - | | | | 139,000 | |
| Realized gain on the sale of cryptocurrencies | | | (404,000 | ) | | | (829,000 | ) |
| Realized gain on the sale of digital assets | | | (738,000 | ) | | | (250,000 | ) |
| Revenue, cryptocurrency mining | | | (23,273,000 | ) | | | (11,398,000 | ) |
| Revenue, digital assets mining | | | (8,862,000 | ) | | | (7,347,000 | ) |
| Realized gains on sale of marketable securities | | | (33,140,000 | ) | | | (19,194,000 | ) |- | | | | 3,627,000 | |
| Unrealized (gains) losses on marketable securities | | | (2,554,000 | ) | | | 16,937,000 | |
| Gain on conversion of investment in equity securities to marketable equity securities | | | (17,900,000 | ) | | | - | |
| Unrealized losses on investments in common stock, related parties | | | 3,752,000 | | | | 5,676,000 | |
| Unrealized gains on marketable securities | | | (8,899,000 | ) | | | (1,908,000 | ) |
| Unrealized gains on equity securities | | | - | | | | (32,949,000 | ) |
| Unrealized (gains) losses on investments in common stock, related parties | | | (84,000 | ) | | | 1,598,000 | |
| Income from cash held in trust | | | (21,000 | ) | | | - | |
| Loss from investment in unconsolidated entity | | | - | | | | 924,000 | |
| Provision for loan losses | | | - | | | | 1,180,000 | |
| Loss on remeasurement of investment in unconsolidated entity | | | - | | | | 2,700,000 | |
| Provision for loan losses, | | | 1,180,000 | | | | - | |
| Provision for loan losses, related party | | | 3,068,000 | | | | - | |
| Change in the fair value of warrant liability | | | (2,655,000 | ) | | | (917,000 | ) |
| (Gain) loss on extinguishment of debt | | | (1,405,000 | ) | | | 63,000 | |
| Other | | | 1,550,000 | | | | (766,000 | ) |
| Other | | | (1,196,000 | ) | | | (83,000 | ) |
| Changes in operating assets and liabilities: | | | | | | | | |
| Proceeds from the sale of cryptocurrencies | | | 21,330,000 | | | | 8,952,000 | |
| Proceeds from the sale of digital assets | | | 8,634,000 | | | | 7,780,000 | |
| Marketable equity securities | | | - | | | | 21,986,000 | |
| Accounts receivable | | | (5,582,000 | ) | | | (3,022,000 | ) |
| Accounts receivable | | | (995,000 | ) | | | 5,030,000 | |
| Inventories | | | (456,000 | ) | | | (5,867,000 | ) |
| Inventories | | | 775,000 | | | | 1,936,000 | |
| Prepaid expenses and other current assets | | | 1,041,000 | | | | (687,000 | ) |
| Other assets | | | (3,969,000 | ) | | | (2,944,000 | ) |
| Other assets | | | 395,000 | | | | (490,000 | ) |
| Accounts payable and accrued expenses | | | (4,385,000 | ) | | | (3,801,000 | ) |
| Lease liabilities | | | (2,511,000 | ) | | | (1,334,000 | ) |
| Lease liabilities | | | (348,000 | ) | | | (910,000 | ) |
| Net cash (used in) provided by operating activities from continuing operations | | | (8,478,000 | ) | | | 10,349,000 | |
| Net cash used in operating activities from discontinued operations | | | (1,738,000 | ) | | | (2,646,000 | ) |
| Net cash (used in) provided by operating activities | | | (10,216,000 | ) | | | 7,703,000 | |
| Cash flows from investing activities: | | | | | | | | |
| Purchase of property and equipment | | | (882,000 | ) | | | (4,308,000 | ) |
| Investment in promissory notes and other, related parties | | | - | | | | (2,200,000 | ) |
| Investments in common stock and warrants, related parties | | | - | | | | (4,840,000 | ) |
| Purchase of SMC, net of cash received | | | - | | | | (8,239,000 | ) |
| Purchase of GIGA, net of cash received | | | - | | | | (3,687,000 | ) |
| Cash received upon acquisition of AVLP | | | - | | | | 1,245,000 | |
| Acquisition of non-controlling interests | | | (1,584,000 | ) | | | (3,901,000 | ) |
| Purchase of marketable equity securities | | | - | | | | (1,981,000 | ) |
| Sales of marketable equity securities | | | - | | | | 11,748,000 | |
| Investments in loans receivable | | | (134,000 | ) | | | (181,000 | ) |
| Principal payments on loans receivable | | | - | | | | 10,525,000 | |
| Investments in equity securities | | | (10,702,000 | ) | | | (22,449,000 | ) |
| Investments in non-marketable equity securities | | | (120,000 | ) | | | (102,000 | ) |
| Proceeds from the sale of fixed assets | | | - | | | | 4,515,000 | |
| Other | | | (5,000 | ) | | | 22,000 | |
| Net cash used in investing activities from continuing operations | | | (1,141,000 | ) | | | (54,000 | ) |
| Net cash used in investing activities from discontinued operations | | | (589,000 | ) | | | (2,713,000 | ) |
| Net cash used in investing activities | | | (1,730,000 | ) | | | (2,767,000 | ) |





The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



| | F-6 | |
| |



AULT ALLIANCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited)



| | | For the Nine Months Ended September 30, | |
| | | For the Three Months Ended March 31, | |
| | | 2024 | | | 2023 | |
| Cash flows from financing activities: | | | | | | | | |
| Gross proceeds from sales of Class A common stock | | $ | 14,599,000 | | | $ | 4,158,000 | |
| Financing cost in connection with sales of Class A common stock | | | (513,000 | ) | | | (105,000 | ) |common stock | | | (847,000 | ) | | | (4,103,000 | ) |
| Proceeds from sales of preferred stock | | | 6,309,000 | | | | 3,873,000 | |
| Proceeds from sales of Series D preferred stock | | | - | | | | 2,255,000 | |
| Financing cost in connection with sales of Series D preferred stock | | | - | | | | (1,079,000 | ) |preferred stock | | | (3,431,000 | ) | | | (602,000 | ) |
| Proceeds from sales of Series C preferred stock and warrants to purchase Class A common stock, related party | | | 2,000,000 | | | | - | |
| Proceeds from subsidiaries' sale of stock to non-controlling interests | | | 1,485,000 | | | | - | |
| Distribution to Circle 8 non-controlling interest | | | (170,000 | ) | | | - | |
| Proceeds from notes payable | | | 2,311,000 | | | | 2,500,000 | |
| Repayment of margin accounts | | | - | | | | (767,000 | ) |
| Payments on notes payable | | | (5,155,000 | ) | | | (19,651,000 | ) |
| Payments on notes payable, | | | (58,068,000 | ) | | | (67,698,000 | ) |
| Payments on convertible notes payable, related party | | | (188,000 | ) | | | - | |
| Payments on notes payable, related party | | | (1,894,000 | ) | | | - | |
| Payments of preferred dividends | | | (1,260,000 | ) | | | (229,000 | ) |
| Purchase of treasury stock | | | - | | | | (197,000 | ) |
| Proceeds from sales of convertible notes | | | 1,800,000 | | | | 2,680,000 | |
| Payments on convertible notes | | | (1,030,000 | ) | | | (160,000 | ) |
| Net cash provided by (used in) financing activities from continuing operations | | | 11,985,000 | | | | (10,595,000 | ) |
| Net cash provided by financing activities from discontinued operations | | | 1,056,000 | | | | 2,498,000 | |
| Net cash provided by (used in) financing activities | | | 13,041,000 | | | | (8,097,000 | ) |
| | | | | | | | | |
| Effect of exchange rate changes on cash and cash equivalents | | | 574,000 | | | | 177,000 | |
| Discontinued operations cash contributions from parent | | | 1,639,000 | | | | 81,000 | |
| | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents and restricted cash - continuing operations | | | 1,301,000 | | | | (203,000 | ) |
| Net increase (decrease) in cash and cash equivalents and restricted cash - discontinued operations | | | 368,000 | | | | (2,781,000 | ) |
| | | (1,565,000 | ) || |(6,490,000 | ) || Net increase (decrease) in cash and cash equivalents and restricted cash | | | 1,669,000 | | | | (2,984,000 | ) |
| | | | | | | | | |
| Cash and cash equivalents and restricted cash at beginning of period - continuing operations | | | 13,592,000 | | | | 8,674,000 | || | | 14,055,000 | | | | 21,233,000 | |
| Cash and cash equivalents and restricted cash at beginning of period - discontinued operations | | | 1,776,000 | | | | 5,381,000 | |
| Cash and cash equivalents and restricted cash at beginning of period | | | 15,368,000 | | | | 14,055,000 | |
| | | | | | | | | |
| Cash and cash equivalents and restricted cash at end of period | | | 17,037,000 | | | | 11,071,000 | |
| Less cash and cash equivalents and restricted cash of discontinued operations at end of period | | | (2,144,000 | ) | | | (2,601,000 | ) |
| Cash and cash equivalents and restricted cash of continued operations at end of period | | $ | 14,893,000 | | | $ | 8,470,000 | |
| | | | | | | | | |
| Supplemental disclosures of cash flow information: | | | | | | | | |
| Cash paid during the period for interest - continuing operations | | $ | 1,945,000 | | | $ | 2,990,000 | |
| Cash paid during the period for interest - discontinued operations | | $ | 2,023,000 | | | $ | 1,668,000 | |
| | | | | | | | | |
| Non-cash investing and financing activities: | | | | | | | | |
| Settlement of accounts payable with digital currency | | $ | 20,000 | | | $ | 417,000 | |assets | | $ | 8,000 | | | $ | - | |
| Conversion of investment in unconsolidated entity for acquisition of AVLP | | $ | - | | | $ | 20,706,000 | |
| Settlement of interest payable with digital assets | | $ | 142,000 | | | $ | - | |
| Settlement of note payable with digital assets | | $ | 506,000 | | | $ | - | |
| Conversion of convertible notes payable, related party into shares of Class A common stock | | $ | - | | | $ | 400,000 | |
| Conversion of debt and equity securities to marketable securities | | $ | 1,810,000 | | | $ | 13,340,000 | |
| Conversion of loans receivable to marketable securities | | $ | - | | | $ | 5,430,000 | |
| Conversion of interest receivable to marketable securities, | | $ | - | | | $ | 250,000 | |
| Exchange of related party advances for investment in other equity securities, related party | | $ | 2,000,000 | | | $ | - | |
| Recognition of new operating lease right-of-use assets and lease liabilities | | $ | 1,725,000 | | | $ | - | |
| Remeasurement of Ault Disruptive temporary equity | | $ | 23,000 | | | $ | 679,000 | |
| Preferred stock exchanged for notes payable | | $ | 9,224,000 | | | $ | - | |
| Dividend of ROI investment in White River to ROI shareholders | | $ | 19,210,000 | | | $ | - | |
| Notes payable exchanged for convertible notes payable | | $ | 2,200,000 | | | $ | - | |
| Notes payable exchanged for notes payable, related party | | $ | 11,645,000 | | | $ | - | |
| Redeemable non-controlling interests in equity of subsidiaries paid with cash and marketable securities held in trust account | | $ | 1,463,000 | | | $ | - | |
| Dividend paid in TurnOnGreen common stock in additional paid-in capital | | $ | 4,900,000 | | | $ | - | |
| Debt discount from accrued lender profit participation rights | | $ | - | | | $ | 8,500,000 | |






The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



| | F-7 | |
| |



1. DESCRIPTION OF BUSINESS



Ault Alliance, Inc., a Delaware corporation ("Ault Alliance" or the "Company") is a diversified holding company pursuing growth by acquiring and developing 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 offers colocation and hosting services for the emerging artificial intelligence ecosystems and other industries, and provides mission-critical products that support a diverse range of industries, including metaverse platform, oil exploration, crane services, defense/aerospace, industrial, automotive, medical/biopharma, consumer electronics, hotel operations and textiles. In addition, the Company extends credit to select entrepreneurial businesses through a licensed lending subsidiary.



Ault Alliance was founded by Milton "Todd" Ault, III, its Executive Chairman and is led by Milton "Todd" Ault, III, 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 the Executive Committee. The Company has the following seven reportable segments:



| | ∙ | Energy and Infrastructure ("Energy") - crane operations, advanced textiles processing and oil exploration; |



| | ∙ | Technology and Finance ("Fintech") - commercial lending, activist investing, and stock trading; media, and digital learning; |



| | ∙ | The Singing Machine Company, Inc. ("SMC") - consumer electronics; |



| | ∙ | Sentinum, Inc. ("Sentinum") - digital assets mining operations and colocation and hosting services for the emerging artificial intelligence ecosystems and other industries; |



| | ∙ | Gresham Worldwide, Inc., formerly known as Giga-tronics Incorporated ("GIGA") - defense industry; |



| | ∙ | TurnOnGreen - commercial electronics solutions; |



| | ∙ | RiskOn International, Inc., formerly BitNile Metaverse, Inc. ("ROI") - immersive metaverse platform, and |
| | ∙ | ROI - immersive metaverse platform, media, and digital learning; and |



| | ∙ | Ault Disruptive - a special purpose acquisition company. |



Reverse Stock Split



On May 15, 2023, pursuant to the authorization provided by the Company's stockholders at a special meeting of stockholders, the Company's board of directors approved an amendment to the Certificate of Incorporation to effectuate a reverse stock split of the Company's issued and outstanding common stock by a ratio of one-for-three hundred (the "Reverse Split"). The Reverse Split did not affect the number of authorized shares of common stock, preferred stock or their respective par value per share. As a result of the Reverse Split, each three hundred shares of common stock issued and outstanding prior to the Reverse Split were converted into one share of common stock. The Reverse Split became effective in the State of Delaware on May 17, 2023. All share amounts in these financial statements have been updated to reflect the Reverse Split.



2. LIQUIDITY AND FINANCIAL CONDITION



As of March 31, 2024, the Company had cash and cash equivalents of $9.4 million, negative working capital of $53.5 million and a history of net operating losses. The Company has financed its operations principally through issuances of convertible debt, promissory notes and equity securities. These factors create substantial doubt about the Company's ability to continue as a going concern for at least one year after the date that these condensed consolidated financial statements are issued.



The condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.



In making this assessment management performed a comprehensive analysis of the Company's current circumstances, including its financial position, cash flow and cash usage forecasts, as well as obligations and debts. Although management has a long history of successful capital raises, the analysis used to determine the Company's ability as a going concern does not include cash sources beyond the Company's direct control that management expects to be available within the next 12 months.



| | F-10 | |
| |



Management expects that the Company's existing cash and cash equivalents, accounts receivable and marketable securities as of March 31, 2024, will not be sufficient to enable the Company to fund its anticipated level of operations through one year from the date these financial statements are issued. Management anticipates raising additional capital through the private and public sales of the Company's equity or debt securities and selling its marketable securities as well as digital assets, or a combination thereof. Although management believes that such capital sources will be available, there can be no assurances that financing will be available to the Company when needed in order to allow the Company to continue its operations, or if available, on terms acceptable to the Company. If the Company does not raise sufficient capital in a timely manner, among other things, the Company may be forced to scale back its operations or cease operations altogether.or cease its operations altogether.



| | F-8 | |
| |



3. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES



The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Regulation S-X and do not include all the information and disclosures required by generally accepted accounting principles in the United States of America ("GAAP"). The Company has made estimates and judgments affecting the amounts reported in the Company's condensed consolidated financial statements and the accompanying notes. The actual results experienced by the Company may differ materially from the Company's estimates. The condensed consolidated financial information is unaudited but reflects all normal adjustments that are, in the opinion of management, necessary to provide a fair statement of results for the interim periods presented.



These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company's amended Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Annual Report"), filed with the Securities and Exchange Commission (the "SEC") on April 16, 2024. The condensed consolidated balance sheet as of December 31, 2023 was derived from the Company's audited 2023 financial statements contained in the above referenced 2023 Annual Report. Results of the three months ended March 31, 2024, are not necessarily indicative of the results to be expected for the full year ending December 31, 2024.



Significant Accounting Policies



Other than as noted below, there have been no material changes to the Company's significant accounting policies previously disclosed in the 2023 Annual Report.



Revenue Recognition - Bitcoin Mining



The Company recognizes revenue from Bitcoin mining under Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"). The core principle of ASC 606 is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:



| | ∙ | Step 1: Identify the contract with the customer; |
| | ∙ | Step 2: Identify the performance obligations in the contract; |
| | ∙ | Step 3: Determine the transaction price; |

| | ∙ | Step 4: Allocate the transaction price to the performance obligations in the contract; and |
| | ∙ | Step 5: Recognize revenue when the company satisfies a performance obligation. |



The Company has entered into a digital asset mining pool by executing a contract with a mining pool operator to provide computing power to the mining pool. The Company's customer, as defined in ASC 606-10-20, is the mining pool operator with which the Company has agreed to the terms of service and user service agreement. The Company supplies computing power, in exchange for consideration, to the pool operator who in turn provides transaction verification services to third parties via a mining pool that includes other participants.



The Company's enforceable right to compensation begins only when, and lasts as long as, the Company provides computing power to the mining pool operator and is created as power is provided over time. The only consideration due to the Company relates to the provision of computing power. The contracts are terminable at any time by and at no cost to the Company, and by the pool operator. Providing computing power in digital asset transaction verification services is an output of the Company's ordinary activities. Providing such computing power is the only performance obligation in the Company's contracts with mining pool operators.



| | F-11 | |
| |



The transaction consideration the Company receives, if any, is non-cash consideration in the form of Bitcoin. Changes in the fair value of the non-cash consideration due to form of the consideration (changes in the market price of Bitcoin) are not included in the transaction price and are therefore not included in revenue. The mining pool operator charges fees to cover the costs of maintaining the pool and are deducted from amounts the Company may otherwise earn and are treated as a reduction to the consideration received. Fees fluctuate and historically have been approximately 0.3% per reward earned, on average.



In exchange for providing computing power, the Company is entitled to a Full-Pay-Per-Share payout of Bitcoin based on a contractual formula, which primarily calculates the hash rate provided by the Company to the mining pool as a percentage of total network hash rate, and other inputs. The Company is entitled to consideration even if a block is not successfully placed by the mining pool operator. The contract is in effect until terminated by either party.



All consideration pursuant to this arrangement is variable. It is not probable that a significant reversal of cumulative revenue will occur and the Company is able to calculate the payout based on the contractual formula, non-cash revenue is estimated and recognized based on the spot price of the Company's principal market for Bitcoin at the inception of each contract, which is determined to be daily. Non-cash consideration is measured at fair value at contract inception. Fair value of the crypto asset consideration is determined using the spot price of the Company's principal market for Bitcoin at the beginning of the contract period. This amount is estimated and recognized in revenue upon inception, which is when hash rate is provided.



There is no significant financing component in these transactions.



Expenses associated with running the cryptocurrency mining business, such as equipment depreciation and electricity costs, are recorded as a component of cost of revenues.



Preferred Stock Liabilities



The Company follows ASC 480-10, "Distinguishing Liabilities from Equity" in its evaluation of the accounting for the Preferred Shares (as defined in Note 17). ASC 480-10-25-14 requires liability accounting for certain financial instruments, including shares that embody an unconditional obligation to transfer a variable number of shares, provided that the monetary value of the obligation is based solely or predominantly on one of the following three characteristics:



| | ∙ | A fixed monetary amount known at inception; |



| | ∙ | Variations in something other than the fair value of the issuer's shares; or |



| | ∙ | Variations in the fair value of the issuer's equity shares, but the monetary value to the counterparty moves in the opposite direction as the value of the issuer's shares. |



The number of shares delivered is determined on the basis of (1) the fixed monetary amount determined as the stated value and (2) the current stock price at settlement, so that the aggregate fair value of the shares delivered equals the monetary value of the obligation, which is fixed or predominantly fixed. Accordingly, the holder is not significantly exposed to gains and losses attributable to changes in the fair value of the Company's equity shares. Instead, the Company is using its own equity shares as currency to settle a monetary obligation.



Discontinued operations



The Company records discontinued operations when the disposal of a separately identified business unit constitutes a strategic shift in the Company's operations, as defined in ASC Topic 205-20, Discontinued Operations ("ASC Topic 205-20").



Reclassifications



Certain prior period amounts have been reclassified for comparative purposes to conform to the current-period financial statement presentation. These reclassifications had no effect on previously reported results of operations.



Recently Issued Accounting Standards



On December 14, 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, "Financial Instruments - Credit Losses," ("ASU No. 2016-13") to improve information on credit losses for financial assets and net investment in leases that are not accounted for at fair value through net income ASU 2016-13 replaces The current incurred loss impairment methodology with a methodology that reflects expected credit losses. This guidance was effective for the Company beginning on January 1, 2023. The adoption of this guidance did not have a material impact on the Company's condensed consolidated financial statements.2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 requires entities to disclose specific rate reconciliations, amount of income taxes separated by federal and individual jurisdiction, and the amount of income (loss) from continuing operations before income tax expense (benefit) disaggregated between federal, state, and foreign. The new standard is effective for the Company for its fiscal year beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard.



| | F-12 | |



| |



In October 2021, the FASB issued ASU 2021-08, "Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers," which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, "Revenue from Contracts with Customers." The guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. the guidance should be applied prospectively to acquisitions occurring on or after the effective date. The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The adoption of this guidance did not have a material impact on the Company's condensed consolidated financial statements.
On November 27, 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"). ASU 2023-07 is designed to improve the reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker. The new standard is effective for the Company for its fiscal year beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard.



4. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS



Presentation of Ault Global Real Estate Equities, Inc. ("AGREE") Operations



In September 2023, the Company committed to a plan for its 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 is driven by the Company's desire to focus on its core businesses, Energy, Fintech and Sentinum.The Company's real estate properties, which include both hotels and land are currently listed for sale.



In connection with the planned sale of AGREE assets, the Company 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 significant effect on the Company's operations and financial results. As a result, the Company has 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.



As of September 30, 2023, the Company expects the planned sale of AGREE assets to close within one year and, as a result,As of March 31, 2024 and December 31, 2023, the Company has classified the total assets and total liabilities associated with AGREE as current in the consolidated balance sheets.as of September 30, 2023.



| | F-9 | |
| |



The following table presents the assets and liabilities of AGREE operations:

| Schedule of assets and liabilities of agree operations | | | | | | | | |
| | | March 31, | | | December 31, | |
| | | 2024 | | | 2023 | |
| Cash and cash equivalents | | $ | 1,285,000 | | | $ | 1,080,000 | |
| Restricted cash | | | - | | | | 2,831,000 | |
| Restricted cash | | | 859,000 | | | | 697,000 | |
| Accounts receivable | | | 256,000 | | | | 264,000 | |
| Accounts receivable | | | 204,000 | | | | 247,000 | |
| Inventories | | | 51,000 | | | | 44,000 | |
| Inventories | | | 59,000 | | | | 50,000 | |
| Property and equipment, net - current | | | 89,114,000 | | | | 88,525,000 | |
| Prepaid expenses and other current assets | | | 351,000 | | | | 392,000 | |
| Total current assets | | | 2,420,000 | | | | 5,959,000 | |
| Total current assets | | | 91,872,000 | | | | 90,991,000 | |
| | | | | | | | | |
| Property and equipment, net | | | - | | | | - | |
| Total assets | | | 98,596,000 | | | | 98,494,000 | |
| Total assets | | | 91,872,000 | | | | 90,991,000 | |
| Accounts payable and accrued expenses | | | 2,985,000 | | | | 3,099,000 | |
| Notes payable, current | | | 68,420,000 | | | | 67,262,000 | |
| Total current liabilities | | | 71,405,000 | | | | 70,361,000 | |
| Notes payable | | | 67,115,000 | | | | 61,633,000 | |
| | | | | | | | | |
| Total liabilities | | | 69,212,000 | | | | 64,264,000 | |
| Total liabilities | | | 71,405,000 | | | | 70,361,000 | |
| Net assets of discontinued operations | | $ | 20,467,000 | | | $ | 20,630,000 | |



A disposal group classified as held for sale shall be measured at the lower of its carrying amount or fair value less costs to sell. No impairment was recognized up reclassification of the disposal group as assets and liabilities held for sale.



