0000896493 ault:TotalMember 2023-01-01 2023-06-30

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~Amendment No. 1 to~~

FORM ~~10-Q/A~~10-Q

x	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the quarterly period ended June 30, ~~2022~~2023

☐o	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 Pkwy #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:

~~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 x No ¨o

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 x No ¨o

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 ¨o	Accelerated filer ¨o
Non-accelerated filer x	Smaller reporting company x
Emerging growth company ¨o

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. ¨o

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

At August 18, ~~2022~~2023, the registrant had outstanding ~~330,961,668~~5,553,027 shares of common stock.

~~EXPLANATORY NOTE~~

This Amendment No. 1 to the Quarterly Report on Form 10-Q/A (the “Amendment”) amends the Quarterly Report on Form 10-Q of Ault Alliance, Inc., which was then known as BitNile Holdings, Inc. (the “Company”) for the six months ended June 30, 2022 (the “Original Filing”), that was originally filed with the U.S. Securities and Exchange Commission on August 22, 2022. This Report only amends and restates Item 1, Item 2 and Item 4 of Part I of the Original Report to reflect the restatement. The foregoing items have not been updated to reflect other events occurring after the date of the Original Report (other than the Name Change, as defined below), or to modify or update those disclosures affected by subsequent events. Subsequent to the date of filing of the Original Filing, the Company merged its wholly owned subsidiary, Ault Alliance, Inc., with and into the Company, and in connection therewith, changed its name from BitNile Holdings, Inc. to Ault Alliance, Inc. (the “Name Change”). As such, other than on the cover page of this Amendment, the signature page to this Amendment, and the revised disclosures contained in Item 1 and Item 2, which reflects the Name Change, all other references in this Amendment to Ault Alliance, Inc. refers to the former wholly owned subsidiary of the same name, and not to the Company. In addition, the exhibit list in Item 6 of Part II has been updated only to include currently dated certifications from the Company’s Chief Executive Officer and Chief Financial Officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, are filed with this Amendment as Exhibit 31.1, 31.2 and 32.1.

The Amendment is being filed to correct an error in classification with respect to changes in fair value of financial instruments issued by a related party. The changes in fair value were erroneously recorded in other comprehensive income (loss) and have been reclassified to correct for the error within the statement of operations.

Further, this Amendment also includes certain limited modifications to reflect the correct classification in disclosures in the Company’s Note 20 Net (Loss) Income per Share footnote in the Company’s Notes to Condensed Consolidated Financial Statements.

AULT ALLIANCE, INC.

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	F-1

	Condensed Consolidated Balance Sheets as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022	F-1

	Condensed Consolidated Statements of Operations and Comprehensive ~~(Loss) Income~~Loss for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022	F-3

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022	F-4

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, ~~2022~~2023 and ~~2021~~2022	F-8

	Notes to Condensed Consolidated Financial Statements	F-10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	1315

Item 4.	Controls and Procedures	1315

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	1517
Item 1A.	Risk Factors	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	1817
Item 3.	Defaults Upon Senior Securities	18
Item 4.	Mine Safety Disclosures	18
Item 5.	Other Information	18
Item 6.	Exhibits	1918

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 report and our Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2021,~~2022, as amended, 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. Readers are urged to carefully review and consider the various disclosures made in this Form 10-Q and in other documents we file from time to time with the Securities and Exchange Commission that disclose risks and uncertainties that may affect our business. The forward-looking statements in this 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 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)


	June 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	24,133,000	$	15,912,000	$	19,705,000	$	10,492,000
Restricted cash		4,672,000		5,321,000		1,092,000		3,563,000
Cash and marketable securities held in trust account						-		118,193,000
Marketable equity securities		17,467,000		40,380,000		653,000		6,590,000
Digital currencies		2,745,000		2,165,000
Accounts receivable		18,076,000		6,455,000		13,534,000		19,586,000
Accrued revenue		2,177,000		2,283,000
Inventories		20,833,000		5,482,000		20,999,000		22,080,000
Investment in promissory notes and other, related parties		2,770,000		2,842,000
Investment in promissory notes and other, related party						2,968,000		2,868,000
Loans receivable, current						1,165,000		7,593,000
Prepaid expenses and other current assets		13,734,000		15,436,000		16,745,000		14,744,000
TOTAL CURRENT ASSETS		106,607,000		96,276,000		76,861,000		205,709,000

Cash and marketable securities held in Trust Account		116,895,000		116,725,000
Cash and marketable securities held in trust account						2,143,000		-
Intangible assets, net		8,084,000		4,035,000		17,290,000		34,786,000
Goodwill		55,322,000		10,090,000		9,158,000		27,902,000
Property and equipment, net		245,987,000		174,025,000		227,860,000		229,914,000
Right-of-use assets		7,735,000		5,243,000		7,333,000		8,419,000
Investments in common stock, related parties		8,845,000		13,230,000		5,836,000		6,449,000
Investments in other equity securities		38,495,000		30,482,000		25,856,000		42,494,000
Investment in unconsolidated entity		-		22,130,000
Loans receivable		4,352,000		14,337,000
Other assets		3,949,000		3,713,000		6,053,000		5,841,000
TOTAL ASSETS	$	596,271,000	$	490,286,000	$	378,390,000	$	561,514,000

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable and accrued expenses	$	43,525,000	$	22,755,000	$	81,131,000	$	63,411,000
Investment margin accounts payable		-		18,488,000
Dividend payable in TurnOnGreen common stock						5,200,000		-
Operating lease liability, current		2,484,000		1,123,000		2,479,000		2,975,000
Notes payable, net		7,340,000		39,554,000		46,434,000		39,621,000
Convertible notes payable, current		1,884,000		-		3,326,000		1,325,000
Series E Convertible Preferred Liability: $100 stated value per share, $0.001 par value – 83,000 shares authorized; 83,000 and 0 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively (liquidation preference of $8,300,000 as of June 30, 2023)						7,055,000		-
Series G Convertible Preferred Liability: $100 stated value per share, $0.001 par value – 16,000 shares authorized; 14,208 and 0 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively (liquidation preference of $1,421,000 as of June 30, 2023)						1,208,000		-
Redeemable noncontrolling interests in equity of subsidiaries						-		117,993,000
TOTAL CURRENT LIABILITIES		55,233,000		81,920,000		146,833,000		225,325,000

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)

June 30, December 31,
2022 2021
LONG TERM LIABILITIES
Operating lease liability, non-current 5,538,000 4,213,000
Notes payable 55,547,000 55,055,000
Convertible notes payable 14,209,000 468,000
Deferred underwriting commissions of Ault Disruptive subsidiary 3,450,000 3,450,000

TOTAL LIABILITIES 133,977,000 145,106,000

COMMITMENTS AND CONTINGENCIES
Redeemable noncontrolling interests in equity of subsidiaries 116,895,000 116,725,000

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 June 30, 2022 and December 31, 2021
   (redemption amount and liquidation preference of $176,000 as of
   June 30, 2022 and December 31, 2021)
Series B Convertible Preferred Stock, $10 stated value per share, - -
   share, $0.001 par value – 500,000 shares authorized; 125,000 shares issued
   and outstanding at June 30, 2022 and December 31, 2021 (liquidation
   preference of $1,250,000 at June 30, 2022 and December 31, 2021)
Series D Cumulative Redeemable Perpetual Preferred Stock, $25 stated
   value per share, $0.001 par value – 2,000,000 shares authorized;
   shares authorized, 146,618 shares and 0 shares issued and outstanding at
   June 30, 2022 and December 31, 2021, respectively (liquidation preference of
  $3,665,450 and $0 as of June 30, 2022 and December 31, 2021, respectively)
Class A Common Stock, $0.001 par value – 500,000,000 shares authorized; 324,000 84,000
  324,440,579 and 84,344,607 shares issued and outstanding at June 30,
   2022 and December 31, 2021, respectively
Class B Common Stock, $0.001 par value – 25,000,000 shares authorized; - -
   0 shares issued and outstanding at June 30, 2022 and December 31, 2021
Additional paid-in capital 549,713,000 385,644,000
Accumulated deficit (200,184,000 ) (145,600,000 )
Accumulated other comprehensive loss (1,863,000 ) (106,000 )
Treasury stock, at cost (20,639,000 ) (13,180,000 )
TOTAL AULT ALLIANCE STOCKHOLDERS’ EQUITY 327,351,000 226,842,000

Non-controlling interest 18,048,000 1,613,000

TOTAL STOCKHOLDERS’ EQUITY 345,399,000 228,455,000

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 596,271,000 $ 490,286,000
June 30, December 31,
2023 2022
LONG TERM LIABILITIES
Operating lease liability, non-current 5,145,000 5,836,000
Notes payable 87,561,000 91,464,000
Convertible notes payable 11,949,000 11,451,000
Deferred underwriting commissions of Ault Disruptive Technologies Corporation (“Ault Disruptive”) subsidiary 3,450,000 3,450,000

TOTAL LIABILITIES 254,938,000 337,526,000

COMMITMENTS AND CONTINGENCIES

Redeemable noncontrolling interests in equity of subsidiaries 1,951,000 -

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 June 30, 2023 and December 31, 2022 (liquidation preference of $176,000 as of June 30, 2023 and December 31, 2022) - -
Series B Convertible Preferred Stock, $10 stated value per share, share, $0.001 par value – 500,000 shares authorized; 125,000 shares issued   and outstanding at June 30, 2023 and December 31, 2022 (liquidation preference of $1,190,000 at June 30, 2023 and December 31, 2022) - -
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 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively (liquidation preference of $10,630,000 and $4,321,000 as of June 30, 2023 and December 31, 2022, respectively) - -
Class A Common Stock, $0.001 par value – 500,000,000 shares authorized; 1,526,411 and 1,274,157 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively 2,000 1,000
Class B Common Stock, $0.001 par value – 25,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2023 and December 31, 2022 - -
Additional paid-in capital 573,386,000 565,904,000
Accumulated deficit (444,371,000 ) (329,078,000 )
Accumulated other comprehensive loss (1,450,000 ) (1,100,000 )
Treasury stock, at cost (29,919,000 ) (29,235,000 )
TOTAL AULT ALLIANCE STOCKHOLDERS’ EQUITY 97,648,000 206,492,000

Non-controlling interest 23,853,000 17,496,000

TOTAL STOCKHOLDERS’ EQUITY 121,501,000 223,988,000

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 378,390,000 $ 561,514,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AULT ALLIANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE ~~(LOSS) INCOME~~LOSS
(Unaudited)

For the Three Months Ended For the Six Months Ended
June 30, June 30,
2021 2021
2022 Restated 2022 Restated
Revenue $ 7,849,000 $ 8,564,000 $ 16,508,000 $ 16,469,000
Revenue, cryptocurrency mining 3,976,000 291,000 7,524,000 421,000
Revenue, hotel operations 4,598,000 - 7,296,000 -
Revenue, lending and trading activities 943,000 53,274,000 18,864,000 58,485,000
Total revenue 17,366,000 62,129,000 50,192,000 75,375,000
Cost of revenue 12,369,000 6,278,000 22,863,000 11,386,000
Gross profit 4,997,000 55,851,000 27,329,000 63,989,000

Operating expenses
Research and development 729,000 531,000 1,424,000 1,133,000
Selling and marketing 6,979,000 1,505,000 13,460,000 2,747,000
General and administrative 19,032,000 7,992,000 32,719,000 13,084,000
Impairment of mined cryptocurrency 1,976,000 - 2,415,000 -
Total operating expenses 28,716,000 10,028,000 50,018,000 16,964,000

(Loss) income from operations (23,719,000 ) 45,823,000 (22,689,000 ) 47,025,000
Other income (expenses)
Interest and other income 81,000 14,000 530,000 51,000
Change in fair value of equity securities, related party -
(5,893,000
)
-

(2,924,000
)
Interest expense (2,031,000 ) (22,000 ) (31,855,000 ) (337,000 )
Change in fair value of marketable equity securities 241,000 (1,915,000 ) 241,000 45,000
Realized gain (loss) on marketable securities (43,000 ) - 66,000 397,000
Loss from investment in unconsolidated entity (391,000 ) - (924,000 ) -
Gain on extinguishment of debt - 447,000 - 929,000
Change in fair value of warrant liability (6,000 ) 290,000 (24,000 ) (388,000 )
Total other expenses, net (2,149,000 ) (7,079,000 ) (31,966,000 ) (2,227,000)

(Loss) income before income taxes (25,868,000 ) 38,744,000 (54,655,000 ) 44,798,000
Income tax (provision) benefit (217,000 ) (3,504,000 ) (217,000 ) (3,510,000 )
Net (loss) income (26,085,000 ) 35,240,000 (54,872,000 ) 41,288,000
Net loss attributable to non-controlling interest 321,000 1,083,000 336,000 3,000
Net (loss) income attributable to Ault Alliance, Inc. (25,764,000 ) 36,323,000 (54,536,000 ) 41,291,000
Preferred dividends (44,000 ) (4,000 ) (49,000 ) (9,000 )
Net (loss) income available to common stockholders $ (25,808,000 ) $ 36,319,000 $ (54,585,000 ) $ 41,282,000

Basic net (loss) income per common share $ (0.09 ) $ 0.72 $ (0.29 ) $ 0.92
Diluted net (loss) income per common share $ (0.09 ) $ 0.69 $ (0.29 ) $ 0.86

Weighted average basic common shares outstanding 289,672,000 50,783,000 190,870,000 45,052,000
Weighted average diluted common shares outstanding 289,672,000 52,780,000 190,870,000 47,574,000

Comprehensive (loss) income
Net (loss) income available to common stockholders $ (25,808,000 ) $ 36,319,000 $ (54,585,000 ) $ 41,282,000
Other comprehensive income (loss)
Foreign currency translation adjustment (1,471,000 ) 134,000 (1,758,000 ) 41,000
Other comprehensive (loss) income (1,471,000 ) 134,000 (1,758,000 ) 41,000
Total comprehensive (loss) income $ (27,279,000 ) $ 36,453,000 $ (56,343,000 ) $ 41,323,000

For the Three Months Ended For the Six Months Ended
June 30, June 30,
2023 2022 2023 2022
Revenue, products $ 12,216,000 $ 7,849,000 $ 25,647,000 $ 16,508,000
Revenue, cryptocurrency mining 8,368,000 3,976,000 15,715,000 7,524,000
Revenue, hotel and real estate operations 4,709,000 4,598,000 7,410,000 7,296,000
Revenue, crane operations 12,590,000 - 25,236,000 -
Revenue, lending and trading activities 9,525,000 943,000 4,586,000 18,864,000
Total revenue 47,408,000 17,366,000 78,594,000 50,192,000
Cost of revenue, products 9,036,000 5,044,000 18,823,000 10,792,000
Cost of revenue, cryptocurrency mining 9,726,000 4,453,000 17,829,000 6,950,000
Cost of revenue, hotel and real estate operations 3,120,000 2,872,000 5,808,000 5,121,000
Cost of revenue, crane operations 7,641,000 - 15,029,000 -
Cost of revenue, lending and trading activities - - 1,180,000 -
Total cost of revenue 29,523,000 12,369,000 58,669,000 22,863,000
Gross profit 17,885,000 4,997,000 19,925,000 27,329,000

Operating expenses
Research and development 1,804,000 729,000 3,646,000 1,424,000
Selling and marketing 9,575,000 6,979,000 18,371,000 13,460,000
General and administrative 21,317,000 19,032,000 43,998,000 32,719,000
Impairment of goodwill and intangible assets 35,570,000 - 35,570,000 -
Impairment of mined cryptocurrency 124,000 1,976,000 263,000 2,415,000
Total operating expenses 68,390,000 28,716,000 101,848,000 50,018,000
Loss from operations (50,505,000 ) (23,719,000 ) (81,923,000 ) (22,689,000 )
Other income (expense):
Interest and other income 2,382,000 81,000 3,579,000 530,000
Interest expense (15,927,000 ) (2,031,000 ) (29,657,000 ) (31,855,000 )
Loss on extinguishment of debt (91,000 ) - (154,000 ) -
Realized and unrealized (loss) gain on marketable securities (206,000 ) 198,000 (244,000 ) 307,000
Loss from investment in unconsolidated entity - (391,000 ) - (924,000 )
Impairment of equity securities - - (9,555,000 ) -
(Loss) gain on the sale of fixed assets (1,754,000 ) - 2,761,000 -
Change in fair value of warrant liability 3,217,000 (6,000 ) 3,217,000 (24,000 )
Total other expense, net (12,379,000 ) (2,149,000 ) (30,053,000 ) (31,966,000 )
Loss before income taxes (62,884,000 ) (25,868,000 ) (111,976,000 ) (54,655,000 )
Income tax provision 1,368,000 217,000 1,105,000 217,000
Net loss (64,252,000 ) (26,085,000 ) (113,081,000 ) (54,872,000 )
Net loss attributable to non-controlling interest 3,569,000 321,000 3,752,000 336,000
Net loss attributable to Ault Alliance, Inc. (60,683,000 ) (25,764,000 ) (109,329,000 ) (54,536,000 )
Preferred dividends (321,000 ) (44,000 ) (550,000 ) (49,000 )
Net loss available to common stockholders $ (61,004,000 ) $ (25,808,000 ) $ (109,879,000 ) $ (54,585,000 )

Basic net loss per common share $ (50.08 ) $ (26.73 ) $ (91.41 ) $ (85.83 )
Diluted net loss per common share $ (50.08 ) $ (26.73 ) $ (91.41 ) $ (85.83 )

Weighted average basic and diluted common shares outstanding 1,218,000 966,000 1,202,000 636,000

Comprehensive loss
Net loss available to common stockholders $ (61,004,000 ) $ (25,808,000 ) $ (109,879,000 ) $ (54,585,000 )
Foreign currency translation adjustment (520,000 ) (1,471,000 ) (350,000 ) (1,758,000 )
Other comprehensive loss (520,000 ) (1,471,000 ) (350,000 ) (1,758,000 )
Total comprehensive loss $ (61,524,000 ) $ (27,279,000 ) $ (110,229,000 ) $ (56,343,000 )

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

AULT ALLIANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
Three Months Ended June 30, ~~2022~~2023

Accumulated
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, April 1, 2022 132,040 $ - 225,015,203 $ 225,000 $ 495,536,000 $ (174,378,000 ) $ (393,000 ) $ 1,640,000 $ (14,172,000 ) $ 308,458,000
Issuance of common stock for restricted stock awards - - 429,379 - - - - - - -
Preferred stock issued 146,618 - - - 3,666,000 - - - - 3,666,000
Preferred stock offering costs - - - - (537,000 ) - - - - (537,000 )
Stock-based compensation 983,000 36,000 1,019,000
Sale of common stock - - 98,995,997 99,000 53,180,000 - - - - 53,279,000
Financing cost in connection with sales of common stock - - - - (1,266,000 ) - - - - (1,266,000 )
Acquisition of non-controlling interests - - - - (1,848,000 ) - - (382,000 ) - (2,230,000 )
Non-controlling interest from AVLP acquisition - - - - - - - 6,738,000 - 6,738,000
Non-controlling interest from SMC acquisition - - - - - - - 10,336,000 - 10,336,000
Purchase of treasury stock - Ault Alpha - - - - - - - - (6,467,000 ) (6,467,000 )
Net loss - - - - - (25,764,000 ) - - - (25,764,000 )
Preferred dividends - - - - (44,000 ) - - - (44,000 )
Foreign currency translation adjustments - - - - - - (1,471,000 ) - - (1,471,000 )
Net loss attributable to non-controlling interest - - - - - - - (321,000 ) - (321,000 )
Other - - - - (1,000 ) 2,000 1,000 1,000 - 3,000
BALANCES, June 30, 2022 278,658 $ - 324,440,579 $ 324,000 $ 549,713,000 $ (200,184,000 ) $ (1,863,000 ) $ 18,048,000 $ (20,639,000 ) $ 345,399,000

Accumulated
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, April 1, 2023 395,062 $ - 1,385,822 $ 1,000 $ 575,073,000 $ (378,633,000 ) $ (931,000 ) $ 24,265,000 $ (29,432,000 ) $ 190,343,000
Preferred stock issued for cash 162,175 - - - 5,090,000 - - - - 5,090,000
Preferred stock offering costs - - - - (3,388,000 ) - - - - (3,388,000 )
Stock-based compensation - - - - 752,000 - - 1,307,000 - 2,059,000
Issuance of common stock for cash - - 103,096 - 754,000 - - - - 754,000
Financing cost in connection with sales of common stock - - - - (27,000 ) - - - - (27,000 )
Issuance of common stock for conversion of preferred stock liabilities - - 37,493 - 328,000 - - - - 328,000
Remeasurement of Ault Disruptive subsidiary temporary equity - - - - - (4,736,000 ) - - - (4,736,000 )
Increase in ownership interest of subsidiary - - - - 2,000 - - (1,223,000 ) - (1,221,000 )
Sale of subsidiary stock to non-controlling interests - - - - - - - 3,572,000 - 3,572,000
Distribution to Circle 8 non-controlling interest
- - - - - - -
(500,000
)
- (500,000 )
Purchase of treasury stock - Ault Alpha LP (“Ault Alpha”) - - - - - - - - (488,000 ) (488,000 )
Net loss - - - - - (60,683,000 ) - - - (60,683,000 )
Preferred dividends - - - - - (321,000 ) - - - (321,000 )
Foreign currency translation adjustments - - - - - - (520,000 ) - - (520,000 )
Net loss attributable to non-controlling interest - - - - - - - (3,569,000 ) - (3,569,000 )
Dividend payable in TurnOnGreen common stock ($3.52 per share) - - - - (5,200,000 ) - - - - (5,200,000 )
Other - - - 1,000 2,000 2,000 1,000 1,000 1,000 8,000
BALANCES, June 30, 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

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 ~~(RESTATED)~~
(Unaudited)
Three Months Ended June 30, ~~2021~~2022

Accumulated
Series A & B Additional Other Total
Preferred Stock Common Stock Paid-In Accumulated Comprehensive Non-Controlling Stockholders’
Shares Amount Shares Amount Capital Deficit Income (Loss) Interest Equity

BALANCES, April 1, 2021 132,040 $ - 49,498,676 $ 49,000 $ 292,763,000 $ (117,366,000 ) $ (878,000 ) $ 1,902,000 $ 176,470,000
Stock-based compensation 20,000 545,000 565,000
Sale of common stock - - 6,385,425 7,000 19,054,000 - - - 19,061,000
Financing cost in connection with sales of common stock - - - - (477,000 ) - - - (477,000 )
Issuance of common stock for conversion
  of convertible notes payable, related party

-

-

275,862

-

400,000

-

-

-

400,000

Comprehensive loss:
Net income - - - - - 36,323,000 - - 36,323,000
Preferred dividends - - - - - (4,000 ) - - (4,000 )
Foreign currency translation adjustments - - - - - - 134,000 - 134,000
Net income attributable to non-controlling interest - - - - - - - (1,083,000 ) (1,083,000 )
BALANCES, June 30, 2021 132,040 $ - 56,159,963 $ 56,000 $ 311,760,000 $ (81,047,000 ) $ (744,000 ) $ 1,364,000 $ 231,389,000
Accumulated
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, April 1, 2022 132,040 $ - 225,015,203 $ 225,000 $ 495,536,000 $ (174,378,000 ) $ (393,000 ) $ 1,640,000 $ (14,172,000 ) $ 308,458,000
Issuance of common stock for restricted stock awards - - 429,379 - - - - - - -
Preferred stock issued for cash 146,618 - - - 3,666,000 - - - - 3,666,000
Preferred stock offering costs - - - - (537,000 ) - - - - (537,000 )
Stock-based compensation 983,000 36,000 1,019,000
Sale of common stock - - 98,995,997 99,000 53,180,000 - - - - 53,279,000
Financing cost in connection with sales of common stock - - - - (1,266,000 ) - - - - (1,266,000 )
Acquisition of non-controlling interests - - - - (1,848,000 ) - - (382,000 ) - (2,230,000 )
Non-controlling interest from Avalanche International Corp. (“AVLP”) acquisition - - - - - - - 6,738,000 - 6,738,000
Non-controlling interest from The Singing Machine Company, Inc. (“SMC”) acquisition - - - - - - - 10,336,000 - 10,336,000
Purchase of treasury stock - Ault Alpha - - - - - - - - (6,467,000 ) (6,467,000 )
Net loss - - - - - (25,764,000 ) - - - (25,764,000 )
Preferred dividends - - - - (44,000 ) - - - (44,000 )
Foreign currency translation adjustments - - - - - - (1,471,000 ) - - (1,471,000 )
Net loss attributable to non-controlling interest - - - - - - - (321,000 ) - (321,000 )
Other - - - - (1,000 ) 2,000 1,000 1,000 - 3,000
BALANCES, June 30, 2022 278,658 $ - 324,440,579 $ 324,000 $ 549,713,000 $ (200,184,000 ) $ (1,863,000 ) $ 18,048,000 $ (20,639,000 ) $ 345,399,000

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

AULT ALLIANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
Six Months Ended June 30, 2023
Accumulated
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
Preferred stock offering costs - - - - (3,431,000 ) - - - - (3,431,000 )
Stock-based compensation 4,683,000 - - 1,924,000 - 6,607,000
Issuance of common stock for cash - - 209,787 - 4,912,000 - - - - 4,912,000
Financing cost in connection with sales of common stock - - - - (132,000 ) - - - - (132,000 )
Issuance of common stock for conversion of preferred stock liabilities - - 37,493 - 328,000 - - - - 328,000
Remeasurement of Ault Disruptive subsidiary temporary equity - - - - - (5,415,000 ) - - - (5,415,000 )
Increase in ownership interest of subsidiary - - - - 13,000 - - (1,245,000 ) - (1,232,000 )
Non-controlling position at BitNile Metaverse, Inc. (“BMI”) subsidiary acquired - - - - - - - 6,357,000 - 6,357,000
Sale of subsidiary stock to non-controlling interests - - - - - - - 3,572,000 - 3,572,000
Distribution to Circle 8 non-controlling interest
- - - - - - - (500,000 ) - (500,000 )
Purchase of treasury stock - Ault Alpha - - - - - - - - (685,000 ) (685,000 )
Net loss - - - - - (109,329,000 ) - - - (109,329,000 )
Preferred dividends - - - - (550,000 ) - - - (550,000 )
Foreign currency translation adjustments - - - - - - (350,000 ) - - (350,000 )
Net loss attributable to non-controlling interest - - - - - - - (3,752,000 ) - (3,752,000 )
Dividend payable in TurnOnGreen common stock ($3.52 per share) - - - - (5,200,000 ) - - - - (5,200,000 )
Other - - - 1,000 - 1,000 1,000 1,000 4,000
BALANCES, June 30, 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
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
~~F-5~~F-6

AULT ALLIANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
Six Months Ended June 30, 2022

Accumulated Accumulated
Series A, B & D Additional Other Non- Total Series A, B & D Additional Other Non- Total
Preferred Stock Common Stock Paid-In Accumulated Comprehensive Controlling Treasury Stockholders’ Preferred Stock Common Stock Paid-In Accumulated Comprehensive Controlling Treasury Stockholders’
Shares Amount Shares Amount Capital Deficit Loss Interest Stock Equity Shares Amount Shares Amount Capital Deficit Loss Interest Stock Equity
BALANCES, January 1, 2022 132,040 $ - 84,344,607 $ 84,000 $ 385,644,000 $ (145,600,000 ) $ (106,000 ) $ 1,613,000 $ (13,180,000 ) $ 228,455,000 132,040 $ - 84,344,607 $ 84,000 $ 385,644,000 $ (145,600,000 ) $ (106,000 ) $ 1,613,000 $ (13,180,000 ) $ 228,455,000
Issuance of common stock for restricted stock awards - - 441,879 - - - - - - - - - 441,879 - - - - - - -
Preferred stock issued 146,618 - - - 3,666,000 - - - - 3,666,000
Preferred stock issued for cash 146,618 - - - 3,666,000 - - - - 3,666,000
Preferred stock offering costs - - - - (537,000 ) - - - - (537,000 ) - - - - (537,000 ) - - - - (537,000 )
Stock-based compensation 3,627,000 77,000 3,704,000 - - - - 3,627,000 - - 77,000 - 3,704,000
Sale of common stock - - 239,654,093 240,000 163,186,000 - - - - 163,426,000 - - 239,654,093 240,000 163,186,000 - - - - 163,426,000
Financing cost in connection with sales of common stock - - - - (4,024,000 ) - - - - (4,024,000 ) - - - - (4,024,000 ) - - - - (4,024,000 )
Acquisition of non-controlling interests - - - - (1,848,000 ) - - (382,000 ) - (2,230,000 ) - - - - (1,848,000 ) - - (382,000 ) - (2,230,000 )
Non-controlling interest from AVLP acquisition - - - - - - - 6,738,000 - 6,738,000 - - - - - - - 6,738,000 - 6,738,000
Non-controlling interest from SMC acquisition - - - - - - - 10,336,000 - 10,336,000 - - - - - - - 10,336,000 - 10,336,000
Purchase of treasury stock - Ault Alpha - - - - - - - - (7,459,000 ) (7,459,000 ) - - - - - - - - (7,459,000 ) (7,459,000 )
Net loss - - - - - (54,536,000 ) - - - (54,536,000 ) - - - - - (54,536,000 ) - - - (54,536,000 )
Preferred dividends - - - - (49,000 ) - - - (49,000 ) - - - - (49,000 ) - - - (49,000 )
Foreign currency translation adjustments - - - - - - (1,758,000 ) - - (1,758,000 ) - - - - - - (1,758,000 ) - - (1,758,000 )
Net loss attributable to non-controlling interest - - - - - - - (336,000 ) - (336,000 ) - - - - - - - (336,000 ) - (336,000 )
Other - - - - (1,000 ) 1,000 1,000 2,000 - 3,000 - - - - (1,000 ) 1,000 1,000 2,000 - 3,000
BALANCES, June 30, 2022 278,658 $ - 324,440,579 $ 324,000 $ 549,713,000 $ (200,184,000 ) $ (1,863,000 ) $ 18,048,000 $ (20,639,000 ) $ 345,399,000 278,658 $ - 324,440,579 $ 324,000 $ 549,713,000 $ (200,184,000 ) $ (1,863,000 ) $ 18,048,000 $ (20,639,000 ) $ 345,399,000

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~
~~AULT ALLIANCE, INC. AND SUBSIDIARIES~~
~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (RESTATED)~~
~~(Unaudited)~~
~~Six Months Ended June 30, 2021~~

Series A & B Additional Other Non- Total
Preferred Stock Common Stock Paid-In Accumulated Comprehensive Controlling Stockholders’
Shares Amount Shares Amount Capital Deficit Income (Loss) Interest Equity

BALANCES, January 1, 2021 132,040 $ — 27,753,562 $ 28,000 $ 171,396,000 $ (122,329,000 ) $ (785,000 ) $ 822,000 $ 49,132,000
Stock-based compensation 39,000 545,000 584,000
Sale of common stock — — 27,947,325 28,000 144,016,000 — — — 144,044,000
Financing cost in connection with sales of
common stock

—

—

—

—

(4,541,000
)

—

—

—

(4,541,000
)
Issuance of common stock for conversion
  of convertible notes payable

—

—

183,214

—

450,000

—

—

—

450,000

Issuance of common stock for conversion
  of convertible notes payable, related party

—

—

275,862

—

400,000

—

—

—

400,000

Comprehensive loss:
Net income — — — — — 41,291,000 — — 41,291,000
Preferred dividends — — — — (9,000 ) — — (9,000 )
Foreign currency translation adjustments — — — — — — 41,000 — 41,000
Net income attributable to non—controlling interest — — — — — — — (3,000 ) (3,000 )
BALANCES, June 30, 2021 132,040 $ — 56,159,963 $ 56,000 $ 311,760,000 $ (81,047,000 ) $ (744,000 ) $ 1,364,000 $ 231,389,000
~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~
~~AULT ALLIANCE, INC. AND SUBSIDIARIES~~
~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~
~~(Unaudited)~~