| | F-13 | |
| |



The following table presents the results of AGREE operations:

| Schedule of estimated costs to sell and expected | | | | | | | | |
| | | For the Three Months Ended | || For the Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | March 31, | |
| | | 2023 | | | 2022 | | | 2023 | | | 2022 | |
| | | 2024 | | | 2023 | |
| Revenue, hotel and real estate operations | | $ | 5,404,000 | | | $ | 5,513,000 | | | $ | 12,031,000 | | | $ | 12,809,000 | |3,006,000 | | | $ | 2,243,000 | |
| Cost of revenue, hotel operations | | | 3,278,000 | | | | 3,230,000 | | | | 9,086,000 | | | | 8,350,000 | |2,817,000 | | | | 2,688,000 | |
| Gross profit | | | 2,126,000 | | | | 2,283,000 | | | | 2,945,000 | | | | 4,459,000 | |
| Gross profit | | | 189,000 | | | | (445,000 | ) |
| General and administrative | | | 1,076,000 | | | | 585,000 | | | | 3,294,000 | | | | 4,309,000 | |407,000 | | | | 1,110,000 | |
| Total operating expenses | | | 1,076,000 | | | | 585,000 | | | | 3,294,000 | | | | 4,309,000 | |407,000 | | | | 1,110,000 | |
| Income (loss) from operations | | | 1,050,000 | | | | 1,698,000 | | | | (349,000 | ) | | | 150,000 | |
| Loss from operations | | | (218,000 | ) | | | (1,555,000 | ) |
| Interest expense | | | (1,979,000 | ) | | | (1,605,000 | ) | | | (5,513,000 | ) | | | (3,764,000 | ) |
| Interest expense | | | (1,583,000 | ) | | | (1,668,000 | ) |
| Net loss from discontinued operations | | $ | (929,000 | ) | | $ | 93,000 | | | $ | (5,862,000 | ) || $ | (3,614,000 | ) |(1,801,000 | ) | | $ | (3,223,000 | ) |



| | F-10 | |

| |



The following tables summarize disaggregated customer contract revenues and the source of the revenue for the three and nine months ended September 30, 2023 and 2022. Revenues from lending and trading activities included in consolidated revenues were primarily interest, dividend and other investment income, which are not considered to be revenues from contracts with customers under GAAP.
The cash flow activity related to discontinued operations is presented separately on the statement of cash flows as summarized below:




the Company's disaggregated revenues consisted of the following for the three months ended September 30, 2023 (excludes Ault Disruptive, as that segment has no revenue):


| Schedule of disaggregated revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Schedule of cash flow activity related to discontinued operations | | | | | | | | |
| | | GIGA | | | TurnOn | | | Fintech | | | Sentinum | | | SMC | | | ROI | | | Energy | | | Total | |
| | | For the Three Months Ended March 31, | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2024 | | | 2023 | |
| | | | | | Green | | | | | | | | | | | | | | | | | | | |
| Cash flows from operating activities: | | | | | | | | |
| Primary Geographical Markets | | | | | | | | | | | | | | | | | | | | | | | | |
| Net loss | | $ | (1,801,000 | ) | | $ | (3,223,000 | ) |
| Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | | | | |

| North America | | $ | 3,711,000 | | | $ | 1,075,000 | || $ | - | | | $ | 7,891,000 | | | $ | 15,931,000 | | | $ | 18,000 | | | $ | 12,929,000 | | |$ | 41,555,000 | |
| Europe | | | 2,521,000 | | | | 66,000 | Depreciation and amortization | | | | - | | | | - | || | - | | | | - | | | | 2,000 | | | | 2,589,000 | |838,000 | |
| Amortization of debt discount | | | 101,000 | | | | 98,000 | |

| Middle East and other | | | 4,043,000 | | | | 25,000 | || | - | | | | - | | | | - | | | | - | | | | - | | | | 4,068,000 | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts receivable | | | 43,000 | | | | 114,000 | |

| Revenue from contracts with customers | | | 10,275,000 | | | | 1,166,000 | | | | - | | | | 7,891,000 | | | | 15,931,000 | | | | 18,000 | | | | 12,931,000 | | | | 48,212,000 | |
| Inventories | | | (9,000 | ) | | | (12,000 | ) |
| Revenue, lending and trading activities (North America) | | | - | || Prepaid expenses and other current assets | | | 41,000 | | - | | | | (249,000 | ) || | - | | | | - | | | | - | | | | - | | | | (249,000 | ) |(32,000 | ) |
| Accounts payable and accrued expenses | | | (113,000 | ) | | | (429,000 | ) |

| Total revenue | | $ | 10,275,000 | | | $ | 1,166,000 | | | $ | (249,000 | ) | | $ | 7,891,000 | | | $ | 15,931,000 | | | $ | 18,000 | | | $ | 12,931,000 | | | $ | 47,963,000 | |
| Net cash used in operating activities | | | (1,738,000 | ) | | | (2,646,000 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | Cash flows from investing activities: | | | | | | | | ||
| Major Goods or Services | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Purchase of property and equipment | | | (589,000 | ) | | | (2,713,000 | ) |
| Radio frequency/microwave filters | | $ | 2,201,000 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | 2,201,000 | |
| Net cash used in investing activities | | | (589,000 | ) | | | (2,713,000 | ) |
| Power supply units & systems | | | 2,316,000 | | | | 1,074,000 | | | | - | | | | - | | | | - | | | | - | | Cash flows from financing activities: | | | - | | | | 3,390,000 | |
| Healthcare diagnostic systems | | | 1,243,000 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,243,000 | |
| Proceeds from notes payable | | | 1,056,000 | | | | 2,498,000 | |
| Defense systems | | | 4,155,000 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 4,155,000 | |
| Cash contributions from parent | | | 1,639,000 | | | | 81,000 | |
| Digital currency mining | | | - | | | | - | | | | - | | | | 7,558,000 | | | | - | | | | - | | | | - | | | | 7,558,000 | |
| Net cash provided by financing activities | | | 2,695,000 | | | | 2,579,000 | |
| Karaoke machines and related consumer goods | | | - | | | | - | | | | - | | | | - | | | | 15,931,000 | | | | - | | | | - | | | | 15,931,000 | |
| Net increase (decrease) in cash and cash equivalents and restricted cash | | | 368,000 | | | | (2,780,000 | ) |
| Crane rental | | | - | | | | - | | | | - | | | |- | | | | - | | | | - | | | | 12,490,000 | | | | 12,490,000 | | | |
| Other | | | 360,000 | | | | 92,000 | | | | - | | | | 333,000 | | | | - | | | | 18,000 | | | | 441,000 | | | | 1,244,000 | |
| Cash and cash equivalents and restricted cash at beginning of period | | | 1,776,000 | | | | 5,381,000 | |
| Revenue from contracts with customers | | | 10,275,000 | | | | 1,166,000 | | | | - | | | | 7,891,000 | | | | 15,931,000 | | | | 18,000 | | | | 12,931,000 | | | | 48,212,000 | |
| | | | | | | | | |
| Revenue, lending and trading activities | | | - | | | | - | | | | (249,000 | ) | | | - | | | | - | | | | - | | | | - | | | | (249,000 | ) |
| Cash and cash equivalents and restricted cash at end of period | | $ | 2,144,000 | | | $ | 2,601,000 | |
| Total revenue | | $ | 10,275,000 | | | $ | 1,166,000 | | | $ | (249,000 | ) | | $ | 7,891,000 | | | $ | 15,931,000 | | | $ | 18,000 | | | $ | 12,931,000 | | | $ | 47,963,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Timing of Revenue Recognition | | | | | | | | | | | | | | | | | | | | | | | | Supplemental disclosures of cash flow information: | | | | | | | | ||
| Goods transferred at a point in time | | $ | 5,391,000 | | | $ | 1,162,000 | | | $ | - | | | $ | 7,891,000 | | | $ | 15,931,000 | | | $ | 18,000 | | | $ | 441,000 | | | $ | 30,834,000 | |
| Cash paid during the period for interest | | $ | 1,583,000 | | | $ | 1,668,000 | |



| Services transferred over time | | | 4,884,000 | | | | 4,000 | | | | - | | | | - | | | | - | | | | - | | | | 12,490,000 | | | |17,378,000 | |
Change in Plan of Sale of AGREE Hotel Properties



On April 30, 2024, the Company had a change in plan of sale for its 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.




| | F-11 | |
| |




| REVENUE from contracts with customers | | $ | 10,275,000 | | | $ | 1,166,000 | | | $ | - | | | $ | 7,891,000 | | | $ | 15,931,000 | | | $ | 18,000 | | | $ | 12,931,000 | | | $ | 48,212,000 | |

5. REVENUE DISAGGREGATION



The following tables summarize disaggregated customer contract revenues and the source of the revenue for the three months ended March 31, 2024 and 2023. Revenues from lending and trading activities included in consolidated revenues were primarily interest, dividend and other investment income, which are not considered to be revenues from contracts with customers under GAAP.



The Company's disaggregated revenues consisted of the following for the three months ended March 31, 2024 (excludes Ault Disruptive, as that segment has no revenue):

| Schedule of disaggregated revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |




| | F-14 | |
| |



The Company's disaggregated revenues consisted of the following for the nine months ended September 30, 2023 (excludes Ault Disruptive, as that segment has no revenue):



| | | GIGA | | | TurnOnGreen | | | Fintech | | | Sentinum | | | Energy | | | ROI | | | Holding | | | Total | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Green | | | | | | | | | | | | | | | Company | | | | |
| Primary Geographical Markets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | $ | 8,901,000 | | | $ | 2,401,000 | | | $ | - | | | $ | 24,389,000 | | | $ | 21,939,000 | | | $ | 63,000 | | | $ | 38,604,000 | | | $ | 96,297,000 | |
| North America | | $ | 2,065,000 | | | $ | 1,157,000 | | | $ | - | | | $ | 11,749,000 | | | $ | 12,918,000 | | | $ | 28,000 | | | $ | 301,000 | | | $ | 28,218,000 | |
| Europe | | | 7,232,000 | | | | 77,000 | Europe | | | 2,511,000 | | | | 4,000 | | | | - | | | | - | | | | 39,000 | | | | - | | | | - | | | | 2,554,000 | |
| Middle East and other | | | 4,997,000 | | | | 64,000 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 5,061,000 | |
| Revenue from contracts with customers | | | 27,723,000 | | | | 2,766,000 | | | | - | | | | 24,389,000 | | | | 21,939,000 | | | | 63,000 | | | | 38,713,000 | | | | 115,593,000 | |9,573,000 | | | | 1,225,000 | | | | - | | | | 11,749,000 | | | | 12,957,000 | | | | 28,000 | | | | 301,000 | | | | 35,833,000 | |
| Revenue, lending and trading activities (North America) | | | - | | | | - | | | | 9,099,000 | | | | - | | | | - | | | | - | | | | - | | | | 9,099,000 | |
| Total revenue | | $ | 27,723,000 | | | $ | 2,766,000 | | | $ | 4,337,000 | | | $ | 24,389,000 | | | $ | 21,939,000 | | | $ | 63,000 | | | $ | 38,713,000 | | | $ | 119,930,000 | |
| Total revenue | | $ | 9,573,000 | | | $ | 1,225,000 | | | $ | 9,099,000 | | | $ | 11,749,000 | | | $ | 12,957,000 | | | $ | 28,000 | | | $ | 301,000 | | | $ | 44,932,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Major Goods or Services | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Radio frequency/microwave filters | | $ | 2,091,000 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | 2,091,000 | |
| Power supply units and systems | | | 2,260,000 | | | | 1,225,000 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 3,485,000 | |
| Healthcare diagnostic systems | | | 531,000 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 531,000 | |
| Defense systems | | | 4,691,000 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 4,691,000 | |
| Digital assets mining | | | - | | | | - | | | | - | | | | 23,273,000 | | | | - | | | | - | | | | - | | | | 23,273,000 | |
| Karaoke machines and related consumer goods | | | - | | | | - | | | | - | | | | - | | | | 21,939,000 | | | | - | | | | - | | | | 21,939,000 | |
11,447,000 | | | | - | | | | - | | | | - | | | | 11,447,000 | |
| Crane rental | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 37,726,000 | | | | 37,726,000 | |12,918,000 | | | | - | | | | - | | | | 12,918,000 | |
| Other | | | 1,109,000 | | | | 222,000 | | | | - | | | | 1,116,000 | | | | - | | | | 63,000 | | | | 987,000 | | | | 3,497,000 | |
| Other | | | - | | | | - | | | | - | | | | 302,000 | | | | 39,000 | | | | 28,000 | | | | 301,000 | | | | 670,000 | |
| Revenue from contracts with customers | | | 27,723,000 | | | | 2,766,000 | | | | - | | | | 24,389,000 | | | | 21,939,000 | | | | 63,000 | | | | 38,713,000 | | | | 115,593,000 | |9,573,000 | | | | 1,225,000 | | | | - | | | | 11,749,000 | | | | 12,957,000 | | | | 28,000 | | | | 301,000 | | | | 35,833,000 | |
| Revenue, lending and trading activities | | | - | | | | - | | | | 9,099,000 | | | | - | | | | - | | | | - | | | | - | | | | 9,099,000 | |
| Total revenue | | $ | 27,723,000 | | | $ | 2,766,000 | | | $ | 4,337,000 | | | $ | 24,389,000 | | | $ | 21,939,000 | | | $ | 63,000 | | | $ | 38,713,000 | | | $ | 119,930,000 | |
| Total revenue | | $ | 9,573,000 | | | $ | 1,225,000 | | | $ | 9,099,000 | | | $ | 11,749,000 | | | $ | 12,957,000 | | | $ | 28,000 | | | $ | 301,000 | | | $ | 44,932,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Timing of Revenue Recognition | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Goods and services transferred at a point in time | | $ | 15,517,000 | | | $ | 2,755,000 | | | $ | - | | | $ | 24,389,000 | | | $ | 21,939,000 | | | $ | 63,000 | | | $ | 987,000 | | | $ | 65,650,000 | |4,762,000 | | | $ | 10,000 | | | $ | - | | | $ | 11,749,000 | | | $ | 39,000 | | | $ | 28,000 | | | $ | 301,000 | | | $ | 16,889,000 | |
| Services transferred over time | | | 4,811,000 | | | | 1,215,000 | | | | - | | | | - | | | | - | | | | - | | | | 37,726,000 | | | | 49,943,000 | |12,918,000 | | | | - | | | | - | | | | 18,944,000 | |
| Revenue from contracts with customers | | $ | 27,723,000 | | | $ | 2,766,000 | | | $ | - | | | $ | 24,389,000 | | | $ | 21,939,000 | | | $ | 63,000 | | | $ | 38,713,000 | | | $ | 115,593,000 | |9,573,000 | | | $ | 1,225,000 | | | $ | - | | | $ | 11,749,000 | | | $ | 12,957,000 | | | $ | 28,000 | | | $ | 301,000 | | | $ | 35,833,000 | |



| | F-12 | |
| |




The Company's disaggregated revenues consisted of the following for the three months ended March 31, 2023 (excludes Ault Disruptive, as that segment has no revenue):



| | | GIGA | | | TurnOn | | | Fintech | | | SMC | | | Sentinum | | | Total | |
| | | | | | | | | | | | | | | | | | | |

| | | GIGA | | | TurnOnGreen | | | Fintech | | | Sentinum | | | The Singing | | | Energy | | | Total | |
| | | | | | Green | | | | | | | | | | | | | |
| Primary Geographical Markets | | | | | | | | | | | | | | | | | | |
| North America | | $ | 2,472,000 | | | $ | 1,428,000 | | | $ | - | | | $ | 16,138,000 | | | $ | 4,146,000 | | |$ | 24,184,000 | |
| | | | | | | | | | | | | | | Machine | | | | | | | |
| Europe | | | 2,288,000 | | | | 32,000 | | | | 201,000 | | | | 306,000| | | | | | | | | | | | | | | | | | | | - | | | | 2,827,000 | |
| Middle East and other | | | 3,022,000 | | | | 202,000 | | | | - | | | | 670,000 | | | | | | | | | | | | | | | | | Company, Inc. | | - | | | | 3,894,000 | |
| Revenue from contracts with customers | | | 7,782,000 | | | | 1,662,000 | | | | 201,000 | | | | 17,114,000 | | | | 4,146,000 | | | |30,905,000 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Revenue, lending and trading activities (North America) | | | - | | | | - | | | | | | | ("SMC") | | | | | - | | || 13,360,000 | |
| Total revenue | | $ | 7,782,000 | | | $ | 1,662,000 | | | $ | 13,561,000 | | | $ | 17,114,000 | | | $ | 4,146,000 | | | $ | 44,265,000 | |
| Primary Geographical Markets | | | | |
| | | | | | | | | | | | | | | | | | | | | | | || |
| Major Goods or Services | | | | | | | | | | | | | | | | | | | | | | | | |
| Power supply units | | $ | 2,799,000 | | | $ | 1,480,000 | | | $ | - | | | $ | - | | | $ | - | || $ | 4,279,000 | |
| Digital currency mining, net | | | -
| North America | | $ | 2,334,000 | | | $ | 785,000 | | | $ | - | | | $ | 7,805,000 | | | $ | 3,383,000 | | | $ | 13,085,000 | | | $ | 27,392,000 | |
| Europe | | | 2,441,000 | | | | 4,000
| | | | - | | | | - | | | | - | | | | 25,000 | | | | 2,470,000 | |
| Karaoke machines and related | | | - | | | | - | | | | - | | | | 17,114,000 | | | | - | | | | 17,114,000 | |
| Middle East and other | | | 3,933,000 | | | | 87,000 | | | | - | | | | - | | | | - | | | | - | | | | 4,020,000 | |
| Other | | | 4,983,000 | | | | 182,000 | | | | 201,000 | | | | - | | | | 272,000 | | | | 5,638,000 | |
| Revenue from contracts with customers | | | 7,782,000 | | | | 1,662,000 | | | | 201,000 | | | | 17,114,000 | | | | 4,146,000 | | | | 30,905,000 | |8,708,000 | | | | 876,000 | | | | - | | | | 7,805,000 | | | | 3,383,000 | | | | 13,110,000 | | | | 33,882,000 | |
| Revenue, lending and trading activities | | | - | | | | - | | | | 13,360,000 | | | | - | | | | - | | | | 13,360,000 | |(North America) | | | - | | | | - | | | | (4,939,000 | )
| Total revenue | | $ | 7,782,000 | | | $ | 1,662,000 | | | $ | 13,561,000 | | | $ | 17,114,000 | | | $ | 4,146,000 | | | $ | 44,265,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Timing of Revenue Recognition | | | | | | | | | | | | | | | | | | | | | | | | |
| Goods transferred at a point in time | | $ | 5,821,000 | | | $ | 1,662,000 | | | $ | 201,000 | | | $ | 17,114,000 | | | $ | 4,146,000 | | | $ | 28,944,000 | |
| Services transferred over time | | | 1,961,000 | | | | - | | | | - | | | | - | | | | - | | | | (4,939,000 | ) |
| revenue from contracts with customers | | $ | 7,782,000 | | | $ | 1,662,000 | | | $ | 201,000 | | | $ | 17,114,000 | | | $ | 4,146,000 | | | $ | 30,905,000 | |

| Total revenue | | $ | 8,708,000 | | | $ | 876,000 | | | $ | (4,939,000 | ) | | $ | 7,805,000 | | | $ | 3,383,000 | | | $ | 13,110,000 | | | $ | 28,943,000 | |



| | F-15 | |
| |

The Company's disaggregated revenues consisted of the following for the nine months ended September 30, 2022:



| | | GIGA | | | TurnOn | | | Fintech | | | SMC | | | Sentinum | | | Total | |

| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | || | | | |
| | | | | | Green | | | | | | | | | | | | | |
| Primary Geographical Markets
| Major Goods or Services | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | $ | 5,094,000 | | | $ | 3,262,000 | | | $ | 19,000 | | | $ | 16,138,000 | | | $ | 12,220,000 | | | $ | 36,733,000 | |
| Radio frequency/microwave filters | | $ | 1,792,000 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | 1,792,000 | |
| Europe | | | 7,007,000 | | | | 79,000 | | | | 201,000 | | | | 306,000 | | | | - | | | | 7,593,000 | |
| Middle East and other | | | 9,429,000 | | | | 512,000 | Power supply units and systems | | | 3,114,000 | | | | 876,000 | | | | - | | | | - | | | | - | | | | 10,611,000 | |
| Revenue from contracts with customers | | | 21,530,000 | | | |3,853,000 | | | | 220,000 | | | | 17,114,000 | | | | 12,220,000 | | | | 54,937,000 | |
- | | | | 3,990,000 | |
| Healthcare diagnostic systems | | | 1,137,000 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,137,000 | |

| Revenue, lending and trading activities (North America) | | | - | | | | - | | | | 32,224,000 | | | | - | | | | - | | | | 32,224,000 | |
| Total revenue | | $ | 21,530,000 | | | $ | 3,853,000 | | | $ | 32,444,000 | | | $ | 17,114,000 | | | $ | 12,220,000 | | | $ | 87,161,000 | |
| Defense systems | | | 2,665,000 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 2,665,000 | |
| Major Goods or Services | | | | | | | | | | | | | | | | | | | | | | | | |
| Power supply units | | $ | 6,928,000 | | | $ | 3,592,000 | | | $ | -
| Digital assets mining | | | - | | | | - | | | | - | | | | 7,347,000 | | | $ | - | | | $ | - | | | | 7,347,000 | |
| Healthcare diagnostic systems | | | 2,285,000 | | Karaoke machines and related consumer goods | | | - | | | | - | | | | - | | | | - | | | | 2,285,000 | |
| Defense systems | | | 6,842,000 | | | | - | | | | - | || | - | | | | - | | | | 6,842,000 | |
3,383,000 | | | | - | | | | 3,383,000 | |
| Crane rental | | | - | |

| Digital currency mining | | | - | | | | - | | | | - | | | | - | | | | 12,646,000 | | | | 12,646,000 | |
| Other | | | - | | | | - | | | | - | | | | 17,114,000 | | | | - | | | | 17,114,000 | |458,000 | | | | - | | | | 464,000 | | | | 922,000 | |
| Other | | | 5,475,000 | | | | 261,000 | | | | 220,000 | | | | - | | | | 822,000 | | | | 6,778,000 | |
| Revenue from contracts with customers | | | 21,530,000 | | | | 3,853,000 | | | | 220,000 | | | | 17,114,000 | | | | 12,220,000 | | | | 54,937,000 | |8,708,000 | | | | 876,000 | | | | - | | | | 7,805,000 | | | | 3,383,000 | | | | 13,110,000 | | | | 33,882,000 | |
| Revenue, lending and trading activities | | | - | | | | - | | | | (4,939,000 | ) | | | - | | | | - | | | | - | | | | (4,939,000 | ) |
| Total revenue | | $ | 21,530,000 | | | $ | 3,853,000 | | | $ | 32,444,000 | | | $ | 17,114,000 | | | $ | 12,220,000 | | | $ | 87,161,000 | |
| Total revenue | | $ | 8,708,000 | | | $ | 876,000 | | | $ | (4,939,000 | ) | | $ | 7,805,000 | | | $ | 3,383,000 | | | $ | 13,110,000 | | | $ | 28,943,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Timing of Revenue Recognition | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Goods and services transferred at a point in time | | $ | 12,934,000 | | | $ | 3,853,000 | | | $ | 220,000 | | | $ | 17,114,000 | | | $ | 12,220,000 | | | $ | 46,341,000 | |5,406,000 | | | $ | 873,000 | | | $ | - | | | $ | 7,805,000 | | | $ | 3,383,000 | | | $ | 464,000 | | | $ | 17,931,000 | |
| Services transferred over time | | | 3,302,000 | | | | 3,000 | | | | - | | | | - | | | | - | | | | 12,646,000 | | | | 15,951,000 | |
| Revenue from contracts with customers | | $ | 21,530,000 | | | $ | 3,853,000 | | | $ | 220,000 | | | $ | 17,114,000 | | | $ | 12,220,000 | | | $ | 54,937,000 | |8,708,000 | | | $ | 876,000 | | | $ | - | | | $ | 7,805,000 | | | $ | 3,383,000 | | | $ | 13,110,000 | | | $ | 33,882,000 | |



| | F-13 | |
| |




6. FAIR VALUE OF FINANCIAL INSTRUMENTS



The following table sets forth the Company's financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy:

| Fair value, assets measured on recurring basis | | | | | | | | | | | | | | | | |
| | | Fair Value Measurement at March 31, 2024 | |
| | | Total | | | Level 1 | | | Level 2 | | | Level 3 | |
| Assets: | | | | | | | | | | | | |
| Investment in common stock of Alzamend Neuro, Inc. ("Alzamend") - a related party | | $ | 768,000 | | | $ | 768,000 | | | $ | - | | | $ | - | |
| Investments in marketable equity securities | | | 9,426,000 | | | | 9,426,000 | | | | - | | | | - | |
| Cash and marketable securities held in trust account | | | 794,000 | | | | 794,000 | | | | - | | | | - | |
| Total assets measured at fair value | | $ | 10,988,000 | | | $ | 10,988,000 | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Warrant and embedded conversion feature liabilities | | $ | 715,000 | | | $ | - | | | $ | - | | | $ | 715,000 | |
| Convertible promissory notes | | | 21,180,000 | | | | - | | | | - | | | | 21,180,000 | |
| Total liabilities measured at fair value | | $ | 21,895,000 | | | $ | - | | | $ | - | | | $ | 21,895,000 | |



| | | Fair Value Measurement at December 31, 2023 | |
| | | Total | | | Level 1 | | | Level 2 | | | Level 3 | |
| Assets: | | | | | | | | | | | | |
| Investment in common stock of Alzamend - a related party | | $ | 6,449,000 | | | $ | 6,449,000 | | $ | 679,000 | | | $ | 679,000 | | | $ | - | | | $ | - | |
| Investments in marketable equity securities | | | 27,000 | | | | 27,000 | | | | - | | | | - | |
| Cash and marketable securities held in trust account | | | 118,193,000 | | | | 118,193,000 | | | | - | | | | - | |2,200,000 | | | | 2,200,000 | | | | - | | | | - | |
| Investments in other equity securities | | | 13,340,000 | | | | - | | | | - | | | | 13,340,000 | |
| Total assets measured at fair value | | $ | 144,572,000 | | | $ | 131,232,000 | | | $ | - | | | $ | 13,340,000 | |2,906,000 | | | $ | 2,906,000 | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Warrant and embedded conversion feature liabilities | | $ | 1,742,000 | | | $ | - | | | $ | - | | | $ | 1,742,000 | |
| Convertible promissory notes | | | 22,485,000 | | | | - | | | | - | | | | 22,485,000 | |
| Total liabilities measured at fair value | | $ | 24,227,000 | | | $ | - | | | $ | - | | | $ | 15,743,000 | |



| | F-16 | |
| |
24,227,000 | |



The Company assesses the inputs used to measure fair value using the three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the market. For investments where little or no public market exists, management's determination of fair value is based on the best available information which may incorporate management's own assumptions and involves a significant degree of judgment, taking into consideration various factors including earnings history, financial condition, recent sales prices of the issuer's securities and liquidity risks.



The following table summarizes the changes in investments in other equity securities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) for the nine months ended September 30, 2023 (no changes during the three months ended September 30, 2023):



| Schedule of investments | | | | |
| | | Investments in | |
| | | other equity | |
| | | securities | |
| Balance at January 1, 2023 | | $ | 13,340,000 | |
| Conversion to Level 1 marketable securities | | | (13,340,000 | ) |
| Balance at September 30, 2023 | | $ | - | |



Equity Investments for Which Measurement Alternative Has Been Selected



As of March 31, 2024 and December 31, 2023, the Company held equity investments in other securities which consisted of investments in preferred stock, valued at $26.0 million and $29.2  valued at $20.6 million and $21.8 million, respectively, that were valued using a measurement alternative. These investments are included in other equity securities in the accompanying condensed consolidated balance sheets.



Measurement Alternative Impairment



The Company has made cumulative downward adjustments for impairments for equity securities that do not have readily determinable fair values as of September 30, 2023, totaling $11.6 million, Approximately $9.6 million of these adjustments have been for the three months ended March 31, 2024 and 2023, totaling $0 and $11.6 million, respectively. Approximately $9.6 million of the prior year adjustments are reflected in other income (expense) and $2.0 million of these adjustments related to Fintech lending operations and have been recorded against revenue from lending and trading activities on the condensed consolidated statement of operations and comprehensive loss.



| | F-14 | |
| |



The changes in Level 3 fair value hierarchy during the three months ended March 31, 2024 and 2023 were as follows:



| Schedule of changes in fair value hierarchy | | | | | | | | | | | | | | | | | | | | |
| | | Level 3 Balance | | | Fair Value | | | Purchases, | | | Transfer in | | | Level 3 Balance | |
| | | | | | | | | | | | | | | | |
| | | at Beginning of | | | Adjustments | | | Sales and | | | and/or out of | | | at End of | |
| | | | | | | | | | | | | | | | |
| | | Period | | | | | | Settlements | | | Level 3 | | | Period | |
| Three months ended March 31, 2024 | | | | | | | | | | | | | | | | | | | | |
| Warrant and embedded conversion feature liabilities | | $ | 1,742,000 | | | $ | (1,027,000 | ) | | $ | - | | | $ | - | | | $ | 715,000 | |
| Convertible promissory notes | | | 22,485,000 | | | | - | | | | 770,000 | | | | (2,075,000 | ) | | | 21,180,000 | |
| | | | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, 2023 | | | | | | | | | | | | | | | | | | | | |
| Warrant and embedded conversion feature liabilities | | $ | 2,967,000 | | | $ | (1,311,000 | ) | | $ | 1,530,000 | | | $ | - | | | $ | 3,186,000 | |
| Series E, F and G preferred stock liabilities | | | | | | | - | | | | 8,500,000 | | | | - | | | | 8,500,000 | |
| Convertible promissory notes | | | 10,571,000 | | | | - | | | | 2,205,000 | | | | - | | | | 12,776,000 | |



7. Marketable EQUITY Securities



Marketable equity securities with readily determinable market prices consisted of the following as of March 31, 2024 and December 31, 2023:

| Schedule of marketable securities | | | | | | | | | | | | | | | | | |
| | | | Marketable equity securities at March 31, 2024 | |
| | | | | | | | Gross unrealized | | | Gross unrealized | | | | | |
| | | | Cost | | | gains | | | losses | | | Fair value | |
| Common shares | | | $ | 5,133,000 | | | $ | 26,000 | | | $ | (5,087,000 | ) | | $ | 72,000 | |5,581,000 | | | $ | 8,910,000 | | | $ | (5,065,000 | ) | | $ | 9,426,000 | |



| | | | | Marketable equity securities at December 31, 2023 | |
| | | | | | | | Gross unrealized | | | Gross unrealized | | | | | |
| | | | Cost | | | gains | | | losses | | | Fair value | |
| Common shares | | | $ | 10,271,000 | | | $ | 383,000 | | | $ | (4,064,000 | ) | | $ | 6,590,000 | |5,119,000 | | | $ | 12,000 | | | $ | (5,104,000 | ) | | $ | 27,000 | |



The Company's investment in marketable equity securities is revalued on each balance sheet date.



8. DIGITAL ASSETS



The following table presents revenue from mined digital assets for the three months ended March 31, 2024 and 2023:

| Schedule of revenue from digital assets | | | | | | | | |
| | | For the Three Months Ended | |
| | | March 31, | |
| | | 2024 | | | 2023 | |
| Revenue from mined digital assets at Sentinum owned and operated facilities | | $ | 8,862,000 | | | $ | 7,347,000 | |
| Revenue from Sentinum mining equipment hosted at third-party facilities | | | 2,585,000 | | | | - | |
| Revenue, digital assets mining | | $ | 11,447,000 | | | $ | 7,347,000 | |



The following table presents the activities of the digital assets (included in prepaid expenses and other current assets) for the nine months ended September 30, 2023 and 2022:three months ended March 31, 2024 and 2023:



| Schedule of activities of the digital assets | | | | |
| | | Digital | |
| | | | |
| | | Assets | |
| Balance at January 1, 2023 | | $ | 554,000 | |
| Balance at January 1, 2024 | | $ | 546,000 | |
| Additions of mined digital currencies | | | 21,103,000 | |
| Additions of mined digital assets | | | 8,862,000 | |
| Payments to vendors | | | (8,000 | ) |
| Impairment of mined cryptocurrency | | | (376,000 | ) |
| Sale of digital assets | | | (8,634,000 | ) |
| Payment of notes payable with digital assets | | | (506,000 | ) |
| Sale of digital currencies | | | (21,330,000 | ) |
| Payment of interest payable with digital assets | | | (142,000 | ) |
| Realized gain on sale of digital assets | | | 738,000 | |
| Unrealized gain on digital assets | | | 43,000 | |
| Balance at September 30, 2023 | | $ | 335,000 | |
| Balance at March 31, 2024 | | $ | 899,000 | |



| | F-15 | |
| |




| | | Digital | |
| | | | |
| | | Assets | |
| Balance at January 1, 2022 | | $ | 2,165,000 | |
| Balance at January 1, 2023 | | $ | 554,000 | |
| Additions of mined digital currencies | | | 11,398,000 | |
| Additions of mined digital assets | | | 7,347,000 | |
| Payments to vendors | | | (418,000 | ) |
| Impairment of mined cryptocurrency | | | (2,930,000 | ) |
(139,000 | ) |
| Sale of digital currencies | | | (8,952,000 | ) |
| Sale of digital assets | | | (7,780,000 | ) |
| Realized gain on sale of digital assets | | | 250,000 | |
| Balance at September 30, 2022 | | $ | 2,092,000 | |
| Balance at March 31, 2023 | | $ | 232,000 | |



9. PROPERTY AND EQUIPMENT, NET



At March 31, 2024 and December 31, 2023, property and equipment consisted of:

| Schedule of property and equipment | | | | | | | | |
| | | March 31, 2024 | | | December 31, 2023 | |
| Building, land and improvements | | $ | 16,161,000 | | | $ | 15,752,000 | |
| Digital assets mining equipment | | | 50,640,000 | | | | 50,640,000 | |
| Crane rental equipment | | | 34,228,000 | | | | 34,469,000 | |
| Land | | | 2,692,000 | | | | 2,567,000 | |
| Computer, software and related equipment | | | 14,885,000 | | | | 14,335,000 | |
| Aircraft | | | 15,983,000 | | | | 15,983,000 | |
| Vehicles | | | 4,797,000 | | | | 3,314,000 | |
| Other property and equipment | | | 8,751,000 | | | | 8,603,000 | |
| Office furniture and equipment | | | 682,000 | | | | 610,000 | |
| Oil and natural gas properties, unproved properties | | | 3,878,000 | | | | 972,000 | |
| | | | 140,648,000 | | | | 139,782,000 | |
| | | | 148,326,000 | | | | 131,933,000 | |
| Accumulated depreciation and amortization | | | (36,659,000 | ) | | | (30,953,000 | ) |
| Property and equipment, placed in service, net | | | 122,600,000 | | | | 126,051,000 | |
| Construction in progress AVLP equipment | | | 9,444,000 | | | | 9,400,000 | |
| Deposits on cryptocurrency machines | | | - | | | | 11,328,000 | |
| Property and equipment, net | | $ | 103,989,000 | | | $ | 108,829,000 | |



Summary of depreciation expense:

| Schedule of depreciation | | | || | | | | | | | |
| | | For the Three Months Ended | | | For the Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | March 31, | |
| | | 2023 | | | 2022 | | | 2023 | | | 2022 | |
| | | 2024 | | | 2023 | |
| Depreciation expense | | $ | 7,805,000 | | | $ | 2,779,000 | | | $ | 20,047,000 | | | $ | 7,742,000 | |
| Depreciation expense | | $ | 5,778,000 | | | $ | 5,072,000 | |




| | F-18 | |
| |




10. INTANGIBLE ASSETS, NET



At March 31, 2024 and December 31, 2023, intangible assets consisted of:

| Schedule of intangible asset | | | | | | | | | | |
| | | Useful Life | | March 31, 2024 | | | December 31, | |
| | | | | | | | 2022 | |
2023 | |
| Definite lived intangible assets: | | | | | | | | | | |
| Developed technology | | 3-8 years | | $ | 1,807,000 | | | $ | 1,949,000 | |
| Customer list | | 8-10 years | | | 3,567,000 | | | | 3,596,000 | |
| Trade names | | 5-10 years | | | 1,030,000 | | | | 1,030,000 | |
| Domain name and other intangible assets | | 5 years | | | 603,000 | | | | 612,000 | |
| | | | | | 18,235,000 | | | | 35,395,000 | |
| | | | | | 7,007,000 | | | | 7,187,000 | |
| Accumulated amortization | | | | | (1,998,000 | ) | | | (1,910,000 | ) |
| Total definite-lived intangible assets | | | | $ | 5,009,000 | | | $ | 5,277,000 | |
| | | | | | | | | | | |
| Indefinite lived intangible assets: | | | | | | | | | | |
| Trade name and trademark | | Indefinite life | | | 473,000 | | | | 477,000 | |
| Total intangible assets, net | | | | $ | 5,482,000 | | | $ | 5,754,000 | |



Certain of the Company's trade names and trademarks were determined to have an indefinite life. The remaining definite-lived intangible assets are primarily being amortized on a straight-line basis over their estimated useful lives.

| Schedule of indefinite-lived intangible assets | | | | | | |
| | | For the Three Months Ended | || For the Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | March 31, | |
| | | 2023 | | | 2022 | | | 2023 | || 2022 | |
| | | 2024 | | | 2023 | |
| Amortization expense | | $ | 254,000 | | | $ | 223,000 | | |$ | 761,000 | | | $ |381,000 | |
| Amortization expense | | $ | 157,000 | | | $ | 253,000 | |



| | F-16 | |
| |




As of March 31, 2024, intangible assets subject to amortization have an average remaining useful life of 9.5 years. The following table presents estimated amortization expense for each of the succeeding five calendar years and thereafter.

| Schedule of estimated amortization expense | | | | | |
| 2024 (remainder) | | | $ | 628,000 | |
| 2025 | | | | 704,000 | |
| 2026 | | | | 704,000 | |
| 2027 | | | | 704,000 | |
| 2028 | | | | 693,000 | |
| 2029 | | | | 473,000 | |
| Thereafter | | | | 1,103,000 | |
| | | | $ | 5,009,000 | |



Impairment of AVLP Intangible Assets



Due to indicators of impairment, AVLP intangible assets were tested for impairment as of June 30, 2023. Based on internally developed forecasts of undiscounted expected future cash flows, it was determined that the carrying amount of the assets were not recoverable and, based on an assessment of the fair value of the assets, impairment of $17.0 million was recognized as a non-cash impairment charge during the nine months ended September 30, 2023.



The tradenames and patents/developed technology intangible assets were valued using the relief-from-royalty method. The relief-from-royalty method is one of the methods under the income approach whereby estimates of a company's earnings attributable to the intangible asset are based on the royalty rate the company would have paid for the use of the asset if it did not own it. Royalty payments are estimated by applying royalty rates of 18% for patents and developed technology and 0.25% for trademarks. The resulting net annual royalty payments are then discounted to present value using a discount factor of 25.7%.



11. GOODWILL



The following table summarizes the changes in the Company's goodwill for the three months ended March 31, 2024:

| Schedule of goodwill | | | | |
| | | Goodwill | |
| Balance as of January 1, 2023 | | $ | 27,902,000 | |
| Balance as of January 1, 2024 | | $ | 6,088,000 | |
| Acquisition of ROI | | | 17,000 | |
| Impairment of goodwill | | |(18,570,000 | ) |
| Effect of exchange rate changes | | | (78,000 | ) |
| Balance as of September 30, 2023 | | $ | 8,973,000 | |



| | F-19 | |
| |



Impairment of AVLP Goodwill



The Company tests the recorded amount of goodwill for impairment on an annual basis on December 31 or more frequently if there are indicators that the carrying amount of the goodwill exceeds its carried value. The Company performed a goodwill impairment test as of June 30, 2023 related to AVLP as there were indicators of impairment related to certain unforeseen business developments and changes in financial projections.



The valuation of the AVLP reporting unit was determined using a market and income approach methodology of valuation. The income approach was based on the projected cash flows discounted to their present value using discount rates that, in the Company's judgment, consider the timing and risk of the forecasted cash flows using internally developed forecasts and assumptions. Under the income approach, the discount rate used is the average estimated value of a market participant's cost of capital and debt, derived using customary market metrics. The analysis included assumptions regarding AVLP's revenue forecast and discount rates of 26.7% using a weighted average cost of capital analysis. The market approach utilized the guideline public company method.



The results of the quantitative test indicated that the fair value of the AVLP reporting unit did not exceed its carrying amounts, including goodwill, in excess of the carrying value of the goodwill. As a result, the entire $18.6 million carrying amount of AVLP's goodwill was recognized as a non-cash impairment charge during the nine months ended September 30, 2023.



12. CONSOLIDATED VARIABLE INTEREST ENTITY - SMC



During the quarter ended September 30, 2023, the Company's voting interest in SMC was less than 50%. As a result, the Company assessed its interest in SMC under the Variable Interest Entity Model. As a result of that assessment, the Company consolidates SMC as a variable interest entity (a "VIE") due to the Company's significant level of influence and control of SMC, the size of its investment, and its ability to participate in policy making decisions. As a result, the Company is considered the primary beneficiary of the VIE.



13. BUSINESS COMBINATION



ROI Acquisition



On March 6, 2023, the Company closed a Share Exchange Agreement (the "Agreement") with ROI and sold to ROI all of the outstanding shares of capital stock of the Company's subsidiary, BitNile.com, Inc. ("BitNile.com") as well as RiskOn360, Inc. (formerly Ault Iconic, Inc.) and the securities of Earnity, Inc. ("Earnity") beneficially owned by BitNile.com as of the date of the Agreement (the "Transaction"). As consideration for the acquisition, ROI issued shares of preferred stock convertible into common stock of ROI representing approximately 73.2% of ROI's outstanding common stock. Pending approval of the transaction by the Nasdaq Stock Market and ROI's shareholders, the preferred stock combined are subject to a 19.99% beneficial ownership limitation. The Transaction benefits the Company as ROI is a publicly traded company and provides BitNile.com access to capital markets as the primary focus for ROI to fund the expected growth of the ROI metaverse platform.
March 31, 2024 | | $ | 6,010,000 | |




The holders of preferred stock will be entitled to receive dividends at a rate of 5% of the stated value of the preferred stock.



The Company consolidates ROI as a VIE due to its significant level of influence and control of ROI, the size of its investment, and its ability to participate in policy making decisions. The Company is considered the primary beneficiary of the VIE.



| Schedule of variable interest entities | | | |
| Ault Alliance investment in ROI | | Amount | |
| Common stock | | $ | 287,000 | |



The total purchase price to acquire ROI has been allocated to the assets acquired and assumed liabilities based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill. The goodwill resulting from this acquisition is not tax deductible. The fair value of the acquired assets and assumed liabilities as of the date of acquisition are based on preliminary estimates provided, in part, by a third-party valuation expert. The estimates are subject to change upon the finalization of appraisals and other valuation analyses, which are expected to be completed no later than one year from the date of acquisition. Although the completion of the valuation activities may result in asset and liability fair values that are different from the preliminary estimates included herein, it is not expected that those differences would alter the understanding of the impact of the Transaction on the consolidated financial position and results of operations of the Company.



| | F-20 | |
| |



The preliminary purchase price allocation is as follows:



| Schedule of recognized identified assets acquired and liabilities assumed | | | | |
| | | Preliminary | |
| | | Allocation | |
| Fair value of Company interest | | $ | 287,000 | |
| Fair value of non-controlling interest | | | 6,357,000 | |



| Total consideration | | $ | 6,644,000 | |
| | | | | |
| Identifiable net assets acquired: | | | | |
| Cash | | $ | 67,000 | |
| Investment in equity securities | | | 8,076,000 | |
| Prepaid expenses and other current assets | | | 172,000 | |
| Property and equipment, net | | | 4,109,000 | |
| Right-of-use assets | | | 339,000 | |
| Accounts payable and accrued expenses | | | (5,790,000 | ) |
| Lease liabilities | | | (346,000 | ) |
| Net assets acquired | | | 6,627,000 | |
| Goodwill | | $ | 17,000 | |



12. INVESTMENTS - RELATED PARTIES



Investments in Alzamend and Ault & Company, Inc. ("Ault & Company") at March 31, 2024 and December 31, 2023, were comprised of the following:



Investment in Promissory Notes, Related Parties - Ault & Company

| Schedule of investment | | | | | | | | | | | | | | |
| | | Interest | | | Due | | | March 31, | | | December 31, | |
| | | Rate | | | Date | | | 2024 | | | 2023 | |
| Investment in Promissory note, of Ault & Company | | 8% | | December 31, 2023 | | $ | 2,500,000 | | | $ | 2,500,000 | |
| Promissory note, related party | | 8% | | | Dec. 31, 2024 | | | $ | - | | | $ | 2,500,000 | |
| Accrued interest receivable Ault & Company | | | | | | | 518,000 | | - | | | | 568,000 | |
| Other - Alzamend | | | | | | | | | - | | | | 900,000 | |
| Total investment in promissory note, related party | | | | | | $ | 3,018,000 | | | $ | 2,868,000 | |notes and other, related parties | | | | | | | | $ | - | | | $ | 3,968,000 | |



Summary of interest income, related party, recorded within interest and other income on the condensed consolidated statement of operations:



| Schedule of Interest income, related party | | | |
| | |For the Three Months Ended | | | For the Three Months Ended | |
| | | September 30, | | | September 30, | |
| | | March 31, | |
| | | 2023 | | | 2022 | | | 2023 | || 2022 | |
| | | 2024 | | | 2023 | |
| Interest income, related party | | $ | - | | | $ | 50,000 | || $ | 150,000 | | | $ | 150,000 | |



During the quarter ended March 31, 2023, due to uncertainties surrounding collection, the Company recorded a loan loss reserve of $3.1 million related to the promissory note from Ault & Company, reversed the related accrued receivable and did not record interest income on the note.



Investment in Common Stock, Related Parties - Alzamend

| Schedule of investment in common stock | | | | | | | | | | |
| | | | Investments in common stock, related parties at March 31, 2024 | |
| | | | Cost | | | Gross unrealized losses | | | Fair value | |
| Common shares | | | $ | 24,688,000 | | | $ | (21,976,000 | ) | | $ | 2,712,000 | |24,694,000 | | | $ | (23,926,000 | ) | | $ | 768,000 | |



| | | | Investments in common stock, related parties at December 31, 2023 | |
| | | | Cost | | | Gross unrealized losses | | | Fair value | |
| Common shares | | | $ | 24,673,000 | | | $ | (18,224,000 | ) | | $ | 6,449,000 | |24,688,000 | | | $ | (24,009,000 | ) | | $ | 679,000 | |



| | F-17 | |
| |



The following table summarizes the changes in the Company's investments in Alzamend common stock during the three months ended March 31, 2024 and 2023:

| Schedule of investment in warrants and common stock | | | | | | | | |
| | | For the Three Months Ended March 31, | |
| | | 2024 | | | 2023 | |
| Balance at July 1 | | $ | 5,836,000 | | | $ | 8,845,000 | |
| Balance at January 1 | | $ | 679,000 | | | $ | 6,449,000 | |
| Investment in common stock of Alzamend | | | 5,000 | | | | 5,000 | |
| Unrealized gain (loss) in common stock of Alzamend | | | 84,000 | | | | (1,598,000 | ) |
| Balance at September 30 | | $ | 2,712,000 | | | $ | 12,394,000 | |
| Balance at March 31 | | $ | 768,000 | | | $ | 4,856,000 | |



Ault Lending, LLC ("Ault Lending") Investment in Alzamend Series B Convertible Preferred Stock and Warrants

| Schedule of investment in warrants and preferred stock | | | | | | |
| | | March 31, | | | December 31, | |
| | | 2024 | | | 2023 | |
| Investment in Alzamend preferred stock | | $ | 2,000,000 | | | $ | - | |
| Total investment in other investments securities, related party | | $ | 2,000,000 | | | $ | - | |



In connection with a securities purchase agreement entered into with Alzamend in January 2024, the Company purchased 2,000 shares of Alzamend Series B Convertible Preferred Stock and warrants to purchase 2.0 million shares of Alzamend common stock with a five-year term and an exercise price of $1.20 per share for a total purchase price of $2.0 million.



The Agreement provides that Ault Lending may purchase up to $6 million of Alzamend Series B Convertible Preferred Stock in one or more closings.



The Company has elected to account for investment in other investments securities, related party, using a measurement alternative under which they are measured at cost and adjusted for observable price changes and impairments.



Messrs. Ault, Horne and Nisser are each paid $50,000 annually by Alzamend.



13. EQUITY METHOD INVESTMENT



Equity Investments in Unconsolidated Entity - SMC



The following table summarizes the changes in the Company's equity investments in an unconsolidated entity, SMC, included in other assets on the condensed consolidated balance sheet, during the three months ended March 31, 2024:investments in Alzamend common stock during the nine months ended September 30, 2023 and 2022:



| Schedule of equity investments in unconsolidated entity - SMC | | | | |
| Rollforward investment in unconsolidated entity | | Amount | |
| Beginning balance - January 1, 2024 | | $ | 1,957,000 | |
| Loss from investment in unconsolidated entity | | | (667,000 | ) |
| Ending balance - March 31, 2024 | | $ | 1,290,000 | |



The following table provides summarized financial information for the Company's ownership interest in SMC accounted for under the equity method and has been compiled from SMC's financial statements. Amounts presented represent totals at the investee level and not the Company's proportionate share:



Summarized Statements of Operations



| Schedule of summarized statements of operations | | | |
| | | For the Nine Months Ended September 30, | |
| | | For the Three | |
| | | Months Ended | |
| | | March 31, | |
| | | 2024 | |

| Balance at January 1 | | $ | 6,449,000 | || $ | 13,230,000 | || Revenue | | $ | 2,426,000 | |
| Gross profit | | $ | 502,000 | |

| Investment in common stock of Alzamend | | |15,000 | | | |4,840,000 | |
| Loss from operations | | $ | (2,287,000 | ) |
| Net loss | | $ | (2,368,000 | ) |



| | F-18 | |
| |




Summarized Balance Sheet Information



| Schedule of summarized balance sheet information | | | | | | |

| Unrealized loss in common stock of Alzamend | | | (3,752,000 | ) | | | (5,676,000 | ) |
| | | March 31, | | | December 31, | |
| | | 2024 | | | 2023 | |

| Balance at September 30 | | $ | 2,712,000 | | | $ | 12,394,000 | |
| Current assets | | $ | 15,532,000 | | | $ | 23,206,000 | |
Unrealized loss in common stock of Alzamend is recorded within revenue from lending and trading activities on the condensed consolidated statements of operations.
| Non-current assets | | $ | 4,372,000 | | | $ | 4,509,000 | |
| Current liabilities | | $ | 10,645,000 | | | $ | 16,209,000 | |
| Non-current liabilities | | $ | 4,029,000 | | | $ | 3,928,000 | |



14. ACCOUNTS PAYABLE AND ACCRUED EXPENSES



Other current liabilities at March 31, 2024 and December 31, 2023 consisted of:

| Schedule of other current liabilities | | | | | | | | |
| | | March 31, | | | December 31, | |
| | | 2024 | | | 2023 | |
| Accounts payable | | $ | 36,883,000 | | | $ | 20,027,000 | |
| Accounts payable | | $ | 25,517,000 | | | $ | 32,592,000 | |
| Accrued payroll and payroll taxes | | | 10,520,000 | | | | 9,779,000 | |
| Financial instrument liabilities | | | 560,000 | | | | 832,000 | |
| Interest payable | | | 3,946,000 | | | | 3,207,000 | |
| Interest payable | | | 4,534,000 | | | | 4,197,000 | |
| Accrued legal | | | 4,390,000 | | | | 3,168,000 | |
| Accrued legal | | | 2,399,000 | | | | 2,340,000 | |
| Accrued lender profit participation rights | | | 2,497,000 | | | | 6,000,000 | |
| Contract liabilities | | | 1,820,000 | | | | 1,621,000 | |
| Related party advances | | | 68,000 | | | | 352,000 | |
| Other accrued expenses | | | 16,409,000 | | | | 15,082,000 | |
| | | $ | 88,213,000 | | | $ | 60,780,000 | |
| | | $ | 61,759,000 | | | $ | 66,443,000 | |



15. DIVIDEND PAYABLE IN TURNONGREEN COMMON STOCK



During the nine months ended September 30, 2023, In March 2024, the Company, in connection with a planned distribution of its common stock holdings of TurnOnGreen, announced the distribution to its stockholders 25.0 million shares of TurnOnGreen common stock and warrants to purchase 25.0 million shares of TurnOnGreen common stock, which resulted in an adjustment to additional paid in capital and increase to non-controlling interest of $4.9 million based on the recorded value of the Company's holdings in TurnOnGreen at the record date of the distribution.