For the Six Months Ended June 30,
2021
2022 Restated
Cash flows from operating activities:
Net (loss) income $ (54,872,000 ) $ 41,288,000
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization 7,129,000 1,093,000
Interest expense – debt discount 26,493,000 40,000
Gain on extinguishment of debt - (929,000 )
Change in fair value of warrant liability 24,000 (290,000 )
Accretion of original issue discount on notes receivable – related party - (4,000 )
Accretion of original issue discount on notes receivable (612,000 ) (955,000 )
Increase in accrued interest on notes receivable – related party (100,000 ) (1,000 )
Stock-based compensation 3,704,000 584,000
Impairment of cryptocurrencies 2,415,000 -
Realized gains on sale of marketable securities (18,585,000 ) (12,283,000 )
Unrealized losses (gains) on marketable securities 9,669,000 (3,483,000 )
Unrealized losses (gains) on investments in equity securities, related parties 9,048,000 (36,928,000 )
Unrealized gains on equity securities (17,021,000 ) (1,224,000 )
Loss from investment in unconsolidated entity 924,000 -
Loss on remeasurement of investment in unconsolidated entity
2,700,000 -
Changes in operating assets and liabilities:
Marketable equity securities 50,734,000 (9,616,000 )
Accounts receivable (2,311,000 ) (887,000 )
Accrued revenue (7,000 ) 78,000
Inventories (2,646,000 ) 485,000
Prepaid expenses and other current assets 2,406,000 (2,537,000 )
Digital currencies (7,785,000 ) -
Other assets (384,000 ) (246,000 )
Accounts payable and accrued expenses 4,706,000 83,000
Other current liabilities - 4,472,000
Lease liabilities (626,000 ) (439,000 )
Net cash provided by (used in) operating activities 15,003,000 (21,699,000 )

Cash flows from investing activities:
Purchase of property and equipment (72,779,000 ) (5,590,000 )
Investment in promissory notes and other, related parties (2,200,000 ) (4,040,000 )
Investments in common stock and warrants, related parties (4,663,000 ) (16,483,000 )
Investment in real property, related party - (2,670,000 )
Proceeds from sale of investment in real property, related party - 2,670,000
Purchase of SMC, net of cash received (8,239,000 ) -
Cash received upon acquisition of AVLP 1,245,000 -
Acquisition of non-controlling interests (2,230,000 ) -
Purchase of marketable equity securities (1,981,000 ) -
Sales of marketable equity securities 11,733,000 430,000
Investments in loans receivable (2,728,000 ) -
Principal payments on loans receivable 10,525,000 -
Sale of digital currencies 4,377,000 -
Investments in equity securities (15,820,000 ) (4,054,000 )
Net cash used in investing activities (82,760,000 ) (29,737,000 )
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

AULT ALLIANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ~~(continued)~~
(Unaudited)

For the Six Months Ended June 30,
2021
2022
Restated

Cash flows from financing activities:
Gross proceeds from sales of common stock $ 163,426,000 $ 144,044,000
Financing cost in connection with sales of common stock (4,024,000 ) (4,541,000 )
Proceeds from sales of preferred stock 3,666,000 -
Financing cost in connection with sales of preferred stock (537,000 ) -
Proceeds from notes payable 4,945,000 500,000
Repayment of margin accounts (18,488,000 ) -
Payments on notes payable (65,999,000 ) (1,917,000 )
Payments of preferred dividends (49,000 ) (9,000 )
Purchase of treasury stock (7,459,000 ) -
Payments on revolving credit facilities, net - (23,000 )
Net cash provided by financing activities 75,481,000 138,054,000

Effect of exchange rate changes on cash and cash equivalents (152,000 ) 93,000

Net increase in cash and cash equivalents and restricted cash 7,572,000 86,711,000

Cash and cash equivalents and restricted cash at beginning of period 21,233,000 18,680,000

Cash and cash equivalents and restricted cash at end of period $ 28,805,000 $ 105,391,000

Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 4,104,000 $ 658,000

Non-cash investing and financing activities:
Conversion of convertible notes payable into shares of common stock $ - $ 450,000
Settlement of accounts payable with digital currency $ 413,000 $ 119,000
Conversion of investment in unconsolidated entity for acquisition of AVLP $ 23,406,000 $ -
Conversion of convertible notes payable, related party into shares of common stock $ 400,000 $ 400,000
Conversion of debt and equity securities to marketable securities $ 24,828,000 $ 2,656,000
Conversion of loans receivable to marketable securities $ 3,600,000 $ -
Conversion of interest receivable to marketable securities $ 231,000 $ -
Conversion of loans receivable to debt and equity securities $ - $ 150,000
Recognition of new operating lease right-of-use assets and lease liabilities $ 2,188,000 $ -

For the Six Months Ended June 30,
2023 2022
Cash flows from operating activities:
Net loss $ (113,081,000 ) $ (54,872,000 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 14,383,000 6,618,000
Amortization of debt discount 16,418,000 26,493,000
Amortization of right-of-use assets 1,446,000 511,000
Impairment of goodwill and intangible assets 35,570,000 -
Stock-based compensation 6,607,000 3,704,000
Gain on the sale of fixed assets (2,761,000 ) -
Impairment of equity securities 11,555,000 -
Impairment of cryptocurrencies 263,000 2,415,000
Realized gain on the sale of cryptocurrencies (348,000 ) (261,000 )
Revenue, cryptocurrency mining (15,715,000 ) (7,524,000 )
Realized losses on sale of marketable securities (2,946,000 ) (18,585,000 )
Unrealized gains on marketable securities (3,367,000 ) 9,669,000
Unrealized losses on investments in common stock, related parties 628,000 9,048,000
Unrealized gains on equity securities - (17,021,000 )
Income from cash held in trust (2,533,000 ) -
Loss from investment in unconsolidated entity - 924,000
Loss on remeasurement of investment in unconsolidated entity - 2,700,000
Provision for loan losses 1,180,000 -
Change in the fair value of warrant liability (3,217,000 ) 24,000
Other 54,000 (712,000 )
Changes in operating assets and liabilities:
Proceeds from the sale of cryptocurrencies 15,040,000 4,377,000
Marketable equity securities 41,197,000 50,734,000
Accounts receivable 6,088,000 (2,311,000 )
Inventories 1,124,000 (2,646,000 )
Prepaid expenses and other current assets (1,077,000 ) 2,399,000
Other assets (211,000 ) (384,000 )
Accounts payable and accrued expenses 8,148,000 4,706,000
Lease liabilities (1,532,000 ) (626,000 )
Net cash provided by operating activities 12,913,000 19,380,000
Cash flows from investing activities:
Purchase of property and equipment (11,346,000 ) (72,779,000 )
Investment in promissory notes and other, related parties - (2,200,000 )
Investments in common stock and warrants, related parties - (4,663,000 )
Purchase of SMC, net of cash received - (8,239,000 )
Cash received upon acquisition of AVLP - 1,245,000
Acquisition of non-controlling interests - (2,230,000 )
Purchase of marketable equity securities - (1,981,000 )
Sales of marketable equity securities - 11,733,000
Investments in loans receivable (181,000 ) (2,728,000 )
Principal payments on loans receivable - 10,525,000
Investments in equity securities (10,544,000 ) (15,820,000 )
Proceeds from the sale of fixed assets 4,515,000 -
Other (1,310,000 ) -
Net cash used in investing activities (18,866,000 ) (87,137,000 )

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

F-8
AULT ALLIANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
For the Six Months Ended June 30,
2023 2022
Cash flows from financing activities:
Gross proceeds from sales of common stock $ 4,912,000 $ 163,426,000
Financing cost in connection with sales of common stock (132,000 ) (4,024,000 )
Proceeds from sales of preferred stock 6,309,000 3,666,000
Financing cost in connection with sales of preferred stock (3,431,000 ) (537,000 )
Proceeds from subsidiaries’ sale of stock to non-controlling interests 3,572,000 -
Distribution to Circle 8 non-controlling interest
(500,000 ) -
Proceeds from notes payable 30,665,000 4,945,000
Repayment of margin accounts (767,000 ) (18,488,000 )
Payments on notes payable (34,057,000 ) (65,999,000 )
Payments of preferred dividends (550,000 ) (49,000 )
Purchase of treasury stock (685,000 ) (7,459,000 )
Proceeds from sales of convertible notes 7,817,000 -
Payments on convertible notes (360,000 ) -
Net cash provided by financing activities 12,793,000 75,481,000

Effect of exchange rate changes on cash and cash equivalents (98,000 ) (152,000 )

Net increase in cash and cash equivalents and restricted cash 6,742,000 7,572,000

Cash and cash equivalents and restricted cash at beginning of period 14,055,000 21,233,000

Cash and cash equivalents and restricted cash at end of period $ 20,797,000 $ 28,805,000

Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 4,658,000 $ 4,104,000

Non-cash investing and financing activities:
Settlement of accounts payable with digital currency $ 13,000 $ 413,000
Conversion of investment in unconsolidated entity for acquisition of AVLP $ - $ 23,406,000
Conversion of convertible notes payable, related party into shares of common stock $ 400,000 $ 400,000
Conversion of debt and equity securities to marketable securities $ 23,703,000 $ 24,828,000
Conversion of loans receivable to marketable securities $ 5,430,000 $ 3,600,000
Conversion of interest receivable to marketable securities $ - $ 231,000
Recognition of new operating lease right-of-use assets and lease liabilities $ - $ 2,188,000
Remeasurement of Ault Disruptive temporary equity $ 5,415,000 $ -
Preferred stock exchanged for notes payable $ 8,591,000 $ -
Redeemable noncontrolling interests in equity of Ault Disruptive paid with cash and marketable securities held in trust account $ 120,064,000 $ -
Dividend payable in TurnOnGreen common stock in additional paid-in capital
$ 5,200,000 $ -
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-9

1. DESCRIPTION OF BUSINESS

Ault Alliance, Inc., a Delaware corporation ~~which was then known as BitNile Holdings, Inc.~~ (“~~BitNile”~~Ault Alliance” or the “Company”) ~~was incorporated in September 2017. BitNile~~ is a diversified holding company pursuing growth by acquiring undervalued businesses and disruptive technologies with a global impact. Through its wholly- and majority-owned subsidiaries and strategic investments, the Company owns and operates a data center at which it mines Bitcoin and 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, ~~karaoke audio equipment,~~consumer electronics, hotel operations and textiles. In addition, the Company extends credit to select entrepreneurial businesses through a licensed lending subsidiary. ~~BitNile~~
Ault Alliance was founded by Milton “Todd” Ault, III, its Executive Chairman and is led by ~~Mr.~~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 ~~Mr. Ault and the other members of~~ the Executive Committee. The Company has ~~eight~~the following nine reportable segments:

· ~~BitNile, Inc.~~Energy and Infrastructure (“~~BNI”~~Energy”) – ~~cryptocurrency mining operations;~~crane operations, advanced textiles processing and oil exploration;

· ~~Ault Alliance, Inc.~~Technology and Finance (“~~Ault Alliance”~~Fintech”) ~~– commercial~~–commercial lending, activist investing, stock trading, media, and digital learning;

· ~~Gresham Worldwide,~~The Singing Machine Company, Inc. (“~~GWW”~~SMC”) – ~~defense solutions;~~consumer electronics;

· Sentinum, Inc. (“Sentinum”) – cryptocurrency mining operations and colocation and hosting services for the emerging artificial intelligence ecosystems and other industries;
· Giga-tronics Incorporated (“GIGA”) – defense industry;
· Imperalis Holding Corp., d/b/a TurnOnGreen, Inc. (“TurnOnGreen”) – commercial electronics solutions;

· ~~The Singing Machine Company,~~BitNile Metaverse, Inc. (“~~SMC”~~BMI”) – ~~karaoke audio equipment;~~immersive metaverse platform;

· ~~Avalanche International Corp. (“Avalanche” or “AVLP”) – advanced textiles processing technology;~~
· Ault Global Real Estate Equities, Inc. (“AGREE”) – hotel operations and other commercial real estate holdings; and

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

~~1 A. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS~~Reverse Stock Split

~~This Amendment amends~~On May 15, 2023, pursuant to the ~~Quarterly Report on Form 10-Q~~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 for the six months ended June 30, 2022, that was originally filed with the U.S. Securities~~Company’s issued and ~~Exchange Commission on August 22, 2022. This Amendment only corrects an error in classification with respect to changes in fair value of financial instruments issued~~outstanding common stock by a ~~related party.~~ratio of one-for-three hundred (the “Reverse Split”). The ~~changes~~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 ~~fair value were erroneously recorded~~the State of Delaware on May 17, 2023. All share amounts in ~~other comprehensive income (loss) and~~these financial statements have been reclassified to correct for the error within the statement of operations. The Company has restated its Condensed Consolidated Statements of Operations and Comprehensive Loss, Condensed Consolidated Statements of Changes in Stockholders’ Equity and Condensed Consolidated Statements of Cash Flows to correct this misclassification. Further, this Amendment also includes certain limited modificationsupdated to reflect the ~~correct classification in disclosures in the Company’s Note 20 Net (Loss) Income per Share footnote in the Company’s Notes to Condensed Consolidated Financial Statements.~~ ~~Finally, the Company has modified its disclosures in Item 4 of Part I to reflect the identification of an additional material weakness.~~
~~As a result, the Condensed Consolidated~~ ~~Statements of Operations and Comprehensive Loss~~ ~~amounts of “Change in fair value of equity securities, related party” and “Net unrealized gain on derivative securities of related party” were adjusted pursuant to the schedules below:~~
Schedule of condensed consolidated statements of operations and comprehensive loss
For the Three Months Ended
June 30, 2021
As Reported Adjustment As Restated
Revenue $ 8,564,000 $ - $ 8,564,000
Revenue, cryptocurrency mining, net 291,000 291,000
Revenue, lending and trading activities 53,274,000 53,274,000
Total revenue 62,129,000 - 62,129,000
Cost of revenue 6,278,000 6,278,000
Gross profit 55,851,000 - 55,851,000

Operating expenses
Research and development 531,000 531,000
Selling and marketing 1,505,000 1,505,000
General and administrative 7,992,000 7,992,000
Total operating expenses 10,028,000 - 10,028,000

Income from operations 45,823,000 45,823,000
Other income (expenses)
Interest and other income 14,000 14,000
Change in fair value of equity securities, related party - (5,893,000 ) (5,893,000 )
Interest expense (22,000 ) (22,000 )
Change in fair value of marketable equity securities (1,915,000 ) (1,915,000 )
Gain on extinguishment of debt 447,000 447,000
Change in fair value of warrant liability 290,000 290,000
Total other expenses, net (1,186,000 ) (5,893,000 ) (7,079,000 )

Income (loss) before income taxes 44,637,000 (5,893,000 ) 38,744,000
Income tax provision (3,504,000 ) (3,504,000 )
Net income (loss) 41,133,000 (5,893,000 ) 35,240,000
Net income attributable to non-controlling interest 1,083,000 1,083,000
Net income (loss) attributable to Ault Alliance, Inc. 42,216,000 (5,893,000 ) 36,323,000
Preferred dividends (4,000 ) (4,000 )
Net income (loss) available to common stockholders $ 42,212,000 $ (5,893,000 ) $ 36,319,000

Basic net income (loss) per common share $ 0.83 $ 0.72
Diluted net income (loss) per common share $ 0.81 $ 0.69

Weighted average basic common shares outstanding 50,783,000 50,783,000
Weighted average diluted common shares outstanding 52,780,000 52,780,000

Comprehensive income
Net income (loss) available to common stockholders $ 42,212,000 $ (5,893,000 ) $ 36,319,000
Other comprehensive income (loss)
Foreign currency translation adjustment 134,000 134,000
Net unrealized gain on derivative securities of related party (5,893,000 ) 5,893,000 -
Other comprehensive (loss) income (5,759,000 ) 5,893,000 134,000
Total comprehensive income $ 36,453,000 $ - $ 36,453,000

For the Six Months Ended
June 30, 2021
As Reported Adjustment As Restated
Revenue $ 16,469,000 $ - $ 16,469,000
Revenue, cryptocurrency mining, net 421,000 421,000
Revenue, lending and trading activities 58,485,000 58,485,000
Total revenue 75,375,000 - 75,375,000
Cost of revenue 11,386,000 11,386,000
Gross profit 63,989,000 - 63,989,000

Operating expenses
Research and development 1,133,000 1,133,000
Selling and marketing 2,747,000 2,747,000
General and administrative 13,084,000 13,084,000
Total operating expenses 16,964,000 - 16,964,000

Income from operations 47,025,000 47,025,000
Other income (expenses)
Interest and other income 51,000 51,000
Change in fair value of equity securities, related party - (2,924,000 ) (2,924,000 )
Interest expense (337,000 ) (337,000 )
Change in fair value of marketable equity securities 45,000 45,000
Realized gain on marketable securities 397,000 397,000
Gain on extinguishment of debt 929,000 929,000
Change in fair value of warrant liability (388,000 ) (388,000 )
Total other (expenses) income, net 697,000 (2,924,000 ) (2,227,000 )

Income (loss) before income taxes 47,722,000 (2,924,000 ) 44,798,000
Income tax provision (3,510,000 ) (3,510,000 )
Net income (loss) 44,212,000 (2,924,000 ) 41,288,000
Net income attributable to non-controlling interest 3,000 3,000
Net income (loss) attributable to Ault Alliance, Inc. 44,215,000 (2,924,000 ) 41,291,000
Preferred dividends (9,000 ) (9,000 )
Net income (loss) available to common stockholders $ 44,206,000 $ (2,924,000 ) $ 41,282,000

Basic net income (loss) per common share $ 0.98 $ 0.92
Diluted net income (loss) per common share $ 0.92 $ 0.86

Weighted average basic common shares outstanding 45,052,000 45,052,000
Weighted average diluted common shares outstanding 47,574,000 47,574,000

Comprehensive income
Net income (loss) available to common stockholders $ 44,206,000 $ (2,924,000 ) $ 41,282,000
Other comprehensive income (loss)
Foreign currency translation adjustment 41,000 41,000
Net unrealized gain on derivative securities of related party (2,924,000 ) 2,924,000 -
Other comprehensive (loss) income (2,883,000 ) 2,924,000 41,000
Total comprehensive income $ 41,323,000 $ - $ 41,323,000
~~The Condensed Consolidated~~ ~~Statements of Changes in Stockholders’ Equity~~ ~~amounts of “Accumulated deficit” and “Accumulated other comprehensive loss” were adjusted pursuant to the schedules below:~~
Schedule of condensed consolidated statements of changes in stockholders’ equity
January 1, 2021
As Reported Adjustment As Restated
STOCKHOLDERS’ EQUITY
Common stock $ 28,000 $ - $ 28,000
Additional paid-in capital 171,396,000 171,396,000
Accumulated deficit (121,396,000 ) (933,000 ) (122,329,000 )
Accumulated other comprehensive loss (1,718,000 ) 933,000 (785,000 )
TOTAL AULT ALLIANCE STOCKHOLDERS’ EQUITY 48,310,000 - 48,310,000

Non-controlling interest 822,000 822,000

TOTAL STOCKHOLDERS’ EQUITY $ 49,132,000 $ - $ 49,132,000

April 1, 2021
As Reported Adjustment As Restated
STOCKHOLDERS’ EQUITY
Common stock $ 49,000 $ - $ 49,000
Additional paid-in capital 292,763,000 292,763,000
Accumulated deficit (119,402,000 ) 2,036,000 (117,366,000 )
Accumulated other comprehensive loss 1,158,000 (2,036,000 ) (878,000 )
TOTAL AULT ALLIANCE STOCKHOLDERS’ EQUITY 174,568,000 - 174,568,000

Non-controlling interest 1,902,000 1,902,000

TOTAL STOCKHOLDERS’ EQUITY $ 176,470,000 $ - $ 176,470,000

June 30, 2021
As Reported Adjustment As Restated
STOCKHOLDERS’ EQUITY
Common stock $ 56,000 $ - $ 56,000
Additional paid-in capital 311,760,000 311,760,000
Accumulated deficit (77,190,000 ) (3,857,000 ) (81,047,000 )
Accumulated other comprehensive loss (4,601,000 ) 3,857,000 (744,000 )
TOTAL AULT ALLIANCE STOCKHOLDERS’ EQUITY 230,025,000 - 230,025,000

Non-controlling interest 1,364,000 1,364,000

TOTAL STOCKHOLDERS’ EQUITY $ 231,389,000 $ - $ 231,389,000
~~Further, the reclassification also resulted in a corresponding decrease in net income and a decrease in~~ ~~unrealized gains on equity securities, related party~~ ~~within net cash used in operating activities, as reflected in the Company’s Condensed Consolidated Statements of Cash Flows, as follows:~~
Schedule of condensed consolidated statements of cash flows
For the Six Months Ended
June 30, 2021
As Reported Adjustment As Restated
Cash flows from operating activities:
Net income $ 44,212,000 $ (2,924,000 ) $ 41,288,000
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 1,093,000 1,093,000
Interest expense – debt discount 40,000 40,000
Gain on extinguishment of debt (929,000 ) (929,000 )
Change in fair value of warrant liability (290,000 ) (290,000 )
Accretion of original issue discount on notes receivable – related party (4,000 ) (4,000 )
Accretion of original issue discount on notes receivable (955,000 ) (955,000 )
Increase in accrued interest on notes receivable – related party (1,000 ) (1,000 )
Stock-based compensation 584,000 584,000
Realized gains on sale of marketable securities (12,283,000 ) (12,283,000 )
Unrealized losses (gains) on marketable securities (3,483,000 ) (3,483,000 )
Unrealized losses (gains) on equity securities, related parties (39,852,000 ) 2,924,000 (36,928,000 )
Unrealized gains on equity securities (1,224,000 ) (1,224,000 )
Changes in operating assets and liabilities:
Marketable equity securities (9,616,000 ) (9,616,000 )
Accounts receivable (887,000 ) (887,000 )
Accrued revenue 78,000 78,000
Inventories 485,000 485,000
Prepaid expenses and other current assets (2,537,000 ) (2,537,000 )
Other assets (246,000 ) (246,000 )
Accounts payable and accrued expenses 83,000 83,000
Other current liabilities 4,472,000 4,472,000
Lease liabilities (439,000 ) (439,000 )
Net cash used in operating activities $ (21,699,000 ) $ - $ (21,699,000 )
Reverse Split.

2. LIQUIDITY AND FINANCIAL CONDITION

As of June 30, ~~2022,~~2023, the Company had cash and cash equivalents of $~~24.1~~19.7 million, ~~and~~negative working capital of $~~51.4~~70.0 ~~million.~~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. ~~The Company believes its current cash on hand is sufficient~~These factors create substantial doubt about the Company’s ability to ~~meet its operating and capital requirements~~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 ~~twelve months~~12 months.
Management expects that the Company’s existing cash and cash equivalents, accounts receivable and marketable securities as of June 30, 2023, 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 and digital currencies, 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.

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~~10-K/A for the year ended December 31, ~~2021,~~2022 (the “2022 Annual Report”), filed with the Securities and Exchange Commission (the “SEC”) on ~~April 15, 2022.~~May 22, 2023. The condensed consolidated balance sheet as of December 31, ~~2021~~2022 was derived from the Company’s audited ~~2021~~2022 financial statements contained in the above referenced ~~Form 10-K.~~2022 Annual Report. Results of the three and six months ended June 30, ~~2022,~~2023, are not necessarily indicative of the results to be expected for the full year ending December 31, ~~2022.~~2023.

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 ~~2021~~2022 Annual Report.

Revenue Recognition – Bitcoin Mining
The Company recognizes revenue from Bitcon Mining under 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 with the mining pool operator with whom 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.
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 therefore, are 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.
~~Business Combination~~Preferred Stock Liabilities

The Company ~~allocates~~follows Accounting Standards Codification (“ASC”) 480-10, “Distinguishing Liabilities from Equity” in its evaluation of the ~~purchase price~~accounting for the Preferred Shares (as defined in Note 16). 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 ~~an acquired business to~~shares, provided that the ~~tangible and intangible assets acquired and liabilities assumed~~monetary value of the obligation is based ~~upon their estimated fair values~~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 equity 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 ~~acquisition date. Any excess~~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 ~~purchase price over~~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 ~~net assets acquired~~Company’s equity shares. Instead, the Company is ~~recorded~~using its own equity shares as ~~goodwill. Acquired customer relations, technology, tradenames and know how are recognized at fair value. The purchase price allocation process requires management~~currency to make significant estimates and 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. The Company includes the results of operations of the business that it has acquired in its consolidated results prospectively from the date of acquisition.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquirer 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.settle a monetary obligation.

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.

~~Recent~~Recently Adopted Accounting Standards

In ~~May 2021,~~June 2016, the Financial ~~Accountings~~Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-04, “Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815- 40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.” The guidance became effective for the Company on January 1, 2022. The Company adopted the guidance on January 1, 2022, and has concluded the adoption did not have a material impact on its unaudited condensed consolidated financial statements.
~~In June 2016, the FASB issued 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 iswas effective for the Company beginning on January 1, ~~2023, with early adoption permitted.~~2023. The ~~Company does not expect that the~~ adoption of this ~~standard will~~guidance did not have a ~~significant~~material impact on ~~its condensed consolidated financial statements.~~
~~In August 2020,~~ the FASB issued ASU 2020-06, “Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)-Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. ASU 2020-06 also simplifies the diluted net income per share calculation in certain areas. The amendments in ASU 2020-06 are effective for smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Effective January 1, 2022, the Company early adopted ASU 2020-06 using the modified retrospective approach, which resulted in no impact on itsCompany’s condensed consolidated financial statements.

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 ~~Accounting Standards Codification (“ASC”)~~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. ~~Early~~The adoption ~~is permitted, including in interim periods, for any financial statements that have not yet been issued. The Company is currently evaluating~~of this guidance ~~to determine~~did not have a material impact on the ~~impact it may have on its~~Company’s condensed consolidated financial statements.

In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832),” which requires annual disclosures that increase the transparency of transactions involving government grants, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an issuer’s financial statements. The amendments in this update are effective for financial statements issued for annual periods beginning after December 15, 2021. The Company expects that this guidance will not have a significant impact on its condensed consolidated financial statements.
4. REVENUE DISAGGREGATION

The following tables summarize disaggregated customer contract revenues and the source of the revenue for the three and six months ended June 30, ~~2022~~2023 and ~~2021.~~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 Company’s disaggregated revenues consisted of the following for the three months ended June 30, 2023 (excludes Ault Disruptive, as that segment has no revenue):
Schedule of disaggregated revenues
GIGA
TurnOn
Green
Fintech Sentinum AGREE SMC BMI Energy Total
Primary Geographical Markets
North America $ 2,856,000 $ 541,000 $ - $ 8,693,000 $ 4,384,000 $ 2,625,000 $ 45,000 $ 12,590,000 $ 31,734,000
Europe 2,270,000 7,000 - - - - - 82,000 2,359,000
Middle East and other 3,614,000 176,000 - - - - - - 3,790,000
Revenue from contracts with customers 8,740,000 724,000 - 8,693,000 4,384,000 2,625,000 45,000 12,672,000 37,883,000
Revenue, lending and trading activities (North America) - - 9,525,000 - - - - - 9,525,000
Total revenue $ 8,740,000 $ 724,000 $ 9,525,000 $ 8,693,000 $ 4,384,000 $ 2,625,000 $ 45,000 $ 12,672,000 $ 47,408,000

Major Goods or Services
RF/microwave filters $ 1,972,000 $ - $ - $ - $ - $ - $ - $ - $ 1,972,000
Power supply units & systems 1,564,000 645,000 - - - - - - 2,209,000
Healthcare diagnostic systems 1,101,000 - - - - - - - 1,101,000
Defense systems 3,899,000 - - - - - - - 3,899,000
Digital currency mining - - - 8,368,000 - - - - 8,368,000
Hotel and real estate operations - - - 325,000 4,384,000 - - - 4,709,000
Karaoke machines and related consumer goods - - - - - 2,625,000 - - 2,625,000
Crane rental - - - - - - - 12,590,000 12,590,000
Other 204,000 79,000 - - - - 45,000 82,000 410,000
Revenue from contracts with customers 8,740,000 724,000 - 8,693,000 4,384,000 2,625,000 45,000 12,672,000 37,883,000
Revenue, lending and trading activities - - 9,525,000 - - - - - 9,525,000
Total revenue $ 8,740,000 $ 724,000 $ 9,525,000 $ 8,693,000 $ 4,384,000 $ 2,625,000 $ 45,000 $ 12,672,000 $ 47,408,000

Timing of Revenue Recognition
Goods transferred at a point in time $ 4,720,000 $ 722,000 $ - $ 8,693,000 $ 4,384,000 $ 2,625,000 $ 45,000 $ 82,000 $ 21,271,000
Services transferred over time 4,020,000 2,000 - - - - - 12,590,000 16,612,000
Revenue from contracts with customers $ 8,740,000 $ 724,000 $ - $ 8,693,000 $ 4,384,000 $ 2,625,000 $ 45,000 $ 12,672,000 $ 37,883,000
The Company’s disaggregated revenues consisted of the following for the six months ended June 30, 2023 (excludes Ault Disruptive, as that segment has no revenue):
GIGA
TurnOn
Green
Fintech Sentinum AGREE SMC BMI Energy Total
Primary Geographical Markets
North America $ 5,190,000 $ 1,326,000 $ - $ 16,498,000 $ 6,627,000 $ 6,008,000 $ 45,000 $ 25,675,000 $ 61,369,000
Europe 4,711,000 11,000 - - - - - 107,000 4,829,000
Middle East and other 7,547,000 263,000 - - - - - - 7,810,000
Revenue from contracts with customers 17,448,000 1,600,000 - 16,498,000 6,627,000 6,008,000 45,000 25,782,000 74,008,000
Revenue, lending and trading activities (North America) - - 4,586,000 - - - - - 4,586,000
Total revenue $ 17,448,000 $ 1,600,000 $ 4,586,000 $ 16,498,000 $ 6,627,000 $ 6,008,000 $ 45,000 $ 25,782,000 $ 78,594,000

Major Goods or Services
RF/microwave filters $ 3,219,000 $ - $ - $ - $ - $ - $ - $ - $ 3,219,000
Power supply units & systems 4,678,000 1,470,000 - - - - - - 6,148,000
Healthcare diagnostic systems 2,238,000 - - - - - - - 2,238,000
Defense systems 6,564,000 - - - - - - - 6,564,000
Digital currency mining - - - 15,715,000 - - - - 15,715,000
Hotel and real estate operations - - - 783,000 6,627,000 - - - 7,410,000
Karaoke machines and related consumer goods - - - - - 6,008,000 - - 6,008,000
Crane rental - - - - - - - 25,236,000 25,236,000
Other 749,000 130,000 - - - - 45,000 546,000 1,470,000
Revenue from contracts with customers 17,448,000 1,600,000 - 16,498,000 6,627,000 6,008,000 45,000 25,782,000 74,008,000
Revenue, lending and trading activities - - 4,586,000 - - - - - 4,586,000
Total revenue $ 17,448,000 $ 1,600,000 $ 4,586,000 $ 16,498,000 $ 6,627,000 $ 6,008,000 $ 45,000 $ 25,782,000 $ 78,594,000

Timing of Revenue Recognition
Goods transferred at a point in time $ 10,126,000 $ 1,595,000 $ - $ 16,498,000 $ 6,627,000 $ 6,008,000 $ 45,000 $ 546,000 $ 41,445,000
Services transferred over time 7,322,000 5,000 - - - - - 25,236,000 32,563,000
Revenue from contracts with customers $ 17,448,000 $ 1,600,000 $ - $ 16,498,000 $ 6,627,000 $ 6,008,000 $ 45,000 $ 25,782,000 $ 74,008,000
The Company’s disaggregated revenues consisted of the following for the three months ended June 30, 2022:
Schedule of disaggregated revenues
Three months ended June 30, 2022
GWW TurnOnGreen Ault
Alliance BNI AGREE Total
Primary Geographical Markets
North America $ 1,111,000 $ 822,000 $ 12,000 $ 4,248,000 $ 4,598,000 $ 10,791,000
Europe 2,540,000 28,000 - - - 2,568,000
Middle East and other 2,852,000 212,000 - - - 3,064,000
Revenue from contracts with customers 6,503,000 1,062,000 12,000 4,248,000 4,598,000 16,423,000
Revenue, lending and trading activities (North America) - - 943,000 - - 943,000
Total revenue $ 6,503,000 $ 1,062,000 $ 955,000 $ 4,248,000 $ 4,598,000 $ 17,366,000