16. ROI TRANSFERS OF WHITE RIVER COMMON STOCK



March 28, 2023 Security Purchase Agreement



On March 28, 2023, the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") with certain institutional investors (the "Investors"), pursuant to which the Company sold, in a private placement (the "Offering"), an aggregate of 100,000 shares of its preferred stock, with each such share having a stated value of $100.00 and consisting of (i) 83,000 shares of Series E Convertible Preferred Stock (the "Series E Preferred Stock"), (ii) 1,000 shares of Series F Convertible Preferred Stock (the "Series F Preferred stock and (iii) 16,000 shares of Series G Convertible Preferred Stock (the "Series G Preferred Stock" and collectively, the "Preferred Shares"). the Preferred shares are convertible into shares of the Company's common stock at the option of the holders and, in certain circumstances, by the Company.
In January 2024, ROI announced that it had concluded that, for regulatory reasons, ROI would be unable to effect the distribution of its shares of common stock of White River as contemplated by a registration statement previously filed by White River. In an effort to attempt to fulfill its original intent to transfer the shares to ROI shareholders of record as of September 30, 2022, ROI would send such shareholders an agreement whereby qualified shareholders can demonstrate to ROI's satisfaction that they in fact were beneficial shareholders of ROI's common or preferred stock as of September 30, 2022 and affirm that they are "accredited investors" by July 26, 2024.




| | F-22 | |
| |



The purchase price of the Series E preferred stock and the Series F Preferred Stock was paid for by the Investors' canceling outstanding secured promissory notes in the principal amount of $8.4 million whereas the purchase price of the shares of Series G Preferred stock consisted primarily of accrued but unpaid interest on these notes. The Company recorded a loss on extinguishment of debt of $0.1 million related to the transaction. the Preferred Shares have been classified as a liability as they embody an unconditional obligation to transfer a variable number of shares, based on a fixed monetary amount known at inception. The Company elected the fair value option to record the Preferred Shares with changes In fair value recorded through earnings.




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 to certain of its accredited investors to resolve the matters discussed above.



In conjunction with the transfers to non-controlling interests, ROI converted a portion of their White River's Series A Convertible Preferred Stock into common stock and recorded a non-cash $17.9 million gain on conversion.





During the nine months ended September 30, 2023, the Investors converted 1,000 shares of Series F Preferred Stock and 6,756 shares of Series G Preferred Stock into an aggregate of 143,402 shares of the Company's common stock During the nine months ended September 30, 2023, the Company recorded a loss of $0.3 million on the conversions of Series F Preferred Stock and Series G Preferred Stock.



Exchange of Preferred Shares for Secured Debt and Assignment of Secured Note
Ault Lending Transfer



In August 2023, the Company and the Investors entered into an Exchange Agreement (the "Exchange Agreement") pursuant to which the Investors exchanged 83,000 shares of Series E Convertible Stock and 9,244 shares of Series G Convertible stock as well as their demand notes (the "Demand Notes") with each Demand Note having a principal outstanding amount of approximately $0.8 million for two new 10% Secured OID Promissory Notes (the "Exchange Notes"), each with a principal face amount of $5.3 million, for an aggregate of amount owed of $10.5 million (the "Principal Amount"). the Company recorded a loss on extinguishment of debt of $1.5 million related to the transaction based on the difference between the carrying amount of the preferred stock liability and the value of the Exchange Notes.
On February 14, 2024, ROI transferred 2.5 million shares of White River common stock with a carryover basis of $0.5 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.




Concurrent with the Exchange Agreement, the Company assigned the Exchange Notes to Ault & Company. As consideration for Ault & Company assuming the Exchange Notes from the Company, the Company issued a 10% demand promissory note in the principal face amount of $10.5 million to Ault & Company. The Company and Milton "Todd" Ault III, the Company's Executive Chairman, entered into guaranty agreements with the Investors guaranteeing Ault & Company's repayment of the Exchange Notes.



Certificates of Elimination of Series E Preferred Stock, Series F Preferred Stock, and the Series G Preferred Stock



On August 17, 2023, the Company filed certificates of elimination with respect to the Company's Series E Preferred Stock, Series F Preferred Stock and Series G Preferred Stock.
| | F-19 | |
| |



17. REDEEMABLE NONCONTROLLING INTERESTS IN EQUITY OF SUBSIDIARY LIABILITY



The Company records redeemable noncontrolling interests in equity of subsidiaries to reflect the economic interests of the common stockholders in Ault Disruptive. As of March 31, 2024, the carrying amount of the redeemable noncontrolling interest in equity of subsidiaries was recorded at its redemption value of $2.2 million. In June 2023, approximately 11.3 million.$0.8 million. During the three months ended March 31, 2024, shares of Ault Disruptive common stock were redeemed at a redemption price of $10.61 per share, for an aggregate redemption amount of $1.4 million.



The following table summarizes the changes in the Company's redeemable noncontrolling interests in equity of subsidiaries during the three months ended March 31, 2024:

| Redeemable noncontrolling interests in equity of subsidiary liability | | | | |
| Redeemable noncontrolling interests in equity of subsidiaries as of December 31, 2022 | | $ | 117,993,000 | |January 1, 2024 | | $ | 2,224,000 | |
| Redemption of ADRT common stock | | | (1,463,000 | ) |
| Remeasurement of carrying value to redemption value | | | 23,000 | |
| Redeemable noncontrolling interests in equity of subsidiaries as of March 31, 2024 | | $ | 784,000 | |



| | F-20 | |
| |



18. NOTES PAYABLE



Notes payable at March 31, 2024 and December 31, 2023, were comprised of the following:

| Schedule of notes payable | | | | | | | | | | | | | | | | |
| | | Collateral | | Guarantors | | Interest | | Due date | | March 31, | | | December 31, | |
| | | | | | | rate | | | | 30, 2023 | | | 31, 2022 | |
| | | | | | | rate | | | | | | | 2023 | |
| Circle 8 revolving credit facility | | Circle 8 cranes| | | | | - | | 8.4% | | December 16, 2025 | | $ | 16,960,000 | | | $ | 14,724,000 | | | | | | 2024 | | | | |
| 8.5% secured promissory notes | | Deposit accounts, 19,389 Antminers, BNI Montana assets, Circle 8 membership interests, Florida property, Michigan property, aircraft | | Ault & Company, Ault Lending, Sentinum, Alliance Cloud Services, Inc., Ault Aviation, LLC, Third Avenue Apartments LLC, BNI Montana, LLC, Milton C. Ault, III | | 8.5% | | May 7, 2024 | | | 22,749,000 | | | | 17,389,000 | |
| Circle 8 revolving credit facility | | Circle 8 cranes with a book value of $30.7 million | | - | | 8.4% | | December 16, 2025 | | $ | 15,467,000 | | | $ | 15,907,000 | |
| 16% promissory notes | | - | | Ault & Company Sentinum, Ault Lending, | 16% promissory note (in default at December 31, 2023) | | - | | Ault & Company and Milton C. Ault, III | | 16.0% | | December 16, 2023 | | | 2,662,000 | | | | 17,456,000 | |June 15, 2024 | | | 4,072,000 | | | | 2,572,000 | |
| Circle 8 equipment financing notes | | Circle 8 equipment with a book value of $3.8 million | | - | | 6.6% | | April 15, 2024 through November 15, 2026 | | | 4,739,000 | | | | 5,629,000 | || | - | | 7.2% | | Various dates from | | | 7,375,000 | | | | 10,677,000 | |
| | | | | | | | | March 15, 2024 to | | | | | | | | |
| | | | | | | | | November 15, 2026 | | | | | | | | |
| 3% secured promissory notes | | - | | - | | 3.0% | | N/A | | | - | | | | 5,672,000 | |
| 8% demand loans | | - | | - | | 8.0% | | Upon demand | | | - | | | | 950,000 | |
| Short-term bank credit facilities | | - | | - | | 6.8% | | Renews monthly | | | 942,000 | | | | 1,464,000 | |
| XBTO note payable | | 2,482 Antminers | | - | | 12.5% | | December 30, 2023 | | | 1,087,000 | | | | 2,749,000 | |
| Sentinum note payable | | - | | - | | 12.5% | | - | | | - | | | | 1,067,000 | |
| 10% secured promissory notes | | - | | - | | 10.0% | | N/A | | | - | | | | 8,789,000 | |
| SMC line of credit | | SMC assets | | - | | 8.0% | | October 14, 2025 | | | - | | | | 1,761,000 | |
| ROI promissory note (in default as of May 1, 2024) | | - | | - | | 18.0% | | April 30, 2024 | | | 2,094,000 | | | | - | |
| Other ($0.9 million in default at March 31, 2024) | | - | | - | | - | | - | | | 2,698,000 | | | | 3,518,000 | |
| Total notes payable | | - | | - | | | | | | $ | 30,012,000 | | | $ | 31,107,000 | |
| Less: | | - | | - | | | | | | | | | | | | |
| Unamortized debt discounts | | - | | - | | | | | | | (328,000 | ) | | | (83,000 | ) |
| Total notes payable, net | | - | | - | | | | | | $ | 29,684,000 | | | $ | 31,024,000 | |
| Less: current portion | | - | | - | | | | | | | (12,370,000 | ) | | | (12,866,000 | ) |
| Notes payable - long-term portion | | - | | - | | | | | | $ | 17,314,000 | | | $ | 18,158,000 | |



| | F-21 | |
| |



ROI 15% Term Note



On February 9, 2024, ROI entered into a $1.77 million term note agreement with an institutional investor bearing interest of 15%. The term note was issued at a discount, with net proceeds to ROI of $1.75 million. The term note was scheduled to mature February 14, 2024. This note has been guaranteed by Ault & Company and Mr. Ault. The term note was subsequently amended to increase the principal amount due to $2.1 million, increase the interest rate to 18% and extend the maturity date to April 30, 2024. The term note is in default as of May 1, 2024.



Subsequent Events - 15% Term Notes



On April 29, 2024, the Company 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 the Company 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.



On May 16, 2024, the Company 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.



Notes Payable Maturities



The contractual maturities of the Company's notes payable, assuming the exercise of all extensions that are exercisable solely at the Company's option, as of March 31, 2024 were:

| Schedule of maturities | | | | |
| Year | | | |
| 2024 (remainder) | | $ | 12,370,000 | |
| 2025 | | | 17,241,000 | |
| 2026 | | | 379,000 | |
| 2027 | | | 11,000 | |
| 2028 | | | 11,000 | |
| | | $ | 30,012,000 | |



Interest Expense

| Schedule of interest expense | | | | | | | | |
| | | For the Three Months Ended | || For the Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | March 31, | |
| | | 2023 | | | 2022 | | | 2023 | || 2022 | |
| | | 2024 | | | 2023 | |
| Contractual interest expense | | $ | 3,262,000 | | | $ | 2,263,000 | | | $ | 5,002,000 | | | $ | 4,373,000 | |1,263,000 | | | $ | 1,097,000 | |
| Forbearance fees | | | 518,000 | | | | - | | | | 7,319,000 | | | | 1,203,000 | |
| Forbearance fees | | | 1,500,000 | | | | 603,000 | |
| Amortization of debt discount | | | 634,000 | | | | 104,000 | | | | 18,216,000 | | | | 26,487,000 | |2,137,000 | | | | 10,400,000 | |
| Total interest expense | | $ | 4,414,000 | | | $ | 2,367,000 | | | $ | 30,537,000 | | | $ | 32,063,000 | |4,900,000 | | | $ | 12,100,000 | |



Amendment to 8.5% Secured Promissory Notes



On July 19. 2023, the Company and certain of its subsidiaries entered into an amendment agreement with the institutional investors and increased the principal balance of the secured promissory notes by an additional $8.8 million. The net proceeds to the Company from the amendment agreement were $7.5 million.
19.




10% Secured Promissory Notes



The 10% secured promissory notes were retired in March 2023 and converted into the Preferred Shares, as described in Note 17 - Preferred Stock Liability.



20. NOTES PAYABLE, RELATED PARTY



Notes payable, related party at March 31, 2024 and December 31, 2023, were comprised of the following:

| Schedule of notes payable, related party | | | | | | | | | | | | | | |
| | | Interest rate | | | Due date | | March 31, 2024 | | | December 31, | |
| | | | | | | | | | | | |
| Loan agreement | | | 9.5 | % | | Upon demand | | $ | 4,580,000 | | | $ | - | |
| | | | | | | | | | | 2023 | |
| Notes from officers - Ault Alliance | | 18% | | | - | | $ | - | | | $ | 98,000 | |
| Notes from officers - TurnOnGreen | | 14% | | | Past due | | | 51,000 | | | | 51,000 | |
| 12% demand promissory note | | | 12.0 | % | | Upon demand | | | 1,100,000 | | | | - | |
| Notes from board member - ROI | | 18% | | | - | | | - | | | | 90,000 | |
| Ault & Company advances | | No interest | | | Upon demand | | | 65,000 | | | | 1,909,000 | |

| 10% demand promissory note | | |10.0 | % | | Upon demand | | | 10,545,000 | | | | - | || Advances from officers - GIGA | | 8% | | | Upon demand | | | 53,000 | | | | 52,000 | |
| Other related party advances | | No interest | | | Upon demand | | | 124,000 | | | | 175,000 | |

| Total notes payable related party | | | | | | | | $ | 293,000 | | | $ | 2,375,000 | |



Ault & Company Loan Agreement



On June 8, 2023, the Company entered into a loan agreement with Ault & Company as lender. The loan agreement provides for an unsecured, non-revolving credit facility in an aggregate principal amount of up to $10 million. All loans under the loan agreement are due within five business days after request by Ault & Company. Ault & Company is not obligated to make any further advances under the loan agreement after December 8, 2023. Advances under the loan agreement bear interest at the rate of 9.5% per annum and may be repaid at any time without penalty or premium. As of September 30, 2023, $4.6 million has been advanced under the loan agreement.



In August 2023, Ault & Company assumed $11.6 million of secured promissory notes previously issued by the Company for which the Company has issued term notes to Ault & Company in the same amount. One term note has a principal amount of $1.1 million and bears interest at 12% and the second term note has a principal amount of $10.5 million and bears interest at 10%.



| | F-22 | |
| |



Summary of interest expense, related party, recorded within interest expense on the condensed consolidated statement of operations:

| Schedule of interest expense, related party | | | | | | |
| | | For the Three Months Ended | || For the Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | March 31, | |
| | | 2023 | | | 2022 | | | 2023 | || 2022 | |
| | | 2024 | | | 2023 | |
| Interest expense, related party | | $ | 287,000 | | | $ | - | | | $ | 292,000 | | | $ | - | |16,000 | | | $ | - | |



20. CONVERTIBLE NOTES



Convertible notes payable at March 31, 2024 and December 31, 2023, were comprised of the following:

| Schedule of convertible notes payable | | | | | | | | | | | | | | | | |
| | | Conversion price per | | Interest rate | | | Due date | | March 31, 2024 | | | December 31, 2023 | |
| | | share | | rate | | | | 30, 2023 | | | 31, 2022 | |
| | | share | | | | | | | | | | | |
| Convertible promissory note | | $4.00 | | 4% | | May 10, 2024 | | $ | - | | | $ | 660,000 | |
| Convertible promissory notes | | $0.35 | | | 6% | | | June 12, 2024 | | $ | 2,000,000 | | | $ | - | |
| Convertible promissory note - original issue discount ("OID") only | | 90% of 5-day VWAP | | | OID Only | | | September 28, 2024 | | | 643,000 | | | | 1,673,000 | |
| Avalanche International Corp. ("AVLP") convertible promissory notes, principal | | $0.35 (AVLP stock) | | | 7% | | | August 22, 2025 | | | 9,911,000 | | | | 9,911,000 | |
| GIGA senior secured convertible notes - in default | | $0.25 (GIGA stock) | | | 18% | | | October 11, 2024 | | | 4,381,000 | | | | 4,388,000 | |
| ROI senior secured convertible note - in default as of May 1, 2024 | | $0.11 (ROI stock) | | | OID Only | | | April 27, 2024 | | | 4,245,000 | | | | 6,513,000 | |
| Fair value of embedded conversion options | | | | | | | | | | | 154,000 | | | | 910,000 | |
| Total convertible notes payable | | | | | | | | $ | 21,831,000 | | | $ | 12,887,000 | | | | | 21,334,000 | | | | 23,395,000 | |
| Less: unamortized debt discounts | | | | | | | | | | | (750,000 | ) | | | (2,179,000 | ) |
| Total convertible notes payable, net of financing cost, long term | | | | | | | | | | $ | 20,584,000 | | | $ | 21,216,000 | | $ | 18,054,000 | | | $ | 12,776,000 | |
| Less: current portion | | | | | | | | | | | (11,131,000 | ) | | | (11,763,000 | ) |
| Convertible notes payable, net of financing cost - long-term portion | | | | | | | | | | $ | 9,453,000 | | | $ | 9,453,000 | |



6% Convertible Promissory Notes



On March 11, 2024, the Company entered into a note purchase agreement with two institutional investors pursuant to which the investors agreed to acquire, and the Company agreed to issue and sell in a registered direct offering to the investors an aggregate of $2.0 million convertible promissory notes, bearing interest of 6%. The convertible promissory notes were issued at a discount, with net proceeds to the Company of $1.8 million. The convertible promissory notes are scheduled to mature June 12, 2024, though the Company has the option to extend the maturity date to September 12, 2024, for which the Company will increase the principal amount of the Notes by 5%. The Notes are convertible into shares of Class A common stock at a conversion price of $0.35 per share.



ROI Gain on Extinguishment of Senior Secured Convertible Notes



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.



The contractual maturities of the Company's convertible notes payable, assuming the exercise of all extensions that are exercisable solely at the Company's option, as of March 31, 2024 were:

| Schedule of contractual maturities | | | | |
| Year | | Principal | |
| 2024 | | $ | 11,269,000 | |
| 2025 | | | 9,911,000 | |
| | | $ | 21,180,000 | |



| | | $ |21,831,000 | |
| | F-23 | |
| |




Significant inputs associated with the embedded conversion options include:

| Schedule of weighted average assumptions | | | | | | | | | | | | |
| | | March 31, 2024 | | | December 31, 2023 | | | At Inception | |
| Contractual term in years | | | Variable | | | | 2.7 | | | | 1.0 | |
| Volatility | | | 75% | | | | 82% | % | | | 111% | % |
| Dividend yield | | | 0% | | | | 0% | % | | | 0% | % |
| Risk-free interest rate | | | 4.8% | | | | 4.0% | % | | | 3.5% | % |



Activity related to the embedded conversion option derivative liabilities for the nine months ended September 30, 2023 was as follows:three months ended March 31, 2024 was as follows:

| Schedule of derivative liabilities | | | | |
| Balance as of December 31, 2022 | | $ | 2,316,000 | |
| Balance as of January 1, 2024 | | $ | 910,000 | |
| Fair value of embedded conversion options issued | | | 1,652,000 | |
| Change in fair value | | | (756,000 | ) |
| Ending balance as of September 30, 2023 | | $ | 528,000 | |
| Ending balance as of March 31, 2024 | | $ | 154,000 | |




| | F-26 | |



| |



21. COMMITMENTS AND CONTINGENCIES



Contingencies



Litigation Matters



The Company is involved in litigation arising from other matters in the ordinary course of business. The Company is regularly subject to claims, suits, regulatory and government investigations, and other proceedings involving labor and employment, commercial disputes, and other matters. Such claims, suits, regulatory and government investigations, and other proceedings could result in fines, civil penalties, or other adverse consequences.



Certain of these outstanding matters include speculative, substantial or indeterminate monetary amounts. The Company records a liability when it believes that it is probable that a loss has been incurred and the amount can be reasonably estimated. If the Company determines that a loss is reasonably possible and the loss or range of loss can be estimated, the Company discloses the reasonably possible loss. The Company evaluates developments in its legal matters that could affect the amount of liability that has been previously accrued, and the matters and related reasonably possible losses disclosed, and makes adjustments as appropriate. Significant judgment is required to determine both likelihood of there being and the estimated amount of a loss related to such matters.



With respect to the Company's other outstanding matters, based on the Company's current knowledge, the Company believes that the amount or range of reasonably possible loss will not, either individually or in aggregate, have a material adverse effect on the Company's business, consolidated financial position, results of operations, or cash flows. However, the outcome of such matters is inherently unpredictable and subject to significant uncertainties.



As of September 30, 2023, The Company had accrued $4.4 million as a loss contingency related to litigation matters
The Company had accrued loss contingencies related to litigation matters $2.4 million and $2.3 million as of March 31, 2024 and December 31, 2023, respectively.



22. STOCKHOLDERS' EQUITY



2023 Issuances



Reverse Stock Split



On February 25, 2022, the Company entered into an At-The-Market issuance sales agreement with Ascendiant Capital Markets, LLC ("Ascendiant Capital") to sell shares of common stock having an aggregate offering price of up to $200 million from time to time, through an "at the market offering" program (the "2022 Common ATM Offering"). During The three months ended March 31, 2023, the Company sold an aggregate of 0.1 million shares of common stock, pursuant to the 2022 Common ATM Offering for gross proceeds of $4.2 million. Effective March 17, 2023, the 2022 Common ATM Offering was terminated.
On January 12, 2024, pursuant to the authorization provided by the Company's stockholders at the annual meeting of stockholders, the Company's board of directors approved an amendment to the Certificate of Incorporation to effectuate a reverse stock split of the Company's issued and outstanding common stock by a ratio of one-for-twenty-five (the "1-for-25 Reverse Split"). The 1-for-25 Reverse Split did not affect the number of authorized shares of common stock, preferred stock or their respective par value per share. As a result of the 1-for-25 Reverse Split, each twenty-five shares of common stock issued and outstanding prior to the 1-for-25 Reverse Split were converted into one share of common stock. The 1-for-25 Reverse Split became effective in the State of Delaware on January 16, 2024.




2022 Preferred ATM Offering



On June 14, 2022, the Company entered into an At-The-Market sales agreement with Ascendiant Capital under which it may sell, from time to time, shares of its Series D preferred stock for aggregate gross proceeds of up to $46.4 million (the "2022 Preferred ATM Offering"). During the nine months ended September 30, 2023, the Company sold an aggregate of 252,359 shares of Series D Preferred stock pursuant to the 2022 Preferred ATM Offering for net proceeds of $2.9 million. effective June 16, 2023, the 2022 Preferred ATM Offering was terminated.



| | F-24 | |
| |



2023 Issuances



On June 9, 2023, the Company entered into an At-The-Market issuance sales agreement with Ascendiant Capital to sell shares of common stock having an aggregate offering price of up to $10 million from time to time, through an "at the market offering" program (the "2023 Common ATM OfferingOn July 13, 2023 and September 8, 2023, the sales agreement was amended increasing the size of the 2023 ATM Offering to $20 million and $50 million, respectively. During the nine months ended September 30, 2023,
Common ATM Offering



During the three months ended March 31, 2024,
the Company sold an aggregate of 25.6 million shares of Class A common stock pursuant to the At-The-Market issuance sales agreement, as amended, entered into with Ascendiant Capital Markets, LLC in 2023 (the "2023 Common ATM Offering") for gross proceeds of $14.6 million.



Issuance of Common Stock Upon Conversion of Preferred Stock
Series C Convertible Preferred Stock Offering, Related Party



During the nine months ended September 30, 2023, the Investors converted 1,000 shares of Series F Preferred Stock and 6,756 During the three months ended March 31, 2024, the Company sold to Ault & Company an aggregate of 2,000 shares of Series C Preferred Stock into an aggregate of 143,402 shares of the Company's common stock. A loss on extinguishment of $0.3 million was recognized on the issuance of common stock based on the fair value of the Company's common stock at the date of the conversions.and Warrants to purchase 0.6 million shares of Class A common stock, for a total purchase price of $2.0 million.



Issuance of common stock, for Restricted Stock Awards



During the nine months ended September 30, 2023, the Company issued 4,974 shares of common stock upon vesting of restricted stock awards.



Proceeds from Subsidiaries' Sale of Stock to Non-Controlling Interests



During the nine months ended September 30, 2023, SMC and ROI sold an aggregate of $2.3 million.of common stock pursuant to their respective at-the-market issuance sales agreements.



23. INCOME TAXES



The Company calculates its interim income tax provision in accordance with ASC Topic 270, Interim Reporting, and ASC Topic 740, Income Taxes. The Company's effective tax rate ("ETR") from continuing operations was (2.0%) and 1.8% for the three months ended September 30, 2023 and 2022, respectively, and 0.4% and 0.6% for the nine months ended September 30, 2023, and 2022,0.4% and (0.6%) for the three months ended March 31, 2024 and 2023, respectively. The Company recorded an income tax (benefit) provision of ($0.6) million and $0.1 benefit of $44,000 and $0.3 million for the three months ended September 30, 2023 and 2022, respectively, and $0.5 million and $0.4 million for the nine months ended September 30, 2023, and 2022,March 31, 2024 and 2023, respectively. The difference between the ETR and federal statutory rate of 21% is primarily attributable to items recorded for GAAP but permanently disallowed for U.S. federal income tax purposes and changes in valuation allowance.