Major Goods or Services
RF/microwave filters 559,000 - - - - 559,000
Detector logarithmic video amplifiers 692,000 - - - - 692,000
Power supply units 1,698,000 1,016,000 - - - 2,714,000
Power supply systems 609,000 - - - - 609,000
Healthcare diagnostic systems 1,992,000 - - - - 1,992,000
Electric vehicle chargers - 46,000 - - - 46,000
Defense systems 953,000 - - - - 953,000
Digital currency mining - - - 3,976,000 - 3,976,000
Hotel operations - - - - 4,598,000 4,598,000
Other - - 12,000 272,000 - 284,000
Revenue from contracts with customers 6,503,000 1,062,000 12,000 4,248,000 4,598,000 16,423,000
Revenue, lending and trading activities - - 943,000 - - 943,000
Total revenue $ 6,503,000 $ 1,062,000 $ 955,000 $ 4,248,000 $ 4,598,000 $ 17,366,000

Timing of Revenue Recognition
Goods transferred at a point in time $ 3,601,000 $ 1,062,000 $ 12,000 $ 4,248,000 $ 4,598,000 $ 13,521,000
Services transferred over time 2,902,000 - - - - 2,902,000
Revenue from contracts with customers $ 6,503,000 $ 1,062,000 $ 12,000 $ 4,248,000 $ 4,598,000 $ 16,423,000
Three months ended June 30, 2022
GWW TurnOnGreen Fintech Sentinum AGREE Total
Primary Geographical Markets
North America $ 1,111,000 $ 822,000 $ 12,000 $ 4,248,000 $ 4,598,000 $ 10,791,000
Europe 2,540,000 28,000 - - - 2,568,000
Middle East and other 2,852,000 212,000 - - - 3,064,000
Revenue from contracts with customers 6,503,000 1,062,000 12,000 4,248,000 4,598,000 16,423,000
Revenue, lending and trading activities (North America) - - 943,000 - - 943,000
Total revenue $ 6,503,000 $ 1,062,000 $ 955,000 $ 4,248,000 $ 4,598,000 $ 17,366,000

Major Goods or Services
RF/microwave filters $ 559,000 $ - $ - $ - $ - $ 559,000
Power supply units & systems 2,307,000 1,016,000 - - - 3,323,000
Healthcare diagnostic systems 1,992,000 - - - - 1,992,000
Defense systems 953,000 - - - - 953,000
Digital currency mining - - - 3,976,000 - 3,976,000
Hotel and real estate operations - - - 272,000 4,598,000 4,870,000
Other 692,000 46,000 12,000 - - 750,000
Revenue from contracts with customers 6,503,000 1,062,000 12,000 4,248,000 4,598,000 16,423,000
Revenue, lending and trading activities - - 943,000 - - 943,000
Total revenue $ 6,503,000 $ 1,062,000 $ 955,000 $ 4,248,000 $ 4,598,000 $ 17,366,000

Timing of Revenue Recognition
Goods transferred at a point in time $ 3,601,000 $ 1,062,000 $ 12,000 $ 4,248,000 $ 4,598,000 $ 13,521,000
Services transferred over time 2,902,000 - - - - 2,902,000
Revenue from contracts with customers $ 6,503,000 $ 1,062,000 $ 12,000 $ 4,248,000 $ 4,598,000 $ 16,423,000

The Company’s disaggregated revenues consisted of the following for the six months ended June 30, 2022:

Six months ended June 30, 2022
GWW TurnOnGreen Ault
Alliance BNI AGREE Total
Primary Geographical Markets
North America $ 2,622,000 $ 1,834,000 $ 19,000 $ 8,074,000 $ 7,296,000 $ 19,845,000
Europe 4,719,000 47,000 - - - 4,766,000
Middle East and other 6,407,000 310,000 - - - 6,717,000
Revenue from contracts with customers 13,748,000 2,191,000 19,000 8,074,000 7,296,000 31,328,000
Revenue, lending and trading activities (North America) - - 18,864,000 - - 18,864,000
Total revenue $ 13,748,000 $ 2,191,000 $ 18,883,000 $ 8,074,000 $ 7,296,000 $ 50,192,000

Major Goods or Services
RF/microwave filters 2,070,000 - - - - 2,070,000
Detector logarithmic video amplifiers 692,000 - - - - 692,000
Power supply units 4,129,000 2,112,000 - - - 6,241,000
Power supply systems 657,000 - - - - 657,000
Healthcare diagnostic systems 1,992,000 - - - - 1,992,000
Electric vehicle chargers - 79,000 - - - 79,000
Defense systems 4,208,000 - - - - 4,208,000
Digital currency mining - - - 7,524,000 - 7,524,000
Hotel operations - - - - 7,296,000 7,296,000
Other - - 19,000 550,000 - 569,000
Revenue from contracts with customers 13,748,000 2,191,000 19,000 8,074,000 7,296,000 31,328,000
Revenue, lending and trading activities - - 18,864,000 - - 18,864,000
Total revenue $ 13,748,000 $ 2,191,000 $ 18,883,000 $ 8,074,000 $ 7,296,000 $ 50,192,000

Timing of Revenue Recognition
Goods transferred at a point in time $ 7,113,000 $ 2,191,000 $ 19,000 $ 8,074,000 $ 7,296,000 $ 24,693,000
Services transferred over time 6,635,000 - - - - 6,635,000
Revenue from contracts with customers $ 13,748,000 $ 2,191,000 $ 19,000 $ 8,074,000 $ 7,296,000 $ 31,328,000
~~The Company’s disaggregated revenues consisted of the following for the three months ended June 30, 2021:~~
Three months ended June 30, 2021
GWW TurnOnGreen Ault Alliance Total
Primary Geographical Markets
North America $ 2,140,000 $ 1,289,000 $ 550,000 $ 3,979,000
Europe 1,842,000 453,000 - 2,295,000
Middle East and other 2,493,000 88,000 - 2,581,000
Revenue from contracts with customers 6,475,000 1,830,000 550,000 8,855,000
Revenue, lending and trading activities (North America) - - 53,274,000 53,274,000
Total revenue $ 6,475,000 $ 1,830,000 $ 53,824,000 $ 62,129,000

Major Goods
RF/microwave filters $ 1,076,000 $ - $ - $ 1,076,000
Detector logarithmic video amplifiers 73,000 - - 73,000
Power supply units 240,000 1,830,000 - 2,070,000
Power supply systems 2,475,000 - - 2,475,000
Healthcare diagnostic systems 228,000 - - 228,000
Defense systems 2,383,000 - - 2,383,000
Digital currency mining - - 291,000 291,000
Other - - 259,000 259,000
Revenue from contracts with customers 6,475,000 1,830,000 550,000 8,855,000
Revenue, lending and trading activities - - 53,274,000 53,274,000
Total revenue $ 6,475,000 $ 1,830,000 $ 53,824,000 $ 62,129,000

Timing of Revenue Recognition
Goods transferred at a point in time $ 3,863,000 $ 1,830,000 $ 550,000 $ 6,243,000
Services transferred over time 2,612,000 - - 2,612,000
Revenue from contracts with customers $ 6,475,000 $ 1,830,000 $ 550,000 $ 8,855,000
~~The Company’s disaggregated revenues consisted of the following for the six months ended June 30, 2021:~~
Six months ended June 30, 2021
GWW TurnOnGreen Ault Alliance Total
Primary Geographical Markets
North America $ 4,029,000 $ 2,497,000 $ 852,000 $ 7,378,000
Europe 3,752,000 562,000 - 4,314,000
Middle East and other 5,044,000 154,000 - 5,198,000
Revenue from contracts with customers 12,825,000 3,213,000 852,000 16,890,000
Revenue, lending and trading activities (North America) - - 58,485,000 58,485,000
Total revenue $ 12,825,000 $ 3,213,000 $ 59,337,000 $ 75,375,000

Major Goods
RF/microwave filters $ 2,291,000 $ - $ - $ 2,291,000
Detector logarithmic video amplifiers 144,000 - - 144,000
Power supply units 478,000 3,213,000 - 3,691,000
Power supply systems 4,708,000 - - 4,708,000
Healthcare diagnostic systems 413,000 - - 413,000
Defense systems 4,791,000 - - 4,791,000
Digital currency mining - - 421,000 421,000
Other - - 431,000 431,000
Revenue from contracts with customers 2,825,000 3,213,000 852,000 16,890,000
Revenue, lending and trading activities - - 58,485,000 58,485,000
Total revenue $ 12,825,000 $ 3,213,000 $ 59,337,000 $ 75,375,000

Timing of Revenue Recognition
Goods transferred at a point in time $ 7,621,000 $ 3,213,000 $ 852,000 $ 11,686,000
Services transferred over time 5,204,000 - - 5,204,000
Revenue from contracts with customers $ 12,825,000 $ 3,213,000 $ 852,000 $ 16,890,000
Six months ended June 30, 2022
GWW TurnOnGreen Fintech Sentinum AGREE Total
Primary Geographical Markets
North America $ 2,622,000 $ 1,834,000 $ 19,000 $ 8,074,000 $ 7,296,000 $ 19,845,000
Europe 4,719,000 47,000 - - - 4,766,000
Middle East and other 6,407,000 310,000 - - - 6,717,000
Revenue from contracts with customers 13,748,000 2,191,000 19,000 8,074,000 7,296,000 31,328,000
Revenue, lending and trading activities (North America) - - 18,864,000 - - 18,864,000
Total revenue $ 13,748,000 $ 2,191,000 $ 18,883,000 $ 8,074,000 $ 7,296,000 $ 50,192,000

Major Goods or Services
RF/microwave filters $ 2,070,000 $ - $ - $ - $ - $ 2,070,000
Power supply units & systems 4,786,000 2,112,000 - - - 6,898,000
Healthcare diagnostic systems 1,992,000 - - - - 1,992,000
Defense systems 4,208,000 - - - - 4,208,000
Digital currency mining - - - 7,524,000 - 7,524,000
Hotel and real estate operations - - - 550,000 7,296,000 7,846,000
Other 692,000 79,000 19,000 - - 790,000
Revenue from contracts with customers 13,748,000 2,191,000 19,000 8,074,000 7,296,000 31,328,000
Revenue, lending and trading activities - - 18,864,000 - - 18,864,000
Total revenue $ 13,748,000 $ 2,191,000 $ 18,883,000 $ 8,074,000 $ 7,296,000 $ 50,192,000

Timing of Revenue Recognition
Goods transferred at a point in time $ 7,113,000 $ 2,191,000 $ 19,000 $ 8,074,000 $ 7,296,000 $ 24,693,000
Services transferred over time 6,635,000 - - - - 6,635,000
Revenue from contracts with customers $ 13,748,000 $ 2,191,000 $ 19,000 $ 8,074,000 $ 7,296,000 $ 31,328,000

5. 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:
Schedule of financial instrument measured at fair value
Fair Value Measurement at June 30, 2022
Total Level 1 Level 2 Level 3
Investment in term promissory note of Ault & Company, Inc. (“Ault & Company”) and other – a related party $ 2,770,000 $ - $ - $ 2,770,000
Investment in common stock of Alzamend Neuro, Inc. (“Alzamend”) – a related party 8,845,000 8,845,000 - -
Investments in marketable equity securities 17,467,000 17,467,000 - -
Cash and marketable securities held in trust account 116,895,000 116,895,000 - -
Investments in other equity securities 804,000 - - 804,000
Total assets measured at fair value $ 146,781,000 $ 143,207,000 $ - $ 3,574,000

Fair value, assets measured on recurring basis
Fair Value Measurement at December 31, 2021 Fair Value Measurement at June 30, 2023
Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Investment in term promissory note of Ault & Company and other – a related party $ 2,842,000 $ - $ - $ 2,842,000
Investment in common stock of Alzamend – a related party 13,230,000 13,230,000 - -
Assets:
Investment in common stock of Alzamend Neuro, Inc. (“Alzamend”) – a related party $ 5,836,000 $ 5,836,000 $ - $ -
Investments in marketable equity securities 40,380,000 40,380,000 - - 653,000 653,000 - -
Cash and marketable securities held in trust account 116,725,000 116,725,000 - - 2,143,000 2,143,000 - -
Investments in other equity securities 9,215,000 - - 9,215,000
Total assets measured at fair value $ 182,392,000 $ 170,335,000 $ - $ 12,057,000 $ 8,632,000 $ 8,632,000 $ - $ -

Liabilities:
Series E and G preferred stock liabilities $ 8,263,000 $ - $ - $ 8,263,000
Warrant and embedded conversion feature liabilities 5,605,000 - - 5,605,000
Convertible promissory notes 15,275,000 - - 15,275,000
Total liabilities measured at fair value $ 29,143,000 $ - $ - $ 29,143,000
Fair Value Measurement at December 31, 2022
Total Level 1 Level 2 Level 3
Assets:
Investment in common stock of Alzamend – a related party $ 6,449,000 $ 6,449,000 $ - $ -
Investments in marketable equity securities 6,590,000 6,590,000 - -
Cash and marketable securities held in trust account 118,193,000 118,193,000 - -
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

Liabilities:
Warrant and embedded conversion feature liabilities $ 2,967,000 $ - $ - $ 2,967,000
Convertible promissory notes 12,776,000 - - 12,776,000
Total liabilities measured at fair value $ 15,743,000 $ - $ - $ 15,743,000

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 six months ended June 30, ~~2022:~~2023:
Schedule of other equity securities measured and carried at fair value
Investments in
other equity
securities
Balance at January 1, 2022 $ 9,215,000
Investment in preferred stock 2,550,000
Change in fair value of warrants 13,867,000
Conversion to marketable securities (24,828,000 )
Balance at June 30, 2022 $ 804,000
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 June 30, 2023 $ -

~~See Note 11~~Equity Investments for the changes in investments in Ault & Company measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) during the three and six months ended June 30, 2022.Which Measurement Alternative Has Been Selected

Other equity securities also include investments in entities that do not have a readily determinable fair value and do not report net asset value per share. These investments are accounted for using a measurement alternative under which they are measured at cost and adjusted for observable price changes and impairments. Observable price changes result from, among other things, equity transactions for the same issuer executed during the reporting period, including subsequent equity offerings or other reported equity transactions related to the same issuer. For these transactions to be considered observable price changes of the same issuer, the Company evaluates whether these transactions have similar rights and obligations, including voting rights, distribution preferences, conversion rights, and other factors, to the investments the Company holds. Any investments adjusted to their fair value by applying the measurement alternative are disclosed as nonrecurring fair value measurements, including the level in the fair value hierarchy that was used. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company held equity investments in other ~~equity~~ securities, which consisted of investments in preferred stock, valued at $25.9 million and $29.2 million, respectively, that were valued using a measurement ~~alternative of $37.7~~ ~~million and $21.3~~ ~~million, respectively,~~alternative. These investments are included in other equity securities in the accompanying condensed consolidated balance sheets.

Measurement Alternative Impairment
The ~~following table presents information on the assets measured at~~Company has made cumulative downward adjustments for impairments for equity securities that do not have readily determinable fair ~~value on a nonrecurring basis by level within the fair value hierarchy~~values as of June 30, ~~2022~~2023, totaling $11.6 million. Approximately $9.6 million of these adjustments have been reflected in other income (expense) and ~~December 31, 2021. These investments were not measured due~~$2.0 million of these adjustments related to ~~an observable price change or impairment during~~Fintech lending operations and have been recorded against revenue from lending and trading activities on the ~~six months ended June 30, 2022.~~
Schedule of investments not measured
Fair Value Measurement Using
Total Quoted prices
in active
markets for
identical assets
(Level 1) Other
observable
inputs
(Level 2) Significant
unobservable
inputs
(Level 3)
As of June 30, 2022
Investments in other equity securities that do not report net asset value $ 37,691,000 $ - $ - $ 37,691,000
Fair Value Measurement Using
Total Quoted prices
in active
markets for
identical assets
(Level 1) Other
observable
inputs
(Level 2) Significant
unobservable
inputs
(Level 3)
As of December 31, 2021
Investments in other equity securities that do not report net asset value $ 21,241,000 $ - $ - $ 21,241,000
consolidated statement of operations and comprehensive loss.

6. ~~MARKETABLE~~Marketable EQUITY ~~SECURITIES~~Securities

Marketable equity securities with readily determinable market prices consisted of the following as of June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:
Schedule of marketable equity securities
Marketable equity securities at June 30, 2022
Gross unrealized Gross unrealized
Cost gains losses Fair value
Common shares $ 26,063,000 $ 481,000 $ (9,077,000 ) $ 17,467,000

Marketable equity securities at December 31, 2021
Gross unrealized Gross unrealized
Cost gains losses Fair value
Common shares $ 53,475,000 $ 32,000 $ (13,127,000 ) $ 40,380,000
Schedule of marketable securities
Marketable equity securities at June 30, 2023
Gross unrealized Gross unrealized
Cost gains losses Fair value
Common shares $ 5,131,000 $ 9,000 $ (4,487,000 ) $ 653,000
Marketable equity securities at December 31, 2022
Gross unrealized Gross unrealized
Cost gains losses Fair value
Common shares $ 10,271,000 $ 383,000 $ (4,064,000 ) $ 6,590,000

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

~~F-20~~
7. DIGITAL CURRENCIES
The following table presents the activities of the digital currencies (included in prepaid expenses and other current assets) for the six months ended June 30, 2023 and 2022:
Schedule of activities of the digital currencies
Digital
Currencies
Balance at January 1, 2023 $ 554,000
Additions of mined digital currencies 14,714,000
Payments to vendors (13,000 )
Impairment of mined cryptocurrency (263,000 )
Sale of digital currencies (15,040,000 )
Realized gain on sale of digital currencies 348,000
Balance at June 30, 2023 $ 300,000
Digital
Currencies
Balance at January 1, 2022 $ 2,165,000
Additions of mined digital currencies 7,524,000
Payments to vendors (412,000 )
Impairment of mined cryptocurrency (2,415,000 )
Sale of digital currencies (4,377,000 )
Realized gain on sale of digital currencies 260,000
Balance at June 30, 2022 $ 2,745,000

7.8. PROPERTY AND EQUIPMENT, NET

At June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, property and equipment consisted of:
Schedule of property and equipment
June 30, 2022 December 31, 2021
Cryptocurrency machines and related equipment $ 76,963,000 $ 10,763,000
Computer, software and related equipment 18,697,000 8,884,000
Office furniture and equipment 2,585,000 702,000
Land 25,696,000 25,696,000
Building and improvements 70,926,000 68,959,000
194,867,000 115,004,000
Accumulated depreciation and amortization (10,403,000 ) (5,096,000 )
Property and equipment placed in service, net 184,464,000 109,908,000
Deposits on cryptocurrency machines 61,523,000 64,117,000
Property and equipment, net $ 245,987,000 $ 174,025,000
Schedule of property and equipment
June 30, 2023 December 31, 2022
Building and improvements $ 87,159,000 $ 81,102,000
Bitcoin mining equipment 50,640,000 42,438,000
Crane rental equipment 32,681,000 32,453,000
Land 25,646,000 25,646,000
Computer, software and related equipment 27,358,000 23,168,000
Aircraft 15,983,000 15,983,000
Vehicles 4,702,000 3,314,000
Office furniture and equipment 3,210,000 2,854,000
Oil and natural gas properties, unproved properties 3,564,000 972,000
250,943,000 227,930,000
Accumulated depreciation and amortization (23,083,000 ) (9,344,000 )
Property and equipment placed in service, net 227,860,000 218,586,000
Deposits on cryptocurrency machines - 11,328,000
Property and equipment, net $ 227,860,000 $ 229,914,000

~~For~~Summary of depreciation expense:
Schedule of depreciation
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2023 2022 2023 2022
Depreciation expense $ 7,966,000 $ 3,725,000 $ 13,876,000 $ 6,287,000
9. INTANGIBLE ASSETS, NET
At June 30, 2023 and December 31, 2022, intangible assets consisted of:
Schedule of intangible asset
Useful Life
June 30,
2023
December 31,
2022
Developed technology 3-8 years $ 7,984,000 $ 24,584,000
Customer list 8-10 years 5,829,000 5,865,000
Trade names 5-10 years 3,916,000 4,316,000
Trade name and trademark Indefinite life 1,513,000 1,493,000
Domain name and other intangible assets 5 years 599,000 630,000
19,841,000 36,888,000
Accumulated amortization (2,551,000 ) (2,102,000 )
Intangible assets, net $ 17,290,000 $ 34,786,000
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 Six Months Ended
June 30, June 30,
2023 2022 2023 2022
Amortization expense $ 254,000 $ 79,000 $ 507,000 $ 158,000
As of June 30, 2023, intangible assets subject to amortization have an average remaining useful life of 8.2 years. The following table presents estimated amortization expense for each of the succeeding five calendar years and thereafter.
Schedule of estimated amortization expense
2023 $ 1,029,000
2024 2,026,000
2025 1,926,000
2026 1,826,000
2027 1,826,000
Thereafter 7,144,000
$ 15,777,000
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 six months ended June 30, ~~2022 and 2021, depreciation expense amounted to $6.3~~ ~~million and $0.4~~ ~~million, respectively.~~
8. ~~BUSINESS COMBINATIONS~~
~~Overview of AVLP Acquisition~~
On June 1, 2022, the Company converted the principal amount under the convertible promissory notes issued to it by AVLP and accrued but unpaid interest into common stock of AVLP. The Company converted $~~20.0~~ ~~million in principal and $5.9~~ ~~million of accrued interest receivable at a conversion price of $0.50 per share and received 51,889,168 shares of common stock increasing its common stock ownership of AVLP from less than~~ 20~~% to approximately~~ 92%.
Prior to the conversion of the convertible promissory notes, the Company accounted for its investment in AVLP as an investment in an unconsolidated entity under the equity method of accounting. In connection with the conversion of the convertible promissory notes, the Company’s consolidated financial statements now include all of the accounts of AVLP, and any significant intercompany balances and transactions have been eliminated in consolidation.
The consideration transferred for the Company’s approximate 92% ownership interest in connection with this acquisition aggregated $20.7 million, which represented the fair value of the Company’s holdings in AVLP immediately prior to conversion. The carrying amount of the Company’s holdings in AVLP immediately prior to conversion was $23.4 million, resulting in a $2.7 million loss for the related remeasurement, which was recognized in interest and other income. The allocation of the total consideration transferred to the assets acquired, including intangible assets and goodwill, and the liabilities assumed is preliminary and could be revised as a result of additional information obtained due to the finalization of a third-party valuation report, leases and related commitments, tax related matters and contingencies and certain assets and liabilities, including receivables and payables. Amounts will be finalized within the measurement period, which will not exceed one year from the acquisition date. The goodwill resulting from this acquisition is not tax deductible.2023.

The ~~following table presents~~tradenames and patents/developed technology intangible assets were valued using the ~~preliminary allocation~~relief-from-royalty method. The relief-from-royalty method is one of the ~~consideration transferred~~methods under the income approach wherein estimates of a company’s earnings attributable to the ~~assets acquired and liabilities assumed~~intangible asset are based on ~~their fair values.~~
Schedule of preliminary allocation
Preliminary
allocation
Total purchase consideration $ 20,706,000
Fair value of non-controlling interest 6,706,000
Total consideration $ 27,412,000

Identifiable net liabilities assumed:
Cash $ 1,245,000
Prepaid expenses and other current assets 55,000
Property and equipment 5,057,000
Note receivable 800,000
Accounts payable and accrued expenses (6,935,000 )
Convertible notes payable, principal (9,734,000 )
Fair value of embedded derivative (1,226,000 )
Fair value of bifurcated conversion option

(4,425,000
)
Fair value of bifurcated put option

(200,000
)
Net liabilities assumed (15,363,000 )
Goodwill $ 42,775,000
~~The Company consolidates~~ the ~~results of AVLP on a one-month lag, therefore~~royalty rate the ~~statements of operations do not include results for AVLP~~company would have paid for the ~~three~~use of the asset if it did not own it. Royalty payments are estimated by applying royalty rates of 18% for patents and ~~six months ended June 30, 2022.~~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%.

~~Overview of SMC Acquisition~~
Beginning in June 2022, the Company, through its subsidiary Digital Power Lending, LLC (“DP Lending”), began making open market purchases of SMC common stock. These purchases granted the Company a greater than 20% effective ownership on June 9, 2022, and subsequently, on June 15, 2022, ~~the Company owned more than 50% of the issued and outstanding common stock of SMC. The Company’s ownership of SMC stands at 51.6% as of June 30, 2022.~~
~~As of June 15, 2022 (“Acquisition Date”), the purchase price of the common stock acquired totaled $7.4~~ ~~million and on June 15, 2022 a $3.1~~ ~~million gain was recognized in interest and other income for the remeasurement of the Company’s previously held ownership interest to $10.5~~ ~~million, based on the trading price of SMC common stock. The Company also recognized non-controlling interest at fair value as of the Acquisition Date in the amount of $10.3~~ ~~million.~~
The allocation of the total consideration transferred to the assets acquired, including intangible assets and goodwill, and the liabilities assumed, is preliminary and could be revised as a result of additional information obtained due to the finalization of a third-party valuation report, leases and related commitments, tax related matters and contingencies and certain assets and liabilities, including receivables and payables. Amounts will be finalized within the measurement period, which will not exceed one year from the Acquisition Date. The goodwill resulting from this acquisition is not tax deductible.
The Company consolidates the results of SMC on a one-quarter lag as it enables the Company to report its quarterly results independent from the timing of when SMC reports its results, therefore the statements of operations do not include results for SMC for the three and six months ended June 30, 2022.
~~The following table presents the preliminary allocation of the consideration transferred to the assets acquired and liabilities assumed based on their fair values.~~
Schedule of assets acquired and liabilities assumed
Preliminary
Allocation
Total purchase consideration $ 10,517,000
Fair value of non-controlling interest 10,336,000
Total consideration $ 20,853,000

Identifiable net assets acquired:
Cash $ 2,278,000
Accounts receivable 9,891,000
Prepaid expenses and other current assets 673,000
Inventories 12,840,000
Property and equipment, net 529,000
Right-of-use assets 1,073,000
Other assets 83,000
Intangible assets:
Trade names-estimated useful life of 19 years 2,470,000
Customer relationships-estimated useful life of 16 years 1,380,000
Proprietary technology-estimated useful life of 3 years 600,000
Accounts payable and accrued expenses (10,052,000 )
Notes payable (2,972,000 )
Lease liabilities (1,124,000 )
Net assets acquired 17,669,000
Goodwill $ 3,184,000
~~Unaudited Pro Forma Financial Information~~
~~The following unaudited pro forma consolidated results of operations for the three and six months ended June 30, 2022 have been prepared as if the SMC acquisition had occurred on January 1, 2022.~~
Schedule of pro forma consolidated results of operations
Three Months Ended Six Months Ended
June 30, 2022 June 30, 2022
Total revenues $ 29,058,000 $ 64,717,000
Net loss attributable to BitNile Holdings, Inc. $ (26,206,000 ) $ (56,531,000 )
The unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the acquisition been consummated as of that time, nor is it intended to be a projection of future results.
9.10. GOODWILL

~~The Company’s goodwill increased due to the acquisition of controlling interests in AVLP on June 1, 2022 and SMC on June 15, 2022.~~ The following table summarizes the changes in the Company’s goodwill for the six months ended June 30, ~~2022:~~2023:
Schedule of goodwill
Goodwill
Balance as of January 1, 2022 $ 10,090,000
Acquisition of AVLP 42,775,000
Acquisition of SMC 3,184,000
Effect of exchange rate changes (727,000 )
Balance as of June 30, 2022 $ 55,322,000
Schedule of goodwill
Goodwill
Balance as of January 1, 2023 $ 27,902,000
Acquisition of BMI 17,000
Impairment of goodwill (18,570,000 )
Effect of exchange rate changes (191,000 )
Balance as of June 30, 2023 $ 9,158,000
~~10.~~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 ~~INCREASE IN OWNERSHIP~~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 six months ended June 30, 2023.
F-19
11. CONSOLIDATED VARIABLE INTEREST ~~OF SUBSIDIARIES~~ENTITY - SMC
During the quarter ended June 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.
12. BUSINESS COMBINATION
BMI Acquisition

On ~~May 12, 2022, BNI~~March 6, 2023, the Company closed a $~~1.8~~ ~~million membership interest purchase agreement whereby BNI acquired~~Share Exchange Agreement (the “Agreement”) with BMI and sold to BMI all of the 30~~% minority interest~~outstanding shares of ~~Alliance Cloud Services, LLC (“ACS”) which BNI did not previously own, resulting in ACS becoming a wholly-owned subsidiary~~capital stock of ~~BNI. ACS owns and operates~~ the Company’s ~~Michigan data center, where BNI conducts~~subsidiary, BitNile.com, Inc. (“BitNile.com”) as well as Ault Iconic, Inc. (formerly Ault Media Group, 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, BMI issued shares of preferred stock convertible into common stock of BMI representing approximately 73.2% of BMI’s outstanding common stock. Pending approval of the transaction by the Nasdaq Stock Market and BMI’s shareholders, the preferred stock combined are subject to a 19.9% beneficial ownership limitation. The Transaction benefits the Company as BMI is a publicly traded company and provides BitNile.com access to capital markets as the primary focus for BMI to fund the expected growth of the BMI metaverse platform. In addition, there are certain synergies between the Company’s Bitcoin mining ~~operations.~~operations and BMI’s Agora Digital mining business.

~~Between June 15, 2022 and June 30, 2022, DP Lending increased~~The holders of preferred stock will be entitled to receive dividends at a rate of 5% of the ~~Company’s ownership interest in SMC through~~stated value of the ~~open market purchase of approximately~~ ~~55,000~~ ~~shares for $430,000~~.preferred stock.

The Company is entitled to appoint three members to the board of directors of BMI and, following shareholder approval, a majority of the board, in each case subject to the approval of the Nasdaq Stock Market.
The Company consolidates BMI as a VIE due to its significant level of influence and control of BMI, 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 BMI Amount
Common stock $ 287,000
The total purchase price to acquire BMI 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.
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
~~11.~~13. INVESTMENTS – RELATED PARTIES

Investments in Alzamend and Ault & Company, Inc. (“Ault & Company”) at June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, were comprised of the following:

Investment in Promissory Notes, Related Parties – Ault & Company
Schedule of investment
Interest Due June 30, December 31,
rate date 2022 2021
Investment in promissory note of Ault & Company 8% December 31, 2022 $ 2,500,000 $ 2,500,000
Accrued interest receivable, Ault & Company 270,000 170,000
Other - 172,000
Total investment in promissory note, related party $ 2,770,000 $ 2,842,000
Schedule of investment
Interest June 30, December 31,
rate Due Date 2023 2022
Investment in promissory note of Ault & Company 8% December 31, 2023 $ 2,500,000 $ 2,500,000
Accrued interest receivable, Ault & Company 468,000 368,000
Total investment in promissory note, related party $ 2,968,000 $ 2,868,000
Summary of interest income, related party, recorded within interest and other income on the condensed consolidated statement of operations:
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2023 2022 2023 2022
Interest income, related party $ 50,000 $ 50,000 $ 100,000 $ 100,000

Investment in Common Stock, ~~and Options,~~ Related Parties – Alzamend

June 30, December 31,
2022 2021
Investment in common stock and options of Alzamend $ 8,845,000 $ 13,230,000
Schedule of investment in common stock
Investments in common stock, related parties at June 30, 2023
Cost Gross unrealized losses Fair value
Common shares $ 24,688,000 $ (18,852,000 ) $ 5,836,000
Investments in common stock, related parties at December 31, 2022
Cost Gross unrealized losses Fair value
Common shares $ 24,673,000 $ (18,224,000 ) $ 6,449,000

The following table summarizes the changes in the Company’s investments in Alzamend ~~and Ault & Company~~common stock during the ~~six~~three months ended June 30, ~~2022:~~
Schedule of investments in Alzamend and Ault
Investment in
warrants and
common stock of
Alzamend Investment in
promissory notes of
Ault & Company
Balance at January 1, 2022 $ 13,230,000 $ 2,842,000
Investment in common stock and options of Alzamend 4,663,000 -
Unrealized loss in common stock of Alzamend (9,048,000 ) -
Amortization of related party investment - (173,000 )
Accrued interest - 101,000
Balance at June 30, 2022 $ 8,845,000 $ 2,770,000
2023 and 2023:

~~Investments in Alzamend Common Stock~~
Schedule of investment in warrants and common stock
For the Three Months Ended June 30,
2023 2022
Balance at April 1 $ 4,856,000 $ 8,729,000
Investment in common stock of Alzamend 10,000 4,469,000
Unrealized gain (loss) in common stock of Alzamend 970,000 (4,353,000 )
Balance at June 30 $ 5,836,000 $ 8,845,000

The following table summarizes the changes in the Company’s investments in Alzamend common stock during the six months ended June 30, ~~2022:~~2023 and 2023:
Schedule of investments in Alzamend common stock
Shares of Per Share Investment in
Common Stock Price Common Stock
Balance at January 1, 2022 6,947,000 $ 1.90 $ 13,230,000
March 9, 2021 securities purchase agreement^* 2,667,000 $ 1.50 4,000,000
Open market purchases after initial public offering 618,000 $ 1.07 663,000
Unrealized loss in common stock of Alzamend (9,048,000 )
Balance at June 30, 2022 10,232,000 $ 0.86 $ 8,845,000

* Pursuant to the March 9, 2021 securities purchase agreement, in aggregate, Alzamend agreed to sell up to 6,666,667 shares of its common stock to DP Lending for $10.0 million, or $1.50 per share, and issue to DP Lending warrants to acquire 3,333,334 shares of Alzamend common stock with an exercise price of $3.00 per share. As of December 31, 2021, DP Lending funded $6.0 million, including the conversion of notes and advances of $0.8 million, and the remaining $4.0 million was funded upon Alzamend achieving certain milestones during the three months ended June 30, 2022.
For the Six Months Ended June 30,
2023 2022
Balance at January 1 $ 6,449,000 $ 13,230,000
Investment in common stock of Alzamend 15,000 4,663,000
Unrealized loss in common stock of Alzamend (628,000 ) (9,048,000 )
Balance at June 30 $ 5,836,000 $ 8,845,000

~~12.~~ ~~INVESTMENT IN UNCONSOLIDATED ENTITY – AVLP~~ Unrealized loss in common stock of Alzamend is recorded within revenue from lending and trading activities on the condensed consolidated statements of operations.

~~Equity Investments in Unconsolidated Entity – AVLP~~
The Company converted its AVLP convertible promissory note on June 1, 2022 as part of the acquisition of AVLP (see Note 8). Equity investments in the then unconsolidated entity, AVLP, at December 31, 2021, were comprised of the following:
~~Investment in Promissory Notes~~
Schedule of convertible promissory note
Interest rate Due date December 31, 2021
Investment in convertible promissory note 12% 2022-2026 $ 17,799,000
Investment in promissory note – Alpha Fund 8% June 30, 2022 3,600,000
Accrued interest receivable 2,092,000
Other 600,000
Total investment in promissory notes, gross 24,091,000
Less: provision for loan losses (2,000,000 )
Total investment in promissory note $ 22,091,000
~~The following table summarizes the changes in the Company’s equity investments in the then unconsolidated entity, AVLP, during the six months ended June 30, 2022:~~
Schedule ofchanges in the equity investments
Investment in Investment in
warrants and promissory notes Total
common stock and advances investment
Balance at January 1, 2022 $ 39,000 $ 22,091,000 $ 22,130,000
Investment in convertible promissory notes - 2,200,000 2,200,000
Loss from equity investment (39,000 ) (885,000 ) (924,000 )
Accrued interest - 143,000 143,000
Loss on remeasurement upon conversion - (2,700,000 ) (2,700,000 )
Conversion of AVLP convertible promissory notes - (17,040,000 ) (17,040,000 )
Elimination of intercompany debt after conversion - (3,809,000 ) (3,809,000 )
Balance at June 30, 2022 $ - $ - $ -
~~13.~~ ~~CONSOLIDATED VARIABLE INTEREST ENTITY - ALPHA FUND~~
~~Alpha Fund – Consolidated Variable Interest Entity~~
As of June 30, 2022 and December 31, 2021, the Company held an investment in Ault Alpha LP (“Alpha Fund”). Alpha Fund operates as a private investment fund. The general partner of Alpha Fund, Ault Alpha GP LLC (“Alpha GP”) is owned by Ault Capital Management LLC (the “Investment Manager”), which also acts as the investment manager to Alpha Fund. The Investment Manager is owned by Ault & Company. Messrs. Ault, Horne, Nisser and Cragun, who serve as executive officers and/or directors of the Company, are executive officers of the Investment Manager, and Messrs. Ault, Horne and Nisser are executive officers and directors of Ault & Company.
~~As of June 30, 2022, DP Lending subscribed for $~~25 ~~million or~~ ~~100% of the limited partnership interests in Alpha Fund, the full amount of which was funded, an increase of $~~8 ~~million from the $~~17 million subscribed and funded as of December 31, 2021. These investments are subject to a rolling five-year lock-up period, provided that after three years, Alpha GP will waive 24 months of the lock-up period upon receipt of written notice from an executive officer of the Company that a withdrawal of capital is required to prevent a going concern opinion from the Company’s auditors, under the terms of Alpha Fund’s partnership agreement and side letter entered into between the Company and Alpha Fund.
The Company consolidates Alpha Fund as a variable interest entity (a “VIE”) due to its significant level of influence and control of Alpha Fund, the size of its investment, and its ability to participate in policy making decisions, the Company is considered the primary beneficiary of the VIE.
~~Investments by Alpha Fund – Treasury Stock~~
~~As of June 30, 2022, Alpha Fund owned~~ ~~22,225,000~~ ~~shares of the Company’s common stock and~~ ~~53,033~~ ~~shares of the Company’s~~ ~~13.00% Series D Cumulative Redeemable Perpetual Preferred Stock (the “Series D Preferred Stock”), accounted for as treasury stock as of June 30, 2022.~~
14. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Other current liabilities at June 30, ~~2022~~2023 and December 31, ~~2021~~2022 consisted of:
Schedule of other current liabilities
June 30, December 31, June 30, December 31,
2022 2021 2023 2022
Accounts payable $ 18,348,000 $ 6,902,000 $ 30,841,000 $ 21,347,000
Accrued payroll and payroll taxes 6,540,000 5,027,000 11,625,000 9,939,000
Financial instrument liabilities 934,000 4,249,000
Accrued legal 1,787,000 2,637,000 5,736,000 3,168,000
Short position marketable equity securities 5,253,000 -
Interest payable 3,680,000 187,000 4,064,000 3,207,000
Warrant derivative liabilities 3,028,000 651,000
Accrued lender profit participation rights 2,497,000 6,000,000
Related party advances 213,000 352,000
Other accrued expenses 12,236,000 3,753,000 17,874,000 17,980,000
Total $ 43,525,000 $ 22,755,000
$ 81,131,000 $ 62,644,000
15. DIVIDEND PAYABLE IN TURNONGREEN COMMON STOCK
On June 26, 2023, the Company established a record date for its initial distribution of TurnOnGreen securities. Stockholders as of this date were entitled to 40 shares of TurnOnGreen common stock, along with warrants to purchase 40 shares of TurnOnGreen common stock (the “TurnOnGreen Securities”) for every share of the Company's common stock they held on the record date. The initial distribution was finalized in July 2023.
The Company recorded a dividend payable, which was directly offset against equity based on the recorded value of the TurnOnGreen Securities of $5.2 million.
16. PREFERRED STOCK LIABILITY
~~Financial Instruments~~March 28, 2023 Security Purchase Agreement

~~Under authoritative guidance used~~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 FASB on determining whether an instrument (or embedded feature) is indexed to an entity’s own stock, instruments that do not have fixed settlement provisions are deemed to be derivative instruments. In prior years, the Company granted certain warrants that resulted in these warrants accounted for as a financial instrument and being re-measured every reporting period with the change in value reported in the statement of operations.Company.

The ~~financial instruments were valued using a variety of pricing models with the following valuation assumptions:~~
Schedule of Financial Instrument
June 30, 2022 December 31, 2021
Contractually stipulated stock price $2.50 $2.50
Exercise price $2.50 $2.50
Contractually defined remaining term 5.0 5.0
Contractually defined volatility 135% 135%
Dividend yield 0% 0%
Risk-free interest rate 3.0% 1.3%
~~Per the terms~~purchase price of the ~~warrant agreements underlying~~Series E Preferred Stock and the ~~financial instruments,~~Series F Preferred Stock was paid for by the ~~value~~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 ~~warrant holders is defined within the agreement~~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 ~~stock price, contractual term, volatility factor and dividend rate as defined~~fixed monetary amount known at inception. The Company elected the fair value option to record the Preferred Shares with changes in the warrant agreement, and not indexed to the company’s stock, resulting in the financial instrument accounting. The risk-free interest rate was based on rates established by the Federal Reserve Bank.fair value recorded through earnings.

~~The following table sets forth a summary~~In June 2023, the Investors converted 1,000 shares of Series F Preferred Stock and 1,792 shares of Series G Preferred Stock into an aggregate of 37,493 shares of the ~~changes in the estimated fair value of the financial instruments during~~Company’s common stock. During the six months ended June 30, ~~2022~~2023, the Company recorded a loss of $91,000 on the conversions of Series F Preferred Stock and ~~2021:~~Series G Preferred Stock.
Schedule of fair value of the financial instruments
June 30, 2022 June 30, 2021
Beginning balance $ 4,249,000 $ 4,192,000
Change in fair value 24,000 388,000
Extinguishment (3,339,000 ) -
Ending balance $ 934,000 $ 4,580,000
Preferred stock liability at June 30, 2023 was comprised of the following:
Schedule of preferred stock liability
Preferred Type Shares Conversion
Price Stated
Value Fair Value
Series E Convertible Preferred Liability 83,000 See below* $ 8,300,000 $ 7,055,000
Series G Convertible Preferred Liability 14,208 See below* 1,421,000 1,208,000
Total 97,208 $ 9,721,000 $ 8,263,000
* Each Preferred Share is convertible into such number of shares of the Company’s common stock equal to the stated value per share divided by the conversion price, which is equal to 85% of the closing sale price of the common stock on the trading day prior to the date of conversion, subject to a floor price of $0.10, which floor price is not affected by the recently consummated reverse split.
The following table summarizes the changes in the Company’s preferred stock liability for the six months ended June 30, 2023:
Schedule of changes in preferred stock liability Preferred Stock
Liability
Balance at December 31, 2022 $ -
Preferred stock issued upon extinguishment of debt 8,500,000
Conversion of preferred stock to common stock (328,000 )
Change in fair value 91,000
Balance at June 30, 2023 $ 8,263,000
Subsequent Event – Exchange of Preferred Shares for Secured Debt and Assignment of Secured Note
In August 2023, the Company 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”) 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 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.
Further, 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.

~~15.~~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 June 30, 2023, the carrying amount of the redeemable noncontrolling interest in equity of subsidiaries was recorded at its redemption value of $2.0 million. Approximately 11.3 million shares of Ault Disruptive common stock were redeemed at a redemption price of $10.61 per share, for an aggregate redemption amount of $120.0 million.
18. NOTES PAYABLE

Notes payable at June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, were comprised of the ~~following.~~following:
Schedule of notes payable
Interest
rate Due date
June 30,
2022
December 31,
2021 Collateral Guarantors Interest
rate Due date June 30,
2023 December 31,
2022
Short-term notes payable 12.0%
Aug. – Nov. 2022
$ 92,000 $ 118,000
10% original issue discount senior secured notes - 65,972,000
AGREE Madison secured construction loans 7.0% January 1, 2025 55,055,000 55,055,000
AGREE secured construction loans AGREE hotels - 7.0% January 1, 2025 $ 67,359,000 $ 62,395,000
Circle 8 Crane Services, LLC (“Circle 8”) revolving credit facility Circle 8 cranes - 8.4% December 16, 2025 16,616,000 14,724,000
8.5% secured promissory notes 19,389 Antminers, BNI Montana assets, Circle 8 membership interests, Florida property, Michigan property, aircraft Ault & Company, Ault Lending, Milton C. Ault, III 8.5% May 7, 2024 16,001,000 17,389,000
16% senior secured promissory notes* 12,000 Antminers, Ault Lending securities, Ault & Company, Sentinum, Ault Lending, Milton C. Ault, III 16.0% September 15, 2023 12,034,000 17,456,000
Circle 8 equipment financing notes Circle 8 equipment - 7.2% November 16, 2026 6,715,000 10,677,000
3% secured promissory notes** Certain Ault Lending securities - 3.0% May 18, 2023 5,455,000 5,672,000
8% demand loans - - 8.0% Upon demand 4,500,000 -
Short-term bank credit facilities - - 5.6% Renews monthly 2,129,000 1,702,000
XBTO note payable 2,482 Antminers - 12.5% December 30, 2023 1,645,000 2,749,000
Note payable, related party - - 9.5% On demand 750,000 -
10% secured promissory notes - - 10.0% August 10, 2023 - 8,789,000
SMC line of credit 15.5% June 11, 2023 2,500,000 - SMC assets - 8.0% October 14, 2025 - 1,761,000
SMC installment notes 7.6% June 18, 2024 195,000 -
SMC notes payable 6.0% Sep. 2024 – Feb. 2025 353,000 -
XBTO Trading note payable 12.5% December 30, 2023 4,000,000 -
Short-term bank line of credit 3.9% Renews monthly 1,736,000 960,000
Other***
- Ault & Company 4,595,000 858,000
Total notes payable $ 63,931,000 $ 122,105,000 - - $ 137,799,000 $ 144,172,000
Less: - -
Unamortized debt discounts (1,044,000 ) (27,496,000 ) - - (3,804,000 ) (13,087,000 )
Total notes payable, net $ 62,887,000 $ 94,609,000 - - $ 133,995,000 $ 131,085,000
Less: current portion (7,340,000 ) (39,554,000 ) - - (46,434,000 ) (39,621,000 )
Notes payable – long-term portion $ 55,547,000 $ 55,055,000 - - $ 87,561,000 $ 91,464,000
* Defaults on payment terms in July 2023. Payments subsequent to June 30, 2023 of $10.3 million. Currently the loan maturity date was extended to September 15, 2023 and automatically extends for an additional 30 days for a $0.25 million extension fee for each extension period, with an interest rate of 16% and principal amount outstanding of $2.5 million.
** Defaults on payment term as of June 30, 2023. Paid in July 2023.
*** $3.4 million defaults on payment terms. $3.1 million paid off in July 2023. $0.3 million TurnOnGreen note payable remains in default.

~~SMC Debt Security Interest~~Notes Payable Maturities

The ~~SMC debt is secured by a perfected security interest in~~contractual maturities of the Company’s notes payable, assuming the exercise of all ~~SMC assets including a first-priority security interest in SMC accounts receivable and inventory.~~extensions that are exercisable solely at the Company’s option, as of June 30, 2023 were:
Schedule of maturities
Year
2023 $ 36,339,000
2024 15,307,000
2025 85,712,000
2026 441,000
$ 137,799,000
Interest Expense
Schedule of interest expense
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2023 2022 2023 2022
Contractual interest expense $ 2,547,000 $ 1,999,000 $ 5,942,000 $ 2,920,000
Forbearance fees 6,198,000 - 7,538,000 1,203,000
Amortization of debt discount 7,182,000 32,000 16,177,000 27,732,000
Total interest expense $ 15,927,000 $ 2,031,000 $ 29,657,000 $ 31,855,000
~~Amortization~~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 ~~Debt Discount~~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 of9.5% per annum and may be repaid at any time without penalty or premium. As of June 30, 2023, $750,000 has been advanced under the loan agreement.
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 Six Months Ended
June 30, June 30,
2023 2022 2023 2022
Interest income, related party $ 5,000 $ - $ 5,000 $ -
Amendment to 8.5% Secured Promissory Notes

On ~~December 30, 2021,~~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.
10% Secured Promissory Notes
The 10% secured promissory notes were retired in March 2023 and converted into the Preferred Shares, as described in Note 16 – Preferred Stock Liability.
Amendments to 16% Secured Promissory Notes
The Company entered into several amendments subsequent to the initial lending due to certain defaults on payment terms. The amendments included $4.6 million in extension fees and payments subsequent to June 30, 2023 of $10.3 million. Currently the loan maturity date was extended to September 15, 2023 and automatically extends for an additional 30 days for a ~~securities purchase agreement~~$0.25 million extension fee for each extension period, with ~~certain accredited investors providing for the issuance of:~~an interest rate of 16% and principal amount outstanding of $2.5 million.
· ~~secured promissory notes (the “Secured Promissory Notes”) that bear interest at~~ 8~~% per annum with an aggregate principal face amount of approximately $~~66 ~~million including a~~ 10~~% original issue discount;~~
· ~~five-year warrants to purchase an aggregate of~~ ~~14,095,350~~ ~~shares of the Company’s common stock at an exercise price of $2.50, subject to adjustment; and~~
· ~~five-year warrants to purchase an aggregate of~~ ~~1,942,508~~ ~~shares of common stock (the “Class B Warrant Shares”) at an exercise price of $2.50~~ ~~per share, subject to adjustment. The Class B Warrant Shares are deemed to be a derivative instrument.~~
~~As of December 31, 2021, unamortized debt discount on the~~3% Secured Promissory Notes ~~related to the original issue discount and estimated fair value of the warrants totaled $26.3~~ ~~million.~~

During the ~~three months~~quarter ended ~~March 31, 2022,~~June 30, 2023, the ~~Secured Promissory Notes~~holders of the 3% secured promissory notes exercised their rights of future participation whereby Sentinum issued additional promissory notes with a face amount of $10.4 million under the same terms as the existing notes, of which $5.5 million was outstanding and past due as of June 30, 2023. The 3% secured promissory notes were ~~repaid and the Company~~ fully ~~amortized the related debt discount of $26.3~~paid in July 2023. ~~million, which is included within interest expense on the condensed consolidated statements of operations.~~

~~16.~~8% Demand Promissory Notes
On May 29, 2023, the Company issued two demand promissory notes with a total principal amount of $4.5 million, bearing an interest rate of 8%. The demand notes were issued at a discount, with net proceeds to the Company amounting to $2.0 million. The notes are due upon demand; however no demand may be made within 90 days of the issuance date.
19. CONVERTIBLE NOTES

Convertible notes payable at June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, were comprised of the following:
Schedule of convertible notes payable
Conversion price
per share Interest
rate Due
date June 30,
2022 December 31,
2021
Convertible promissory note $4.00 4% May 10, 2024 $ 660,000 $ 660,000
AVLP convertible promissory notes $0.35 (AVLP stock) 15% August 22, 2025 9,911,000 -
Fair value of embedded derivative 1,226,000 -
Fair value of bifurcated conversion option

4,425,000

-

Fair value of bifurcated put option

200,000

-

Less: unamortized debt discounts (329,000 ) (192,000 )
Total convertible notes payable, net of financing cost $
16,093,000
$
468,000

Less: current portion

(1,884,000
)
-

Total convertible notes payable, net of financing cost, long term $ 14,209,000 $ 468,000
Schedule of convertible notes payable
Conversion price per
share Interest
rate Due date June 30,
2023 December
31, 2022
Convertible promissory note $4.00 4% May 10, 2024 $ 300,000 $ 660,000
AVLP convertible promissory notes $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, 2023 2,317,000 -
BMI senior secured convertible notes $3.28 (BMI stock) OID Only April 27, 2024 6,875,000 -
Fair value of embedded conversion options 2,577,000 2,316,000
Total convertible notes payable $ 21,980,000 $ 12,887,000
Less: unamortized debt discounts (6,705,000 ) (111,000 )
Total convertible notes payable, net of financing cost, long term $ 15,275,000 $ 12,776,000
Less: current portion (3,326,000 ) (1,325,000 )
Convertible notes payable, net of financing cost – long-term portion $ 11,949,000 $ 11,451,000
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 June 30, 2023 were:
Schedule of contractual maturities
Year Principal
2023 $ 2,317,000
2024 7,175,000
2025 12,488,000
$ 21,980,000
Significant inputs associated with the AVLP embedded conversion option include:
Schedule of weighted average assumptions
June 30, 2023 December 31, 2022
Exercise price Variable Variable
Contractual term in years 2.2 2.7
Volatility 75 % 82 %
Dividend yield 0 % 0 %
Risk-free interest rate 4.2 % 4.0 %

~~AVLP convertible promissory notes~~BMI Senior Secured Convertible Notes

~~The AVLP~~On April 27, 2023, BMI sold $6.9 million of principal face amount senior secured convertible notes ~~payable~~with an original issue discount to sophisticated investors for net proceeds to BMI of $5.5 million. The notes mature on April 27, 2024 and are ~~due and payable~~ ~~on August 22, 2025, with interest at 7% per annum. At the election~~secured by all of the ~~holders, outstanding principal~~assets of BMI and ~~accrued but unpaid~~certain of its subsidiaries. There is no stated interest ~~under~~rate on the convertible note unless there is an event of default. The notes are convertible into shares of ~~AVLP’s~~BMI common stock at $3.28; however there are provision in the convertible note that enables the holders of the notes to receive a lower conversion ~~price equal~~rate upon future common stock issuances by BMI that fall below the $3.28 price.
As BMI does not have sufficient authorized shares to ~~either (i) if~~fulfill the ~~aggregate market capital~~conversion option, the conversion option meets the criteria of ~~AVLP on~~a derivative instrument, and the ~~date~~convertible note has been discounted $4.1 million for the fair value of the warrant derivative liability and $1.4 million for the fair value of the embedded conversion ~~(the “Market Cap”)~~option derivative liability at inception. The fair value of the warrant derivative liability is ~~$35~~updated quarterly and is recorded within financial instrument liabilities, a component of accounts payable and accrued liabilities and the fair value of the embedded conversion option derivative liability is updated quarterly and is recorded within convertible notes. In addition, BMI has recorded $1.4 million ~~or less, at a 25%~~in original issue discount, which is being amortized over the interest method for the term of the BMI senior secured convertible notes. Amortization of discount related to the ~~market price, or (ii) if~~senior secured convertible notes was $0.2 million for the Market Cap is greater than $35 million, at a 25% discount to the market price, provided that such discount shall be increased by dividing it by the quotient that shall be obtained by dividing $35 million by the Market Cap at the time of conversion, provided, however, any increase in the discount to the market price shall not result in a discount that is greater than a 75% discount (the “Conversion Price”). Notwithstanding the foregoing, in no event shall the Conversion Price be less than $0.35.three months ended June 30, 2023.

Activity related to the embedded conversion option derivative liability for the three months ended June 30, 2023 is as follows:
Schedule of option derivative liability
April 27, 2023 issuances of convertible note – derivative liability $ 1,352,000
Change in fair value of convertible note derivative liability (1,029,000 )
Ending balance as of June 30, 2023 $ 323,000
Significant Level 3 inputs associated with the BMI embedded conversion option include:
Schedule of assumptions
June 30, 2023 Inception
Contractual term in years
0.8 1.0
Volatility 113% 111%
Dividend yield 0% 0%
Risk-free interest rate 3.8% 3.5%
~~17.~~20. COMMITMENTS AND CONTINGENCIES

~~Blockchain Mining Supply and Services, Ltd.~~Contingencies
On November 28, 2018, Blockchain Mining Supply and Services, Ltd. (“Blockchain Mining”) a vendor who sold computers to one of the Company’s subsidiaries, filed a Complaint (the “Complaint”) in the United States District Court for the Southern District of New York against the Company and the Company’s subsidiary, Digital Farms, Inc. (f/k/a Super Crypto Mining, Inc.), in an action captioned ~~Blockchain Mining Supply and Services, Ltd. v. Super Crypto Mining, Inc. and DPW Holdings, Inc.~~~~, Case No. 18-cv-11099.~~
The Complaint asserts claims for breach of contract and promissory estoppel against the Company and its subsidiary arising from the subsidiary’s alleged failure to honor its obligations under the purchase agreement. The Complaint seeks monetary damages in excess of $~~1,388,495, plus attorneys’ fees and costs.~~
~~The Company intends to vigorously defend against the claims asserted against it in this action.~~
On April 13, 2020, the Company and its subsidiary, jointly filed a motion to dismiss the Complaint in its entirety as against the Company, and the promissory estoppel claim as against its subsidiary. On the same day, the Company’s subsidiary also filed a partial Answer to the Complaint in connection with the breach of contract claim.
On April 29, 2020, Blockchain Mining filed an amended complaint (the “Amended Complaint”). The Amended Complaint asserts the same causes of action and seeks the same damages as the initial Complaint.
On May 13, 2020, the Company and its subsidiary, jointly filed a motion to dismiss the Amended Complaint in its entirety as against the Company, and the promissory estoppel claim as against of its subsidiary. On the same day, the Company’s subsidiary also filed a partial Answer to the Amended Complaint in connection with the breach of contract claim.
~~In its partial Answer, the Company’s subsidiary admitted to the validity of the contract at issue and also asserted numerous affirmative defenses concerning the proper calculation of damages.~~
On December 4, 2020, the Court issued an Order directing the parties to engage in limited discovery to be completed by March 4, 2021. In connection therewith, the Court also denied the defendants’ motion to dismiss without prejudice.
~~On June 2, 2021, the Company and its subsidiary filed a motion to dismiss the Amended Complaint in its entirety as against the Company, and the promissory estoppel claim as against the subsidiary.~~
~~On August 8, 2022, the Court issued an Order denying the motion to dismiss, in its entirety.~~
~~The deadline for the Company and its subsidiaries to file an Answer to the Amended Complaint is September 2, 2022.~~
Based on the Company’s assessment of the facts underlying the claims, the uncertainty of litigation, and the preliminary stage of the case, the Company cannot reasonably estimate the potential loss or range of loss that may result from this action. Notwithstanding, the Company has established a reserve in the amount of the unpaid portion of the purchase agreement, which is included in accounts payable and accrued expenses. An unfavorable outcome may have a material adverse effect on the Company’s business, financial condition and results of operations.
~~Ding Gu (a/k/a Frank Gu) and Xiaodan Wang Litigation~~
On January 17, 2020, Ding Gu (a/k/a Frank Gu) (“Gu”) and Xiaodan Wang (“Wang” and with “Gu” collectively, “Plaintiffs”), filed a Complaint (the “Complaint”) in the Supreme Court of the State of New York, County of New York against the Company and the Company’s Chief Executive Officer, Milton C. Ault, III, in an action captioned ~~Ding Gu (a/k/a Frank Gu) and Xiaodan Wang v. DPW Holdings, Inc. and Milton C. Ault III (a/k/a Milton Todd Ault III a/k/a Todd Ault)~~~~, Index No. 650438/2020.~~
The Complaint asserts causes of action for declaratory judgment, specific performance, breach of contract, conversion, attorneys’ fees, permanent injunction, enforcement of Guaranty, unjust enrichment, money had and received, and fraud arising from: (i) a series of transactions entered into between Gu and the Company, as well as Gu and Ault, in or about May 2019; and (ii) a term sheet entered into between Plaintiffs and the Company, in or about July 2019. The Complaint seeks, among other things, monetary damages in excess of $~~1.1~~ ~~million, plus a decree of specific performance directing the Company to deliver unrestricted shares of common stock to Gu, plus attorneys’ fees and costs.~~
~~The Company intends to vigorously defend against the claims asserted against it in this action.~~
~~On May 4, 2020, the Company and Ault jointly filed a motion to dismiss the Complaint in its entirety, with prejudice.~~
On July 28, 2021, the Court conducted oral argument in connection with the motion to dismiss. During the oral argument, the Court informed the parties that the Court was dismissing the fraud claim, in its entirety, and provided Plaintiffs an opportunity to amend their fraud claim within sixty days of the date of the oral argument. The Court reserved decision on the other causes of action.
On December 14, 2021, the Court entered a decision and order in connection with the motion to dismiss whereby the Court dismissed Plaintiff’s causes of action for specific performance, conversion, permanent injunction, and reiterated its prior determination that the fraud claim was also dismissed. The Court denied the motion to dismiss in connection with the other causes of action asserted in the complaint.
~~On January 26, 2022, the Company and Mr. Ault filed an answer to the complaint and asserted numerous affirmative defenses.~~
Based on the Company’s assessment of the facts underlying the above claims, the uncertainty of litigation, and the preliminary stage of the case, the Company cannot reasonably estimate the potential loss or range of loss that may result from this action. An unfavorable outcome may have a material adverse effect on the Company’s business, financial condition and results of operations.
~~Subpoena~~
The Company and certain affiliates and related parties have received several subpoenas from the SEC for the production of documents and testimony. The Company is fully cooperating with this non-public, fact-finding inquiry and management believes that the Company has operated its business in compliance with all applicable laws. The subpoenas expressly provide that the inquiry is not to be construed as an indication by the SEC or its staff that any violations of the federal securities laws have occurred, nor should they be considered a reflection upon any person, entity or security. However, there can be no assurance as to the outcome of this matter.
~~Other~~ 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 June 30, 2023, the Company had accrued $5.3 million as a loss contingency related to litigation matters.
SEC Investigation
The Company and certain affiliates and related parties received several subpoenas from the SEC for the production of documents and testimony in the non-public fact-finding investigation referred to as In re DPW Holdings, Inc. The Company and those parties have reached a settlement with the SEC to fully resolve the SEC’s previously disclosed investigation into certain of the Company’s public disclosures and its accounting for certain transactions, among other matters.
Under terms of the settlement, announced on August 15, 2023, the Company, Executive Chairman Milton “Todd” Ault, III, and Chief Executive Officer William B. Horne neither admit nor deny the SEC’s findings, which do not entail intentional misconduct. The Company will pay a civil penalty of $0.7 million that was fully accrued in the fourth quarter of 2022; Mr. Ault will pay disgorgement of $85,504 and a civil penalty of $150,000; and Mr. Horne will pay a civil penalty of $20,720. In addition, the Company has undertaken to retain an independent consultant to conduct a comprehensive review of the Company’s internal control over financial reporting and disclosure controls and procedures, and to issue a report providing recommendations for improvements.
~~18.~~21. STOCKHOLDERS’ EQUITY

~~2022~~2023 Issuances

2022 Common ATM Offering ~~– Common Stock~~

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”). ~~As of June 30, 2022,~~During the three months ended March 31, 2023, the Company ~~had~~ sold an aggregate of ~~239.7~~0.1 million shares of common stock pursuant to the 2022 Common ATM Offering for gross proceeds of $~~163.4~~4.2 million.
~~Public~~ Effective March 17, 2023, the 2022 Common ATM Offering ~~of Series D Preferred Stock~~
~~The Company has designated~~ ~~2,000,000~~ ~~shares of preferred stock, par value $0.001 per share, of the Company as the Series D Preferred Stock.~~
On June 3, 2022, the Company announced the closing of its public offering of 144,000 shares of its Series D Preferred Stock at a price to the public of $25.00 per share. Gross proceeds from the offering were approximately $3.6 million, before deducting offering expenses. Net proceeds to the Company, after payment of commissions, non-accountable fees and offering expenses were $3.1 million.was terminated.