24. NET INCOME (LOSS) PER SHARE



Net loss per share is computed by dividing The net loss to common stockholders by the weighted average number of common shares outstanding. The following table presents the calculation of the basic and diluted earnings per share:is the same for all periods presented as the effect of the potential common stock equivalents is anti-dilutive due to the Company's net loss position for all periods presented. Anti-dilutive securities, which are convertible into or exercisable for the Company's common stock, consisted of the following at September 30, 2023 and 2022:net income (loss) per share:



| Schedule of anti-dilutive securities | | | | | | | | |
| Schedule of basic and diluted net income (loss) per share | | | | | | | | |
| | | For the Three Months Ended | |
| | | March 31, | |
| Stock options | | | 19,000 | | | | 21,000 | |
| | | 2024 | | | 2023 | |
| Restricted stock grants | | | - | | | | 7,000 | |
| Numerator: | | | | | | |
| Warrants | | | 52,000 | | | | 62,000 | |
| Net income (loss) from continuing operations | | $ | 11,762,000 | | | $ | (45,606,000 | ) |
| Convertible notes | | | - | | | | 1,000 | |
| Less: net income (loss) attributable to non-controlling interest, continuing operations | | | (6,244,000 | ) | | | 183,000 | |
| Total | | | 71,000 | | | | 91,000 | |
| Less: Preferred stock dividends | | | (1,260,000 | ) | | | (229,000 | ) |
| Numerator for basic EPS - Net income (loss) from continuing operations attributable to Ault Alliance, Inc. | | | 4,258,000 | | | | (45,652,000 | ) |
| |



26. SEGMENT AND CUSTOMERS INFORMATION



The Company had the following reportable segments as of September 30, 2023 and six as of September 30, 2022; see Note 1 for a brief description of the Company's business.



The following data presents the revenues, expenditures and other operating data of the Company and its operating segments for the three and nine months ended September 30, 2023:



| Schedule of operating segments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Nine Months Ended September 30, 2023 | |
| | | GIGA | || TurnOn | | | Fintech | | | Sentinum | | | Ault | | | SMC | | | Energy | | | ROI | | | Holding Co. | | | Total | |

| | | | | | | | | |
| Numerator for basic EPS - Net loss from discontinued operations attributable to Ault Alliance, Inc. | | | (1,801,000 | ) | | | (3,223,000 | ) |

| | | | | | | | | | | | | | | Disruptive | | | | | | | | | | | | | | | | |
| Effect of dilutive securities: | | | | | | | | |
| | | | | | Green | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest expense associated with convertible notes, continuing operations | | | 7,000 | | | | - | |
| Revenue | | $ | 27,723,000 | | | $ | 2,766,000 | | | $ | - | | |$ | 1,116,000 | | | $ | - | | | $ | 21,939,000 | | | $ | 987,000 | | |$ | 63,000 | | | $ | - | | | $ | 54,594,000 | |
| Series C Convertible Preferred Stock dividend | | | 992,000 | | | | - | |
| Numerator for diluted EPS - Net income (loss) from continuing operations attributable to Ault Alliance, Inc., after the effect of dilutive securities | | | 5,257,000 | | | | (45,652,000 | ) |
| Numerator for diluted EPS - Net loss from discontinued operations attributable to Ault Alliance, Inc. | | $ | (1,801,000 | ) | | $ | (3,223,000 | ) |

| Denominator: | | | - | | | | - | |
| Denominator for basic EPS - Weighted average shares of common stock outstanding | | | 16,116,000 | | | | 47,000 | |
| Effect of dilutive securities:
| | - | | | | 23,273,000 | | | | - || | | - | | | | - | | | | - | | | | - | | || 23,273,000 | | | | |
| Revenue, lending and trading activities | | | - | | | | - | | || 4,337,000 | | | | - | | | | - | || | - | | | | -
| Warrants | | | 6,369,000 | | | | - | |
| Convertible notes | | | 5,714,000 | | | | - | |
| Series C Convertible Preferred Stock | | | 8,294,000 |
| | | | - | || | - | | | | 4,337,000 | |
| Revenue, crane operations | | | - | | | | - | | | | - ||| Denominator for diluted EPS - Weighted average shares of common stock outstanding after the effect of dilutive securities | | | 36,493,000 | | | | 47,000 | |
| Basic net income (loss) per share from:
| | - | | | | - | | | |- | | | | 37,726,000 | | | | - | | | | - | | | | 37,726,000 | | | | |
| Total revenues | | $ | 27,723,000 | | | $ | 2,766,000 | | | $ | 4,337,000 | | | $ | 24,389,000 | | | $ | - | | | $ | 21,939,000 | | | $ | 38,713,000 | | | $ | 63,000 | | | $ | - | | | $ | 119,930,000 | |
| Continuing operations | | $ | 0.26 | | | $ | (971.32 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Discontinued operations | | | (0.11 | ) | | | (68.57 | ) |
| Depreciation and amortization expense | | $ | 852,000 | | | $ | 68,000 | | | $ | - | | | $ | 14,362,000 | | | $ | - | | | $ | 779,000 | | | $ | 3,053,000 | | | $ | 152,000 | | | $ | 1,542,000 | | | $ | 20,808,000 | |
| Basic net income (loss) per share | | $ | 0.15 | | | $ | (1,039.89 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Diluted net income (loss) per share from: | | | | | | | | || | |
| Income (loss) from operations | | $ | (5,620,000 | ) | | $ | (4,067,000 | ) || $ | 1,091,000 | | | $ | (4,363,000 | ) | | $ | (1,052,000 | ) || $ | (4,598,000 | ) | | $ | (30,216,000 | ) | | $ | (33,590,000 | ) | | $ | (20,012,000 | ) | | $ | (102,427,000 | ) |
| Continuing operations | | $ | 0.14 | | | $ | (971.32 | ) |
| Discontinued operations | | | (0.05 | ) | | | (68.57 | ) |
| Diluted net income (loss) per share | | $ | 0.09 | | | $ | (1,039.89 | ) |




| | | || | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | F-25 | |
| |




| Capital expenditures for the nine months ended September 30, 2023:| | $ | 410,000 | | |$ | 131,000 | | | $ |- | | | $ | 1,426,000 | | | $ | - | | | $ | 383,000 | | | $ | 12,471,000 | | | $ | 407,000 | | | $ | 2,906,000 | | | $ | 18,134,000 | |
For the three ended March 31, 2023, net loss per share is computed by dividing the net loss to common stockholders by the weighted average number of common shares outstanding. The calculation of the basic and diluted earnings per share is the same for the three months ended March 31, 2023, as the effect of the potential common stock equivalents is anti-dilutive due to the Company's net loss position for the period. Anti-dilutive securities, which are convertible into or exercisable for the Company's common stock, consist of the following at March 31, 2023:

| Schedule of net loss per share | | | | |
| | | March 31, | |
| | | 2023 | |

| | | | | | | | | | | | | | | | | | | | | | | || | | | | || | | | | || | | || |
| Warrants | | | 2,000 | |
| Stock options | | | 1,000 | |
| Total | | | 3,000 | |



| | F-26 | |
| |




| SEGMENT identifiable assets as of September 30, 2023; | | $ | 36,917,000 | | | $ | 5,461,000 | | | $ | 24,727,000 | | | $ | 63,327,000 | | | $ | 2,465,000 | | | $ | 36,653,000 | | | $ | 73,447,000 | | | $ | 10,939,000 | | | $ | 25,924,000 | | | | 279,860,000 | |
25. SEGMENT AND CUSTOMERS INFORMATION



The Company had the following reportable segments as of March 31, 2024 and 2023; see Note 1 for a brief description of the Company's business.



The following data presents the revenues, expenditures and other operating data of the Company and its operating segments for the three months ended March 31, 2024:

| Assets of discontinued operations | | | | | Schedule of operating segments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 98,596,000 | |
| Total identifiable assets as of September 30, 2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 378,456,000 | |
| | | GIGA | | | TurnOnGreen | | | Fintech | | | Sentinum | | | Ault | | | Energy | | | ROI | | | Holding Co. | | | Total | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Disruptive | | | | | | | | | | | | | |
| Revenue | | $ | 9,573,000 | | | $ | 1,225,000 | | | $ | - | | | $ | 302,000 | | | $ | - | | | $ | 39,000 | | | $ | 28,000 | | | $ | 301,000 | | | $ | 11,468,000 | |
| Revenue, digital assets mining
| | | | | | | | | | | | |
| | | Three Months Ended September 30, 2023 | |
| | | GIGA | | | TurnOn | | | Fintech | | | Sentinum | | | Ault || | SMC | | | Energy | | | ROI | | | Holding Co. | | | Total | |
| | | | | | | | | | | | | | | Disruptive | | | | | | | | | | ||
| | | - | |
| | - | | | | - | | | | 11,447,000 | | | | - | | | | - | | | | - | | | | - | | | | 11,447,000 | |
| Revenue, | | $ | 10,275,000 | | | $ | 1,166,000 | | | $ | - | | | $ | 333,000 | Revenue, lending and trading activities | | | - | | | | - | | | | 9,099,000 | | | $ | - | | | $ | 15,931,000 | | | $ | 441,000 | | | $ | 18,000 | - | | | | - | | | | - | | | $ | - | | | | 9,099,000 | |
| Revenue, crane operations | | | - | | | | - | | | | - | | | | 7,558,000 | | | | - | | | | - | | | | - - | | | | - | | | | 12,918,000 | | | | - | | | | - | | | | 12,918,000 | |
| Revenue, lending and trading activities | | | - | | | | - | | | | (249,000 | ) | | | - | Total revenues | | $ | 9,573,000 | | | $ | 1,225,000 | | | $ | 9,099,000 | | | $ | 11,749,000 | | | $ | - | | | | - | | | | - | | | | - | | | | - | | | | (249,000 | ) |$ | 12,957,000 | | | $ | 28,000 | | | $ | 301,000 | | | $ | 44,932,000 | |
| Revenue, crane operations | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 12,490,000 | | | | - | | | | | |
| Total revenues | | $ | 10,275,000 | | | $ | 1,166,000 | | | $ | (249,000 | ) | | $ | 7,891,000 | | | $ | - | | | $ | 15,931,000 | | | $ | 12,931,000 | | | $ | 18,000 | | | $ | - | | | $ | 47,963,000 | |
| Depreciation and amortization expense | | $ | 297,000 | | | $ | 24,000 | | | $ | - | | | $ | 4,051,000 | | | $ | - | | | $ | 1,030,000 | | | $ | 18,000 | | | $ | 515,000 | | | $ | 5,935,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Depreciation and amortization expense | | $ | 286,000 | | | $ | 24,000 | | | $ | - | | | $ | 5,792,000 | | | $ | - | | | $ | 338,000 | | | $ | 1,073,000 | | | $ | 32,000 | | | $ | 514,000 | | | $ | 8,059,000 | |
| (Loss) income from operations | | $ | (3,478,000 | ) | | $ | (495,000 | ) | | $ | 9,008,000 | | | $ | 3,369,000 | | | $ | (386,000 | ) | | $ | 1,188,000 | | | $ | (3,662,000 | ) | | $ | (5,147,000 | ) | | $ | 397,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Income (loss) from operations | | $ | (503,000 | ) | | $ | (1,498,000 | ) | | $ | (1,039,000 | ) | | $ | (2,661,000 | ) | | $ | (214,000 | ) | | $ | 181,000 | | | $ | 2,505,000 | Interest expense | | $ | (627,000 | ) | | $ | (69,000 | ) | | $ | (5,000 | ) | | $ | (118,000 | ) | | $ | (16,000 | ) | | $ | (1,067,000 | ) | | | $ | (13,315,000 | ) | | $ | (5,359,000 | ) | | $ | (21,903,000 | ) |(1,601,000 | ) | | $ | (1,397,000 | ) | | $ | (4,900,000 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | || | | |
| Capital expenditures for the three months ended September 30, 2023 | | $ | 275,000 | | | $ | 121,000 March 31, 2024 | | $ | 51,000 | | | $ | 8,000 | | | $ | - | | | $ | 293,000 | | | $ | - | | | $ | 451,000 | | | | $ | - | | | $ | 314,000 | | | $ | 12,305,000 | |30,000 | | | $ | 49,000 | | | $ | 882,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | || | | |
| Segment identifiable assets as of September 30, 2023 | | $ | 36,917,000 | | | $ | 5,461,000 | | | $ | 24,727,000 | | | $ | 63,327,000 | | | $ | 2,465,000 | | | $ | 36,653,000 | | | $ | 73,447,000 | | | $ | 10,939,000 | | | $ | 25,924,000 | | | | 279,860,000 | |March 31, 2024 | | $ | 31,376,000 | | | $ | 4,507,000 | | | $ | 27,975,000 | | | $ | 55,710,000 | | | $ | 936,000 | | | $ | 52,214,000 | | | $ | 7,692,000 | | | $ | 27,495,000 | | | | 207,905,000 | |
| Assets of discontinued operations | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 91,872,000 | |
| Total identifiable assets as of March 31, 2024 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 299,777,000 | |



| | F-27 | |
| |



Segment information for the three months ended March 31, 2023:



| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | || |
| | | Nine Months Ended September 30, 2022 | |
| | | GIGA | | | TurnOn | | | Fintech | | | Sentinum | | | Ault | | | SMC | | | Holding | | | Total | |

| | | GIGA | | | TurnOnGreen | | | Fintech | | | Sentinum | | | Ault | | | SMC | | | Energy | | | ROI | | | Holding Co. | | | Total | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | Green | | | | | | | | | Disruptive | | | | | | Company | | | | |
| Revenue | | $ | 21,530,000 | || $ | 3,853,000
| | | | | | | | | | |
| Revenue
| | | $ | 220,000 | | | $ | 822,000 | | | $ | - | | | $ | 17,114,000 | | | $ | - | | | $ | 43,539,000 | |
| Revenue, cryptocurrency mining | | | - | | |
- | | | $ | 876,000 | | | $ | - | | | $ | - | | | $ | - | | | $ | 3,383,000 | | | $ | 25,000 | | | $ | - | | | $ | - | | | $ | 12,992,000 | |
| Revenue, digital assets mining | | | - | | | | - | | | | - | | | | 7,347,000 | | | | - | | | |
| 11,398,000 | | | |- | | | | - | | | | - | | | | 11,398,000 | |
| Revenue, lending and trading activities | | | - | | | | - | | | | 32,224,000 | | | |
- | | | | - | | | | - | | | | - | | | | 7,347,000 | |
| Total revenues | | $ | 21,530,000 | | | $ | 3,853,000 | | | $ | 32,444,000 | | | $ | 12,220,000 | Revenue, commercial real estate leases | | | - | | | | - | | | | - | | | | 458,000 | | | $ | - | | | $ | 17,114,000 | | | $ | - | | | $ | 87,161,000 | |
| - | | | | 439,000 | | | | - | | | | - | | | | 897,000 | |
| Revenue, crane operations | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Depreciation and amortization expense | | $ | 1,259,000 | | | $ | 403,000 | | | $ | 240,000 | | | $ |6,949,000 |
| | 12,646,000 | | | | - | | | | - | | | | 12,646,000 | |
| Revenue, lending and trading activities
| | $ | - | | | $ | 166,000 | | | $ | 474,000 | | | $ | 9,491,000 | |
| - | | | | (4,939,000 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (4,939,000 | ) |
| Total revenues | | $ | 8,708,000 | | | $ | 876,000 | | | $ | (4,939,000 | ) | | $ | 7,805,000 | | | $ | - | | | $ | 3,383,000 | | | $ | 13,110,000 | | | $ | - | | | $ | - | | | $ | 28,943,000 | |
| || | | | | | | | | |
| Income (loss) from operations | | $ | (1,881,000 | ) | | $ | (2,577,000 | ) | | $ | 4,212,000 | | | $ | (8,139,000 | ) | | $ | (1,100,000 | ) | | $ | 597,000 | | | $ | (19,262,000 | ) | | $ | (28,150,000 | ) |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Capital expenditures for the nine months ended September 30, 2022 | | $ | 612,000 | | | $ |176,000 | | | $ | 1,739,000 | | | $ | 77,299,000 | | | $ | - | | | $ | 66,000 | | | $ | 166,000 | | | $ | 80,058,000 | |
| | | | | | | |
| Depreciation and amortization expense | | $ | 590,000 | | | $ | 143,000 | | | $ | - | | | $ | 3,335,000 | | | $ | - | | | $ | 371,000 | | | $ | 1,070,000 | | | $ | 83,000 | | | $ | 610,000 | | | $ | 6,202,000 | |





| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, 2022 | |
| | | GIGA | | | TurnOn | | | Fintech | | | Sentinum | | | Ault | | | SMC | | | Holding | | | Total | |
| | | | | | Green | | | | || | | | Disruptive | | | | | | Company | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Impairment of mined digital assets | | $ | - | | | $ | - | | | $ | - | | | $ | 139,000 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | 139,000 | |
| Revenue | | $ | 7,781,000 | | | $ | 1,662,000 | | | $ | 201,000 | | | $ | 273,000 | | | $ | - | | | $ | 17,114,000 | | | $ | - | | | $ | 27,031,000 | |
| Revenue, cryptocurrency mining | | | - | | | | - | | | | - | | | | 3,874,000 | | | | - | | | | - | | | | - | | | | 3,874,000 | |
| Revenue, lending and trading activities | | | - | | | |- | | | | 13,360,000 | | | | - | | | | - | | | | - | | | | - | | | | 13,360,000 | |
| Total revenues | | $ | 7,781,000 | | | $ | 1,662,000 | | | $ | 13,561,000 | | | $ | 4,147,000 | || $ | - | | | $ | 17,114,000 | | | $ | - | | | $ | 44,265,000 | |

| (Loss) income from operations | | $ | (2,672,000 | ) | | $ | (980,000 | ) | | $ | (6,985,000 | ) | | $ | (475,000 | ) | | $ | (383,000 | ) | | $ | (2,251,000 | ) | | $ | 1,970,000 | | | $ | (8,056,000 | ) | | $ | (10,031,000 | ) | | $ | (29,863,000 | ) |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest expense | | $ | 221,000 | | | $ | 2,000 | | | $ | - | | | $ | - | | | $ | - | | | $ | 40,000 | | | $ | 194,000 | | | $ | 6,000 | | | $ | 11,637,000 | | | $ | 12,100,000 | |
| | | | | | | |
| Depreciation and amortization expense | | $ | 740,000 | | | $ | 393,000 | | | $ | 172,000 | | | $ | 2,809,000 | | | $ | - | | | $ | 166,000 | | | $ | (264,000 | ) | | $ | 4,016,000 | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Income (loss) from operations | | $ | (661,000 | ) | | $ |(957,000 | ) | | $ | 3,786,000 | | | $ | (4,322,000 | ) | | $ | (314,000 | ) | | $ | 597,000 | | | $ | (5,138,000 | ) | | $ | (7,009,000 | ) |
| | | | | | | | | | | | | | | |
| | | | | | | |
| Capital expenditures for the three months ended March 31, 2023 | | $ | 46,000 | | | $ | 10,000 | | | $ | - | | | $ | 1,052,000 | | | $ | - | | | $ | 142,000 | | | $ | 331,000 | | | $ | 407,000 | | | $ | 2,320,000 | | | $ | 4,308,000 | |
| | | | | | | | | | | | | | | | | |
| Capital expenditures for the three months ended September 30, 2022 | | $ | 327,000 | | | $ | 51,000 | | | $ | 890,000 | | | $ | 5,915,000 | | | $ | - | | | $ |66,000 | | | $ | 47,000 | | | $ | 7,296,000 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Identifiable assets as of March 31, 2023 | | $ | 37,952,000 | | | $ | 6,293,000 | | | $ | 27,109,000 | | | $ | 73,589,000 | | | $ | 119,649,000 | | | $ | 21,013,000 | | | $ | 95,942,000 | | | $ | 12,929,000 | | | $ | 34,912,000 | | | | 429,388,000 | |




| | F-30 | |
| |



27. CONCENTRATIONS OF CREDIT AND REVENUE RISK



The following table summarizes accounts receivable that are concentrated with certain large customers as of September 30, 2023 and December 31, 2022:



| Schedule of concentrations of credit risk | | | | | | | | |
| | | September 30, 2023 | | | December 31, 2022 | |
| Customer A | | | * | | | | 13 | % |

| Customer B | | | 18 | % | | | 14 | % |

| Assets of discontinued operations | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |



The following table provides the percentage of total revenues attributable to customers from which 10% or more of total revenues are derived:



| | | For the Three Months Ended | | For the Nine Months Ended |
| | | September 30, | | September 30, |
| | | 2023 | | 2022 | | 2023 | | 2022 |
| Customer V (Mining Pool Operator)
| | * | | * | | | 97,519,000 | |
| Customer W (Mining Pool Operator) | | 13%| Total identifiable assets as of March 31, 2023 | | | | | | * | | * | | * |
| Customer X | | 12% | | 17%
| | | | | | | | * | | * |
| Customer Y | | * | | 11% | | * | | * |
| Customer Z | | * | | * | | $ | 526,907,000 | |



| | F-28 | |
| |



2023 Common ATM Offering



During the period between October 1, 2023 through November 17, 2023, the Company sold an aggregate of 54.2 million shares of common stock pursuant to the 2023 Common ATM Offering for gross proceeds OF $10.0 million.
26. CONCENTRATIONS OF CREDIT AND REVENUE RISK



Note Conversions



In October 2023, an investor converted $0.5 million in principal of a convertible note into 2.1 million shares of the Company's common stock.
2024 Concentrations of Credit and Revenue Risk



Senior Secured Convertible Note, Related Party



On October 13, 2023 (the "Closing Date"), the Company entered into a note purchase agreement with Ault & Company, pursuant to which the Company sold to the Purchaser (i) a senior secured convertible promissory note in the principal face amount of $17,519,832 (the "Note") and warrants (the "Warrants") to purchase shares of the Company's common stock for a total purchase price of up to $17,519,832 (the "Transaction").
Accounts receivable are concentrated with two large Energy customers in North America that accounted for 14% and 11% of consolidated accounts receivable, respectively.



For the three months ended March 31, 2024, one customer, a mining pool operator in North America, represented 20% of consolidated revenues.



The purchase price was comprised of the following: (i) cancellation of $4.6 million of cash loaned by Ault & Company to the Company since June 8, 2023 pursuant to the loan agreement; (ii) cancellation of $11.6 million of term loans made by the Company to Ault & Company in exchange for Ault & Company assuming liability for the payment of $11.6 million of secured notes; and (iii) the retirement of $1.25 million stated value of 125,000 shares of the Company's Series B Convertible Preferred Stock (representing all shares issued and outstanding of that series) being transferred from Ault & Company to the Company.
2023 Concentrations of Credit and Revenue Risk



The Note has a principal face amount of $17,519,832 and has a maturity date of October 12, 2028 (the "Maturity Date"). The Note bears interest at the rate of 10% per annum. Interest is payable, At the Purchaser's option, in cash or shares of Common Stock at the applicable Conversion Price (as defined below). Accrued interest is payable on the Maturity Date, provided, however, that Ault & Company has the option, on not less than 10 calendar days' notice to the Company, to require payment of accrued but unpaid interest on a monthly basis in arrears.
Accounts receivable are concentrated with two large customers. At December 31, 2023, one Enertec customer in the Middle East accounted for 14% of consolidated accounts receivable, and one Circle 8 customer in North America accounted for 11% of consolidated accounts receivable.




| | F-31 | |
| |



The Note is convertible into shares of common stock at a conversion price equal to the greater of (i) $0.10 per share (the "Floor Price"), and (ii) the lesser of (A) $0.2952 or (B) 105% of the volume weighted average price of the common stock during the ten trading days immediately prior to the date of conversion (the "Conversion Price"). The Conversion Price is subject to adjustment in the event of an issuance of common stock at a price per share lower than the Conversion Price then in effect, as well as upon customary stock splits, stock dividends, combinations or similar events. The Floor Price shall not be adjusted For stock dividends, stock splits, stock combinations and other similar transactions.




For the three months ended March 31, 2023, one customer, a mining pool operator in North America, represented 25% of consolidated revenues.





the Warrants grant Ault & Company the right to purchase 47,685,988 shares of common stock. The Warrants have a five-year term, expiring on the fifth anniversary of the Closing Date, and become exercisable on the first business day after the six-month anniversary of the Closing Date. The exercise price of the Warrants is $0.1837, which is subject to adjustment in the event of customary stock splits, stock dividends, combinations or similar EVENTS





27. SUBSEQUENT EVENTS



In addition, the Company and various subsidiaries of the Company granted Ault & Company a senior security interest in substantially all of their assets as collateral for the repayment of the Note, which is subordinated to the security interest granted to the holders of the outstanding secured promissory notes.
Additional Closing of Series C Preferred Stock, Related Party




Series C Preferred Purchase Agreement, Related Party




On November 6, 2023, the Company entered into a securities purchase agreement (the "SPA") with Ault & Company, pursuant to which the Company agreed to sell to Ault & Company up to 50,000 shares of Series C convertible On April 17, 2024, the Company 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 up to $50 million.of which up to $17.5 million of the Note may be tendered for cancellation. The consummation of the transactions contemplated by the SPA, specifically the conversion of the Series C convertible preferred stock and the exercise of the warrants in an aggregate number in excess of 19.99% on the execution date of the Agreementare subject to various customary closing conditions as well as regulatory and stockholder approval. In addition to customary closing conditions, the closing of the financing is also conditioned upon the receipt by Ault & Company of financing to consummate the transaction. The SPA contains customary termination provisions for Ault & Company under certain circumstances, and the Agreement shall automatically terminate if the closing has not occurred prior to December 29, 2023, although such date may be extended by Ault & Company for a period of 90 days as set forth in the SPA.$0.5 million.



Amendment to Loan and Guarantee Agreement




Series D Preferred Purchase Agreement, Related Party



On November 15, 2023, the Company purchased from ROI 603.44 shares of ROI's newly designated Series D Convertible Preferred Stock for a total purchase price of $15.1 million. The purchase price was paid by the cancellation of $15.1 million of cash advances made by the Company to ROI between January 1, 2023 and November 9, 2023. The preferred shares each have a stated value of $25,000 per share and each preferred share is convertible into a number of shares of ROI's common stock determined by dividing the stated value by $0.51, or an aggregate of 29.6 million shares of ROI common stock, subject to adjustment in the event of an issuance of ROI 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 preferred shares holders are entitled to receive dividends at a rate of 10% per annum from issuance until November 14, 2033.
On May 15, 2024, the loan and guarantee agreement, under which the Company has financial guarantee obligations related to Ault & Company borrowings, was amended to extend the deadline, from May 15, 2024 to July 22, 2024, by which the Company is required to have the minimum balance in the restricted cash account, and the minimum specified balance was increased from $7 million to $7.4 million.