2022 Preferred ATM Offering ~~– Preferred Stock~~

On June 14, 2022, the Company entered into an At-The-Market ~~equity offering program~~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 $~~46,400,000~~46.4 million (the “2022 Preferred ATM Offering”). ~~As of~~During the six months ended June 30, ~~2022,~~2023, the Company ~~had~~ sold an aggregate of ~~2,618~~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.
2023 ATM Offering – Common Stock
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 Offering”). During the three months ended June 30, 2023, the Company sold an aggregate of 0.1 million shares of common stock pursuant to the 2023 Common ATM Offering for gross proceeds of $~~57,000~~0.8. million.
Issuance of Common Stock Upon Conversion of Preferred Stock
During June 2023, the Investors converted 1,000 shares of Series F Preferred Stock and 1,792 shares of Series G Preferred Stock into an aggregate of 37,493 shares of the Company’s common stock. A loss on extinguishment of $0.1 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.
Issuance of Common Stock for Restricted Stock Awards
During the six months ended June 30, 2023, the Company issued 4,974 shares of common stock upon vesting of restricted stock awards.
Series C Preferred Purchase Agreement
On May 1, 2023, the Company entered into a securities purchase agreement (the “Agreement”) with Ault & Company, pursuant to which the Company agreed to sell to Ault & Company up to 40,000 shares of Series C convertible preferred stock and warrants to purchase up to 1.3 million shares of common stock for a total purchase price of up to $40 million. The consummation of the transactions contemplated by the 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 Agreement contains customary termination provisions for Ault & Company under certain circumstances, and the 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 Agreement.
Proceeds from Subsidiaries’ Sale of Stock to Non-Controlling Interests
During the six months ended June 30, 2023, SMC and BMI sold an aggregate of $2.3 million of common stock pursuant to their respective at-the-market issuance sales agreements.

~~19.~~22. 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 ~~0.4~~3.0%% and ~~(7.4%)~~0.8% for the three months ended June 30, 2023 and 2022, respectively, and 1.2% and 0.4% for the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The Company anrecorded income tax provision of $~~0.2~~1.4 million and $~~3.5~~0.2 million for the three months ended June 30, 2023 and 2022, respectively, and $1.1 million and $0.2 million for the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The difference between the ETR and federal statutory rate of 2121%% is primarily attributable to items recorded for GAAP but permanently disallowed for U.S. federal income tax purposes and changes in valuation allowance.

~~20.~~23. NET ~~(LOSS) INCOME~~LOSS PER SHARE

~~For the three and six months ended June 30, 2022, net~~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 and six months ended June 30, 2022,~~all periods presented as the effect of the potential common stock equivalents is anti-dilutive due to the Company’s net loss position for ~~the period.~~all periods presented. Anti-dilutive securities, which are convertible into or exercisable for the Company’s common stock, consisted of the following at June 30, 2023 and 2022:
Schedule of anti-dilutive securities
June 30,
2023 2022
Stock options 19,000 21,000
Restricted stock grants - 7,000
Warrants 52,000 67,000
Convertible notes 1,000 1,000
Total 72,000 96,000
~~Net Loss Per Share~~
~~June 30, 2022~~
~~Stock options~~ ~~6,396,000~~
~~Restricted stock grants~~ ~~2,085,000~~
~~Warrants~~ ~~18,493,000~~
~~Convertible notes~~ ~~165,000~~
~~Convertible preferred stock~~ ~~2,000~~
~~Total~~ ~~27,141,000~~F-30

~~Basic and diluted net income per common share for the three and six months ended June 30, 2021 are calculated as follows:~~
Schedule of basic and diluted net income per common share
For the Three Months Ended June 30, 2021
Income Shares Per-Share
(Numerator) (Denominator) Amount
Net income attributable to BitNile Holdings $ 36,323,000
Less: Preferred stock dividends (4,000 )

Basic earnings per share
Net income available to common stockholders 36,319,000 50,783,000 $ 0.72

Effect of dilutive securities
Stock options — 292,000
Warrants 290,000 1,540,000
4% convertible notes 7,000 165,000

Diluted earnings per share
Income available to common stockholders plus assumed conversions $ 36,616,000 52,780,000 $ 0.69
For the Six Months Ended June 30, 2021
Income Shares Per-Share
(Numerator) (Denominator) Amount
Net income attributable to BitNile Holdings $ 41,291,000
Less: Preferred stock dividends (9,000 )

Basic earnings per share
Net income available to common stockholders 41,282,000 45,052,000 $ 0.92

Effect of dilutive securities
Stock options — 422,000
Warrants (388,000 ) 1,935,000
4% convertible notes 13,000 165,000

Diluted earnings per share
Income available to common stockholders plus assumed conversions $ 40,907,000 47,574,000 $ 0.86
~~21.~~24. SEGMENT AND CUSTOMERS INFORMATION

The Company had ~~six~~nine reportable segments as of June 30, ~~2022~~2023 and ~~three~~seven as of June 30, ~~2021;~~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’s~~Company and its operating segments for the three and six months ended June 30, ~~2022:~~2023:
Schedule of operating segments

Three Months Ended June 30, 2022
GWW TurnOnGreen Ault Alliance BNI AGREE Ault
Disruptive Holding
Company Total
Revenue $ 6,503,000 $ 1,062,000 $ 12,000 $ - $ - $ - $ - $ 7,577,000
Revenue, cryptocurrency mining - - - 3,976,000 - - - 3,976,000
Revenue, commercial real estate leases - - - 272,000 - - - 272,000
Revenue, lending and trading activities - - 943,000 - - - - 943,000
Revenue, hotel operations - - - - 4,598,000 - - 4,598,000
Total revenues $ 6,503,000 $ 1,062,000 $ 955,000 $ 4,248,000 $ 4,598,000 $ - $ - $ 17,366,000

Depreciation and amortization expense $ 298,000 $ 4,000 $ 34,000 $ 2,613,000 $ 827,000 $ - $ 711,000 $ 4,487,000

Loss from operations $ (1,076,000 ) $ (445,000 ) $ (11,486,000 ) $ (3,454,000 ) $ (166,000 ) $ (489,000 ) $ (6,603,000 ) $ (23,719,000 )

Capital expenditures for the three months ended June 30, 2022 $ 156,000 $ 50,000 $ 761,000 $ 36,397,000 $ (15,000 ) $ - $ 71,000 $ 37,420,000

Six Months Ended June 30, 2022
GWW TurnOnGreen Ault
Alliance BNI AGREE Ault
Disruptive Holding
Company Total
Revenue $ 13,749,000 $ 2,191,000 $ 19,000 $ - $ - $ - $ - $ 15,959,000
Revenue, cryptocurrency mining - - - 7,524,000 - - - 7,524,000
Revenue, commercial real estate leases - - - 549,000 - - - 549,000
Revenue, lending and trading activities - - 18,864,000 - - - - 18,864,000
Revenue, hotel operations - - - - 7,296,000 - - 7,296,000
Total revenues $ 13,749,000 $ 2,191,000 $ 18,883,000 $ 8,073,000 $ 7,296,000 $ - $ - $ 50,192,000

Depreciation and amortization expense $ 519,000 $ 10,000 $ 68,000 $ 4,140,000 $ 1,655,000 $ - $ 53,000 $ 6,445,000

Income (loss) from operations $ (1,220,000 ) $ (1,620,000 ) $ 426,000 $ (3,817,000 ) $ (1,548,000 ) $ (786,000 ) $ (14,124,000 ) $ (22,689,000 )

Capital expenditures for the six months ended June 30, 2022 $ 285,000 $ 125,000 $ 849,000 $ 71,384,000 $ 19,000 $ - $ 117,000 $ 72,779,000
Schedule of operating segments
Six Months Ended June 30, 2023
GWW
TurnOn
Green
Fintech Sentinum AGREE Ault
Disruptive SMC Energy BMI Holding Co. Total
Revenue $ 17,448,000 $ 1,600,000 $ - $ - $ - $ - $ 6,008,000 $ 546,000 $ 45,000 $ - $ 25,647,000
Revenue, cryptocurrency mining - - - 15,715,000 - - - - - - 15,715,000
Revenue, commercial real estate leases - - - 783,000 - - - - - - 783,000
Revenue, lending and trading activities - - 4,586,000 - - - - - - - 4,586,000
Revenue, crane operations - - - - - - - 25,236,000 - - 25,236,000
Revenue, hotel operations - - - - 6,627,000 - - - - - 6,627,000
Total revenues $ 17,448,000 $ 1,600,000 $ 4,586,000 $ 16,498,000 $ 6,627,000 $ - $ 6,008,000 $ 25,782,000 $ 45,000 $ - $ 78,594,000

Depreciation and amortization expense $ 566,000 $ 44,000 $ - $ 8,570,000 $ 1,634,000 $ - $ 441,000 $ 1,980,000 $ 120,000 $ 1,028,000 $ 14,383,000

Income (loss) from operations $ (5,117,000 ) $ (2,569,000 ) $ 2,130,000 $ (1,702,000 ) $ (1,399,000 ) $ (838,000 ) $ (4,779,000 ) $ (32,721,000 ) $ (20,275,000 ) $ (14,653,000 ) $ (81,923,000 )

Capital expenditures for the six months ended June 30, 2023 $ 135,000 $ 10,000 $ - $ 1,165,000 $ 5,517,000 $ - $ 184,000 $ 1,336,000 $ 407,000 $ 2,592,000 $ 11,346,000

Identifiable assets as of June 30, 2023 $ 37,175,000 $ 5,704,000 $ 38,914,000 $ 65,919,000 $ 98,588,000 $ 2,860,000 $ 18,912,000 $ 60,070,000 $ 8,385,000 $ 42,863,000 $ 378,390,000

~~AVLP and SMC Segment Information~~
The AVLP and SMC acquisitions were completed in June 2022. The results of operations were not material to the Company’s consolidated results of operations for the three and six months ended June 30, 2022. As of June 30, 2022, identifiable assets for AVLP and SMC were $~~49.9~~ ~~million and $35.0~~ ~~million, respectively.~~

Three Months Ended June 30, 2023
GWW
TurnOn
Green
Fintech Sentinum AGREE Ault
Disruptive SMC Energy BMI Holding Co. Total
Revenue $ 8,740,000 $ 724,000 $ - $ - $ - $ - $ 2,625,000 $ 82,000 $ 45,000 $ - $ 12,216,000
Revenue, cryptocurrency mining - - - 8,368,000 - - - - - - 8,368,000
Revenue, commercial real estate leases - - - 325,000 - - - - - - 325,000
Revenue, lending and trading activities - - 9,525,000 - - - - - - - 9,525,000
Revenue, crane operations - - - - - - - 12,590,000 - - 12,590,000
Revenue, hotel operations - - - - 4,384,000 - - - - - 4,384,000
Total revenues $ 8,740,000 $ 724,000 $ 9,525,000 $ 8,693,000 $ 4,384,000 $ - $ 2,625,000 $ 12,672,000 $ 45,000 $ - $ 47,408,000

Depreciation and amortization expense $ (24,000 ) $ (99,000 ) $ - $ 5,235,000 $ 796,000 $ - $ 70,000 $ 910,000 $ 37,000 $ 418,000 $ 7,343,000

Income (loss) from operations $ (2,445,000 ) $ (1,589,000 ) $ 9,115,000 $ (1,227,000 ) $ 156,000 $ (455,000 ) $ (2,528,000 ) $ (34,691,000 ) $ (12,219,000 ) $ (4,622,000 ) $ (50,505,000 )

Capital expenditures for the three months ended June 30, 2023 $ 89,000 $ - $ - $ 113,000 $ 2,818,000 $ - $ 42,000 $ 1,005,000 $ - $ 258,000 $ 4,325,000

Segment information for the three and six months ended June 30, ~~2021:~~2022:

Three Months Ended June 30, 2021
GWW TurnOnGreen Ault
Alliance BNI AGREE Ault
Disruptive Holding
Company Total
Revenue $ 6,475,000 $ 1,831,000 $ 50,000 $ - $ - $ - $ - $ 8,356,000
Revenue, cryptocurrency mining - - - 291,000 - - - 291,000
Revenue, commercial real estate leases - - - 208,000 - - - 208,000
Revenue, lending and trading activities - - 53,274,000 - - - - 53,274,000
Revenue, hotel operations - - - - - - - -
Total revenues $ 6,475,000 $ 1,831,000 $ 53,324,000 $ 499,000 $ - $ - $ - $ 62,129,000

Depreciation and amortization expense $ 213,000 $ 6,000 $ 27,000 $ 111,000 $ - $ - $ 13,000 $ 370,000

Income (loss) from operations $ (1,000,000 ) $ 117,000 $ 49,375,000 $ (197,000 ) $ - $ (118,000 ) $ (2,354,000 ) $ 45,823,000

Capital expenditures for the three months ended June 30, 2021 $ 474,000 $ - $ 12,000 $ 650,000 $ - $ - $ 105,000 $ 1,241,000

Six Months Ended June 30, 2021
GWW TurnOnGreen Ault
Alliance BNI AGREE Ault
Disruptive Holding
Company Total
Revenue $ 12,826,000 $ 3,213,000 $ 126,000 $ - $ - $ - $ - $ 16,165,000
Revenue, cryptocurrency mining - - - 421,000 - - - 421,000
Revenue, commercial real estate leases - - - 304,000 - - - 304,000
Revenue, lending and trading activities - - 58,485,000 - - - 58,485,000
Revenue, hotel operations - - - - - -
Total revenues $ 12,826,000 $ 3,213,000 $ 58,611,000 $ 725,000 $ - $ - $ - $ 75,375,000

Depreciation and amortization expense $ 428,000 $ 13,000 $ 28,000 $ 152,000 $ - $ - $ 16,000 $ 637,000

Income (loss) from operations $ (788,000 ) $ (83,000 ) $ 53,781,000 $ (500,000 ) $ - $ (188,000 ) $ (5,197,000 ) $ 47,025,000

Capital expenditures for the six months ended June 30, 2021 $ 566,000 $ - $ 285,000 $ 4,634,000 $ - $ - $ 105,000 $ 5,590,000

Three Months Ended June 30, 2022
GWW TurnOnGreen Fintech Sentinum AGREE Ault
Disruptive Holding
Company Total
Revenue $ 6,503,000 $ 1,062,000 $ 12,000 $ - $ - $ - $ - $ 7,577,000
Revenue, cryptocurrency mining - - - 3,976,000 - - - 3,976,000
Revenue, commercial real estate leases - - - 272,000 - - - 272,000
Revenue, lending and trading activities - - 943,000 - - - - 943,000
Revenue, hotel operations - - - - 4,598,000 - - 4,598,000
Total revenues $ 6,503,000 $ 1,062,000 $ 955,000 $ 4,248,000 $ 4,598,000 $ - $ - $ 17,366,000

Depreciation and amortization expense $ 298,000 $ 4,000 $ 34,000 $ 2,613,000 $ 827,000 $ - $ 711,000 $ 4,487,000

Loss from operations $ (1,076,000 ) $ (445,000 ) $ (11,486,000 ) $ (3,454,000 ) $ (166,000 ) $ (489,000 ) $ (6,603,000 ) $ (23,719,000 )

Capital expenditures for the three months ended June 30, 2022 $ 156,000 $ 50,000 $ 761,000 $ 36,397,000 $ (15,000 ) $ - $ 71,000 $ 37,420,000

Six Months Ended June 30, 2022
GWW TurnOnGreen Fintech Sentinum AGREE Ault
Disruptive Holding
Company Total
Revenue $ 13,748,000 $ 2,191,000 $ 19,000 $ - $ - $ - $ - $ 15,958,000
Revenue, cryptocurrency mining - - - 7,524,000 - - - 7,524,000
Revenue, commercial real estate leases - - - 550,000 - - - 550,000
Revenue, lending and trading activities - - 18,864,000 - - - - 18,864,000
Revenue, hotel operations - - - - 7,296,000 - - 7,296,000
Total revenues $ 13,748,000 $ 2,191,000 $ 18,883,000 $ 8,074,000 $ 7,296,000 $ - $ - $ 50,192,000

Depreciation and amortization expense $ 519,000 $ 183,000 $ 68,000 $ 4,140,000 $ 1,655,000 $ - $ 53,000 $ 6,618,000

Income (loss) from operations $ (1,220,000 ) $ (1,620,000 ) $ 426,000 $ (3,817,000 ) $ (1,548,000 ) $ (786,000 ) $ (14,124,000 ) $ (22,689,000 )

Capital expenditures for the six months ended June 30, 2022 $ 285,000 $ 125,000 $ 849,000 $ 71,384,000 $ 19,000 $ - $ 117,000 $ 72,779,000
F-32

~~22.~~ 25. CONCENTRATIONS OF CREDIT AND REVENUE RISK

~~Accounts~~The following table summarizes accounts receivable that are concentrated with certain large ~~customers. At~~customers as of June 30, ~~2022, approximately~~ 38~~% of accounts receivable were due from two customers in North America, each of which individually accounted for over 10% of consolidated accounts receivable.~~2023 and December 31, 2022:

Schedule of concentrations of credit risk
June 30, 2023 December 31, 2022
Customer A 15 % 13 %
Customer B 2 % 14 %
~~For~~
The following table provides the ~~three months ended June 30, 2022, one customer represented~~percentage of total revenues attributable to customers from which 1310%% or more of ~~consolidated revenues.~~ total revenues are derived:
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2023 2022 2023 2022
Customer X (Mining Pool Operator) Less than 10% 23% 15% 15%
Customer Y Less than 10% 13% Less than 10% Less than 10%

~~23.~~26. SUBSEQUENT EVENTS

~~2022~~2023 Common ATM Offering

The Company 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. During the period between July 1, ~~2022~~2023 through August 18, ~~2022,~~2023, the Company sold an aggregate of ~~6.5~~3.9 million shares of common stock pursuant to the ~~2022~~2023 Common ATM Offering for gross proceeds of $~~2.1~~15.6 million.
~~2022 Preferred ATM Offering~~Advances under Ault & Company Loan Agreement

~~During the period between July 1, 2022 through August 18, 2022,~~An additional $3.9 million has been advanced by Ault & Company to the Company ~~sold an aggregate of~~ ~~6,866~~ ~~shares of Series D Preferred Stock pursuant to~~under the ~~2022 Preferred ATM Offering for gross proceeds of $126,000~~.loan agreement entered into June 8, 2023.

~~Investments in Alpha Fund~~Assignment of Term Note

~~During~~Effective August 10, 2023, the ~~period between July 1, 2022 through August 18, 2022, DP Lending purchased an additional $6.5~~ Company assigned the Term Note to Ault & Company. As consideration for Ault & Company assuming the Term Note from the Company, the Company issued a 12% demand promissory note in the principal face amount of $1.1 million ~~of limited partnership interests in Alpha Fund. As of August 18, 2022, DP Lending had subscribed for $31.5 million of limited partnership interests.~~(the “Second Demand Note”) to Ault & Company.

~~Formation~~Second Partial Distribution of ~~Ault Energy~~TurnOnGreen Securities

On July ~~11, 2022,~~24, 2023, the Company ~~announced the formation~~established a record date for its second partial distribution of ~~Ault Energy, LLC (“Ault Energy”),~~TurnOnGreen Securities. Stockholders as ~~an indirect wholly-owned subsidiary~~of this date were entitled to 40 shares of TurnOnGreen Securities for every share of the ~~Company through Ault Alliance. Ault Energy will partner with White River Holdings Corp. (“White River”), a wholly owned subsidiary of Ecoark Holdings, Inc. (“Ecoark”),~~Company’s common stock they held on ~~drilling projects across 30,000 acres in Texas, Louisiana and Mississippi. Ault Energy, as DP Lending’s designee, has~~ the ~~right to purchase up to~~ 25~~%, or such higher percentages at the discretion of White River, in various drilling projects of White River.~~ Inrecord date. The second distribution was finalized on August ~~2022, Ault Energy committed to purchasing 40% of the first drilling project offered, at a cost to Ault Energy of approximately $1 million.~~
~~F-33~~
~~Note Purchase Agreement~~
~~On August 10, 2022,~~7, 2023, whereby the Company ~~through its BNI and DP Lending subsidiaries, entered into a note purchase agreement providing for the issuance~~relinquished control of ~~secured promissory notes with an aggregate principal face amount~~voting interests of $11,000,000 and an interest rate of 10%. The purchase price (proceeds to the Company) for the secured promissory notes was $10.0 million. The secured promissory notes have a security interest in marketable securities, investments and certain Bitcoin mining equipment. The secured promissory notes are further secured by a guaranty provided by the Company, as well as by Milton C. Ault, the Executive Chairman of the Company.
~~The maturity date of the secured promissory notes is August 10, 2023.~~ TurnOnGreen. The Company is required to make monthly payment (principal and interest) of $1,000,000 on the tenth calendar day of each month, starting in September 2022. After six months, the Company may elect to pay a forbearance fee of $250,000 in lieu of a monthly payment, which would extend the maturity date of the related secured promissory notes.
~~Hosting Agreement~~
On August 15, 2022, the Company, through its BNI subsidiary, entered into a hosting agreement with Compute North LLC (“Compute North”) to host 6,500 S19j Pro Antminers owned by BNI for a period of five years. The Company granted Compute North a continuing first-position security interestdistributed 56.4 million TurnOnGreen Securities in the ~~hosted miners, as collateral for the Company’s obligations under the hosting agreement.~~ second distribution.
ITEM 2.          MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In this quarterly report, the “Company,” ~~“BitNile,~~“AAI,” “we,” “us” and “our” refer to Ault Alliance, Inc., a Delaware ~~corporation which was then known as BitNile Holdings, Inc. BitNile~~corporation. AAI is a diversified holding company pursuing growth by acquiring undervalued businesses and disruptive technologies with a global impact. Through ~~its~~our wholly and majority owned subsidiaries and strategic investments, we own and operate a data center at which we mine Bitcoin and ~~provide~~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, ~~karaoke audio equipment,~~consumer electronics, hotel operations and textiles. In addition, we own and operate hotels and ~~extends~~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 February ~~4, 2022,~~8, 2023, we entered into a Share Exchange Agreement (the “Agreement”) with BMI and the other signatories thereto. The Agreement provides that, subject to the terms and conditions set forth therein, BMI will acquire all of the outstanding shares of capital stock of our ~~wholly owned~~then subsidiary, ~~Ault Alliance,~~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 ~~Alliance”~~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 BMI 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 BMI 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 BMI of $100 million, and subject to adjustment, are convertible into an aggregate of 400 million shares of common stock of BMI (the “BMI Common Stock”), which represent and pursuant to the Agreement will represent approximately 92.4% of BMI’s outstanding BMI Common Stock on a fully-diluted basis as of the date of the Agreement. However, pending approval of the transaction by BMI’s shareholders and the Nasdaq Stock Market, the Preferred Stock is subject to a 19.9% beneficial ownership limitation, including the Series A Convertible Preferred Stock that we acquired from BMI in June of 2022. The Agreement provides that BMI will seek shareholder approval (the “Shareholder Approval”) following the closing.
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 BMI Common Stock determined by dividing the Stated Value by $0.25 (the “Conversion Price”), or 40,000 shares of BMI Common Stock. The Conversion Price will be subject to certain adjustments, including potential downward adjustment if BMI 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 BMI 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 BMI, and will rank senior to all other capital stock of BMI 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 BMI 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.
On March 28, 2023, we entered into a securities purchase agreement ~~providing~~(the “Purchase Agreement”) with certain institutional investors (the “Investors”), pursuant to which 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”). The Preferred Shares will be convertible into shares of our common stock at the option of the holders and, in certain circumstances, by us.
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 ~~purchase~~common stock at a conversion price equal to 85% of ~~BitNile, Inc. (“BNI”) from Ault Alliance. As~~the closing sale price of our common stock on the trading day prior to the date of conversion, subject to a ~~result~~floor price of ~~this transaction, both BNI and Ault Alliance~~$0.10. The Preferred Shares are ~~each stand-alone wholly owned subsidiaries~~convertible at the option of ~~ours.~~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 ~~February 10, 2022, consistent~~April 6, 2023, we issued a term note with ~~our objective~~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 ~~have BNI operate~~us amounting to $1.0 million. The Term Note was scheduled to mature on June 5, 2023. We exercised the ~~entirety~~option to extend the maturity date by one month, by paying a $30,000 extension fee. Ault & Company guaranteed repayment of ~~our business that relates to cryptocurrencies, Ault Alliance assigned~~ the ~~entirety of its interest in Alliance Cloud Services, LLC (“ACS”) to BNI.~~Term Note.

On ~~February 25, 2022,~~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 preferred stock and warrants to purchase up to 1.3 million shares of 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.
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 June 9, 2023, we entered into an ~~At-The-Market issuance sales agreement~~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 ~~$200 million~~$10,000,000 (the “Shares”) from time to time, through an “at the market offering” ~~program~~ (the ~~“2022~~“2023 Common ATM Offering”). AsOn July 12, 2023, we and Ascendiant Capital entered into an amendment to the At-The-Market issuance sales agreement to increase the size of ~~June 30, 2022,~~the 2023 Common ATM Offering from $10.0 million to $20.0 million. Through August 14, 2023, we ~~had~~have sold an aggregate of ~~239.7~~3.8 million shares of common stock pursuant to the ~~2022~~2023 Common ATM Offering for gross proceeds of ~~$163.4~~$16.1 million.
On June 26, 2023, we established a record date for our initial distribution of TurnOnGreen securities. Stockholders as of this date were entitled to 40 shares of TurnOnGreen common stock, along with warrants to purchase 40 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.
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 40 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. We distributed 56.4 million TurnOnGreen Securities in the second 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 March 20, 2022,~~Effective August 3, 2023, we and our majority owned subsidiary Imperalis Holding Corp. (“IMHC”) entered into a securities purchase agreement (the “Agreement”) with TurnOnGreen, Inc. (“TurnOnGreen”), a wholly owned subsidiary of ours. According to the Agreement, we will (i) deliver to IMHC all of the outstanding shares of common stock of TurnOnGreen that we own, and (ii) forgive and eliminate the intracompany accounts between us and TurnOnGreen evidencing historical equity investments made by us in TurnOnGreen, in the approximate amount of $25 million, in consideration for the issuance by IMHC to us (the “Transaction”) of an aggregate of 25,000 newly designated shares of Series A Preferred Stock (the “IMHC Preferred Stock”), with each such share having a stated value of $1,000. The closing of the Transaction is subject to our delivery to IMHC of audited financial statements of TurnOnGreen and other customary closing conditions. Immediately following the completion of the Transaction, TurnOnGreen will be a wholly-owned subsidiary of IMHC. The parties to the Agreement have agreed that, upon completion of the Transaction, IMHC will change its name to TurnOnGreen, Inc., and, through an upstream merger whereby the current TurnOnGreen shall cease to exist, IMHC shall own TurnOnGreen’s two operating subsidiaries, TOG Technologies Inc. and Digital Power Corporation. Following the closing of the Transaction, IMHC will dissolve its dormant subsidiary.
On March 30, 2022, we fully paid our $66 million senior secured notes (the “Senior Notes”) and accrued interest. The 10% original issuance discount promissory notes were sold in December 2021 and were due and payable on March 31, 2022.
~~On April 22, 2022, Ault Alliance~~Investors entered into an ~~Asset Purchase~~Exchange Agreement (the ~~“Asset Purchase~~“Exchange Agreement”) ~~with EYP Group Holdings, Inc. and each of its subsidiaries and affiliates listed on the signature page to the Asset Purchase Agreement (collectively, “EYP”),~~ pursuant to which ~~Ault Alliance agreed to purchase substantially~~the Investors exchanged all of their Preferred Shares as well as their demand notes (the “Demand Notes”) issued to the ~~assets of EYP (such assets, the “Assets,” and such transaction, the “Asset Purchase”). On April 24, 2022, EYP filed~~Investors by us on or about May 20, 2023, with each Demand Note having a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). The Bankruptcy Court has permitted joint administration of the Chapter 11 cases under the caption “In re EYP Group Holdings, Inc., et al.”, Case No. 22-10367 (MFW) (the “Chapter 11 Cases”).
Under the Asset Purchase Agreement, Ault Alliance or its designee(s), upon the closing of the transactions contemplated thereby, were to purchase the Assets and assume certain of EYP’s obligations associated with the purchased Assets through a supervised sale under Section 363 of the Bankruptcy Code. Ault Alliance’s stalking horse bid is based on an enterprise value of approximately $67.7 million, which includes the purchase price for the Assets under the Asset Purchase Agreement of $62.5 million, as adjusted by a closing working capital adjustment (the “Purchase Price”), plus Ault Alliance’s assumption of certain liabilities. The Purchase Price would be paid in cash, less theprincipal outstanding amount of ~~the DIP Loans and the senior secured loans previously issued by Ault Alliance to EYP, in an approximate aggregate amount of $11.8~~approximately $0.8 million and less the amount of certain liabilities assumed by Ault Alliance. The Asset Purchase Agreement required the Asset Purchase to close by June 30, 2022. Consummation of the Asset Purchase was subject to Bankruptcy Court approved bidding procedures, higher and better offers made in the auction by other potential bidders, approval of the highest bidder by the Bankruptcy Court and customary closing conditions. On July 7, 2022, we announced that Ault Alliance did not acquire the assets of EYP as a result of a higher bidder. Ault Alliance lent $8.0 million to EYP and earned $4.7 million in interest, penalties and break-up fees from October 2021 through June 2022. The principal amount of the loans, interest, penalties and break-up fees, were fully repaid on June 30, 2022.
On April 26, 2022, Digital Power Lending, LLC (“DP Lending”) made an additional $4 million investment in Alzamend Neuro, Inc. (“Alzamend”), a related party and early clinical-stage biopharmaceutical company focused on developing novel products for the treatment of neurodegenerative diseases and psychiatric disorders. During 2021, DP Lending entered into a securities purchase agreement (the “SPA”) with Alzamend to invest $10 million in Alzamend common stock and warrants, subject to the achievement of certain milestones. DP Lending had previously funded $6 million pursuant to the terms of the SPA and the achievement of certain milestones related to the U.S. Food and Drug Administration approval of Alzamend’s Investigational New Drug application and Phase 1a human clinical trials for AL001. On April 26, 2022, DP Lending funded the remaining amount due to achievement of the final milestone, the receipt of the full data set from Alzamend’s Phase 1 clinical trial for AL001. DP Lending retains the option to acquire an additional 6,666,667 shares of Alzamend common stock and warrants to purchase another 3,333,334 such shares for an aggregate of $10 million.
On May 12, 2022, BNI closed a $1.8 million membership interest purchase agreement whereby BNI acquired the 30% minority interest of ACS which BNI did not previously own, resulting in ACS becoming a wholly-owned subsidiary of BNI. ACS owns and operates our Michigan data center, where BNI conducts our Bitcoin mining operations.
On May 26, 2022, we entered into an underwriting agreement (the “Underwriting Agreement”) with Alexander Capital, L.P., as representative of the several underwriters named therein (collectively, the “Underwriters”), relating to a firm commitment public offering of 123,423 newly issued shares of our 13.00% Series D Cumulative Redeemable Perpetual Preferred Stock (the “Series D Preferred Stock”) at a public offering price of $25.00 per share.
On June 1, 2022, we and the Underwriters mutually agreed to increase the size of the offering of our Series D Preferred Stock from 123,423 shares to 144,000 shares. Thus, we and the Underwriters agreed to terminate the Underwriting Agreement and entered into a side letter to terminate such Underwriting Agreement (the “Side Letter”). Following the execution of the Side Letter, on June 1, 2022, we entered into atwo new underwriting agreement (the “New Underwriting Agreement”) with the Underwriters, relating to a firm commitment public offering of 144,000 newly issued shares of our Series D Preferred Stock at a public offering price of $25.00 per share. On June 3, 2022, we closed the offering of the sale of the 144,000 shares of our Series D Preferred Stock for gross proceeds of approximately $3.6 million, before deducting offering expenses. Net proceeds to us, after payment of commissions, non-accountable fees and offering expenses, were approximately $3.1 million.
On June 14, 2022, we entered into an At-The-Market issuance sales agreement with Ascendiant Capital to sell shares of Series D Preferred Stock having an aggregate offering price of up to $46.4 million from time to time, through an “at the market offering” program (the “2022 Preferred ATM Offering”). As of June 30, 2022, we had sold an aggregate of 2,618 shares of Series D Preferred Stock pursuant to the 2022 Preferred ATM Offering for gross proceeds of $57,000.
On June 1, 2022, we converted our convertible promissory notes of Avalanche International Corp. (“AVLP”) and accrued interest into common stock of AVLP. We converted $20.0 million principal and $5.9 million of accrued interest receivable at a conversion price of $0.50 per share and received 51,889,168 shares of common stock increasing our common stock ownership of AVLP from less than 20% to approximately 92%.
Beginning in June 2022, we, through DP Lending, began making open market purchases of The Singing Machine Company, Inc. (“SMC”) common stock and on June 15, 2022, we owned more than 50% of the issued and outstanding common stock of SMC. As of June 15, 2022, the purchase price of the common stock acquired totaled $7.4 million and on June 15, 2022 a $3.1 million gain was recognized in interest and other income for the remeasurement of our previously held ownership interest to $10.5 million, based on the trading price of SMC common stock.
~~On August 10, 2022, BNI and DP Lending entered into a Note Purchase Agreement (the “NPA”) with two accredited investors (the “Investors”) providing for the issuance of~~10% Secured OID Promissory Notes ~~(individually, a “Note” and collectively, the “Notes”~~(the “Exchange Notes”), each with ~~an aggregate principal face amount of $11,000,000. The Notes have~~ a principal face amount of $11,000,000 and bear interest at 10% per annum, payable monthly in arrears, pursuant to the terms of the Notes. The maturity date of the Notes is August 10, 2023. BNI is required to make an aggregate monthly payment (a “Monthly Payment”) of $1,000,000 on the tenth calendar day of each month, starting in September 2022. The Monthly Payment includes principal and interest pursuant to the amortization table set forth in the Notes. After BNI makes the first six Monthly Payments, BNI may elect to pay a forbearance fee of $125,000 to an Investor, or$5.3 million, for an aggregate of ~~$250,000 to the two Investors (each, a “Monthly Forbearance”) in lieu~~amount owed of a Monthly Payment, which Monthly Forbearance would extend the maturity date of such Notes by one month, provided that BNI may not elect to make a Monthly Forbearance in consecutive months. BNI may prepay the full outstanding principal$10.5 million (the “Principal Amount”). We and ~~accrued but unpaid interest at any time, provided that if BNI prepays the Notes, BNI is required to pay~~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 ~~interest that would have accrued from the date of prepayment until the first anniversary of the issuance date of the Notes. The purchase price for the Notes was $10 million.~~
$10.5 million (the “First A&C Demand Note”) to Ault & Company.

~~Pursuant~~Effective as of August 10, 2023, we assigned the Term Note to Ault & Company. As consideration for Ault & Company assuming the ~~NPA, BNI, DP Lending and Helios Funds LLC, as the collateral agent on behalf of the Investors (the “Agent”) entered into~~Term Note from us, we issued a security agreement (the “Security Agreement”), pursuant to which (i) DP Lending granted to the Investors a security interest in marketable securities, investments and other property having a value of $10 million in a DP Lending brokerage account and (ii) BNI granted to the Investors a security interest in 4,000 S19 Pro Antminers (the “Miners”), provided that the number of Miners would be reduced to 2,000 after BNI makes the third Monthly Payment (as defined below), as set forth12% demand promissory note in the Security Agreement. In addition, pursuant to a subsidiary guaranty, DP Lending jointly and severally agreed to guarantee and act as surety for BNI’s obligation to repay the Notes. The Notes are further secured by a guaranty we provided.
On August 15, 2022, BNI entered into a Master Agreement (the “Master Agreement”) and Order Form (the “Order Form” and together with the Master Agreement, the “Hosting Documents”) with Compute North LLC (“Compute North”) providing for the hosting by Compute North of Bitcoin miners owned by BNI. Pursuant to the Hosting Documents, Compute North will host 6,500 S19j Pro Antminers (the “Hosted Miners”) owned by BNI for a period of five (5) years (the “Term”). BNI agreed to pay a fee for the Hosted Miners (the “Monthly Service Fee”), together with a monthly package fee per Hosted Miner. The Monthly Service Fee is payable based on the actual hashrate performance of the Hosted Miners, of which 70% of the anticipated Monthly Service Fee is payable in advance, and the remaining Monthly Service Fee, if any, will be invoiced in arrears.
Under the Master Agreement, BNI granted Compute North a continuing first-position security interest in the Hosted Miners, as collateral for BNI’s obligations under the Hosting Documents. Upon an event of default (as defined in the Master Agreement) by BNI, Compute North has the right to terminate the Hosting Documents and BNI is obligated to pay to Compute North all amounts then due under the Hosting Documents, together with a fee as liquidated damages, equal to theprincipal face amount of ~~fees that BNI would have been required~~$1.1 million (the “Second Demand Note”) to ~~pay through the end of the Term.~~ Ault & Company.

General

As a holding company, our business objective is designed to increase stockholder value. 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.

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 some or all 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) ~~programs~~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, ~~karaoke audio equipment,~~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.bitnile.com.~~www.ault.com.

Results of Operations

Results of Operations for the Three Months Ended June 30, ~~2022~~2023 and ~~2021~~2022

The following table summarizes the results of our operations for the three months ended June 30, ~~2022~~2023 and ~~2021.~~2022.

For the Three Months Ended June 30,
2022 2021

Revenue $ 7,849,000 $ 8,564,000
Revenue, cryptocurrency mining 3,976,000 291,000
Revenue, hotel operations 4,598,000 -
Revenue, lending and trading activities 943,000 53,274,000
Total revenue 17,366,000 62,129,000
Cost of revenue 12,369,000 6,278,000
Gross profit 4,997,000 55,851,000

Total operating expenses 28,716,000 10,028,000
(Loss) income from operations (23,719,000 ) 45,823,000
Interest and other income 81,000 14,000
Change in fair value of equity securities, related party

-

(5,893,000
)
Interest expense (2,031,000 ) (22,000 )
Change in fair value of marketable equity securities 241,000 (1,915,000 )
Realized loss on marketable securities (43,000 ) -
Loss from investment in unconsolidated entity (391,000 ) -
Gain on extinguishment of debt - 447,000
Change in fair value of warrant liability (6,000 ) 290,000
(Loss) income before income taxes (25,868,000 ) 38,744,000
Income tax (provision) benefit (217,000 ) (3,504,000 )
Net (loss) income (26,085,000 ) 35,240,000
Net loss attributable to non-controlling interest 321,000 1,083,000
Net (loss) income attributable to Ault Alliance, Inc.
(25,764,000 ) 36,323,000
Preferred dividends (44,000 ) (4,000 )
Net (loss) income available to common stockholders $ (25,808,000 ) $ 36,319,000

Comprehensive (loss) income
Net (loss) income available to common stockholders $ (25,808,000 ) $ 36,319,000
Other comprehensive income (loss)
Foreign currency translation adjustment (1,471,000 ) 134,000
Other comprehensive loss (1,471,000 ) 134,000
Total comprehensive (loss) income $ (27,279,000 ) $ 36,453,000
For the Three Months Ended June 30,
2023 2022
Revenue $ 12,216,000 $ 7,577,000
Revenue, cryptocurrency mining 8,368,000 3,976,000
Revenue, hotel and real estate operations 4,709,000 4,870,000
Revenue, crane operations 12,590,000 -
Revenue, lending and trading activities 9,525,000 943,000
Total revenue 47,408,000 17,366,000
Cost of revenue, products 9,036,000 5,044,000
Cost of revenue, cryptocurrency mining 9,726,000 4,453,000
Cost of revenue, hotel and real estate operations 3,120,000 2,872,000
Cost of revenue, hotel operations 7,641,000 -
Cost of revenue, lending and trading activities - -
Total cost of revenue 29,523,000 12,369,000
Gross profit 17,885,000 4,997,000
Total operating expenses 68,390,000 28,716,000
Loss from operations (50,505,000 ) (23,719,000 )
Other income (expense):
Interest and other income 2,382,000 81,000
Interest expense (15,927,000 ) (2,031,000 )
Loss on extinguishment of debt (91,000 ) -
Realized and unrealized (loss) gain on marketable securities (206,000 ) 198,000
Loss from investment in unconsolidated entity - (391,000 )
Loss on the sale of fixed assets (1,754,000 ) -
Change in fair value of warrant liability 3,217,000 (6,000 )
Loss before income taxes (62,884,000 ) (25,868,000 )
Income tax provision 1,368,000 217,000
Net loss (64,252,000 ) (26,085,000 )
Net loss attributable to non-controlling interest 3,569,000 321,000
Net loss attributable to Ault Alliance, Inc. (60,683,000 ) (25,764,000 )
Preferred dividends (321,000 ) (44,000 )
Net loss available to common stockholders $ (61,004,000 ) $ (25,808,000 )
Comprehensive loss
Net loss available to common stockholders $ (61,004,000 ) $ (25,808,000 )
Other comprehensive loss
Foreign currency translation adjustment (520,000 ) (1,471,000 )
Other comprehensive loss (520,000 ) (1,471,000 )
Total comprehensive loss $ (61,524,000 ) $ (27,279,000 )
4

Revenues

Revenues by segment for the three months ended June 30, 2023 and 2022 ~~and 2021 are~~were as follows:

For the Three Months Ended June 30, Increase For the Three Months Ended June 30, Increase
2022 2021 (Decrease) % 2023 2022 (Decrease) %
GWW $ 6,503,000 $ 6,475,000 $ 28,000 0 %
GIGA $ 8,740,000 $ 6,503,000 $ 2,237,000 34 %
TurnOnGreen 1,062,000 1,831,000 (769,000 ) -42 % 724,000 1,062,000 (338,000 ) -32 %
BNI
SMC 2,625,000 - 2,625,000 -
Sentinum
Revenue, cryptocurrency mining 3,976,000 291,000 3,685,000 1266 % 8,368,000 3,976,000 4,392,000 110 %
Revenue, commercial real estate leases 272,000 185,000 87,000 47 % 325,000 272,000 53,000 19 %
Ault Global Real Estate Equities, Inc. (“AGREE”) 4,598,000 - 4,598,000 —
Ault Alliance:
AGREE 4,384,000 4,598,000 (214,000 ) -5 %
Fintech:
Revenue, lending and trading activities 943,000 53,274,000 (52,331,000 ) -98 % 9,525,000 943,000 8,582,000 910 %
Other 12,000 73,000 (61,000 ) -84 % 45,000 12,000 33,000 275 %
Energy 12,672,000 - 12,672,000 -
Total revenue $ 17,366,000 $ 62,129,000 $ (44,763,000 ) -72 % $ 47,408,000 $ 17,366,000 $ 30,042,000 173 %

~~Our~~GIGA
The $2.2 million increase in our GIGA segment revenue for the three months ended June 30, 2023 included $0.7 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 three months ended June 30, 2023, as businesses rebound in the post-pandemic COVID-19 economy.
TurnOnGreen
TurnOnGreen revenues ~~decreased by $44.8 million, or 72%, to $17.4~~were down $0.3 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022 due to a large project in 2022 that was cancelled.
SMC
SMC revenues increased by $2.6 million due to the acquisition of SMC in June 2022.
Sentinum
Revenues from ~~$62.1~~Sentinum’s cryptocurrency mining operations increased $4.4 million as we increased our cryptocurrency mining activities from the prior period, partially offset by lower Bitcoin prices and an increase in Bitcoin mining difficulty level in the current year period.
AGREE
AGREE’s revenues decreased by $0.2 million for the three months ended June 30, ~~2021.~~
~~GWW~~
~~GWW revenues were flat at $6.5 million for both~~2023, compared to the three months ended June 30, 2022, ~~and 2021.~~
~~TurnOnGreen~~
~~TurnOnGreen revenues for the three months ended June 30, 2022 of $1.1 million declined $0.8 million, or 42%, from $1.8 million for the three months ended June 30, 2021,~~ due to ~~supply chain challenges.~~
~~The current supply chain crisis~~interruptions in business operations as the ~~global economy has led to delivery delays and shortages~~properties were being renovated through the end of certain electronic components and associated raw materials that TurnOnGreen uses in its products. Should this supply chain crisis continue throughout 2022, it will likely extend TurnOnGreen’s production time periods and delay the timing of revenue recognition. TurnOnGreen cannot predict if or when circumstances may change, nor can it predict the amount by which bookings or shipments may change.
April 2023.
~~BNI~~
Revenues from BNI’s cryptocurrency mining operations were $4.0 million for the three months ended June 30, 2022, compared to $0.3 million for three months ended June 30, 2021. During 2021, we purchased Bitcoin mining equipment and increased our cryptocurrency mining activities. Our decision to increase our cryptocurrency mining operations was based on several factors, which positively affected the number of active miners we operated, including the market prices of digital currencies, and favorable power costs available at our Michigan data center.
~~AGREE~~
~~AGREE revenues were $4.6 million for the three months ended June 30, 2022 compared to $0 for the three months ended June 30, 2021.~~ On December 22, 2021, AGREE acquired four hotel properties for $71.3 million, consisting of a 136-room Courtyard by Marriott, a 133-room Hilton Garden Inn and a 122-room Residence Inn by Marriott in Middleton, WI, as well as a 135-room Hilton Garden Inn in Rockford, IL.
~~Ault Alliance~~Fintech

Revenues from our lending and trading activities ~~decreased~~were $9.5 million due to ~~$0.9 million~~significant realized gains for the three months ended June 30, ~~2022, from $53.3 million for the three months ended June 30, 2021, which is attributable to significant unrealized gains in the prior year period and unrealized losses in the current year period~~2023 from our investment portfolio. During the three months ended June 30, ~~2021, DP~~2022, Ault Lending generated ~~significant~~ income from appreciation of investments in marketable securities as well as shares of common stock underlying ~~convertible notes and warrants~~equity securities issued to DPAult Lending in certain financing transactions. Revenue from lending and trading activities ~~during~~for the three months ended June 30, ~~2021~~2023 included an approximate ~~$40~~$0.9 million unrealized gain from our investment in Alzamend. Under its business model, DPAult Lending also generates revenue through origination fees charged to borrowers and interest generated from each loan.

Revenues from our trading activities ~~during~~for the three months ended June 30, ~~2022~~2023 included net gains 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 $12.7 million for the three months ended June 30, 2023, due to the acquisition of the Circle 8 crane operations in December 2022.
Gross Margins

Gross margins ~~decreased~~increased to ~~28.8%~~38% for the three months ended June 30, ~~2022,~~2023, compared to ~~89.9%~~29% for the three months ended June 30, ~~2021. Our gross margins have typically ranged between 30% and 35%, with slight variations depending on the overall composition of our revenue.~~2022.

Our gross margins of ~~28.8%~~38% recognized during the three months ended June 30, ~~2022 were impacted by the~~2023 benefited from favorable margins from our lending and trading activities and ~~modest~~were impacted by negative margins onfrom our Sentinum cryptocurrency mining ~~operations~~segment due to the decline in the price of ~~Bitcoin.~~Bitcoin coupled with an 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 June 30, ~~2022~~2023 and ~~2021,~~2022 would have been ~~33.1%~~33% and ~~30.0%~~36%, ~~respectively, consistent with our historical range.~~respectively.

Research and Development

Research and development expenses increased by ~~$0.2 million to $0.7~~$1.1 million for the three months ended June 30, ~~2022, from $0.5 million for the three months ended June 30, 2021. The increase in research and development expenses is~~2023, due to ~~product~~expenditures related to development ~~efforts at TurnOnGreen.~~work on the BMI metaverse platform.

Selling and Marketing

Selling and marketing expenses were $9.6 million for the three months ended June 30, 2023, compared to $7.0 million for the three months ended June 30, 2022, ~~compared to $1.5 million for the three months ended June 30, 2021,~~ an increase of ~~$5.5~~$2.6 million, or ~~364%~~37%. The increase was the result of ~~$3.7~~$3.6 million higher ~~marketing~~advertising and promotion costs ~~at Ault Alliance, including $2.4 million~~ related to ~~an advertising sponsorship agreement as well as~~BMI’s metaverse platform, partially offset by a $1.4 million decline in employee related costs and consulting expenses. The increase is also attributable to $0.4 million increases in sales and marketing ~~personnel~~costs from SMC, which was acquired in June 2022 and ~~consultants.~~$0.2 million from GIGA, which was acquired in September 2022.

General and Administrative

General and administrative expenses were $21.3 million for the three months ended June 30, 2023, compared to $19.0 million for the three months ended June 30, 2022, ~~compared to $8.0 million for the three months ended June 30, 2021,~~ an increase of ~~$11.0~~$2.3 million, or ~~138%~~12%. General and administrative expenses increased from the comparative prior period, mainly due ~~to:~~to increases from new acquisitions:

· ~~increased~~general and administrative costs of ~~$2.6~~$3.4 million ~~related to the Michigan data center, operated by ACS;~~from Circle 8, which was acquired in December 2022;
· general and administrative costs of $3.0 million from BMI, which was acquired in March 2023;
· general and administrative costs of $2.9 million from SMC, which was acquired in June 2022;
· general and administrative costs of $2.3 million from GIGA, which was acquired in September 2022; and
· general and administrative costs of $0.6 million from AVLP, which was acquired in June 2022.
The increases above were partially offset by the following decreases in general and administrative expenses:
· $~~2.5~~5.0 million ~~increase in the accrual of a~~lower performance bonus related to realized gains on trading ~~activities during the period;~~activities;
· $1.2 million lower corporate legal fees;
· $1.0 million lower corporate bonuses;
· $0.8 million lower general and administrative ~~costs of $1.9 million from our hotel operations, which were acquired in December 2021;~~expenses at AGREE;
· ~~higher salaries of $1.3~~$0.7 million ~~and audit fees of $1.0 million;~~lower corporate consulting fees;
· ~~non-cash stock compensation costs of $1.0 million;~~$0.7 million lower corporate audit fees; and
· ~~increased legal fees~~$0.5 million lower corporate board of ~~$0.9 million, in part related to the efforts to acquire EYP.~~directors fees.

~~Loss From Operations~~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 ~~loss from operations~~goodwill impairment test as of ~~$23.7~~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 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 three months ended June 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 three months ended June 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 Mined Cryptocurrency
Impairment of mined cryptocurrency for the three months ended June 30, 2023 and 2022 ~~compared~~was $0.1 million and $2.0 million, respectively. Impairment losses are attributable to ~~a gain~~the volatility of ~~$45.8 million~~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 June 30, ~~2021. The decrease in operating income~~2023 is ~~attributable primarily to~~lower than the ~~decrease in unrealized gains from trading activities from the~~comparable prior year period ~~combined with an increase in operating expenses.~~as the average amount of digital currency held decreased during the three months ended June 30, 2023 as we generally sold our mined digital currency the next business day.

Interest and Other Income

Interest and other income was $81,000 for the three months ended June 30, 2022 compared to $14,000 for the three months ended June 30, 2021. Other income for the three months ended June 30, 2022 included a $2.8 million gain related to remeasurement of our previously held ownership interest of SMC prior to the June 15, 2022 acquisition, based on the trading price of SMC common stock. In addition, other income for the three months ended June 30, 2022 included a $2.7 million loss related to remeasurement of our previously held ownership interest of AVLP prior to the June 1, 2022 acquisition.
~~Change in fair value of equity securities, related party~~
Change in fair value of equity securities, related party resulting from the warrant securities that we received as a result of our investment in AVLP was nil for the three months ended June 30, 2022, compared to a loss of $5.9$2.4 million for the three months ended June 30, ~~2021.~~2023, compared to $0.1 million for the three months ended June 30, 2022. The increase in interest and other income is primarily due to higher interest rates resulting in higher income from ADRT’s cash and marketable securities held in the trust account.

Interest Expense

Interest expense was $15.9 million for the three months ended June 30, 2023, compared to $2.0 million for the three months ended June 30, ~~2022, compared to $22,000~~2022. The $15.9 million interest expense for the three months ended June 30, ~~2021.~~2023 included amortization of debt discount of $7.2 million, forbearance and extension fees of $6.2 million and contractual interest of $2.5 million. The ~~increase in~~$2.0 million interest expense ~~is due primarily to interest on the $55.1 million construction loans related to the December 2021 acquisition of hotel properties.~~
~~Change in Fair Value of Warrant Liability~~
~~Change in fair value of warrant liability was a loss of $6,000~~ for the three months ended June 30, 2022 ~~compared to a gain~~included amortization of ~~$0.3~~debt discount of $32,000 and contractual interest of $2.0 million.
Loss on Extinguishment of Debt
Loss on extinguishment of debt was $0.1 million for the three months ended June 30, 2021. During the three months ended June 30, 2021, the fair value of the warrants that were issued during 2021 in a series of debt financings decreased by $0.3 million. The fair value of warrant liabilities is re-measured at each financial reporting period and immediately before exercise, with any changes in fair value recorded as change in fair value of warrant liability in the condensed consolidated statements of operations and comprehensive (loss) income.
~~Change in Fair Value of Marketable Equity Securities~~
Change in fair value of marketable equity securities was a gain of $0.2 million for the three months ended June 30, 2022, compared to a loss of $1.9 million for the three months ended June 30, 2021. The loss generated in the prior year period related to an investment in marketable securities held by Microphase Corporation (“Microphase”), a majority owned subsidiary of GWW, that was fully sold in the fourth quarter of 2021.
~~Realized Loss on Marketable Securities~~
~~Realized loss on marketable securities was $43,000 for the three months ended June 30, 2022,~~2023, compared to $0 for the three months ended June 30, ~~2021. Realized loss for the three months ended June 30, 2022 included losses from Alpha Fund, which began operations in October 2021.~~2022.

Loss From Investment in Unconsolidated Entity

Loss from investment in unconsolidated entity was $0 for the three months ended June 30, 2023, compared to $0.4 million for the three months ended June 30, 2022, ~~compared to $0 for the three months ended June 30, 2021,~~ representing our share of losses from our equity method investment in AVLP prior to the June 1, 2022 acquisition.
~~Gain on Extinguishment of Debt~~
~~Gain on extinguishment of debt was $0 for the three months ended June 30, 2022, compared to a gain of $0.4 million for the three months ended June 30, 2021.~~ ~~On May 20, 2021, Microphase received forgiveness of its Paycheck Protection Program loan in the principal amount of $0.4 million.~~
~~Net (Loss) Income~~
~~For the foregoing reasons, our net loss for the three months ended June 30, 2022 was $25.8 million, compared to net income of $36.3 million for the three months ended June 30, 2021.~~
7
~~Other Comprehensive Loss~~
Other comprehensive loss was $1.5 million for the three months ended June 30, 2022, compared to other comprehensive income of $0.1 million for the three months ended June 30, 2021. Other comprehensive loss for the three months ended June 30, 2022 and 2021 was attributable to foreign currency translation adjustments between our functional currency, the U.S. Dollar, and the British Pound and Israeli Shekel.
Results of Operations for the Six Months Ended June 30, ~~2022~~2023 and ~~2021~~2022

The following table summarizes the results of our operations for the six months ended June 30, ~~2022~~2023 and ~~2021.~~2022.

For the Six Months Ended June 30,
2022 2021

Revenue $ 16,508,000 $ 16,469,000
Revenue, cryptocurrency mining 7,524,000 421,000
Revenue, hotel operations 7,296,000 -
Revenue, lending and trading activities 18,864,000 58,485,000
Total revenue 50,192,000 75,375,000
Cost of revenue 22,863,000 11,386,000
Gross profit 27,329,000 63,989,000

Total operating expenses 50,018,000 16,964,000

(Loss) income from operations (22,689,000 ) 47,025,000
Interest and other income 530,000 51,000
Change in fair value of equity securities, related party
-

(2,924,000
)
Interest expense (31,855,000 ) (337,000 )
Change in fair value of marketable equity securities 241,000 45,000
Realized gain on marketable securities 66,000 397,000
Loss from investment in unconsolidated entity (924,000 ) -
Gain on extinguishment of debt - 929,000
Change in fair value of warrant liability (24,000 ) (388,000 )

(Loss) income before income taxes (54,655,000 ) 44,798,000
Income tax (provision) benefit (217,000 ) (3,510,000 )
Net (loss) income (54,872,000 ) 41,288,000
Net loss attributable to non-controlling interest 336,000 3,000
Net (loss) income attributable to Ault Alliance, Inc.
(54,536,000 ) 41,291,000
Preferred dividends (49,000 ) (9,000 )
Net (loss) income available to common stockholders $ (54,585,000 ) $ 41,282,000

Comprehensive (loss) income
Net (loss) income available to common stockholders $ (54,585,000 ) $ 41,282,000
Other comprehensive income (loss)
Foreign currency translation adjustment (1,758,000 ) 41,000
Other comprehensive loss (1,758,000 ) (2,883,000 )
Total comprehensive (loss) income $ (56,343,000 ) $ 41,323,000
For the Six Months Ended June 30,
2023 2022
Revenue $ 25,647,000 $ 15,958,000
Revenue, cryptocurrency mining 15,715,000 7,524,000
Revenue, hotel and real estate operations 7,410,000 7,846,000
Revenue, crane operations 25,236,000 -
Revenue, lending and trading activities 4,586,000 18,864,000
Total revenue 78,594,000 50,192,000
Cost of revenue, products 18,823,000 10,792,000
Cost of revenue, cryptocurrency mining 17,829,000 6,950,000
Cost of revenue, hotel and real estate operations 5,808,000 5,121,000
Cost of revenue, hotel operations 15,029,000 -
Cost of revenue, lending and trading activities 1,180,000 -
Total cost of revenue 58,669,000 22,863,000
Gross profit 19,925,000 27,329,000
Total operating expenses 101,848,000 50,018,000
Loss from operations (81,923,000 ) (22,689,000 )
Other income (expense):
Interest and other income 3,579,000 530,000
Interest expense (29,657,000 ) (31,855,000 )
Loss on extinguishment of debt (154,000 ) -
Realized and unrealized (loss) gain on marketable securities (244,000 ) 307,000
Loss from investment in unconsolidated entity - (924,000 )
Impairment of equity securities (9,555,000 ) -
Gain on the sale of fixed assets 2,761,000 -
Change in fair value of warrant liability 3,217,000 (24,000 )
Loss before income taxes (111,976,000 ) (54,655,000 )
Income tax provision 1,105,000 217,000
Net loss (113,081,000 ) (54,872,000 )
Net loss attributable to non-controlling interest 3,752,000 336,000
Net loss attributable to Ault Alliance, Inc. (109,329,000 ) (54,536,000 )
Preferred dividends (550,000 ) (49,000 )
Net loss available to common stockholders $ (109,879,000 ) $ (54,585,000 )
Comprehensive loss
Net loss available to common stockholders $ (109,879,000 ) $ (54,585,000 )
Other comprehensive loss
Foreign currency translation adjustment (350,000 ) (1,758,000 )
Other comprehensive loss (350,000 ) (1,758,000 )
Total comprehensive loss $ (110,229,000 ) $ (56,343,000 )

Revenues

Revenues by segment for the six months ended June 30, 2023 and 2022 ~~and 2021 are~~were as follows:

For the Six Months Ended June 30, Increase For the Six Months Ended June 30, Increase
2022 2021 (Decrease) % 2023 2022 (Decrease) %
GWW $ 13,748,000 $ 12,825,000 $ 923,000 7 %
GIGA $ 17,448,000 $ 13,748,000 $ 3,700,000 27 %
TurnOnGreen 2,191,000 3,213,000 (1,022,000 ) -32 % 1,600,000 2,191,000 (591,000 ) -27 %
BNI
SMC 6,008,000 - 6,008,000 —
Sentinum
Revenue, cryptocurrency mining 7,524,000 421,000 7,103,000 1687 % 15,715,000 7,524,000 8,191,000 109 %
Revenue, commercial real estate leases 550,000 281,000 269,000 96 % 783,000 550,000 233,000 42 %
AGREE 7,296,000 - 7,296,000 — 6,627,000 7,296,000 (669,000 ) -9 %
Ault Alliance:
Fintech:
Revenue, lending and trading activities 18,864,000 58,485,000 (39,621,000 ) -68 % 4,586,000 18,864,000 (14,278,000 ) -76 %
Other 19,000 150,000 (131,000 ) -87 % 45,000 19,000 26,000 137 %
Energy 25,782,000 - 25,782,000 —
Total revenue $ 50,192,000 $ 75,375,000 $ (25,183,000 ) -33 % $ 78,594,000 $ 50,192,000 $ 28,402,000 57 %
GIGA

~~Our revenues decreased by $25.2~~The $3.7 million ~~or 33%, to $50.2 million~~increase in our GIGA segment revenue for the six months ended June 30, ~~2022, from $75.4~~2023 included $1.1 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 six months ended June 30, ~~2021.~~
~~GWW~~
GWW revenues increased by $0.9 million, or 7%, to $13.7 million for the six months ended June 30, 2022, from $12.8 million for the six months ended June 30, 2021. The increase in revenue from our GWW segment for customized solutions for the military markets reflects higher revenues from Enertec Systems 2001 Ltd., a GWW subsidiary, which primarily consisted of revenue recognized over time, grew to $6.2 million for the six months ended June 30, 2022, an increase of $1.3 million, or 27%, from $4.9 million2023, as businesses rebound in the ~~prior-year period.~~post-pandemic COVID-19 economy.

TurnOnGreen

TurnOnGreen revenues ~~for the six months ended June 30, 2022 of $2.2 million declined $1.0 million, or 32%, from $3.2~~were down $0.6 million for the six months ended June 30, ~~2021,~~2023, compared to the six months ended June 30, 2022 due to ~~supply chain challenges.~~a large project in 2022 that was cancelled.

~~BNI~~SMC
SMC revenues increased by $6.0 million due to the acquisition of SMC in June 2022.
Sentinum

Revenues from ~~BNI’s~~Sentinum’s cryptocurrency mining operations ~~were $7.5~~increased $8.2 million as we increased our cryptocurrency mining activities from the prior period, partially offset by lower Bitcoin prices and an increase in Bitcoin mining difficulty level in the current year period.
AGREE
AGREE’s revenues decreased by $0.7 million for the six months ended June 30, ~~2022,~~2023, compared to $0.4 million for six months ended June 30, 2021. During 2021, we purchased Bitcoin mining equipment and increased our cryptocurrency mining activities. Our decision to increase our cryptocurrency mining operations in 2022 was based on several factors, which positively affected the number of active miners we operated, including the market prices of digital currencies, and favorable power costs available at our Michigan data center.
~~AGREE~~
~~AGREE revenues were $7.3 million for~~ the six months ended June 30, 2022, ~~compared~~due to ~~$0 for~~ interruptions in business operations as the properties were being renovated during the six months ended June 30, ~~2021.~~ ~~On December 22, 2021, AGREE acquired four hotel properties for $71.3 million, consisting of a 136-room Courtyard by Marriott, a 133-room Hilton Garden Inn and a 122-room Residence Inn by Marriott~~2023. The renovations were completed in ~~Middleton, WI, as well as a 135-room Hilton Garden Inn in Rockford, IL.~~April 2023.

~~Ault Alliance~~Fintech

Revenues from our lending and trading activities ~~decreased~~were $4.6 million due to ~~$18.9 million~~realized gains for the six months ended June 30, ~~2022, from $58.5 million for the six months ended June 30, 2021, which is attributable to significant unrealized gains in the prior year period and unrealized losses in the current year period~~2023 from our investment portfolio. During the six months ended June 30, ~~2021, DP~~2022, Ault Lending generated ~~significant~~ income from appreciation of investments in marketable securities as well as shares of common stock underlying ~~convertible notes and warrants~~equity securities issued to DPAult Lending in certain financing transactions. Revenue from lending and trading activities ~~during~~for the six months ended June 30, ~~2021~~2023 included an approximate ~~$40~~$0.6 million unrealized ~~gain~~loss from our investment in Alzamend. Under its business model, DPAult Lending also generates revenue through origination fees charged to borrowers and interest generated from each loan.

Revenues from our trading activities ~~during~~for the six months ended June 30, ~~2022~~2023 included ~~significant~~ net ~~gains~~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 $25.8 million for the six months ended June 30, 2023, due to the acquisition of the Circle 8 crane operations in December 2022.

Gross Margins

Gross margins decreased to ~~54.4%~~25% for the six months ended June 30, ~~2022,~~2023, compared to ~~84.9%~~54% for the six months ended June 30, ~~2021. Our gross margins have typically ranged between 30% and 35%, with slight variations depending on the overall composition of our revenue.~~
2022.