In addition, for as long as at least 25% of the Preferred Shares remain outstanding, ROI must obtain from the Company consent with respect to certain corporate events, including reclassifications, fundamental transactions, stock redemptions or repurchases, increases in the number of directors, and declarations or payment of dividends, and further ROI is subject to certain negative covenants, including covenants against issuing additional shares of capital stock or derivative securities, incurring indebtedness, engaging in related party transactions, selling of properties having a value of over $50,000, altering the number of directors, and discontinuing the business of any subsidiary, subject to certain exceptions and limitations.



Payment of Related Party Advances



On October 5, 2023, William B. Horne, the Company's Chief Executive Officer, loaned the Company $262,500, including a $12,500 original issue discount. On October 12, 2023, the loan was repaid.



On October 10, 2023, ROI repaid $52,000 of advances payable to Mr. Horne, the Company's Chief Executive Officer and director of ROI.



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Eco Pack Acquisition



On November 10, 2023, the Company's wholly owned subsidiary, Eco Pack Technologies, Inc., completed the acquisition of an 80% ownership interest in Eco Pack Technologies Limited, a company incorporated in England and Wales. As of the closing date, the total consideration paid amounted to $0.8 million. Additionally, the Company is committed to providing approximately $2.5 million in further funding over the next two years.



Deficiency Letter from the NYSE American



On November 13, 2023, the Company received a deficiency letter (the "Letter") from the NYSE American LLC (the "NYSE American" or the "Exchange") indicating that the Company is not in compliance with the Exchange's continued listing standard set forth in Section 1003(f)(v) of the NYSE American Company Guide (the "Company Guide") because the shares of common stock of the Company (the "Common Stock") for a substantial period of time have been selling at a low price per share, which the Exchange determined to be a 30-trading day average price of less than $0.20 per share. The Letter has no immediate effect on the listing or trading of the Company's Common Stock and the Common Stock will continue to trade on the NYSE American under the symbol "AULT". Additionally, the Letter does not result in the immediate delisting of the Common Stock from the NYSE American.



Pursuant to Section 1003(f)(v) of the Company Guide, the NYSE American staff determined that the Company's continued listing is predicated on it demonstrating sustained price improvement within a reasonable period of time or effecting a reverse stock split of its common stock, which the staff determined to be no later than May 13, 2024 The Company intends to regain compliance with the NYSE American's continued listing standards by undertaking a measure or measures that are in the best interests of the Company and its stockholders.



The Company intends to closely monitor the price of its common stock and consider available options if the Common Stock does not trade at a consistent level likely to result in the Company regaining compliance by May 13, 2024. The Company's receipt of the Letter does not affect the Company's business, operations or reporting requirements with the Securities and Exchange Commission. the Company is actively engaged in discussions with the Exchange and is developing plans to regain compliance with the NYSE American's continued listing standards within the cure period.



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| | ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |



In this quarterly report on Form 10-Q (the "Quarterly Report"), the "Company," "AAI," "we," "us" and "our" refer to Ault Alliance, Inc., a Delaware corporation. AAI is a diversified holding company pursuing growth by acquiring undervalued businesses and disruptive technologies with a global impact. Through our wholly and majority owned subsidiaries and strategic investments, we own and operate a data center at which we mine Bitcoin and offer colocation and hosting services for the emerging artificial intelligence ecosystems and other industries, and provide mission-critical products that support a diverse range of industries, including metaverse platform, oil exploration, crane services, defense/aerospace, industrial, automotive, medical/biopharma, consumer electronics, hotel operations and textiles. In addition, we own and operate hotels and extend credit to select entrepreneurial businesses through a licensed lending subsidiary.



Recent Events and Developments



On January 23, 2023, we filed a Certificate of Elimination with the Secretary of State of the State of Delaware with respect to our Series C convertible redeemable preferred stock ("Series C Preferred Stock") which, effective upon filing, eliminated the Series C Preferred Stock.
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




On February 8, 2023, we entered into a Share Exchange agreement (the "Agreement") with ROI and the other signatories thereto. The Agreement provides that, subject to the terms and conditions set forth therein, ROI will acquire all of the outstanding shares of capital stock of our then subsidiary, BitNile.com, Inc. ("BitNile.com"), of which we owned approximately 86%, and the remaining 14% was owned by minority shareholders (the "Minority Shareholders"), as well as Ault Iconic, (formerly Ault Media Group) and the securities of Earnity beneficially owned by BitNile.com (which represented approximately 19.9% of the outstanding equity securities of Earnity as of the date of the Agreement), in exchange for the following: (i) 8,637.5 shares of newly designated Series B convertible preferred stock of ROI to be issued to our company (the "Series B Preferred"), and (ii) 1,362.5 shares of newly designated Series C Convertible Preferred Stock of ROI to be issued to the to the Minority Shareholders (the "Series C Preferred," and together with the Series B Preferred, the "Preferred stock. The Series B Preferred and the Series C Preferred each have a stated value of $10,000 per share (the "Stated Value"), for a combined stated value of the Preferred Stock to be issued by ROI of $100 million and subject to adjustment, are convertible into an aggregate of 13.3 million shares of common stock of ROI (the "ROI Common Stock"). ROI received approval of the Series A Convertible Preferred Stock transaction by its's shareholders and the Nasdaq Stock Market to exceed the 19.9% beneficial ownership limitation.in one or more closings.



Pursuant to the Certificates of Designations of the Rights, Preferences and Limitations of the Series B preferred and the Series C Preferred (collectively, the "Preferred stock Certificates"), each share of Preferred Stock will be convertible into a number of shares of ROI Common Stock determined by dividing the Stated Value by $7.50 (the "Conversion Price"), or 1,333 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 The Conversion Price will be subject to certain adjustments, including potential downward adjustment if ROI closes a qualified financing resulting in at least $25 million in gross proceeds at a price per share that is lower than the Conversion Price then in effect. The holders of Preferred Stock will be entitled to receive dividends at a rate of 5% of the Stated Value per annum from issuance until February 7, 2033 (the "Dividend Term"). During the first two years of the Dividend Term, dividends will be payable in additional shares of Preferred Stock rather than cash, and thereafter dividends will be payable in either additional shares of Preferred Stock or cash as each holder may elect. If ROI fails to make A dividend payment as required by the preferred stock Certificates, the dividend rate will be increased to 12% for as long as such default remains ongoing and uncured. Each share of Preferred Stock will also have an $11,000 liquidation preference in the event of a liquidation, change of control event, dissolution or winding up of ROI, and will rank senior to all other capital stock of ROI with respect thereto, except that the Series B Preferred and Series C Preferred shall rank pari passu. Each share of Series B Preferred was originally entitled to vote with the ROI Common Stock at a rate of 10 votes per share of common stock into which the Series B Preferred is convertible, but that provision was subsequently eliminated. Other than certain rights granted to the Company relating to amendments or waiver of various negative covenants, the terms, rights, preferences and limitations of the Preferred Stock Certificates are essentially identical. The Agreement closed on March 6, 2023.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.



On March 28, 2023, we entered into a securities purchase agreement (the "Purchase Agreement") with certain sophisticated investors (the "Investors"), pursuant to which 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 private placement, an aggregate of 100,000 shares of our preferred stock, with each such share having a stated value of $100.00 and consisting of (i) 83,000 shares of Series E convertible Preferred Stock (the "Series E Preferred Stock"), (ii) 1,000 shares of Series F Convertible Preferred Stock (the "Series F Preferred Stock") and (iii) 16,000 shares of Series G Convertible Preferred Stock (the "Series G Preferred Stock" and collectively, the "Preferred Shares").registered direct offering to the investors, an aggregate of $2.0 million convertible promissory notes, bearing interest at 6%. The convertible promissory notes were



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Each share of Series E Preferred Stock and Series F Preferred Stock had a purchase price of $100.00, equal to each such share's stated value. The purchase price of the Series E Preferred Stock and the Series F Preferred Stock was paid for by the Investors' canceling outstanding secured promissory notes, in the principal amount of $8.4 million, whereas the purchase price of the shares of Series G Preferred Stock consisted of accrued but unpaid interest on these notes, as well as for other good and valuable consideration. Each Preferred Share is convertible into shares of our common stock at a conversion price equal to 85% of the closing sale price of our common stock on the trading day prior to the date of conversion, subject to a floor price of $0.10. The Preferred Shares are convertible at the option of the holder at any time following our receipt of stockholder approval of the Reverse Split (as defined below). The private placement closed on March 30, 2023.



On April 6%. 2023, we issued a term note with a principal amount of $1.1 million, bearing an interest rate of 12% (the "Term Note"). The Term Note was issued at a discount, with net proceeds to us amounting to $1.0 million. the Term Note was scheduled to mature on June 5, 2023. we exercised 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 by one month, by paying a $30,000 extension fee. Ault & Company guaranteed repayment of the Term Note.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.



On May 1, 2023 we entered into a securities purchase agreement (the "Series C Agreement") with Ault & Company pursuant to which we agreed to sell to Ault & Company up to 40,000 shares of Series C convertible On each 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 up to $40 million. The consummation of the transactions contemplated by the Series C Agreement are subject to various customary closing conditions and the receipt of certain third party consents. In addition to customary closing conditions, the closing of the transaction is also conditioned upon the receipt by Ault & Company of financing in an amount sufficient to consummate the transaction, in whole or in part. The Series C Agreement contains customary termination provisions for Ault & Company under certain circumstances, and the Series C Agreement shall automatically terminate if the closing has not occurred prior to May 31, 2023, although such date may be extended by Ault & Company for a period of 90 days as set forth in the Series C Agreement.$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.



Our stockholders approved, at a special meeting of our stockholders called for such purpose, an amendment (the "Amendment") to our certificate of incorporation to authorize a reverse split of our common stock (the "Reverse Split"). The Investors agreed in the Purchase Agreement to not transfer, offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of the Preferred shares until after the Reverse Split. Pursuant to the certificate of designation of the Series E Preferred Stock the shares of Series E Preferred Stock have the right to vote on such Amendment on an as converted to common stock basis. In addition, pursuant to the certificate of designation of the Series F Preferred Stock, the Shares, of Series F Preferred Stock have The right to vote on such Amendment. Each Investor has separately agreed to vote the shares of the Series E Preferred Stock in favor of the Amendment and that the shares of the Series F Preferred Stock shall automatically be voted in a manner that "mirrors" the proportions on which the shares of our common stock and Series E Preferred Stock are voted on the Amendment. The Amendment requires the approval of the majority of the votes associated with our outstanding capital stock entitled to vote on the proposal. Because the Series F Preferred Stock will automatically and without further action of the purchaser be voted in a manner that "mirrors" the proportions on which the shares of common stock and Series E Preferred Stock are voted on the Reverse Split, abstentions by common stockholders will not have any effect on the votes cast by the holders of the Series F Preferred Stock. The Series G Preferred Stock does not carry any voting rights, except as required by law or expressly provided by its certificate of designation.



On June 8, 2023 we entered into a loan agreement with Ault & Company as lender. the loan agreement provides for an unsecured, non-revolving credit facility in an aggregate principal amount of up to $10 million. All loans under the loan agreement are due within five business days after request by Ault & Company and Ault & Company is not obligated to make any further advances under the loan agreement after December 8, 2023. Advances under the loan agreement bear interest at the rate of 9.5% per annum and may be repaid at any time without penalty or premium. As of the date of this report, $4.7 million has been advanced under the loan agreement and not repaid.
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.




On June 9, 2023, we entered into an At-the-Market Issuance Sales Agreement with Ascendiant Capital Markets, LLC, as sales agent ("Ascendiant Capital") to sell shares of our common stock having an aggregate offering price of up to $10,000,000 (the "Shares") from time to time, through an "at the market offering" (the "2023 Common ATM Offering"). On July 12, 2023, we and Ascendiant Capital entered into an amendment to the At-The-Market issuance sales agreement to increase the size of the 2023 Common ATM Offering from $10.0 million to $20.0 million. Through August 14, 2023, we have sold an aggregate of 3.8 million shares of common Stock pursuant to the 2023 Common ATM Offering for gross proceeds of $16.1 million.




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On April 15, 2024, we established a record date for our initial distribution of TurnOnGreen. securities.final distribution of securities of TurnOnGreen. Stockholders as of this date were entitled to 0.83 shares of TurnOnGreen common stock, along with warrants to purchase 0.83 shares of TurnOnGreen common stock (the "TurnOnGreen Securities") for every share of our common stock they held on the record date. The initial distribution was finalized in July 2023. We distributed 58.7 million TurnOnGreen Securities in the first distribution.



On July 24, 2023, we established a record date for our second partial distribution of TurnOnGreen Securities. Stockholders as of this date were entitled to 15 shares of TurnOnGreen Securities for every share of the Company's common stock they held on the record date. The second distribution was finalized on August 7, 2023, whereby we relinquished control of voting interests of TurnOnGreen. final distribution was paid on April 29, 2024. We distributed 25.0 million TurnOnGreen Securities in the final distribution.



On July 19, 2023 we along with certain of our subsidiaries entered into a First Amendment and Joinder to Loan and Guarantee agreement (the "Amendment") with the institutional investors pursuant to which the (i) Loan and Guarantee Agreement, dated November 7, 2022, entered into between us and the institutional investors (the "Loan Agreement") and (ii) Security Agreement, dated November 7, 2022, entered into between the institutional investors and Sentinum (the "Security Agreement") was amended. Pursuant to the Amendment, we borrowed an additional $8.8 million. The net proceeds of The additional loan amount were $7.5 million.
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.




Effective August 3, 2023, we and the Investors entered into an Exchange Agreement (the "Exchange Agreement") pursuant to which the Investors exchanged all of their Preferred Shares as well as their demand notes (the "Demand Notes") issued to the Investors by us on or about May 20, 2023, with each Demand Note having a principal outstanding amount of approximately $0.8 million for two new 10% Secured OID Promissory Notes (the "Exchange Notes"), each with a principal face amount of $5.3 million, for an aggregate of amount owed of $10.5 million (the "Principal Amount"). We and Milton "Todd" Ault, III, our Executive Chairman, entered into guaranty agreements with the Investors guaranteeing repayment by Ault & Company, Inc., a related party ("Ault & Company") of the Exchange Notes.



Effective as of August 3, 2023, we assigned the Exchange Notes to Ault & Company. As consideration for Ault & Company assuming the Exchange Notes from us we issued a 10% demand promissory note in the principal face amount of $10.5 million. (the "First A&C Demand Note") to Ault & Company.



Effective as of August 10, 2023, we assigned The term note to Ault & Company. As consideration for Ault & Company assuming The term note from us, we issued a 12% demand promissory note in the principal face amount of $1.1 million (the "Second Demand Note") to Ault & Company.



on October 13, 2023 (the "Closing date we entered into a note purchase agreement with Ault & Company, pursuant to which we sold to the Purchaser (i) a senior secured convertible promissory note in the principal face amount of $17.5 million (the "Note") and warrants (the "Warrants") to purchase shares of our common stock for a total purchase price of up to $17.5 million (the "Transaction").




The purchase price was comprised of the following: (i) cancellation of $4.6 million of cash loaned by Ault & Company to us since June 8, 2023 pursuant to the loan agreement; (ii) cancellation of $11.6 million of term loans made by us to Ault & Company in exchange for Ault & Company assuming liability for the payment of $11.6 million of secured notes; and (iii) the retirement of $1.25 million stated value of 125,000 shares of our Series B Convertible Preferred Stock (representing all shares issued and outstanding of that series) being transferred from Ault & Company to us.



The Note has a principal face amount of $17.5 million and has a maturity date of October 12, 2028 (the "Maturity Date"). The Note bears interest at the rate of 10% per annum. Interest is payable, at the Purchaser's option, in cash or shares of Common Stock at the applicable Conversion Price (as defined below). Accrued interest is payable on the Maturity Date, provided, however, that Ault & Company has the option, on not less than 10 calendar days' notice to us, to require payment of accrued but unpaid interest on a monthly basis in arrears.



the note.is convertible into shares of common stock at a conversion price equal to the greater of (i) $0.10 per share (the "Floor Price"), and (ii) the lesser of (A) $0.2952 or (B) 105% of the volume weighted average price of the common stock during the ten trading days immediately prior to the date of conversion (the "Conversion Price"). The Conversion Price is subject to adjustment in the event of an issuance of common stock at a price per share lower than the Conversion Price then in effect, as well as upon customary stock splits, stock dividends, combinations or similar events. The Floor Price shall not be adjusted for stock dividends, stock splits, stock combinations and other similar transactions.




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The Warrants grant Ault & Company the right to purchase 47,685,988 shares of common stock. The Warrants have a five-year term, expiring on the fifth anniversary of the Closing Date, and become exercisable on the first business day after the six-month anniversary of the Closing Date. The exercise price of the Warrants is $0.1837, which is subject to adjustment in the event of customary stock splits, stock dividends, combinations or similar events.



In addition, we and various of our subsidiaries granted Ault & Company a senior security interest in substantially all of our assets as collateral for the repayment of the Note, which is subordinated to the security interest granted to the holders of the outstanding secured promissory notes.



On November 6, 2023, we entered into a securities purchase agreement (the "SPA") with Ault & Company, pursuant to which we agreed to sell to Ault & Company up to 50,000 shares of Series C convertible preferred stock and warrants to purchase up to 370 million shares of common stock for a total purchase price of up to $50 million, of which up to $17.5 million of the Note may be tendered for cancellation. The consummation of the transactions contemplated by the SPA, specifically the conversion of the Series C convertible preferred stock and the exercise of the warrants in an aggregate number in excess of 19.99% on the execution date of the Agreement, are subject to various customary closing conditions as well as regulatory and stockholder approval. In addition to customary closing conditions, the closing of the financing is also conditioned upon the receipt by Ault & Company of financing to consummate the transaction. The SPA contains customary termination provisions for Ault & Company under certain circumstances, and the Agreement shall automatically terminate if the closing has not occurred prior to December 29, 2023, although such date may be extended by Ault & Company for a period of 90 days as set forth in the SPA.



On November 15, 2023, we purchased from ROI 603.44 shares of ROI's newly designated Series D Convertible Preferred Stock for a total purchase price of $15.1 million. The purchase price was paid by the cancellation of $15.1 million of cash advances made by us to ROI between January 1, 2023 and November 9, 2023. The preferred shares each have a stated value of $25,000 per share and each preferred share is convertible into a number of shares of ROI's common stock determined by dividing the stated value by $0.51, or an aggregate of 29.6 million shares of ROI common stock, subject to adjustment in the event of an issuance of ROI 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 preferred shares holders are entitled to receive dividends at a rate of 10% per annum from issuance until November 14, 2033. In addition, for as long as at least 25% of the Preferred Shares remain outstanding, ROI must obtain our consent with respect to certain corporate events, including reclassifications, fundamental transactions, stock redemptions or repurchases, increases in the number of directors, and declarations or payment of dividends, and further ROI is subject to certain negative covenants, including covenants against issuing additional shares of capital stock or derivative securities, incurring indebtedness, engaging in related party transactions, selling of properties having a value of over $50,000, altering the number of directors, and discontinuing the business of any subsidiary, subject to certain exceptions and limitations.



Presentation of AGREE as Discontinued Operations



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.We plan to use the proceeds from the sales of the hotel properties to pay off debt and commit more capital to our core businesses. Our real estate properties, which include both hotels and land are currently listed for sale.



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.



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.



General



As a holding company, our business objective is designed to increase stockholder value through developing and growing our subsidiaries. Under the strategy we have adopted, we are focused on managing and financially supporting our existing subsidiaries and partner companies, with the goal of pursuing monetization opportunities and maximizing the value returned to stockholders. We have, are and will consider initiatives including, among others: public offerings, the sale of individual partner companies, the sale of certain or all partner company interests in secondary market transactions, or a combination thereof, as well as other opportunities to maximize stockholder value. We anticipate returning value to stockholders after satisfying our debt obligations and working capital needs.



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From time to time, we engage in discussions with other companies interested in our subsidiaries or partner companies, either in response to inquiries or as part of a process we initiate. To the extent we believe that a subsidiary or partner company's further growth and development can best be supported by a different ownership structure or if we otherwise believe it is in our stockholders' best interests, we will seek to sell all or a portion of our position in the subsidiary or partner company. These sales may take the form of privately negotiated sales of stock or assets, mergers and acquisitions, public offerings of the subsidiary or partner company's securities and, in the case of publicly traded partner companies, sales of their securities in the open market. Our plans may include taking subsidiaries or partner companies public through rights offerings and directed share subscription programs. We will continue to consider these (or similar) initiatives and the sale of certain subsidiary or partner company interests in secondary market transactions to maximize value for our stockholders.



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.



We are a Delaware corporation with our corporate office located at 11411 Southern Highlands Pkwy, Suite 240, Las Vegas, NV 89141. Our phone number is 949-444-5464 and our website address is www.ault.com.



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Results of Operations



Results of Operations for the Three Months Ended March 31, 2024 and 2023



The following table summarizes the results of our operations for the three months ended March 31, 2024 and 2023.



| | | For the Three Months Ended March 31, | |
| | | 2024 | | | 2023 | |
| | | | | | | |
| Revenue | | $ | 28,164,000 | | | $ | 27,031,000 | |
| Revenue | | $ | 11,468,000 | | | $ | 13,889,000 | |
| Revenue, cryptocurrency mining | | | 7,558,000 | | | | 3,874,000 | |
| Revenue, digital assets mining | | | 11,447,000 | | | | 7,347,000 | |
| Revenue, crane operations | | | 12,918,000 | | | | 12,646,000 | |
| Revenue, lending and trading activities | | | 9,099,000 | | | | (4,939,000 | ) |
| Total revenue | | | 47,963,000 | | | | 44,265,000 | |
| Total revenue | | | 44,932,000 | | | | 28,943,000 | |
| Cost of revenue, products | | | 9,164,000 | | | | 9,787,000 | |
| Cost of revenue, cryptocurrency mining | | | 10,228,000 | | | | 5,255,000 | |
| Cost of revenue, digital assets mining | | | 8,544,000 | | | | 8,103,000 | |
| Cost of revenue, crane operations | | | 7,642,000 ||7,715,000 | | | | 7,388,000 | |
| Cost of revenue, lending and trading activities
| | | - | | | | 1,180,000 | |
| Total cost of revenue | | | 38,295,000 | | | | 25,448,000 | |
| Total cost of revenue | | | 25,423,000 | | | | 26,458,000 | |
| Gross profit | | | 9,668,000 | | | | 18,817,000 | |
| Gross profit | | | 19,509,000 | | | | 2,485,000 | |
| Total operating expenses | | | 19,112,000 | | | | 32,348,000 | |
| Loss from operations | | | (21,903,000 | ) | | | (7,009,000 | ) |
| Income (loss) from operations | | | 397,000 | | | | (29,863,000 | ) |
| Other income (expense): | | | | | | | | |
| Interest and other income | | | 583,000 | | | | 1,197,000 | |
| Interest expense | | | (4,414,000 | ) | | | (2,367,000 | ) |
| Interest expense | | | (4,900,000 | ) | | | (12,100,000 | ) |
| Gain on conversion of investment in equity securities to marketable equity securities | | | 17,900,000 | | | | - | |
| Loss on extinguishment of debt | | | 1,405,000 | | | | (63,000 | ) |
| Loss from investment in unconsolidated entity | | | (667,000 | ) | | | - | |
| Realized and unrealized gain on marketable securities | | | 74,000 | | | | 709,000 | |
| Impairment of equity securities | | | - | | | | (9,555,000 | ) |
| Loss on the sale of fixed assets | | | (33,000 | ) | | | - | |
| Provision for loan losses, related party | | | (3,068,000 | ) | | | - | |
| Change in fair value of warrant liability | | | (562,000 | ) | | | (3,000 | ) |
| Gain on the sale of fixed assets | | | 68,000 | | | | 4,515,000 | |
| Total other expense, net | | | (6,172,000 | ) | | | (936,000 | ) |
| Total other income (expense), net | | | 11,321,000 | | | | (16,006,000 | ) |
| Loss before income taxes | | | (28,075,000 | ) | | | (7,945,000 | ) |
| Income (loss) before income taxes | | | 11,718,000 | | | | (45,869,000 | ) |
| Income tax (benefit) provision | | | (565,000 | ) | | | 144,000 | |
| Income tax benefit | | | (44,000 | ) | | | (263,000 | ) |
| Net income (loss) from continuing operations | | | 11,762,000 | | | | (45,606,000 | ) |
| Net loss from discontinued operations | | | (1,801,000 | ) | | | (3,223,000 | ) |
| Net loss | | | (28,439,000 | ) | | | (7,996,000 | ) |
| Net income (loss) | | | 9,961,000 | | | | (48,829,000 | ) |
| Net (income) loss attributable to non-controlling interest | | | (6,244,000 | ) | | | 183,000 | |
| Net income (loss) attributable to Ault Alliance, Inc. | | | 3,717,000 | | | | (48,646,000 | ) |
| Preferred dividends | | | (413,000 | ) | | | (190,000 | ) |
| Preferred dividends | | | (1,260,000 | ) | | | (229,000 | ) |
| Net income (loss) available to common stockholders | | $ | 2,457,000 | | | $ | (48,875,000 | ) |
| Comprehensive loss | | | | | | | | |
| Net loss available to common stockholders | | $ | 2,457,000 | | | $ | (48,875,000 | ) |
| Other comprehensive income (loss) | | | | | | | | |
| Foreign currency translation adjustment | | | 36,000 | | | | 170,000 | |
| Other comprehensive loss | | | (651,000 | ) | | | 306,000 | |
| Other comprehensive income | | | 36,000 | | | | 170,000 | |
| Total comprehensive loss | | $ | (22,835,000 | ) | | $ | (7,155,000 | ) |
| Total comprehensive income (loss) | | $ | 2,493,000 | | | $ | (48,705,000 | ) |



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Revenues



Revenues by segment for the three months ended September 30, 2023 and 2022 were as follows:March 31, 2024 and 2023 were as follows:



| | | For the Three Months Ended March 31, | | | Increase | | | | |
| | | September 30, | | | | | | | |
| | | 2024 | | | | 2023 | | | 2022 | | | (Decrease) | | | % | |
| GIGA | | $ | 10,275,000 | | | $ | 7,781,000 | | | $ | 2,493,000 | | | | 32 | % |
| TurnOnGreen | | | 1,166,000 | | | | 1,662,000 | | | | (496,000 | ) | | | -30 | % |
| SMC | | | 15,931,000 | | | | 17,114,000 | | | | (1,183,000 | ) | | | -7 | % |
| Sentinum | | | | | | | | | | | | | | | | |
| Revenue, cryptocurrency mining | | | 7,558,000 | | | | 3,874,000 | | | | 3,684,000 | Revenue, digital assets mining | | $ | 11,447,000 | | | $ | 7,347,000 | | | $ | 4,100,000 | | | | 56 | % |
| Revenue, commercial real estate leases | | | 333,000 | | | | 273,000 | | | | 61,000 | | | | 22 | % |302,000 | | | | 458,000 | | | | (156,000 | ) | | | -34 | % |
| Energy | | | | | | | | | | | | | | | | |
| Revenue, lending and trading activities | | | (249,000 | ) | | | 13,360,000 | | | | (13,609,000 | ) | | | -102 | % |
| Revenue, crane operations | | | 12,918,000 | | | | 12,646,000 | | | | 272,000 | | | | 2 | % |
| Other | | | 18,000 | | | | 201,000 | | | | (183,000 | Other | | | 39,000 | | | | 464,000 | | | | (425,000 | ) | | | -92 | % |
| Energy | | | 12,931,000 | | | | - | | | | 12,931,000 | | | | - | |
| Total revenue | | $ | 47,963,000 | | | $ | 44,265,000 | | | $ | 3,698,000 | | | | 8 | % |



GIGA



GIGA revenues were up $2.5 million for the three months ended September 30, 2023, including $0.4 million growth attributable to our acquisition of Giga-tronics Incorporated on September 8, 2022. Continued conflicts and tensions worldwide are driving defense-related investments in force protection technologies at GIGA across the United States, U.K., Europe, Asia, and the Middle East. Additionally, demand for key electronics solutions, particularly for customers in medicine and telecommunications, accelerated in the three months ended September 30, 2023.