Our gross margins of ~~54.4%~~25% recognized during the six months ended June 30, ~~2022~~2023 were impacted by ~~the favorable~~negative margins from our ~~lending and trading activities and modest margins on~~Sentinum cryptocurrency mining ~~operations~~segment due to the decline in the price of ~~Bitcoin.~~Bitcoin coupled with an increase in Bitcoin mining difficulty level, offset by favorable margins from our lending and trading activities. Excluding the effects of margin from our lending and trading activities and cryptocurrency mining operations, our adjusted gross margins for the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 would have been ~~31.4%~~33% and ~~33.2%~~36%, ~~respectively, consistent with our historical range.~~respectively.

Research and Development

Research and development expenses increased by ~~$0.3 million to $1.4~~$2.2 million for the six months ended June 30, ~~2022, from $1.1 million for the six months ended June 30, 2021. The increase in research and development expenses was~~2023, primarily due to ~~product~~expenditures related to development ~~efforts at TurnOnGreen and GWW.~~work on the BMI metaverse platform.

Selling and Marketing

Selling and marketing expenses were $18.4 million for the six months ended June 30, 2023, compared to $13.5 million for the six months ended June 30, 2022, ~~compared to $2.7 million for the six months ended June 30, 2021,~~ an increase of ~~$10.7~~$4.9 million, or ~~390%~~36%. The increase was the result of ~~$8.2~~$5.3 million higher advertising and promotion costs ~~at Ault Alliance, including $6.4 million~~ related to ~~an advertising sponsorship agreement as well as~~BMI’s metaverse platform, partially offset by a ~~$1.4~~$1.8 million ~~increase~~decline in ~~sales~~employee related costs and ~~marketing personnel and a $0.4 million increase in~~ consulting ~~expense.~~expenses. The increase is also attributable to ~~a $0.4~~$1.3 million ~~increase~~increases in ~~costs incurred at TurnOnGreen to grow our selling~~sales and marketing ~~infrastructure related to our electric vehicle charger products.~~costs from SMC, which was acquired in June 2022 and $0.5 million from GIGA, which was acquired in September 2022.

General and Administrative

General and administrative expenses were $44.0 million for the six months ended June 30, 2023, compared to $32.7 million for the six months ended June 30, 2022, ~~compared to $13.1 million for the six months ended June 30, 2021,~~ an increase of ~~$19.6~~$11.3 million, or ~~150%~~34%. General and administrative expenses increased from the comparative prior period, mainly due ~~to:~~to increases from new acquisitions:

· general and administrative costs of ~~$3.7~~$6.4 million from ~~our hotel operations,~~Circle 8, which ~~were~~was acquired in December ~~2021;~~2022;
· ~~non-cash stock compensation~~general and administrative costs of ~~$3.6 million;~~$5.1 million from SMC, which was acquired in June 2022;
· general and administrative costs of $3.5 million from GIGA, which was acquired in September 2022;
· general and administrative costs of $3.0 million from BMI, which was acquired in March 2023; and
· general and administrative costs of $1.2 million from AVLP, which was acquired in June 2022.
The increases above were partially offset by the following decreases in general and administrative expenses:
· $~~2.5~~4.2 million ~~increase in the accrual of a~~lower performance bonus related to realized gains on trading ~~activities during the period;~~activities;
· ~~higher salaries of $1.8~~$2.2 million ~~and audit fees of $1.3 million;~~
· ~~increased costs of $1.5 million related to the Michigan data center, operated by ACS;~~lower corporate legal fees; and
· ~~increased legal fees of $1.5~~$1.5 million ~~in part related to the efforts to acquire EYP.~~lower general and administrative expenses at AGREE.

~~(Loss) Income From Operations~~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 ~~loss from operations~~goodwill impairment test as of ~~$22.7~~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 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 six months ended June 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 six months ended June 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 Mined Cryptocurrency
Impairment of mined cryptocurrency for the six months ended June 30, 2023 and 2022 ~~compared~~was $0.3 million and $2.4 million, respectively. Impairment losses are attributable to ~~a gain~~the volatility of ~~$47.0 million~~the Bitcoin market as market price of Bitcoin drops below our carrying value within the respective periods. The impairment of mined cryptocurrency for the six months ended June 30, ~~2021. The decrease in operating income~~2023 is ~~attributable primarily to~~lower than the ~~decrease in unrealized gains from trading activities from the~~comparable prior year period ~~combined with an increase in operating expenses.~~
10
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.
Interest and Other Income

Interest and other income was $3.6 million for the six months ended June 30, 2023, compared to $0.5 million for the six months ended June 30, 2022 compared to $51,000 for the six months ended June 30, 2021. Other income for the six months ended June 30, 2022 included a $2.8 million gain related to remeasurement of our previously held ownership2022. The increase in interest ~~of SMC prior to the June 15, 2022 acquisition, based on the trading price of SMC common stock. In addition,~~and other income ~~for~~is primarily due to higher interest rates resulting in higher income from ADRT’s cash and marketable securities held in the ~~six months ended June 30, 2022 included a $2.7 million loss related to remeasurement of our previously held ownership interest of AVLP prior to the June 1, 2022 acquisition.~~
~~Change in fair value of equity securities, related party~~
Change in fair value of equity securities, related party resulting from the warrant securities that we received as a result of our investment in AVLP was nil for the six months ended June 30, 2022, compared to a loss of $2.9 million for the six months ended June 30, 2021.trust account.

Interest Expense

Interest expense was $29.7 million for the six months ended June 30, 2023, compared to $31.9 million for the six months ended June 30, ~~2022 compared to $0.3~~2022. The $29.7 million interest expense for the six months ended June 30, ~~2021.~~2023 included amortization of debt discount of $16.2 million, forbearance and extension fees of $7.5 million and contractual interest of $5.9 million. The ~~increase in~~$29.8 million interest expense ~~relates~~for the six months ended June 30, 2022 related primarily to ~~the $66.0 million of Senior Notes issued in December 2021, which were fully paid in March 2022. Interest expense from these Senior Notes included the~~ amortization of debt discount of $26.3 million from the issuance of warrants, a non-cash charge, and original issue discount, in connection with ~~these Senior Notes. In addition,~~ the ~~increase~~$66.0 million of senior notes issued in ~~interest expense is due, in part, to interest on the $55.1 million construction loans related to the~~ December 2021, ~~acquisition of hotel properties.~~which were fully paid in March 2022.

~~Change in Fair Value~~Loss on Extinguishment of ~~Warrant Liability~~Debt

Change in fair value of warrant liability was a loss of $24,000 for the six months ended June 30, 2022, compared to a loss of $0.4 million for the six months ended June 30, 2021. During the six months ended June 30, 2021, the fair value of the warrants that were issued during 2021 in a seriesLoss on extinguishment of debt financings increased by $0.4 million. The fair value of warrant liabilities is re-measured at each financial reporting period and immediately before exercise, with any changes in fair value recorded as change in fair value of warrant liability in the condensed consolidated statements of operations and comprehensive (loss) income.
~~Change in Fair Value of Marketable Equity Securities~~
~~Change in fair value of marketable equity securities~~ was ~~a gain of~~ $0.2 million for the six months ended June 30, ~~2022,~~2023, compared to ~~a gain of $45,000~~$0 for the six months ended June 30, ~~2021. The loss generated in the prior year period relates to an investment in marketable securities held by Microphase that was fully sold in the fourth quarter of 2021.~~
~~Realized Gain on Marketable Securities~~
Realized gain on marketable securities was $0.1 million for the six months ended June 30, 2022, compared to $0.4 million for the six months ended June 30, 2021. Realized gains in the prior year period relates to realized gains from an investment in marketable securities held by Microphase, a portion of which was sold during the six months ended June 30, 2021.2022.

Loss From Investment in Unconsolidated Entity

Loss from investment in unconsolidated entity was $0 for the six months ended June 30, 2023, compared to $0.9 million for the six months ended June 30, 2022, ~~compared to $3,000 for the six months ended June 30, 2021,~~ representing our share of losses from our equity method investment in AVLP prior to the June 1, 2022 acquisition.

~~Gain on Extinguishment~~Impairment of ~~Debt~~Equity Securities

~~Gain on extinguishment of debt was $0~~Cumulative downward adjustments for ~~the six months ended~~impairments for our equity securities without readily determinable fair values held at June 30, ~~2022, compared to a gain of $0.9 million for the six months ended June 30, 2021. The prior year gain on extinguishment of debt represents forgiveness of Paycheck Protection Program loans.~~
~~Net (Loss) Income~~2023 were $9.6 million.

~~For the foregoing reasons, our net loss for the six months ended June 30, 2022 was $54.6 million, compared to net income of $41.3 million for the six months ended June 30, 2021.~~
~~Other Comprehensive (Loss) Income~~
Other comprehensive loss was $1.8 million for the six months ended June 30, 2022, compared to other comprehensive income of $41,000 for the six months ended June 30, 2021. Other comprehensive loss for the six months ended June 30, 2022 and 2021 was attributable to foreign currency translation adjustments between our functional currency, the U.S. Dollar, and the British Pound and Israeli Shekel.
Liquidity and Capital Resources

On June 30, ~~2022,~~2023, we had cash and cash equivalents of ~~$24.1~~$19.7 million (excluding restricted cash of ~~$4.7~~$1.1 million)~~. This compares~~, compared to cash and cash equivalents of ~~$15.9~~$10.5 million (excluding restricted cash of ~~$5.3~~$3.6 million) at December 31, ~~2021.~~2022. The increase in cash and cash equivalents was primarily due tocash provided by operating activities and cash provided by financing activities related to the sale of common and preferred stock, as well as proceeds from convertible notes ~~payable and cash provided by operating activities,~~ partially offset by the payment of debt, ~~and~~ purchases of property and ~~equipment.~~equipment and investments in equity securities.

Net cash provided by operating activities totaled ~~$15.0~~$12.9 million for the six months ended June 30, ~~2022~~2023, compared to ~~net cash used in operating activities of $21.7~~$19.4 million for the six months ended June 30, ~~2021.~~2022. Cash provided by operating activities for the six months ended June 30, ~~2022~~2023 included ~~$50.7~~$41.2 million net cash provided by marketable securities from trading activities related to the operations of DPAult Lending and $15.0 million proceeds from the sale of cryptocurrencies from our Sentinum Bitcoin mining operations, partially offset by operating losses and changes in working capital.

Net cash used in investing activities was ~~$82.8~~$21.8 million for the six months ended June 30, 2023, compared to $87.1 million for the six months ended June 30, 2022, ~~compared to $29.7~~which included $72.8 million of capital expenditures, primarily for ~~the six months ended June 30, 2021.~~Bitcoin mining equipment. Net cash used in investing activities for the six months ended June 30, ~~2022 included $72.8 million of capital expenditures~~2023 was primarily related to ~~Bitcoin mining equipment, $15.8 million for investments in equity securities~~capital expenditures and ~~$8.2 million for~~ the purchase of ~~SMC, net of cash received,~~equity securities, partially offset by ~~$11.7 million~~ proceeds from the sale of ~~marketable equity securities, $10.5 million principal payments received on loans receivable and $4.4 million proceeds from the sale~~fixed assets of ~~digital currencies.~~
$4.5 million.
Net cash provided by financing activities was $12.8 million for the six months ended June 30, 2023, compared to net cash provided by financing activities of $75.5 million for the six months ended June 30, 2022, ~~compared to $138.1 million for the six months ended June 30, 2021,~~ and primarily reflects the following transactions:

· 2022 Common ATM Offering – On February 25, 2022, we 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 $200 million from time to time, throughDuring the ~~2022 Common ATM Offering. As of~~six months ended June 30, ~~2022,~~2023, we ~~had~~ sold an aggregate of ~~239.7~~0.1 million shares of common stock pursuant to the 2022 Common ATM Offering for gross proceeds of ~~$163.4 million. Net proceeds to us, after payment of commissions, were $159.4 million.~~$4.2 million and effective March 17, 2023, the 2022 Common ATM Offering was terminated;

· ~~Public~~2022 Preferred ATM Offering ~~of Series D Preferred Stock~~ – On June 3, 2022, we announced the closing of our public offering of 144,000 shares of our Series D Preferred Stock at a price to the public of $25.00 per share. Gross proceeds from the offering were approximately $3.6 million, before deducting offering expenses. Net proceeds to us, after payment of commissions, non-accountable fees and offering expenses were $3.1 million.
· ~~December 2021 Secured Promissory Notes~~ – On December 30, 2021, we entered into a securities purchase agreement with certain accredited investors providing for the issuance of Senior Notes that bore interest at 8% per annum with an aggregate principal face amount of $66.0 million. The Senior Notes were repaid in March 2022.
· ~~Margin Accounts Payable~~ – During the year ended December 31, 2021, we entered into leverage agreements on certain brokerage accounts, whereby we borrowed $18.5 million. The margin accounts payable were repaid during the three months ended March 31, 2022.
· ~~Purchase of Treasury Stock~~ – During the six months ended June 30, ~~2022, Alpha Fund purchased 16.1 million~~2023, we sold an aggregate of 162,175 shares of ~~our common stock for $6.2 million and 53,033 shares of our~~ Series D Preferred Stock pursuant to the 2022 Preferred ATM Offering for ~~$1.3~~net proceeds of $3.0 million ~~accounted for as treasury stock as of~~and effective June 16, 2023, the 2022 Preferred ATM Offering was terminated;
· 2023 Common ATM Offering –On June 9, 2023, we entered into the 2023 Common ATM Offering with Ascendiant Capital. During the six months ended June 30, ~~2022.~~2023, we sold an aggregate of 0.1 million shares of common stock pursuant to the 2023 Common ATM Offering for gross proceeds of $0.8 million;
· $34.1 million payments on notes payable, partially offset by $30.7 million proceeds from notes payable; and
· $7.8 million proceeds from convertible notes payable, partially offset by $0.4 million payments on convertible notes payable.

~~We believe~~Financing Transactions Subsequent to June 30, 2023
Financing transactions subsequent to June 30, 2023 included the following:
2023 Common ATM Offering
During the period between July 1, 2023 through August 14, 2023, we sold an aggregate of 3.9 million shares of common stock pursuant to the 2023 Common ATM Offering for gross proceeds of $15.6 million.
Amendment to 8.5% Secured Promissory Notes
On July 19, 2023, we and certain of our ~~current cash on hand combined~~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 us from the ~~2022 ATM Offering are sufficient~~amendment agreement were $7.5 million.
Advances under Ault & Company Loan Agreement
Subsequent to ~~meet our operating~~June 30, 2023, $3.9 million has been advanced by Ault & Company to us under the loan agreement entered into June 8, 2023.
Exchange of Preferred Shares for Secured Debt and ~~capital requirements for at least~~Assignment of Secured Note
Effective August 3, 2023, we and the ~~next twelve months from~~Investors entered into the ~~date~~Exchange Agreement pursuant to which the ~~financial statements~~Investors exchanged all of their Preferred Shares as well as their 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 $0.9 million for the ~~six months ended June 30, 2022 are issued.~~Exchange Notes, each with a principal face amount of approximately $5.3 million, for an aggregate of amount owed of $10.5 million. We and Milton “Todd” Ault, III, our Executive Chairman issued entered into guaranty agreements with the Investors guaranteeing Ault & Company’s repayment 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 the First A&C Demand Note to Ault & Company.
Assignment of Term Note
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.

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.
The Company evaluates its business relationships with related parties to identify potential VIEs under Accounting Standards Codification (“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.

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, ~~tradenames~~trade names and know how are recognized at fair value. The purchase price allocation process requires management to make significant estimates and 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.

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

Not applicable for a smaller reporting company.

~~ITEM 4.           CONTROLS AND PROCEDURES~~
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, ~~2021,~~2022, the end of its most recent fiscal year.

~~Specifically, management~~Management has determined that we do not have sufficient resources in our accounting function, which restricts our ability to gather, analyze and properly review information related to financial reporting, including applying complex accounting principles relating to consolidation accounting, fair value estimates and analysis of financial instruments for proper classification inidentified the consolidated financial statements, in a timely manner. 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 afollowing material weakness. 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.weaknesses:

A material weakness is a control deficiency or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
131. 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, 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 currency 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.
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.~~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 ~~most recent~~ fiscal quarter ~~of 2022,~~ended June 30, 2023, 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.
PART II — OTHER INFORMATION

~~ITEM 1.           LEGAL PROCEEDINGS~~
ITEM 1. LEGAL PROCEEDINGS

~~Blockchain Mining Supply and Services, Ltd.~~
On November 28, 2018, Blockchain Mining Supply and Services, Ltd. (“Blockchain Mining”) a vendor who sold computers to our subsidiary, filed a Complaint (the “Complaint”) in the United States District Court for the Southern District of New York against us and our subsidiary, Digital Farms, Inc. (f/k/a Super Crypto Mining, Inc.), in an action captioned ~~Blockchain Mining Supply and Services, Ltd. v. Super Crypto Mining, Inc. and DPW Holdings, Inc.~~~~, Case No. 18-cv-11099.~~
The Complaint asserts claims for breach of contract and promissory estoppel against us and our subsidiary arising from the subsidiary’s alleged failure to honor its obligations under the purchase agreement. The Complaint seeks monetary damages in excess of $1.4 million, plus attorneys’ fees and costs.
~~We believe that these claims are without merit and intend to vigorously defend them.~~
On April 13, 2020, we and our subsidiary, jointly filed a motion to dismiss the Complaint in its entirety as against us, and the promissory estoppel claim as against our subsidiary. On the same day, our subsidiary also filed a partial Answer to the Complaint in connection with the breach of contract claim.
On April 29, 2020, Blockchain Mining filed an amended complaint (the “Amended Complaint”). The Amended Complaint asserts the same causes of action and seeks the same damages as the initial Complaint.
On May 13, 2020, we and our subsidiary, jointly filed a motion to dismiss the Amended Complaint in its entirety as against us, and the promissory estoppel claim as against of our subsidiary. On the same day, our subsidiary also filed a partial Answer to the Amended Complaint in connection with the breach of contract claim.
~~In its partial Answer, the Company’s subsidiary admitted to the validity of the contract at issue and also asserted numerous affirmative defenses concerning the proper calculation of damages.~~
On December 4, 2020, the Court issued an Order directing the Parties to engage in limited discovery which was completed on March 4, 2021. In connection therewith, the Court also denied the previously filed motion to dismiss without prejudice.
On June 2, 2021, we and our subsidiary filed a motion to dismiss (the “Motion to Dismiss”) the Amended Complaint in its entirety as against us, and the promissory estoppel claim as against the subsidiary.
~~On August 8, 2022, the Court issued an Order denying the Motion to Dismiss, in its entirety.~~
~~The deadline for us and our subsidiaries to file an Answer to the Amended Complaint is September 2, 2022.~~
Based on our assessment of the facts underlying the claims, the uncertainty of litigation, and the preliminary stage of the case, we cannot reasonably estimate the potential loss or range of loss that may result from this action. Notwithstanding, we have established a reserve in the amount of the unpaid portion of the purchase agreement. An unfavorable outcome may have a material adverse effect on our business, financial condition and results of operations.
~~Ding Gu (a/k/a Frank Gu) and Xiaodan Wang Litigation~~
On January 17, 2020, Ding Gu (a/k/a Frank Gu) (“Gu”) and Xiaodan Wang (“Wang” and with “Gu” collectively, “Plaintiffs”), filed a Complaint (the “Complaint”) in the Supreme Court of the State of New York, County of New York against us and our Chief Executive Officer, Milton C. Ault, III, in an action captioned ~~Ding Gu (a/k/a Frank Gu) and Xiaodan Wang v. DPW Holdings, Inc. and Milton C. Ault III (a/k/a Milton Todd Ault III a/k/a Todd Ault)~~~~, Index No. 650438/2020.~~
The Complaint asserts causes of action for declaratory judgment, specific performance, breach of contract, conversion, attorneys’ fees, permanent injunction, enforcement of Guaranty, unjust enrichment, money had and received, and fraud arising from: (i) a series of transactions entered into between Gu and us, as well as Gu and Ault, in or about May 2019; and (ii) a term sheet entered into between Plaintiffs and DPW, in or about July 2019. The Complaint seeks, among other things, monetary damages in excess of $1.1 million, plus a decree of specific performance directing DPW to deliver unrestricted shares of DPW’s common stock to Gu, plus attorneys’ fees and costs.
~~We believe that these claims are without merit and intend to vigorously defend them.~~
~~On May 4, 2020, we and Ault jointly filed a motion to dismiss the Complaint in its entirety, with prejudice (the “Motion to Dismiss”).~~
On July 28, 2021, the Court conducted oral argument (the “Oral Argument”), via Microsoft Teams, in connection with the Motion to Dismiss. During the Oral Argument, the Court informed the parties that the Court would be dismissing the fraud claim, in its entirety, and provided Plaintiffs an opportunity to amend their fraud claim within sixty days of the date of the Oral Argument. The Court reserved decision on the other causes of action.
On December 14, 2021, the Court entered a Decision and Order in connection with the Motion to Dismiss (the “Order”) whereby the Court dismissed Plaintiff’s causes of action for specific performance, conversion, permanent injunction, and reiterated its prior determination that the fraud claim was also dismissed. The Court denied the Motion to Dismiss in connection with the other causes of action asserted in the Complaint.
~~On January 26, 2022, we and Ault filed an Answer to the Complaint and asserted numerous affirmative defenses.~~
Based on our assessment of the facts underlying the above claims, the uncertainty of litigation, and the preliminary stage of the case, we cannot reasonably estimate the potential loss or range of loss that may result from this action. An unfavorable outcome may have a material adverse effect on our business, financial condition and results of operations.
~~Subpoena~~
The Company and certain affiliates and related parties have received several subpoenas from the SEC for the production of documents and testimony. The Company is fully cooperating with this non-public, fact-finding inquiry and management believes that the Company has operated its business in compliance with all applicable laws. The subpoenas expressly provide that the inquiry is not to be construed as an indication by the Commission or its staff that any violations of the federal securities laws have occurred, nor should they be considered a reflection upon any person, entity or security. However, there can be no assurance as to the outcome of this matter.
~~Other~~ 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~~SEC Investigation
The Company and certain affiliates and related parties received several subpoenas from the SEC for the production of documents and testimony in the non-public fact-finding investigation referred to as In re DPW Holdings, Inc. The Company and those parties have reached a settlement with the SEC to fully resolve the SEC’s previously disclosed investigation into certain of the Company’s public disclosures and its accounting for certain transactions, among other matters.

Under terms of the settlement, announced on August 15, 2023, the Company, Executive Chairman Milton “Todd” Ault, III, and Chief Executive Officer William B. Horne neither admit nor deny the SEC’s findings, which do not entail intentional misconduct. The ~~risks described~~Company will pay a civil penalty of $0.7 million that was fully accrued in ~~Part I, Item 1A, “Risk Factors,”~~the fourth quarter of 2022; Mr. Ault will pay disgorgement of $85,504 and a civil penalty of $150,000; and Mr. Horne will pay a civil penalty of $20,720. In addition, the Company has undertaken to retain an independent consultant to conduct a comprehensive review of the Company’s internal control over financial reporting and disclosure controls and procedures, and to issue a report providing recommendations for improvements.
ITEM 1A. RISK FACTORS
There are no updates or changes to the risk factors set forth in our ~~2021~~amended Annual Report on Form ~~10-K, could materially and adversely affect our business, financial condition and results of operations, and~~10-K/A for the trading price of our common stock could decline. These risk factors do not identify all risks that we face - our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods. The Risk Factors section of our 2021 Annual Report on Form 10-K remains current in all material respects, with the exception that the following section of Risk Factors section of our 2021 Annual Report on Form 10-K is hereby amended and restated in its entirety:
“~~Risks Related to Related Party Transactions~~
~~Avalanche~~
We have lent a substantial amount of funds to Avalanche, a related party, whose ability to repay us is subject to significant doubt; in addition, we currently beneficially own a significant percentage of Avalanche’s issued and outstanding shares of common stock, for which there is presently no market.
On September 6, 2017, we entered into a Loan and Security Agreement with Avalanche (as amended, the “AVLP Loan Agreement”) with an effective date of August 21, 2017 pursuant to which we provided Avalanche a non-revolving credit facility. The AVLP Loan Agreement was increased to up to $20.0 million in June of 2021 and extended toyear ended December 31, ~~2023. Until recently, we held a convertible note issued to us by AVLP in the amount of $20.0 million (the “Prior AVLP Note”).~~
While Avalanche received funds from a third party in the amount of $2.75 million in early April of 2019 in consideration for its issuance of a convertible promissory note to such third party (the “Third Party Note”), $2.7 million was used to pay an outstanding receivable due us and no amount was used to repay the debt Avalanche owes us pursuant to the AVLP Loan Agreement. On October 12, 2021, Ault Alpha, an affiliate of ours, repaid the Third Party Note in full and also acquired a warrant to purchase 1.6 million shares of AVLP common stock. In consideration therefor, AVLP issued Ault Alpha a term note in the principal amount of $3.6 million, which term note had a maturity date of June 30, 2022.

On June 27, 2022, AVLP exchanged the term note it had issued to Ault Alpha for a 10% senior secured convertible note in the principal face amount of $3,797,260 due June 15, 2024 (the “Ault Alpha Note”). The Ault Alpha Note is convertible, subject to adjustment, at $0.50 per share. AVLP also issued Ault Alpha a warrant to purchase an aggregate of 1,617,647 shares of Avalanche common stock at an exercise price of $0.50. Pursuant to a security agreement entered into by Avalanche and Ault Alpha, as amended by an intercreditor agreement entered into by and among the foregoing parties, our company and certain other persons, Ault Alpha has a second priority interest in AVLP’s assets securing the repayment of the Ault Alpha Note.
On July 11, 2022, AVLP issued us a 10% senior secured convertible note in the principal face amount of $3,000,000 due July 10, 2024 (the “AVLP Note”). The AVLP Note is convertible, subject to adjustment, at $0.50 per share. AVLP also issued us warrants to purchase an aggregate of 40,998,272 shares of Avalanche common stock at an exercise price of $0.50. Pursuant to a security agreement entered into by Avalanche and Ault Alpha, as amended by an intercreditor agreement entered into by and among the foregoing parties, our company and certain other persons, we have a first priority interest in AVLP’s assets securing the repayment of the AVLP Note.
On June 1, 2022, we converted the entire principal and accrued interest on the Prior AVLP Note into an aggregate of 51,889,168 shares of common stock of Avalanche, representing approximately 90.2% of Avalanche’s issued and outstanding shares of common stock. There is currently no liquid market for the Avalanche common stock. Consequently, even if we were inclined to sell such shares of common stock on the open market, our ability to do so would be severely limited. Avalanche is not current in its filings with the Commission and is not required to register the shares of its common stock underlying the Prior AVLP Note or any other loan arrangement we have made with Avalanche described above.
There is some doubt as to whether Avalanche will ever have the ability to repay its debt to us, as well as our ability to sell the shares we beneficially own since at present there is no market for these shares. If we are unable to recoup our investment in Avalanche in the foreseeable future or at all, such failure would have a materially adverse effect on our financial condition and future prospects.
Milton C. Ault, III and William Horne, our Executive Chairman and Chief Executive Officer, respectively, and two of our directors are directors of Avalanche. In addition, Philou is the controlling stockholder of Avalanche.
Milton C. Ault, III and William Horne, our Executive Chairman and Chief Executive Officer, respectively, and two of our directors, are also directors of Avalanche. In addition, Philou is the controlling stockholder of Avalanche. Certain conflicts of interest between us, on the one hand, and Avalanche, on the other hand, may arise relating to commercial or strategic opportunities or initiatives, in addition to the conflicts related to the debt that Avalanche owes us. For example, Messrs. Ault and Horne may find it difficult to determine how to meet their fiduciary duties to us as well as Avalanche, which could result in a less favorable result for us than would be the case if they were solely directors of our company. Further, even if Messrs. Ault and Horne were able to successfully meet their fiduciary obligations to us and Avalanche, the fact that they are members of the board of directors of both companies could attenuate their ability to focus on our business and best interests, possibly to the detriment of both companies. Mr. Ault’s control of Philou through Ault & Company only enhances the risk inherent in having Messrs. Ault and Horne serve as directors of both our company and Avalanche.”
~~ITEM 2.           UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

From April 1, ~~2022~~2023 through June 30, ~~2022,~~2023, Ault Alpha LP purchased ~~15,125,000~~19,659 shares of common ~~stock and 10,456 shares of Series D Preferred Stock.~~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.

~~Common Stock Purchased~~
Total
Number of
Shares
Purchased Average
Price Paid
Per Share Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs Maximum
Number of Shares
That May Yet Be
Purchased Under
Plans or Programs
April 1, 2022 – April 30, 2022 - -
May 1, 2022 – May 31, 2022 10,429,605 $ 0.34
June 1, 2022 – June 30, 2022 4,695,395 $ 0.35
Total 15,125,000 $ 0.34 - -
Total
Number of
Shares
Purchased Average Price
Paid Per
Share Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs Maximum
Number of Shares
That May Yet Be
Purchased Under
Plans or Programs
April 1, 2023 – April 30, 2023 5,816 $ 29.15
May 1, 2023 – May 31, 2023 13,843 $ 22.97
June 1, 2023 – June 30, 2023 - $ -
Total 19,659 $ 24.80 - -

Series D Preferred Stock Purchased
Total
Number of
Shares
Purchased Average Price
Paid Per
Share Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs Maximum
Number of Shares
That May Yet Be
Purchased Under
Plans or Programs
April 1, 2022 – April 30, 2022 - -
May 1, 2022 – May 31, 2022 - -
June 1, 2022 – June 30, 2022 10,456 $ 18.99
Total 10,456 $ 18.99 - -
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
~~ITEM 3.           DEFAULTS UPON SENIOR SECURITIES~~

None.

~~ITEM 4.          MINE SAFETY DISCLOSURES~~
ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

~~ITEM 5.          OTHER INFORMATION~~
ITEM 5. OTHER INFORMATION

None.
~~ITEM 6.           EXHIBITS~~
ITEM 6. EXHIBITS

Exhibit
Number Description
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.
3.3 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.
3.4 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.
3.5 Certificate of Designations of Rights and Preferences of Series C Convertible Redeemable Preferred Stock, dated February 27, 2019. Incorporated herein by reference to the Current Report on Form 8-K filed on February 28, 2019 as Exhibit 3.1 thereto.
~~3.6~~ 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.
~~3.7~~3.6 ~~Form of Amended & Restated~~ Certificate of ~~Designations~~Elimination of ~~Rights and Preferences of~~the Series C ~~Convertible Preferred Stock.~~convertible redeemable preferred stock of Ault Alliance, Inc. Incorporated herein by reference to the Current Report on Form 8-K filed on ~~February 25, 2020~~January 27, 2023 as Exhibit 3.1 thereto.
~~3.8~~3.7 ~~Bylaws effective as of August 13, 2020. Incorporated by reference to the Current Report on Form 8-K filed on August 14, 2020 as Exhibit 3.1 thereto.~~
~~3.9~~ 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.
~~3.10~~3.8 Amended and Restated Bylaws, ~~of BitNile Holdings, Inc.,~~ 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.
~~3.11~~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.
~~3.12~~3.10 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.
~~3.13~~3.11 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.
~~3.14~~3.12 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.
~~10.1~~3.13 ~~Form~~Certificate of ~~Asset Purchase Agreement.~~Designation of Series E Convertible Preferred Stock. Incorporated by reference to the Current Report on Form 8-K filed on ~~April 25, 2022~~March 30, 2023 as Exhibit ~~10.1~~3.1 thereto.
~~10.2~~3.14 ~~Form~~Certificate of ~~Senior Secured Superpriority Debtor-in-Possession Financing Term Sheet.~~Designation of Series F Convertible Preferred Stock. Incorporated by reference to the Current Report on Form 8-K filed on ~~April 25, 2022~~March 30, 2023 as Exhibit 3.2 thereto.
3.15 Certificate of Designation of Series G Convertible Preferred Stock. Incorporated by reference to the Current Report on Form 8-K filed on March 30, 2023 as Exhibit 3.3 thereto.
3.16 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.
3.17* Certificate of Designation of Series C Convertible Preferred Stock.
10.1 Securities Purchase Agreement, dated May 1, 2023. Incorporated by reference to the Current Report on Form 8-K filed on May 2, 2023 as Exhibit 10.1 thereto.
10.2 Form of Warrant. Incorporated by reference to the Current Report on Form 8-K filed on May 2, 2023 as Exhibit 10.2 thereto.
10.3 At-The-Market Issuance Sales Agreement, dated June ~~14, 2022,~~9, 2023, with Ascendiant Capital Markets, LLC. Incorporated by reference to the Current Report on Form 8-K filed on June 9, 2023 as Exhibit 10.1 thereto.
10.4 Form of Loan Agreement, dated June 8, 2023. Incorporated by reference to the Current Report on Form 8-K filed on June 14, ~~2022~~2023 as Exhibit 10.1 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 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.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.
* Filed herewith.
** Furnished herewith.
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:  ~~April 14,~~August 21, 2023

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)

21
20


	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
				2021						2021
	2022			Restated			2022			Restated
Revenue	$	7,849,000		$	8,564,000		$	16,508,000		$	16,469,000
Revenue, cryptocurrency mining		3,976,000			291,000			7,524,000			421,000
Revenue, hotel operations		4,598,000			-			7,296,000			-
Revenue, lending and trading activities		943,000			53,274,000			18,864,000			58,485,000
Total revenue		17,366,000			62,129,000			50,192,000			75,375,000
Cost of revenue		12,369,000			6,278,000			22,863,000			11,386,000
Gross profit		4,997,000			55,851,000			27,329,000			63,989,000

Operating expenses
Research and development		729,000			531,000			1,424,000			1,133,000
Selling and marketing		6,979,000			1,505,000			13,460,000			2,747,000
General and administrative		19,032,000			7,992,000			32,719,000			13,084,000
Impairment of mined cryptocurrency		1,976,000			-			2,415,000			-
Total operating expenses		28,716,000			10,028,000			50,018,000			16,964,000

(Loss) income from operations		(23,719,000	)		45,823,000			(22,689,000	)		47,025,000
Other income (expenses)
Interest and other income		81,000			14,000			530,000			51,000
Change in fair value of equity securities, related party		-			(5,893,000	)		-			(2,924,000	)
Interest expense		(2,031,000	)		(22,000	)		(31,855,000	)		(337,000	)
Change in fair value of marketable equity securities		241,000			(1,915,000	)		241,000			45,000
Realized gain (loss) on marketable securities		(43,000	)		-			66,000			397,000
Loss from investment in unconsolidated entity		(391,000	)		-			(924,000	)		-
Gain on extinguishment of debt		-			447,000			-			929,000
Change in fair value of warrant liability		(6,000	)		290,000			(24,000	)		(388,000	)
Total other expenses, net		(2,149,000	)		(7,079,000	)		(31,966,000	)		(2,227,000)

(Loss) income before income taxes		(25,868,000	)		38,744,000			(54,655,000	)		44,798,000
Income tax (provision) benefit		(217,000	)		(3,504,000	)		(217,000	)		(3,510,000	)
Net (loss) income		(26,085,000	)		35,240,000			(54,872,000	)		41,288,000
Net loss attributable to non-controlling interest		321,000			1,083,000			336,000			3,000
Net (loss) income attributable to Ault Alliance, Inc.		(25,764,000	)		36,323,000			(54,536,000	)		41,291,000
Preferred dividends		(44,000	)		(4,000	)		(49,000	)		(9,000	)
Net (loss) income available to common stockholders	$	(25,808,000	)	$	36,319,000		$	(54,585,000	)	$	41,282,000

Basic net (loss) income per common share	$	(0.09	)	$	0.72		$	(0.29	)	$	0.92
Diluted net (loss) income per common share	$	(0.09	)	$	0.69		$	(0.29	)	$	0.86

Weighted average basic common shares outstanding		289,672,000			50,783,000			190,870,000			45,052,000
Weighted average diluted common shares outstanding		289,672,000			52,780,000			190,870,000			47,574,000

Comprehensive (loss) income
Net (loss) income available to common stockholders	$	(25,808,000	)	$	36,319,000		$	(54,585,000	)	$	41,282,000
Other comprehensive income (loss)
Foreign currency translation adjustment		(1,471,000	)		134,000			(1,758,000	)		41,000
Other comprehensive (loss) income		(1,471,000	)		134,000			(1,758,000	)		41,000
Total comprehensive (loss) income	$	(27,279,000	)	$	36,453,000		$	(56,343,000	)	$	41,323,000

															Accumulated
	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, April 1, 2022		132,040	$	-		225,015,203	$	225,000	$	495,536,000		$	(174,378,000	)	$	(393,000	)	$	1,640,000		$	(14,172,000	)	$	308,458,000
Issuance of common stock for restricted stock awards		-		-		429,379		-		-			-			-			-			-			-
Preferred stock issued		146,618		-		-		-		3,666,000			-			-			-			-			3,666,000
Preferred stock offering costs		-		-		-		-		(537,000	)		-			-			-			-			(537,000	)
Stock-based compensation										983,000									36,000						1,019,000
Sale of common stock		-		-		98,995,997		99,000		53,180,000			-			-			-			-			53,279,000
Financing cost in connection with sales of common stock		-		-		-		-		(1,266,000	)		-			-			-			-			(1,266,000	)
Acquisition of non-controlling interests		-		-		-		-		(1,848,000	)		-			-			(382,000	)		-			(2,230,000	)
Non-controlling interest from AVLP acquisition		-		-		-		-		-			-			-			6,738,000			-			6,738,000
Non-controlling interest from SMC acquisition		-		-		-		-		-			-			-			10,336,000			-			10,336,000
Purchase of treasury stock - Ault Alpha		-		-		-		-		-			-			-			-			(6,467,000	)		(6,467,000	)
Net loss		-		-		-		-		-			(25,764,000	)		-			-			-			(25,764,000	)
Preferred dividends				-		-		-		-			(44,000	)		-			-			-			(44,000	)
Foreign currency translation adjustments		-		-		-		-		-			-			(1,471,000	)		-			-			(1,471,000	)
Net loss attributable to non-controlling interest		-		-		-		-		-			-			-			(321,000	)		-			(321,000	)
Other		-		-		-		-		(1,000	)		2,000			1,000			1,000			-			3,000
BALANCES, June 30, 2022		278,658	$	-		324,440,579	$	324,000	$	549,713,000		$	(200,184,000	)	$	(1,863,000	)	$	18,048,000		$	(20,639,000	)	$	345,399,000

															Accumulated
	Series A & B								Additional						Other						Total
	Preferred Stock				Common Stock				Paid-In			Accumulated			Comprehensive			Non-Controlling			Stockholders’
	Shares		Amount		Shares		Amount		Capital			Deficit			Income (Loss)			Interest			Equity

BALANCES, April 1, 2021		132,040	$	-		49,498,676	$	49,000	$	292,763,000		$	(117,366,000	)	$	(878,000	)	$	1,902,000		$	176,470,000
Stock-based compensation										20,000									545,000			565,000
Sale of common stock		-		-		6,385,425		7,000		19,054,000			-			-			-			19,061,000
Financing cost in connection with sales of common stock		-		-		-		-		(477,000	)		-			-			-			(477,000	)
Issuance of common stock for conversion of convertible notes payable, related party		-		-		275,862		-		400,000			-			-			-			400,000
Comprehensive loss:
Net income		-		-		-		-		-			36,323,000			-			-			36,323,000
Preferred dividends		-		-		-		-		-			(4,000	)		-			-			(4,000	)
Foreign currency translation adjustments		-		-		-		-		-			-			134,000			-			134,000
Net income attributable to non-controlling interest		-		-		-		-		-			-			-			(1,083,000	)		(1,083,000	)
BALANCES, June 30, 2021		132,040	$	-		56,159,963	$	56,000	$	311,760,000		$	(81,047,000	)	$	(744,000	)	$	1,364,000		$	231,389,000


	For the Six Months Ended June 30,
				2021
	2022			Restated
Cash flows from operating activities:
Net (loss) income	$	(54,872,000	)	$	41,288,000
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization		7,129,000			1,093,000
Interest expense – debt discount		26,493,000			40,000
Gain on extinguishment of debt		-			(929,000	)
Change in fair value of warrant liability		24,000			(290,000	)
Accretion of original issue discount on notes receivable – related party		-			(4,000	)
Accretion of original issue discount on notes receivable		(612,000	)		(955,000	)
Increase in accrued interest on notes receivable – related party		(100,000	)		(1,000	)
Stock-based compensation		3,704,000			584,000
Impairment of cryptocurrencies		2,415,000			-
Realized gains on sale of marketable securities		(18,585,000	)		(12,283,000	)
Unrealized losses (gains) on marketable securities		9,669,000			(3,483,000	)
Unrealized losses (gains) on investments in equity securities, related parties		9,048,000			(36,928,000	)
Unrealized gains on equity securities		(17,021,000	)		(1,224,000	)
Loss from investment in unconsolidated entity		924,000			-
Loss on remeasurement of investment in unconsolidated entity		2,700,000			-
Changes in operating assets and liabilities:
Marketable equity securities		50,734,000			(9,616,000	)
Accounts receivable		(2,311,000	)		(887,000	)
Accrued revenue		(7,000	)		78,000
Inventories		(2,646,000	)		485,000
Prepaid expenses and other current assets		2,406,000			(2,537,000	)
Digital currencies		(7,785,000	)		-
Other assets		(384,000	)		(246,000	)
Accounts payable and accrued expenses		4,706,000			83,000
Other current liabilities		-			4,472,000
Lease liabilities		(626,000	)		(439,000	)
Net cash provided by (used in) operating activities		15,003,000			(21,699,000	)

Cash flows from investing activities:
Purchase of property and equipment		(72,779,000	)		(5,590,000	)
Investment in promissory notes and other, related parties		(2,200,000	)		(4,040,000	)
Investments in common stock and warrants, related parties		(4,663,000	)		(16,483,000	)
Investment in real property, related party		-			(2,670,000	)
Proceeds from sale of investment in real property, related party		-			2,670,000
Purchase of SMC, net of cash received		(8,239,000	)		-
Cash received upon acquisition of AVLP		1,245,000			-
Acquisition of non-controlling interests		(2,230,000	)		-
Purchase of marketable equity securities		(1,981,000	)		-
Sales of marketable equity securities		11,733,000			430,000
Investments in loans receivable		(2,728,000	)		-
Principal payments on loans receivable		10,525,000			-
Sale of digital currencies		4,377,000			-
Investments in equity securities		(15,820,000	)		(4,054,000	)
Net cash used in investing activities		(82,760,000	)		(29,737,000	)

Schedule of condensed consolidated statements of operations and comprehensive loss
	For the Three Months Ended
	June 30, 2021
	As Reported			Adjustment			As Restated
Revenue	$	8,564,000		$	-		$	8,564,000
Revenue, cryptocurrency mining, net		291,000						291,000
Revenue, lending and trading activities		53,274,000						53,274,000
Total revenue		62,129,000			-			62,129,000
Cost of revenue		6,278,000						6,278,000
Gross profit		55,851,000			-			55,851,000

Operating expenses
Research and development		531,000						531,000
Selling and marketing		1,505,000						1,505,000
General and administrative		7,992,000						7,992,000
Total operating expenses		10,028,000			-			10,028,000

Income from operations		45,823,000						45,823,000
Other income (expenses)
Interest and other income		14,000						14,000
Change in fair value of equity securities, related party		-			(5,893,000	)		(5,893,000	)
Interest expense		(22,000	)					(22,000	)
Change in fair value of marketable equity securities		(1,915,000	)					(1,915,000	)
Gain on extinguishment of debt		447,000						447,000
Change in fair value of warrant liability		290,000						290,000
Total other expenses, net		(1,186,000	)		(5,893,000	)		(7,079,000	)

Income (loss) before income taxes		44,637,000			(5,893,000	)		38,744,000
Income tax provision		(3,504,000	)					(3,504,000	)
Net income (loss)		41,133,000			(5,893,000	)		35,240,000
Net income attributable to non-controlling interest		1,083,000						1,083,000
Net income (loss) attributable to Ault Alliance, Inc.		42,216,000			(5,893,000	)		36,323,000
Preferred dividends		(4,000	)					(4,000	)
Net income (loss) available to common stockholders	$	42,212,000		$	(5,893,000	)	$	36,319,000

Basic net income (loss) per common share	$	0.83					$	0.72
Diluted net income (loss) per common share	$	0.81					$	0.69

Weighted average basic common shares outstanding		50,783,000						50,783,000
Weighted average diluted common shares outstanding		52,780,000						52,780,000

Comprehensive income
Net income (loss) available to common stockholders	$	42,212,000		$	(5,893,000	)	$	36,319,000
Other comprehensive income (loss)
Foreign currency translation adjustment		134,000						134,000
Net unrealized gain on derivative securities of related party		(5,893,000	)		5,893,000			-
Other comprehensive (loss) income		(5,759,000	)		5,893,000			134,000
Total comprehensive income	$	36,453,000		$	-		$	36,453,000

Schedule of condensed consolidated statements of changes in stockholders’ equity
	January 1, 2021
	As Reported			Adjustment			As Restated
STOCKHOLDERS’ EQUITY
Common stock	$	28,000		$	-		$	28,000
Additional paid-in capital		171,396,000						171,396,000
Accumulated deficit		(121,396,000	)		(933,000	)		(122,329,000	)
Accumulated other comprehensive loss		(1,718,000	)		933,000			(785,000	)
TOTAL AULT ALLIANCE STOCKHOLDERS’ EQUITY		48,310,000			-			48,310,000

Non-controlling interest		822,000						822,000

TOTAL STOCKHOLDERS’ EQUITY	$	49,132,000		$	-		$	49,132,000


	April 1, 2021
		As Reported			Adjustment			As Restated
STOCKHOLDERS’ EQUITY
Common stock	$	49,000		$	-		$	49,000
Additional paid-in capital		292,763,000						292,763,000
Accumulated deficit		(119,402,000	)		2,036,000			(117,366,000	)
Accumulated other comprehensive loss		1,158,000			(2,036,000	)		(878,000	)
TOTAL AULT ALLIANCE STOCKHOLDERS’ EQUITY		174,568,000			-			174,568,000

Non-controlling interest		1,902,000						1,902,000

TOTAL STOCKHOLDERS’ EQUITY	$	176,470,000		$	-		$	176,470,000


	June 30, 2021
		As Reported			Adjustment			As Restated
STOCKHOLDERS’ EQUITY
Common stock	$	56,000		$	-		$	56,000
Additional paid-in capital		311,760,000						311,760,000
Accumulated deficit		(77,190,000	)		(3,857,000	)		(81,047,000	)
Accumulated other comprehensive loss		(4,601,000	)		3,857,000			(744,000	)
TOTAL AULT ALLIANCE STOCKHOLDERS’ EQUITY		230,025,000			-			230,025,000

Non-controlling interest		1,364,000						1,364,000

TOTAL STOCKHOLDERS’ EQUITY	$	231,389,000		$	-		$	231,389,000

Schedule of disaggregated revenues
	GIGA		TurnOn Green		Fintech		Sentinum		AGREE		SMC		BMI		Energy		Total
Primary Geographical Markets
North America	$	2,856,000	$	541,000	$	-	$	8,693,000	$	4,384,000	$	2,625,000	$	45,000	$	12,590,000	$	31,734,000
Europe		2,270,000		7,000		-		-		-		-		-		82,000		2,359,000
Middle East and other		3,614,000		176,000		-		-		-		-		-		-		3,790,000
Revenue from contracts with customers		8,740,000		724,000		-		8,693,000		4,384,000		2,625,000		45,000		12,672,000		37,883,000
Revenue, lending and trading activities (North America)		-		-		9,525,000		-		-		-		-		-		9,525,000
Total revenue	$	8,740,000	$	724,000	$	9,525,000	$	8,693,000	$	4,384,000	$	2,625,000	$	45,000	$	12,672,000	$	47,408,000

Major Goods or Services
RF/microwave filters	$	1,972,000	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	1,972,000
Power supply units & systems		1,564,000		645,000		-		-		-		-		-		-		2,209,000
Healthcare diagnostic systems		1,101,000		-		-		-		-		-		-		-		1,101,000
Defense systems		3,899,000		-		-		-		-		-		-		-		3,899,000
Digital currency mining		-		-		-		8,368,000		-		-		-		-		8,368,000
Hotel and real estate operations		-		-		-		325,000		4,384,000		-		-		-		4,709,000
Karaoke machines and related consumer goods		-		-		-		-		-		2,625,000		-		-		2,625,000
Crane rental		-		-		-		-		-		-		-		12,590,000		12,590,000
Other		204,000		79,000		-		-		-		-		45,000		82,000		410,000
Revenue from contracts with customers		8,740,000		724,000		-		8,693,000		4,384,000		2,625,000		45,000		12,672,000		37,883,000
Revenue, lending and trading activities		-		-		9,525,000		-		-		-		-		-		9,525,000
Total revenue	$	8,740,000	$	724,000	$	9,525,000	$	8,693,000	$	4,384,000	$	2,625,000	$	45,000	$	12,672,000	$	47,408,000

Timing of Revenue Recognition
Goods transferred at a point in time	$	4,720,000	$	722,000	$	-	$	8,693,000	$	4,384,000	$	2,625,000	$	45,000	$	82,000	$	21,271,000
Services transferred over time		4,020,000		2,000		-		-		-		-		-		12,590,000		16,612,000
Revenue from contracts with customers	$	8,740,000	$	724,000	$	-	$	8,693,000	$	4,384,000	$	2,625,000	$	45,000	$	12,672,000	$	37,883,000

Schedule of disaggregated revenues
	Three months ended June 30, 2022
	GWW		TurnOnGreen		Ault Alliance		BNI		AGREE		Total
Primary Geographical Markets
North America	$	1,111,000	$	822,000	$	12,000	$	4,248,000	$	4,598,000	$	10,791,000
Europe		2,540,000		28,000		-		-		-		2,568,000
Middle East and other		2,852,000		212,000		-		-		-		3,064,000
Revenue from contracts with customers		6,503,000		1,062,000		12,000		4,248,000		4,598,000		16,423,000
Revenue, lending and trading activities (North America)		-		-		943,000		-		-		943,000
Total revenue	$	6,503,000	$	1,062,000	$	955,000	$	4,248,000	$	4,598,000	$	17,366,000

Major Goods or Services
RF/microwave filters		559,000		-		-		-		-		559,000
Detector logarithmic video amplifiers		692,000		-		-		-		-		692,000
Power supply units		1,698,000		1,016,000		-		-		-		2,714,000
Power supply systems		609,000		-		-		-		-		609,000
Healthcare diagnostic systems		1,992,000		-		-		-		-		1,992,000
Electric vehicle chargers		-		46,000		-		-		-		46,000
Defense systems		953,000		-		-		-		-		953,000
Digital currency mining		-		-		-		3,976,000		-		3,976,000
Hotel operations		-		-		-		-		4,598,000		4,598,000
Other		-		-		12,000		272,000		-		284,000
Revenue from contracts with customers		6,503,000		1,062,000		12,000		4,248,000		4,598,000		16,423,000
Revenue, lending and trading activities		-		-		943,000		-		-		943,000
Total revenue	$	6,503,000	$	1,062,000	$	955,000	$	4,248,000	$	4,598,000	$	17,366,000

Timing of Revenue Recognition
Goods transferred at a point in time	$	3,601,000	$	1,062,000	$	12,000	$	4,248,000	$	4,598,000	$	13,521,000
Services transferred over time		2,902,000		-		-		-		-		2,902,000
Revenue from contracts with customers	$	6,503,000	$	1,062,000	$	12,000	$	4,248,000	$	4,598,000	$	16,423,000

	Six months ended June 30, 2022
	GWW		TurnOnGreen		Ault Alliance		BNI		AGREE		Total
Primary Geographical Markets
North America	$	2,622,000	$	1,834,000	$	19,000	$	8,074,000	$	7,296,000	$	19,845,000
Europe		4,719,000		47,000		-		-		-		4,766,000
Middle East and other		6,407,000		310,000		-		-		-		6,717,000
Revenue from contracts with customers		13,748,000		2,191,000		19,000		8,074,000		7,296,000		31,328,000
Revenue, lending and trading activities (North America)		-		-		18,864,000		-		-		18,864,000
Total revenue	$	13,748,000	$	2,191,000	$	18,883,000	$	8,074,000	$	7,296,000	$	50,192,000

Major Goods or Services
RF/microwave filters		2,070,000		-		-		-		-		2,070,000
Detector logarithmic video amplifiers		692,000		-		-		-		-		692,000
Power supply units		4,129,000		2,112,000		-		-		-		6,241,000
Power supply systems		657,000		-		-		-		-		657,000
Healthcare diagnostic systems		1,992,000		-		-		-		-		1,992,000
Electric vehicle chargers		-		79,000		-		-		-		79,000
Defense systems		4,208,000		-		-		-		-		4,208,000
Digital currency mining		-		-		-		7,524,000		-		7,524,000
Hotel operations		-		-		-		-		7,296,000		7,296,000
Other		-		-		19,000		550,000		-		569,000
Revenue from contracts with customers		13,748,000		2,191,000		19,000		8,074,000		7,296,000		31,328,000
Revenue, lending and trading activities		-		-		18,864,000		-		-		18,864,000
Total revenue	$	13,748,000	$	2,191,000	$	18,883,000	$	8,074,000	$	7,296,000	$	50,192,000

Timing of Revenue Recognition
Goods transferred at a point in time	$	7,113,000	$	2,191,000	$	19,000	$	8,074,000	$	7,296,000	$	24,693,000
Services transferred over time		6,635,000		-		-		-		-		6,635,000
Revenue from contracts with customers	$	13,748,000	$	2,191,000	$	19,000	$	8,074,000	$	7,296,000	$	31,328,000

	Three months ended June 30, 2021
	GWW		TurnOnGreen		Ault Alliance		Total
Primary Geographical Markets
North America	$	2,140,000	$	1,289,000	$	550,000	$	3,979,000
Europe		1,842,000		453,000		-		2,295,000
Middle East and other		2,493,000		88,000		-		2,581,000
Revenue from contracts with customers		6,475,000		1,830,000		550,000		8,855,000
Revenue, lending and trading activities (North America)		-		-		53,274,000		53,274,000
Total revenue	$	6,475,000	$	1,830,000	$	53,824,000	$	62,129,000

Major Goods
RF/microwave filters	$	1,076,000	$	-	$	-	$	1,076,000
Detector logarithmic video amplifiers		73,000		-		-		73,000
Power supply units		240,000		1,830,000		-		2,070,000
Power supply systems		2,475,000		-		-		2,475,000
Healthcare diagnostic systems		228,000		-		-		228,000
Defense systems		2,383,000		-		-		2,383,000
Digital currency mining		-		-		291,000		291,000
Other		-		-		259,000		259,000
Revenue from contracts with customers		6,475,000		1,830,000		550,000		8,855,000
Revenue, lending and trading activities		-		-		53,274,000		53,274,000
Total revenue	$	6,475,000	$	1,830,000	$	53,824,000	$	62,129,000

Timing of Revenue Recognition
Goods transferred at a point in time	$	3,863,000	$	1,830,000	$	550,000	$	6,243,000
Services transferred over time		2,612,000		-		-		2,612,000
Revenue from contracts with customers	$	6,475,000	$	1,830,000	$	550,000	$	8,855,000

	Six months ended June 30, 2021
	GWW		TurnOnGreen		Ault Alliance		Total
Primary Geographical Markets
North America	$	4,029,000	$	2,497,000	$	852,000	$	7,378,000
Europe		3,752,000		562,000		-		4,314,000
Middle East and other		5,044,000		154,000		-		5,198,000
Revenue from contracts with customers		12,825,000		3,213,000		852,000		16,890,000
Revenue, lending and trading activities (North America)		-		-		58,485,000		58,485,000
Total revenue	$	12,825,000	$	3,213,000	$	59,337,000	$	75,375,000

Major Goods
RF/microwave filters	$	2,291,000	$	-	$	-	$	2,291,000
Detector logarithmic video amplifiers		144,000		-		-		144,000
Power supply units		478,000		3,213,000		-		3,691,000
Power supply systems		4,708,000		-		-		4,708,000
Healthcare diagnostic systems		413,000		-		-		413,000
Defense systems		4,791,000		-		-		4,791,000
Digital currency mining		-		-		421,000		421,000
Other		-		-		431,000		431,000
Revenue from contracts with customers		2,825,000		3,213,000		852,000		16,890,000
Revenue, lending and trading activities		-		-		58,485,000		58,485,000
Total revenue	$	12,825,000	$	3,213,000	$	59,337,000	$	75,375,000

Timing of Revenue Recognition
Goods transferred at a point in time	$	7,621,000	$	3,213,000	$	852,000	$	11,686,000
Services transferred over time		5,204,000		-		-		5,204,000
Revenue from contracts with customers	$	12,825,000	$	3,213,000	$	852,000	$	16,890,000

Schedule of financial instrument measured at fair value
	Fair Value Measurement at June 30, 2022
	Total		Level 1		Level 2		Level 3
Investment in term promissory note of Ault & Company, Inc. (“Ault & Company”) and other – a related party	$	2,770,000	$	-	$	-	$	2,770,000
Investment in common stock of Alzamend Neuro, Inc. (“Alzamend”) – a related party		8,845,000		8,845,000		-		-
Investments in marketable equity securities		17,467,000		17,467,000		-		-
Cash and marketable securities held in trust account		116,895,000		116,895,000		-		-
Investments in other equity securities		804,000		-		-		804,000
Total assets measured at fair value	$	146,781,000	$	143,207,000	$	-	$	3,574,000

Fair value, assets measured on recurring basis
	Fair Value Measurement at December 31, 2021								Fair Value Measurement at June 30, 2023
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Investment in term promissory note of Ault & Company and other – a related party	$	2,842,000	$	-	$	-	$	2,842,000
Investment in common stock of Alzamend – a related party		13,230,000		13,230,000		-		-
Assets:
Investment in common stock of Alzamend Neuro, Inc. (“Alzamend”) – a related party									$	5,836,000	$	5,836,000	$	-	$	-
Investments in marketable equity securities		40,380,000		40,380,000		-		-		653,000		653,000		-		-
Cash and marketable securities held in trust account		116,725,000		116,725,000		-		-		2,143,000		2,143,000		-		-
Investments in other equity securities		9,215,000		-		-		9,215,000
Total assets measured at fair value	$	182,392,000	$	170,335,000	$	-	$	12,057,000	$	8,632,000	$	8,632,000	$	-	$	-

Liabilities:
Series E and G preferred stock liabilities									$	8,263,000	$	-	$	-	$	8,263,000
Warrant and embedded conversion feature liabilities										5,605,000		-		-		5,605,000
Convertible promissory notes										15,275,000		-		-		15,275,000
Total liabilities measured at fair value									$	29,143,000	$	-	$	-	$	29,143,000

	Fair Value Measurement at December 31, 2022
	Total		Level 1		Level 2		Level 3
Assets:
Investment in common stock of Alzamend – a related party	$	6,449,000	$	6,449,000	$	-	$	-
Investments in marketable equity securities		6,590,000		6,590,000		-		-
Cash and marketable securities held in trust account		118,193,000		118,193,000		-		-
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

Liabilities:
Warrant and embedded conversion feature liabilities	$	2,967,000	$	-	$	-	$	2,967,000
Convertible promissory notes		12,776,000		-		-		12,776,000
Total liabilities measured at fair value	$	15,743,000	$	-	$	-	$	15,743,000

Schedule of other equity securities measured and carried at fair value
	Investments in other equity securities
Balance at January 1, 2022	$	9,215,000
Investment in preferred stock		2,550,000
Change in fair value of warrants		13,867,000
Conversion to marketable securities		(24,828,000	)
Balance at June 30, 2022	$	804,000

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 June 30, 2023	$	-

Schedule of investments not measured
	Fair Value Measurement Using
	Total		Quoted prices in active markets for identical assets (Level 1)		Other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
As of June 30, 2022
Investments in other equity securities that do not report net asset value	$	37,691,000	$	-	$	-	$	37,691,000

	Fair Value Measurement Using
	Total		Quoted prices in active markets for identical assets (Level 1)		Other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
As of December 31, 2021
Investments in other equity securities that do not report net asset value	$	21,241,000	$	-	$	-	$	21,241,000

Schedule of marketable equity securities
	Marketable equity securities at June 30, 2022
			Gross unrealized		Gross unrealized
	Cost		gains		losses			Fair value
Common shares	$	26,063,000	$	481,000	$	(9,077,000	)	$	17,467,000

	Marketable equity securities at December 31, 2021
			Gross unrealized		Gross unrealized
	Cost		gains		losses			Fair value
Common shares	$	53,475,000	$	32,000	$	(13,127,000	)	$	40,380,000

Schedule of marketable securities
	Marketable equity securities at June 30, 2023
			Gross unrealized		Gross unrealized
	Cost		gains		losses			Fair value
Common shares	$	5,131,000	$	9,000	$	(4,487,000	)	$	653,000

Schedule of activities of the digital currencies
	Digital Currencies
Balance at January 1, 2023	$	554,000
Additions of mined digital currencies		14,714,000
Payments to vendors		(13,000	)
Impairment of mined cryptocurrency		(263,000	)
Sale of digital currencies		(15,040,000	)
Realized gain on sale of digital currencies		348,000
Balance at June 30, 2023	$	300,000

Schedule of property and equipment
	June 30, 2022			December 31, 2021
Cryptocurrency machines and related equipment	$	76,963,000		$	10,763,000
Computer, software and related equipment		18,697,000			8,884,000
Office furniture and equipment		2,585,000			702,000
Land		25,696,000			25,696,000
Building and improvements		70,926,000			68,959,000
		194,867,000			115,004,000
Accumulated depreciation and amortization		(10,403,000	)		(5,096,000	)
Property and equipment placed in service, net		184,464,000			109,908,000
Deposits on cryptocurrency machines		61,523,000			64,117,000
Property and equipment, net	$	245,987,000		$	174,025,000

Schedule of property and equipment
	June 30, 2023			December 31, 2022
Building and improvements	$	87,159,000		$	81,102,000
Bitcoin mining equipment		50,640,000			42,438,000
Crane rental equipment		32,681,000			32,453,000
Land		25,646,000			25,646,000
Computer, software and related equipment		27,358,000			23,168,000
Aircraft		15,983,000			15,983,000
Vehicles		4,702,000			3,314,000
Office furniture and equipment		3,210,000			2,854,000
Oil and natural gas properties, unproved properties		3,564,000			972,000
		250,943,000			227,930,000
Accumulated depreciation and amortization		(23,083,000	)		(9,344,000	)
Property and equipment placed in service, net		227,860,000			218,586,000
Deposits on cryptocurrency machines		-			11,328,000
Property and equipment, net	$	227,860,000		$	229,914,000

Schedule of depreciation
	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Depreciation expense	$	7,966,000	$	3,725,000	$	13,876,000	$	6,287,000

Schedule of intangible asset
	Useful Life	June 30, 2023			December 31, 2022
Developed technology	3-8 years	$	7,984,000		$	24,584,000
Customer list	8-10 years		5,829,000			5,865,000
Trade names	5-10 years		3,916,000			4,316,000
Trade name and trademark	Indefinite life		1,513,000			1,493,000
Domain name and other intangible assets	5 years		599,000			630,000
			19,841,000			36,888,000
Accumulated amortization			(2,551,000	)		(2,102,000	)
Intangible assets, net		$	17,290,000		$	34,786,000

Schedule of indefinite-lived intangible assets
	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Amortization expense	$	254,000	$	79,000	$	507,000	$	158,000

Schedule of estimated amortization expense
2023	$	1,029,000
2024		2,026,000
2025		1,926,000
2026		1,826,000
2027		1,826,000
Thereafter		7,144,000
	$	15,777,000