TurnOnGreen



TurnOnGreen revenues were down $0.5 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022 due to the cancellation of large projects that contributed to revenue in 2022.



SMC



SMC revenues decreased by $1.2 million primarily due to timing of shipments to a large customer.



Sentinum



Revenues from Sentinum's cryptocurrency mining operations increased $3.7 million as we increased our cryptocurrency mining activities from the prior period, and further increased by a 32% increase in the average Bitcoin price, partially offset an 84% increase in the average Bitcoin mining difficulty level in the current year period.



Fintech



Revenues from our lending and trading activities were negative $0.2 million. Revenue from lending and trading activities for the three months ended September 30, 2023 included an approximate $3.0 million unrealized losses from our investment in Alzamend, partially offset by realized gains from our investment portfolio for the three months ended September 30, 2023. During the three months ended September 30, 2022, Ault Lending generated income from appreciation of investments in marketable securities as well as shares of common stock underlying equity securities issued to Ault Lending in certain financing transactions. Ault Lending also generates revenue through origination fees charged to borrowers and interest generated from each loan.



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Revenues from our trading activities for the three months ended September 30, 2023 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.



Energy



Energy revenues increased by $12.9 million for the three months ended September 30, 2023, due to the acquisition of the Circle 8 crane operations in December 2022.



Gross Margins



Gross margins decreased to 20% for the three months ended September 30, 2023, compared to 43% for the three months ended September 30, 2022. Our gross margins of 21% recognized during the three months ended September 30, 2023 were negatively impacted by unfavorable margins from our lending and trading activities and negative margins from our Sentinum cryptocurrency mining segment due to the significant increase in Bitcoin mining difficulty level. Excluding the effects of margin from our lending and trading activities and cryptocurrency mining operations, our adjusted gross margins for the three months ended September 30, 2023 and 2022 would have been 31% and 25%, respectively.



Research and Development



Research and development expenses increased by $1.2 million for the three months ended September 30, 2023, due to expenditures related to development work on ROI's BitNile metaverse platform.



Selling and Marketing



Selling and marketing expenses were $8.0 million for the three months ended September 30, 2023, compared to $7.4 million for the three months ended September 30, 2022, an increase of $0.6 million, or 8%. The increase was primarily the result of higher advertising and promotion costs related to ROI's BitNile metaverse platform, partially offset by a decline in employee related costs and consulting expenses.



General and Administrative



General and administrative expenses were $17.8 million for the three months ended September 30, 2023, compared to $15.4 million for the three months ended September 30, 2022, an increase of $2.4 million, or 16%. General and administrative expenses increased from the comparative prior period, mainly due to increases from new acquisitions:



| | ∙ | general and administrative costs of $2.2 million from ROI, which was acquired in March 2023; |
| | ∙ | general and administrative costs of $2.0 million from Circle 8, which was acquired in December 2022; and |
| | ∙ | general and administrative costs of $0.7 million from GIGA, which was acquired in September 2022. |

| | | | | | | | | | |




The increases above were partially offset by a $2.4 million decrease performance bonus related to realized gains on trading activities.



Impairment of Property and Equipment



During the three months ended September 30, 2023, we recognized an impairment charge of $3.9 million related to property and equipment at ROI's Agora and Bitstream Bitcoin mining operations as they have been unable to commence Bitcoin mining operations, either for themselves or from others through hosting arrangements.



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Impairment of Deposit Due to Vendor Bankruptcy Filing



During the three months ended September 30, 2022, Compute North Holdings, Inc. (along with its affiliated debtors, collectively, "Compute North"), filed for chapter 11 bankruptcy protection. We had a deposit of approximately $2.0 million with Compute North for services yet to be performed by Compute North. We assessed this financial exposure and recorded an impairment of the deposit totaling $2.0 million during the three months ended September 30, 2022.



Impairment of Mined Cryptocurrency



Impairment of mined cryptocurrency for the three months ended September 30, 2023 and 2022 was $0.1 million and $0.5 million, respectively. Impairment losses are attributable to the volatility of the Bitcoin market as market price of Bitcoin drops below our carrying value within the respective periods. The impairment of mined cryptocurrency for the three months ended September 30, 2023 is lower than the comparable prior year period as the average amount of digital currency held decreased during the three months ended September 30, 2023 as we generally sold our mined digital currency the next business day.



Other Expense, Net



Other expense, net was $6.2 million for the three months ended September 30, 2023, compared to $0.9 million for the three months ended September 30, 2022.



Interest and other income was $0.3 million for the three months ended September 30, 2023, compared to $0.7 million for the three months ended September 30, 2022. The decrease in interest and other income is primarily due to the decline in ADRT's cash and marketable securities held in the trust account as a result of redemptions that occurred in June 2023.



Interest expense was $4.4 million for the three months ended September 30, 2023, compared to $2.4 million for the three months ended September 30, 2022. Interest expense increased due to higher levels of borrowing during the three months ended September 30, 2023 as compared to the three months ended September 30, 2023. Interest expense for the three months ended September 30, 2023 included contractual interest of $3.3 million, amortization of debt discount of $0.6 million, and forbearance and extension fees of $0.5 million. Interest expense for the three months ended September 30, 2022 consisted primarily of contractual interest.



The $1.5 million loss on extinguishment of debt for the three months ended September 30, 2023 related to the August 2023 exchange of preferred stock liabilities for secured notes. The preferred stock liabilities were remeasured from their fair value prior to the exchange to the fair value of the secured notes at the date of the exchange.



Income Tax (Benefit) Provision



Benefit from income taxes was $0.6 million during the three months ended September 30, 2023 compared to a provision of $0.1 million during the three months ended September 30, 2022. The effective income tax benefit rate was 2.0% for the three months ended September 30, 2023 as compared to a provision of 1.8% for the three months ended September 30, 2022.



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Results of Operations for the Nine Months Ended September 30, 2023 and 2022



The following table summarizes the results of our operations for the nine months ended September 30, 2023 and 2022.



| | | For the Nine Months Ended September 30, | |
| | | 2023 | | | 2022 | |
| | | | | | | |
| Revenue | | $ | 54,594,000 | | | $ | 43,539,000 | |
| Revenue, cryptocurrency mining | | | 23,273,000 | | | | 11,398,000 | |
| Revenue, crane operations | | | 37,726,000 | | | | - | |
| Revenue, lending and trading activities | | | 4,337,000 | | | | 32,224,000 | |
| Total revenue | | | 119,930,000 | | | | 87,161,000 | |
| Cost of revenue, products | | | 39,248,000 | | | | 30,985,000 | |
| Cost of revenue, cryptocurrency mining | | | 28,057,000 | | | | 12,206,000 | |
| Cost of revenue, crane operations | | | 22,671,000 | | | | - | |
| Cost of revenue, lending and trading activities | | | 1,180,000 | | | | - | |
| Total cost of revenue | | | 91,156,000 | | | | 43,191,000 | |
| Gross profit | | | 28,774,000 | | | | 43,970,000 | |
| Total operating expenses | | | 131,201,000 | | | | 72,120,000 | |
| Loss from operations | | | (102,427,000 | ) | | | (28,150,000 | ) |
| Other income (expense): | | | | | | | | |
| Interest and other income | | | 3,888,000 | | | | 1,255,000 | |
| Interest expense | | | (30,537,000 | ) | | | (32,063,000 | ) |
| Loss on extinguishment of debt | | | (1,700,000 | ) | | | - | |
| Realized and unrealized (loss) gain on marketable securities | | | (170,000 | ) | | | 1,016,000 | |
| Loss from investment in unconsolidated entity | | | - | | | | (924,000 | ) |
| Impairment of equity securities | | | (9,555,000 | ) | | | - | |
| (Loss) gain on the sale of fixed assets | | | 2,728,000 | | | | - | |
| Change in fair value of warrant liability | | | 2,655,000 | | | | (27,000 | ) |
| Total other expense, net | | | (32,691,000 | ) | | | (30,743,000 | ) |
| Loss before income taxes | | | (135,118,000 | ) | | | (58,893,000 | ) |
| Income tax provision | | | 540,000 | | | | 361,000 | |
| Net loss from continuing operations | | | (135,658,000 | ) | | | (59,254,000 | ) |
| Net income (loss) from discontinued operations | | | (5,862,000 | ) | | | (3,614,000 | ) |
| Net loss | | | (141,520,000 | ) | | | (62,868,000 | ) |
| Net loss attributable to non-controlling interest | | | 10,420,000 | | | | 1,061,000 | |
| Net loss attributable to Ault Alliance, Inc. | | | (131,100,000 | ) | | | (61,807,000 | ) |
| Preferred dividends | | | (963,000 | ) | | | (239,000 | ) |
| Net loss available to common stockholders | | $ | (132,063,000 | ) | | $ | (62,046,000 | ) |
| Comprehensive loss | | | | | | | | |
| Net loss available to common stockholders | | $ | (132,063,000 | ) | | $ | (62,046,000 | ) |
| Other comprehensive loss | | | | | | | | |
| Foreign currency translation adjustment | | | (1,001,000 | ) | | | (1,452,000 | ) |
| Other comprehensive loss | | | (1,001,000 | ) | | | (1,452,000 | ) |
| Total comprehensive loss | | $ | (133,064,000 | ) | | $ | (63,498,000 | ) |
9,099,000 | | | | (4,939,000 | ) | | | 14,038,000 | | | | -284



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| |



Revenues



Revenues by segment for the nine months ended September 30, 2023 and 2022 were as follows:



| | | For the Nine Months Ended | | | Increase | | | | |
| | | September 30, | | | | | | | |
| | | 2023 | | | 2022 | | | (Decrease) | | | % ||
| GIGA | | $ | 27,723,000 | | | $ | 21,530,000 | | | $ | 6,193,000 | GIGA | | | 9,573,000 | | | | 8,708,000 | | | | 865,000 | | | | 10 | % |
| TurnOnGreen | | | 2,766,000 | | | | 3,853,000 | | | | (1,087,000 | ) | | | -28 | % |
| SMC | | | - | | | | 3,383,000 | | | | (3,383,000 | ) | | | -100 | % |
| SMC | | | 21,939,000 | | | | 17,114,000 | | | | 4,825,000 | TurnOnGreen | | | 1,225,000 | | | | 876,000 | | | | 349,000 | | | | 40 | % |
| Sentinum | | | | | | | | | | | | | | | | |
| ROI | | | 28,000 | | | | - | | | | 28,000 | | | | - | |
| Revenue, cryptocurrency mining | | | 23,273,000 | | | | 11,398,000 | | | | 11,875,000 | | | | 104 | % |
| Revenue, commercial real estate leases | | | 1,116,000 | | | | 822,000 | | | | 294,000 | | | | 36 | % |
| Fintech: | | | | | | | | | | | | | | | | |
| Revenue, lending and trading activities | | | 4,337,000 | | | | 32,224,000 | | | | (27,887,000 | ) | | |-87 | % |

| Other | | | 63,000 | | | | 220,000 | | | | (157,000 | ) | | | -71 | % |
| Other | | | 301,000 |
| Energy | | | 38,713,000
| | | | - | | | | 301,000 | | | | - | |
| Total revenue | | $ | 119,930,000 | | | $ | 87,161,000 | | | $ | 32,769,000 | Total revenue | | $ | 44,932,000 | | | $ | 28,943,000 | | | $ | 15,989,000 | | | | 55 | % |



Sentinum



The $6.2 million increase in our GIGA segment revenue for the nine months ended September 30, 2023 included $1.6 million attributable to our acquisition of Giga-tronics Incorporated on September 8, 2022. Continued conflicts and tensions worldwide are driving defense-related investments in force protection technologies at GIGA across the United States, UK, Europe, Asia, and the Middle East. Additionally, demand for key electronics solutions, particularly for customers in medicine and telecommunications, accelerated in the nine months ended September 30, 2023.
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.



TurnOnGreen



TurnOnGreen revenues were down $1.1 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022 due to the cancellation of large projects that contributed to revenue in 2022.
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.




SMC



SMC revenues increased by $4.8 million primarily due to the acquisition of SMC in June 2022.



Energy



Energy revenues from the Circle 8 crane operations increased by $0.3 million, or 2%, for the three months ended March 31, 2024.
revenues from Sentinum's cryptocurrency mining operations increased $11.9 million, as we increased our cryptocurrency mining activities from the prior period, partially offset by 17% lower average Bitcoin prices and a 66% increase in average Bitcoin mining difficulty level in the current year period.



Fintech



Revenues from our lending and trading activities were $4.3 million due to realized gains for the nine months ended September 30, 2023 from our investment portfolio. During the nine months ended September 30, 2022, Ault Lending. generated income from realized gains from investments in marketable securities As well as shares of common stock underlying equity securities issued to Ault Lending in certain financing transactions.$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 for the nine months ended September 30, 2023, included an approximate $3.6 million unrealized loss from our investment in Alzamend Ault Lending also generates revenue through origination fees charged to borrowers and interest generated from each loan.and $1.7 million of realized and unrealized losses from our investment portfolio.



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.



GIGA



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.



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SMC



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.



TurnOnGreen



TurnOnGreen's revenues increased by $0.3 million for the nine months ended September 30, 2023. due to the acquisition of the Circle 8 crane operations in December 2022.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.



Gross Margins



Gross margins decreased to 24% for the nine months ended September 30, 2023, compared to 50% for the nine months ended September 30, 2022. 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 nine months ended September 30, 2023 were impacted by negative margins from our Sentinum cryptocurrency mining segment due to the decline in the price of Bitcoin coupled with an increase in Bitcoin mining difficulty level, offset by favorable 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, and cryptocurrency mining operations, our adjusted gross margins for the nine months ended September 30, 2023 and 2022 would have been 32% and 29%, respectively. 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.



Research and Development



Research and development expenses increased by $3.5 million for the nine months ended September 30, 2023, primarily due to 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.



Selling and Marketing



Selling and marketing expenses were $4.7 million for the nine months ended September 30, 2023, compared to $20.9 million for the nine months ended September 30, 2022, an increase of $5.5 million, or 26%. The increase was the result of $6.4 million higher advertising and promotion costs related to ROI's BitNile metaverse platform, partially offset by a $2.6 million decline in employee related costs and consulting expenses The increase is also attributable to $1.5 million increases in sales and marketing costs from SMC which was acquired in June 2022.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 the deconsolidation of SMC as of November 20, 2023.



General and Administrative



General and administrative expenses were $13.4 million for the nine months ended September 30, 2023, compared to $44.4 million for the nine months ended September 30, 2022, an increase of $15.2 million, or 34%. 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:



| | ∙ | general and administrative costs of $8.4 million from Circle 8, which was acquired in December 2022; |
| | ∙ | $5.2 million lower stock compensation expense; |
| | ∙ | general and administrative costs of $5.3 million from SMC which was acquired in June 2022; |
| | ∙ | $2.6 million decrease in general and administrative expenses from SMC due to the deconsolidation of SMC as of November 20, 2023; and |
| | ∙ | general and administrative costs of $5.3 million from ROI, which was acquired in March 2023; |
| | ∙ | general and administrative costs of $4.3 million from GIGA, which was acquired in September 2022; and |
| | ∙ | general and administrative costs of $1.2 million from AVLP, which was acquired in June 2022. |
| | ∙ | $0.7




The increases above were partially offset by the following decreases in general and administrative expenses:



| | ∙ | $6.5 million lower performance bonus related to realized gains on trading activities. and |



| | ∙ | $2.4 million lower corporate legal fees. |



Impairment of AVLP Goodwill and Intangible Assets



Goodwill



We test the recorded amount of goodwill for impairment on an annual basis on December 31 or more frequently if there are indicators that the carrying amount of the goodwill exceeds its carried value. We performed a goodwill impairment test as of June 30, 2023 related to AVLP as there were indicators of impairment related to certain unforeseen business developments and changes in financial projections.



The valuation of the AVLP reporting unit was determined using a market and income approach methodology of valuation.



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The income approach was based on the projected cash flows discounted to their present value using discount rates, that in the Company's judgment, consider the timing and risk of the forecasted cash flows using internally developed forecasts and assumptions. Under the income approach, the discount rate used is the average estimated value of a market participant's cost of capital and debt, derived using customary market metrics. The analysis included assumptions regarding AVLP's revenue forecast and discount rates of 26.7% using a weighted average cost of capital analysis. The market approach utilized the guideline public company method.



The results of the quantitative test indicated the fair value of the AVLP reporting unit did not exceed its carrying amounts, including goodwill, in excess of the carrying value of the goodwill. As a result, the entire $18.6 million carrying amount of AVLP's goodwill was recognized as a non-cash impairment charge during the nine months ended September 30, 2023.



Intangible Assets



Due to indicators of impairment, AVLP intangible assets were tested for impairment as of June 30, 2023. Based on internally developed forecasts of undiscounted expected future cash flows, it was determined that the carrying amount of the assets were not recoverable and, based on an assessment of the fair value of the assets, impairment of $17.0 million was recognized as a non-cash impairment charge during the nine months ended September 30, 2023.



The tradenames and patents/developed technology intangible assets were valued using the relief-from-royalty method. The relief-from-royalty method is one of the methods under the income approach wherein estimates of a company's earnings attributable to the intangible asset are based on the royalty rate the company would have paid for the use of the asset if it did not own it. Royalty payments are estimated by applying royalty rates of 18% for patents and developed technology and 0.25% for trademarks. The resulting net annual royalty payments are then discounted to present value using a discount factor of 25.7%.



Impairment of Property and Equipment



During the nine months ended September 30, 2023, we recognized an impairment charge of $3.9 million related to property and equipment at ROI's Agora and Bitstream Bitcoin mining operations as they have been unable to commence Bitcoin mining operations, either for themselves or from others through hosting arrangements.



Impairment of Deposit Due to Vendor Bankruptcy Filing



During the nine months ended September 30, 2022, Compute North filed for chapter 11 bankruptcy protection. We had a deposit of approximately $2.0 million with Compute North for services yet to be performed by Compute North. We assessed this financial exposure and recorded an impairment of the deposit totaling $2.0 million during the nine months ended September 30, 2022.



Impairment of Mined Cryptocurrency



Impairment of mined cryptocurrency for the nine months ended September 30, 2023 and 2022 was $0.4 million and $2.9 million, respectively. Impairment losses are attributable to the volatility of the Bitcoin market as market price of Bitcoin drops below our carrying value within the respective periods. The impairment of mined cryptocurrency for the nine months ended September 30, 2023 is lower than the comparable prior year period as the average amount of digital currency held decreased during the first half of 2023 as we generally sold our mined digital currency the next business day.



Other Expense, Net



Other expense, net was $32.7 million for the nine months ended September 30, 2023, compared to $30.7 million for the nine months ended September 30, 2022.
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.



Interest and other income was $0.6 million for the nine months ended September 30, 2023, compared to $1.3 million for the nine months ended September 30, 2022. The increase 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 higher interest rates resulting in higher income from ADRT's 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.



| | 5 | |
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Interest expense was $4.9 million for the nine months ended September 30, 2023, compared to $32.1 million for the nine months ended September 30, 2022. Interest expense for the nine months ended September 30, 2023 includedthree 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 $7.3 million and contractual interest of $5.0 $1.5 million. Interest expense for the nine months ended September 30, 2022 related primarily to 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.



| | 12 | |
| |



The $1.5 million loss on extinguishment of debt for the nine months ended September 30, 2023 related to the August 2023 exchange of preferred stock. liabilities for secured notes. the preferred stock liabilities were remeasured from their fair value prior to the exchange to the fair value of the secured notes at the date of the exchange.
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.



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.



Loss from investment in unconsolidated entity was $0 for the nine months ended September 30, 2023, compared to $0.9 million for the nine months ended September 30, 2022, $0.7 million for the three months ended March 31, 2024, representing our share of losses from our equity method investment in AVLP prior to the June 1, 2022 acquisition.SMC.



Cumulative downward adjustments For impairments for our equity securities without readily determinable fair values held at September 30, 2023.were $9.6 million.
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.



Income Tax Benefit



The income tax benefit was $44,000 and $0.3 million during the three months ended September 30, 2023, compared to a provision of $0.4 million during the nine months ended September 30, 2022. The effective income tax provision rate was 0.4% for the nine months ended September 30, 2023, as compared to a provision of 0.6% for the nine months ended September 30, 2022.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.



Liquidity and Capital Resources



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 to cash provided by operating activities and 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.



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 nine months ended September 30, 2023 included $71.2 million net cash provided by marketable securities from trading activities related to the operations of Ault Lending and $21.3 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 nine months ended September 30, 2023 included $3.6 three months ended March 31, 2024 included $1.7 million cash used in operating activities from discontinued operations.



Net cash used in investing activities was $1.7 million for the nine months ended September 30, 2023, compared to $115.4 million for the nine months ended September 30, 2022, which included $80.1 million of capital expenditures, primarily for Bitcoin mining equipment. 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 the $10.7 million purchase of equity securities, partially offset by proceeds from the sale of fixed assets of $4.5 million. Net cash used in investing activities for the nine months ended September 30, 2023 included $6.1 $0.6 million cash used in investing activities from discontinued operations.



Net cash provided by financing activities was $13.0 million for the nine months ended September 30, 2023, compared to net cash provided by 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:



| | ∙ | 2022 Common ATM Offering - During the nine months ended September 30, 2023, | | ∙ | During the period between January 1, 2024 through March 13, 2024, we sold an aggregate of 25.6 million shares of common stock pursuant to the 2023 Common ATM Offering for gross proceeds of $14.6 million and effective March 14, 2024, the 2023 Common ATM Offering was terminated; |



| | ∙ | 2022 Preferred ATM Offering - During the nine months ended September 30, 2023, we sold an aggregate of 162,175 shares | | ∙ | $2.0 million proceeds from sales of Series C preferred stock, pursuant to the 2022 Preferred ATM Offering for net proceeds of $3.0 million and effective June 16, 2023, the 2022 Preferred ATM Offering was terminated; |related party; |



| | ∙ | 2023 Common ATM Offering -On June 9, 2023, we entered into the 2023 Common ATM Offering with Ascendiant Capital. During the nine months ended September 30, 2023, we sold an aggregate of 10.8 million shares of common stock pursuant to the 2023 Common ATM Offering for gross proceeds of $21.2 million; |
| | ∙ | $1.5 million proceeds from subsidiaries' sale of stock to non-controlling interests; |



| | ∙ | $1.9 million payments on notes payable, related party; |



| | ∙ | $1.3 million payments of preferred dividends; |



| | ∙ | $5.2 million payments on notes payable, partially offset by $2.3 million proceeds from notes payable; and |



| | ∙ | $1.8 million proceeds from convertible notes payable, partially offset by $1.0 million payments on convertible notes payable. |



Net provided by financing activities for the nine months ended September 30, 2023 included $5.2 million cash provided by financing activities from discontinued operations



Financing Transactions Subsequent to September 30, 2023



Financing transactions subsequent to September 30, 2023 included the following:



2023 Common ATM Offering



During the period between October 1, 2023 through November 17, 2023, we sold an aggregate of 54.2 million shares of common stock pursuant to the 2023 Common ATM Offering for gross proceeds of $10.0 million.



Senior Secured Convertible Note, Related Party



On October 13, 2023 (the "Closing Date"), we entered into a note purchase agreement with Ault & Company, pursuant to which we sold to the Purchaser (i) a senior secured convertible promissory note in the principal face amount of $17.5 million (the "Note") and warrants (the "Warrants") to purchase shares of our common stock for a total purchase price of up to $17.5 million (the "Transaction").



The purchase price was comprised of the following: (i) cancellation of $4.6 million of cash loaned by Ault & Company to us since June 8, 2023 pursuant to the loan agreement; (ii) cancellation of $11.6 million of term loans made by us to Ault & Company in exchange for Ault & Company assuming liability for the payment of $11.6 million of secured notes; and (iii) the retirement of $1.25 million stated value of 125,000 shares of our Series B Convertible Preferred Stock (representing all shares issued and outstanding of that series) being transferred from Ault & Company to us.
was $1.1 million and $2.5 million for the three months ended March 31, 2024 and 2023, respectively.




The Note has a principal face amount of $17.5 million and has a maturity date of October 12, 2028 (the "Maturity Date"). The Note bears interest at the rate of 10% per annum. Interest is payable, at the Purchaser's option, in cash or shares of Common Stock at the applicable Conversion Price (as defined below). Accrued interest is payable on the Maturity Date, provided, however, that Ault & Company has the option, on not less than 10 calendar days' notice to us, to require payment of accrued but unpaid interest on a monthly basis in arrears.



The Note is convertible into shares of common stock at a conversion price equal to the greater of (i) $0.10 per share (the "Floor Price"), and (ii) the lesser of (A) $0.2952 or (B) 105% of the volume weighted average price of the common stock during the ten trading days immediately prior to the date of conversion (the "Conversion Price"). The Conversion Price is subject to adjustment in the event of an issuance of common stock at a price per share lower than the Conversion Price then in effect, as well as upon customary stock splits, stock dividends, combinations or similar events. The Floor Price shall not be adjusted for stock dividends, stock splits, stock combinations and other similar transactions.



the Warrants grant Ault & Company the right to purchase 47,685,988 shares of common stock. The Warrants have a five-year term, expiring on the fifth anniversary of the Closing Date, and become exercisable on the first business day after the six-month anniversary of the Closing Date. The exercise price of the Warrants is $0.1837, which is subject to adjustment in the event of customary stock splits, stock dividends, combinations or similar events.




In addition, we and various of our subsidiaries granted Ault & Company a senior security interest in substantially all of our assets as collateral for the repayment of the Note, which is subordinated to the security interest granted to the holders of the outstanding secured promissory notes.



| | 6 | |
| |



Series C Preferred Purchase Agreement, Related Party
Financing Transactions Subsequent to March 31, 2024



On November 6, 2023, we entered into a securities purchase agreement (the "SPA") with Ault & Company, pursuant to which we agreed to sell to Ault & Company up to 50,000 shares of Series C convertible 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 up to $50 million.of which up to $17.5 million of the Note may be tendered for cancellation. The consummation of the transactions contemplated by the SPA, specifically the conversion of the Series C convertible preferred stock and the exercise of the warrants in an aggregate number in excess of 19.99% on the execution date of the Agreement, are subject to various customary closing conditions as well as regulatory and stockholder approval. In addition to customary closing conditions, the closing of the financing is also conditioned upon the receipt by Ault & Company of financing to consummate the transaction. The SPA contains customary termination provisions for Ault & Company under certain circumstances, and the Agreement shall automatically terminate if the closing has not occurred prior to December 29, 2023, although such date may be extended by Ault & Company for a period of 90 days as set forth in the SPA.$0.5 million.



Series D Preferred Purchase Agreement, Related Party



On November 15, 2023, we purchased from ROI 603.44 shares of ROI's newly designated Series D Convertible Preferred Stock for a total purchase price of $15.1 million. The purchase price was paid by the cancellation of $15.1 million of cash advances made by us to ROI between January 1, 2023 and November 9, 2023. The preferred shares each have a stated value of $25,000 per share and each preferred share is convertible into a number of shares of ROI's common stock determined by dividing the stated value by $0.51, or an aggregate of 29.6 million shares of ROI common stock, subject to adjustment in the event of an issuance of ROI 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 preferred shares holders are entitled to receive dividends at a rate of 10% per annum from issuance until November 14, 2033. In addition, for as long as at least 25% of the Preferred Shares remain outstanding, ROI must obtain our consent with respect to certain corporate events, including reclassifications, fundamental transactions, stock redemptions or repurchases, increases in the number of directors, and declarations or payment of dividends, and further ROI is subject to certain negative covenants, including covenants against issuing additional shares of capital stock or derivative securities, incurring indebtedness, engaging in related party transactions, selling of properties having a value of over $50,000, altering the number of directors, and discontinuing the business of any subsidiary, subject to certain exceptions and limitations.
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.




Critical Accounting Policies



Variable Interest Entities



The accounting guidance requires an enterprise to perform an analysis to determine whether the enterprise's variable interest or interests give it a controlling financial interest in a variable interest entity; to require ongoing reassessments of whether an enterprise is The primary beneficiary of a Variable Interest Entity ("VIE"); to eliminate the solely quantitative approach previously required for determining the primary beneficiary of a VIE; to add an additional reconsideration event for determining whether an entity is a VIE when any changes in facts and circumstances occur such that holders of the equity investment at risk, as a group, lose the power from voting rights or similar rights of those investments to direct the activities of the entity that most significantly impact the entity's economic performance; and to require enhanced disclosures that will provide readers of financial statements with more transparent information about an enterprise's involvement in a VIE.



For VIEs, the Company assesses whether it is the primary beneficiary as prescribed by the accounting guidance On the consolidation of a VIE.
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.




The Company evaluates its business relationships with related parties to identify potential VIEs under ASC 810, Consolidation. The Company consolidates VIEs in which it is considered to be the primary beneficiary. Entities are considered to be the primary beneficiary if they have both of the following characteristics: (i) the power to direct the activities that, when taken together, most significantly impact the VIE's performance; and (ii) the obligation to absorb losses and right to receive the returns from the VIE that would be significant to the VIE. The Company's judgment with respect to its level of influence or control of an entity involves the consideration of various factors including the form of its ownership interest its representation in the entity's governance, the size of its investment, estimates of future cash flows, its ability to participate in policy making decisions and the rights of the other investors to participate in the decision making process and to replace the Company as manager and/or liquidate the joint venture, if applicable.



| | 15%. | |
| |



Business Combination



We allocate The purchase price of an acquired business to the tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values on the acquisition date. Any excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill. Acquired customer relations, technology, trade names and know how are recognized at fair value. The purchase price allocation process requires management to make significant Estimatesand assumptions, especially at the acquisition date with respect to intangible assets. Direct transaction costs associated with the business combination are expensed as incurred. The allocation of the consideration transferred in certain cases may be subject to revision based on the final determination of fair values during the measurement period, which may be up to one year from the acquisition date. We include the results of operations of the business that we have acquired in our consolidated results prospectively from the date of acquisition.




Critical Accounting Estimates



There have been no material changes to our critical accounting estimates previously disclosed in the 2023 Annual Report.




If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquire is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognized in profit or loss.



| | 16 | |
| |



| | ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |



Not applicable for a smaller reporting company.



| | ITEM 4. | CONTROLS AND PROCEDURES |



Evaluation of Disclosure Controls and Procedures



We have established disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.



Our principal executive officer and principal financial officer, with the assistance of other members of the Company's management, have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Based upon our evaluation, each of our principal executive officer and principal financial officer has concluded that the Company's internal control over financial reporting was not effective as of the end of the period covered by this Quarterly Report on Form 10-Q because the Company has not yet completed its remediation of the material weakness previously identified and disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, the end of its most recent fiscal year.



Management has identified the following material weaknesses:



| | 1. | We do not have sufficient resources in our accounting department, which restricts our ability to gather, analyze and properly review information related to financial reporting, including applying complex accounting principles relating to consolidation accounting, related party transactions, fair value estimates and analysis of financial instruments for proper classification in the consolidated financial statements, in a timely manner; |



| | 2. | Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties during our assessment of our disclosure controls and procedures and concluded that the control deficiency that resulted represented a material weakness; |



| | 3. | Our primary user access controls (i.e., provisioning, de-provisioning, privileged access and user access reviews) to ensure appropriate authorization and segregation of duties that would adequately restrict user and privileged access to the financially relevant systems and data to appropriate personnel were not designed and/or implemented effectively. We did not design and/or implement sufficient controls for program change management to certain financially relevant systems affecting our processes; and |



| | 4. | The Company did not design and/or implement user access controls to ensure appropriate segregation of duties or program change management controls for certain financially relevant systems impacting the Company's processes around revenue recognition and digital assets to ensure that IT program and data changes affecting the Company's (i) financial IT applications, (ii) digital assets mining equipment, and (iii) underlying accounting records, are identified, tested, authorized and implemented appropriately to validate that data produced by its relevant IT system(s) were complete and accurate. Automated process-level controls and manual controls that are dependent upon the information derived from such financially relevant systems were also determined to be ineffective as a result of such deficiency. In addition, the Company has not effectively designed a manual key control to detect material misstatements in revenue. |



| | 7 | |
| |



Planned Remediation



Management continues to work to improve its controls related to our material weaknesses, specifically relating to user access and change management surrounding our IT systems and applications. Management will continue to implement measures to remediate material weaknesses, such that these controls are designed, implemented, and operating effectively. The remediation actions include: (i) enhancing design and documentation related to both user access and change management processes and control activities; and (ii) developing and communicating additional policies and procedures to govern the area of IT change management. In order to achieve the timely implementation of the above, management has commenced the following actions and will continue to assess additional opportunities for remediation on an ongoing basis:



| | ∙ | Engaging a third-party specialist to assist management with improving the Company's overall control environment, focusing on change management and access controls; |



| | ∙ | Implementing new applications and systems that are aligned with management's focus on creating strong internal controls; and |



| | ∙ | Continuing to increase headcount across the Company, with a particular focus on hiring individuals with strong Sarbanes Oxley and internal control backgrounds. |



We are currently working to improve and simplify our internal processes and implement enhanced controls, as discussed above, to address the material weaknesses in our internal control over financial reporting and to remedy the ineffectiveness of our disclosure controls and procedures. These material weaknesses will not be considered to be remediated until the applicable remediated controls are operating for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.



Despite the existence of these material weaknesses, we believe that the condensed consolidated financial statements included in the period covered by this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles.



Changes in Internal Controls over Financial Reporting.



Except as detailed above, during the fiscal quarter ended March 31, 2024, there were no significant changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.



| | 8 | |
| |



PART II - OTHER INFORMATION



| | ITEM 1. | LEGAL PROCEEDINGS |



Litigation Matters



The Company is involved in litigation arising from other matters in the ordinary course of business. We are regularly subject to claims, suits, regulatory and government investigations, and other proceedings involving labor and employment, commercial disputes, and other matters. Such claims, suits, regulatory and government investigations, and other proceedings could result in fines, civil penalties, or other adverse consequences.



Certain of these outstanding matters include speculative, substantial or indeterminate monetary amounts. We record a liability when we believe that it is probable that a loss has been incurred and the amount can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the reasonably possible loss. We evaluate developments in our legal matters that could affect the amount of liability that has been previously accrued, and the matters and related reasonably possible losses disclosed, and make adjustments as appropriate. Significant judgment is required to determine both likelihood of there being and the estimated amount of a loss related to such matters.



With respect to our other outstanding matters, based on our current knowledge, we believe that the amount or range of reasonably possible loss will not, either individually or in aggregate, have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. However, the outcome of such matters is inherently unpredictable and subject to significant uncertainties.



| | ITEM 1A. | RISK FACTORS |



There are no updates or changes to the risk factors set forth in our amended Annual Report on Form 10-K for the year ended December 31, 2023.



| | ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |



From July 1, 2023 through September 30, 2023, Ault Alpha LP purchased 147,000 shares of common stock. Ault Alpha LP may be deemed to be an "affiliated purchaser" as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended. The purchases were made through open market transactions.



| | | Total | | | Average Price | | | Total Number of | | | Maximum | |
| | | Number of | | | Paid Per | | | Shares Purchased | | | Number of Shares | |
| | | Shares | | | Share | | | as Part of Publicly | | | That May Yet Be | |
| | | Purchased | | | | | | Announced Plans | | | Purchased Under | |
| | | | | | | | | or Programs | | | Plans or Programs | |
| July 1, 2023 - July 31, 2023 | | | 147,000 | | | $ | 4.22 | | | | | | | | | |
| August 1, 2023 - August 31, 2023 | | | - | | | $ | - | | | | | | | | | |
| September 1, 2023 - September 30, 2023 | | | - | | | $ | - | | | | | | | | | |
| Total | | | 147,000 | | | $ | 4.22 | | | | - | | | | - | |



| | 19 | |
| |



From July 1, 2023 through September 30, 2023, Ault Alpha LP purchased 9,500 shares of series D preferred stock. Ault Alpha LP may be deemed to be an "affiliated purchaser" as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended. The purchases were made through open market transactions.



| | | Total | | | Average Price | | | Total Number of | | | Maximum | |
| | | Number of | | | Paid Per | | | Shares Purchased | | | Number of Shares | |
| | | Shares | | | Share | | | as Part of Publicly | | | That May Yet Be | |
| | | Purchased | | | | | | Announced Plans | | | Purchased Under | |
| | | | | | | | | or Programs | | | Plans or Programs | |
| July 1, 2023 - July 31, 2023 | | | 9,500 | | | $ | 15.50 | | | | | | | | | |
| August 1, 2023 - August 31, 2023 | | | - | | | $ | - | | | | | | | | | |
| September 1, 2023 - September 30, 2023 | | | - | | | $ | - | | | | | | | | | |
| Total | | | 9,500 | | | $ | 15.50 | | | | - | | | | - | |
None.



| | ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |



None.



| | ITEM 4. | MINE SAFETY DISCLOSURES |



Not applicable.



| | ITEM 5. | OTHER INFORMATION |



On November 15, 2023, we filed the certificate of designation of the Series C convertible preferred stock to be issued pursuant to the SPA entered into with Ault & Company on November 6, 2023. As of the date of this filing, no shares of Series C convertible preferred stock have been issued.
None.



| | ITEM 6. | EXHIBITS |



| Exhibit | | Description |
| | | |
| Number | | |
| 3.1 | | Form of Certificate of Determination of Preferences, Rights and Limitations of Series B Convertible Preferred Stock, dated March 3, 2017. Incorporated by reference to the Current Report on Form 8-K filed on March 9, 2017 as Exhibit 3.1 thereto. |
| 3.2 | | Certificate of Incorporation, dated September 22, 2017. Incorporated herein by reference to the Current Report on Form 8-K filed on December 29, 2017 as Exhibit 3.1 thereto. |
| 3.2 | | Certificate of Designations of Rights and Preferences of 10% Series A Cumulative Redeemable Perpetual Preferred Stock, dated September 13, 2018. Incorporated herein by reference to the Current Report on Form 8-K filed on September 14, 2018 as Exhibit 3.1 thereto. |
| 3.3 | | Certificate of Amendment to Certificate of Incorporation, dated January 2, 2019. Incorporated by reference to the Current Report on Form 8-K filed on January 3, 2019 as Exhibit 3.1 thereto. |



| | 9 | |
| |



| 3.4 | | Certificate of Amendment to Certificate of Incorporation (1-for-20 Reverse Stock Split of Common Stock), dated March 14, 2019. Incorporated herein by reference to the Current Report on Form 8-K filed on March 14, 2019 as Exhibit 3.1 thereto. |
| 3.6 | | Certificate of Elimination of the Series C convertible redeemable preferred stock of Ault Alliance, Inc. Incorporated herein by reference to the Current Report on Form 8-K filed on January 27, 2023 as Exhibit 3.1 thereto. |
| 3.5
| 3.7 | | Certificate of Ownership and Merger. Incorporated by reference to the Current Report on Form 8-K filed on January 19, 2021 as Exhibit 3.1 thereto. |
| 3.8 | | Amended and Restated Bylaws, effective as of November 2, 2021. Incorporated by reference to the Current Report on Form 8-K filed on November 3, 2021 as Exhibit 3.1 thereto. |
2.1 thereto. |
| 3.6
| |



| 3.9 | | Certificate of Ownership and Merger, as filed with the Secretary of State of the State of Delaware on December 1, 2021. Incorporated by reference to the Current Report on Form 8-K filed on December 13, 2021 as Exhibit 3.1 thereto. |
| 3.7 | | Certificate of Designation, Preferences and Rights relating to the 13.00% Series D Cumulative Redeemable Perpetual Preferred Stock, dated May 25, 2022. Incorporated by reference to the Registration Statement on Form 8-A filed on May 26, 2022 as Exhibit 3.6 thereto. |
| 3.8 | | Certificate of Increase of the Designated Number of Shares of 13.00% Series D Cumulative Redeemable Perpetual Preferred Stock, dated June 10, 2022. Incorporated by reference to the Current Report on Form 8-K filed on June 14, 2022 as Exhibit 3.1 thereto. |
| 3.9 | | Certificate of Correction to the Certificate of Designation, Rights and Preferences of 13.00% Series D Cumulative Redeemable Perpetual Preferred Stock, dated June 16, 2022. Incorporated by reference to the Current Report on Form 8-K filed on June 17, 2022 as Exhibit 3.1 thereto. |
| 3.10 | | Certificate of Amendment to Certificate of Incorporation (1-for-300 Reverse Stock Split of Common Stock), dated May 15, 2023. Incorporated herein by reference to the Current Report on Form 8-K filed on May 16, 2023 as Exhibit 3.1 thereto. |
| 3.11 | | Certificate of Elimination of the Series E convertible redeemable preferred stock of Ault Alliance, Inc. Incorporated herein by reference to the Current Report on Form 8-K filed on August 18, 2023 as Exhibit 3.1 thereto. |
| 3.12 | | Certificate of Elimination of the Series F convertible redeemable preferred stock of Ault Alliance, Inc. Incorporated herein by reference to the Current Report on Form 8-K filed on August 18, 2023 as Exhibit 3.2 thereto. |
| 3.13 | | Certificate of Elimination of the Series G convertible redeemable preferred stock of Ault Alliance, Inc. Incorporated herein by reference to the Current Report on Form 8-K filed on August 18, 2023 as Exhibit 3.3 thereto. |
| 3.17 | | Certificate of Elimination of the Series C convertible preferred stock of Ault Alliance, Inc. Incorporated herein by reference to the Current Report on Form 8-K filed on October 12, 2023 as Exhibit 3.1 thereto. |
| 3.14
| 3.18 | | Certificate of Designation of Preferences, Rights and Limitations of Series C Cumulative Preferred Stock, dated November 15, 2023. |
| 10.1 | | Amendment to At-The-Market Issuance Sales Agreement, dated July 12, 2023, with Ascendiant Capital Markets, LLC. Incorporated Incorporated herein by reference to the Current Report on Form 8-K filed on November 21, 2023 as Exhibit 3.1 thereto. |
| 10.2 | | Form of First Amendment and Joinder to Loan and Guarantee Agreement. Incorporated by reference to the Current Report on Form 8-K filed on July 20, 2023 as Exhibit 10.1 thereto. |
| 3.15 | | Certificate of Elimination of the Series B convertible redeemable preferred stock of Ault Alliance, Inc. Incorporated herein
| 10.3 | | Form of Montana Security Agreement. Incorporated by reference to the Current Report on Form 8-K filed on July 20, 2023 as Exhibit 10.2 thereto. |
| 10.4 | | Form of the Circle 8 Pledge. Incorporated by reference to the Current Report on Form 8-K filed on December 12, 2023 as Exhibit 3.1 thereto. |
| 10.5 | | Form of the Florida Mortgage Amendment Incorporated by reference to the Current Report on Form 8-K filed on July 20, 2023 as Exhibit 10.4 thereto. |
| 3.16 | | Certificate of Amendment to Certificate of Incorporation filed with the Delaware Secretary of State on January 12, 2024.
| 10.6 | | Form of the Michigan Mortgage Amendment. Incorporated by reference to the Current Report on Form 8-K filed on July 20, 2023 as Exhibit 10.5 thereto. |
| 10.7 | | Form of Exchange Agreement. Incorporated by reference to the Current Report on Form 8-K filed on August 3, 2023 as Exhibit 10.1 thereto. |
| 10.8 | | Form of Exchange Note. Incorporated by reference to the Current Report on Form 8-K filed on January 12, 2024 as Exhibit 3.2 thereto. |
| 10.9 | | Form of Amended and Restated Assignment. Incorporated by reference to the Current Report on Form 8-K/A filed on August 16, 2023 as Exhibit 10.2 thereto. |
| 3.17 | | Second Amended and Restated Bylaws, effective as of January 11, 2024.
| 10.10 | | Form of Guaranty. Incorporated by reference to the Current Report on Form 8-K filed on August 3, 2023 as Exhibit 10.3 thereto. |
| 10.11 | | Form of Investor Agreement. Incorporated by reference to the Current Report on Form 8-K filed on September 1, 2023 as Exhibit 10.1 thereto. |
| 10.12 | | Form of 7.00% Senior Note due 2024 Incorporated by reference to the Current Report on Form 8-K filed on September 1, 2023 January 12, 2024 as Exhibit 3.1 thereto. |
| 3.18 | | Certificate of Increase to Certificate Designations of Preferences, Rights and Limitations of Series C Convertible Preferred Stock. Incorporated herein
| |



| 10.13 | | Form of 8.50% Senior Note due 2026. Incorporated by reference to the Current Report on Form 8-K filed on September 1, 2023 as Exhibit 4.2 thereto. |
| 10.14 | | Form of 10.50% Senior Note due 2028. Incorporated by reference to the Current Report on Form 8-K filed on April 4, 2024 as Exhibit 3.1 thereto. |
| 10.15 | | Amendment to At-The-Market Issuance Sales Agreement, dated September 7, 2023, with Ascendiant Capital Markets, LLC. Incorporated by reference to the Current Report on Form 8-K filed on September 8, 2023 as Exhibit 10.1 thereto. |
| 10.16 | | Form of Term Note. Incorporated by reference to the Current Report on Form 8-K filed on September 11, 2023 as Exhibit 4.1 thereto. |

| 10.1 | | Amendment to the Securities Purchase Agreement, Certificate of Designation and Series C Warrants, dated March 25, 2024.
| 10.17 | | Form of Guaranty. Incorporated by reference to the Current Report on Form 8-K filed on September 11, 2023 as Exhibit 10.1 thereto. |
| 10.18 | | Securities Exchange Agreement, dated September 27, 2023, by and between the Company and the Investor. Incorporated by reference to the Current Report on Form 8-K filed on September 28, 2023 as Exhibit 10.1 thereto. |March 26, 2024 as Exhibit 10.3 thereto. |
| 10.19 | | Form of Note. Incorporated by reference to the Current Report on Form 8-K filed on September 28, 2023 as Exhibit 4.1 thereto. |
| 31.1* | | Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a). |
| 31.2* | | Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a). |
| 32.1** | | Certification of Chief Executive Officer and Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code. |
| 101.INS* | | Inline XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| 101.SCH* | | Inline XBRL Taxonomy Extension Schema Document. |
| 101.CAL* | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF* | | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| 101.LAB* | | Inline XBRL Taxonomy Extension Label Linkbase Document. |
| 101.PRE* | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
| 101.DEF* | | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| 104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |



_______________________

| | | |
* Filed herewith.|

** Furnished herewith.|



| | 10 | |
| |



SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Dated: May 20, 2024





| | | AULT ALLIANCE, INC. | |
| | | | | | |
| | By: | | | /s/ William B. Horne | |
| | | | | William B. Horne | |
| | | | | Chief Executive Officer | |
| | | | | (Principal Executive Officer) | |
| | | | | | |
| | | | | |
|
| | By: | | | /s/ Kenneth S. Cragun | |
| | | | | Kenneth S. Cragun | |
| | | | | Chief Financial Officer | |
| | | | | (Principal Accounting Officer) | |





23









Exhibit 3.18



DelawareThe First StatePage 1 6551776 8100Authentication: 204606135SR# 20233988486Date: 11-16-23You may verify this certificate online at corp.delaware.gov/authver.shtmlI, JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF DESIGNATION OF "AULT ALLIANCE, INC.", FILED IN THIS OFFICE ON THE FIFTEENTH DAY OF NOVEMBER, A.D. 2023, AT 5:38 O`CLOCK P.M.



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EXHIBIT 31.1

CERTIFICATION



I, William B. Horne, certify that:



1. I have reviewed this quarterly report on Form 10-Q of Ault Alliance, Inc.;



2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:



(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;



(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;



(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and



5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):



(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and



(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Dated: May 20, 2024



| /s/ William B. Horne | |
| Name: William B. Horne | |
| Title: Chief Executive Officer | |
| (Principal Executive Officer) | |















EXHIBIT 31.2

CERTIFICATION



I, Kenneth S. Cragun, certify that:



1. I have reviewed this quarterly report on Form 10-Q of Ault Alliance, Inc.;



2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:



(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;



(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;



(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and



5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):



(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and



(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Dated: May 20, 2024



| /s/ Kenneth S. Cragun | |
| Name: Kenneth S. Cragun | |
| Title: Chief Financial Officer | |
| (Principal Accounting Officer) | |















EXHIBIT 32.1



CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In connection with the quarterly report of Ault Alliance, Inc. (the "Company") on Form 10-Q for the period ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:



(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.



| Date: May 20, 2024 | | |
| | | |
| | By: /s/ William B. Horne | |
| | Name: William B. Horne | |
| | Title: Chief Executive Officer | |
| | (Principal Executive Officer) | |
| | | |
| | | |
| Date: May 20, 2024 | | |
| | | |
| | By: /s/ Kenneth S. Cragun | |
| | Name: Kenneth S. Cragun | |
| | Title: Chief Financial Officer | |
| | (Principal Accounting Officer) | |