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

~~F-2~~

~~AULT ALLIANCE, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS~~

~~(Unaudited)~~

For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2021 2021
2022 Restated 2022 Restated
Revenue $ 27,031,000 $ 7,803,000 $ 43,539,000 $ 24,272,000
Revenue, cryptocurrency mining 3,874,000 272,000 11,398,000 693,000
Revenue, hotel operations 5,513,000 - 12,809,000 -
Revenue, lending and trading activities 13,360,000 (38,869,000 ) 32,224,000 19,615,000
Total revenue 49,778,000 (30,794,000 ) 99,970,000 44,580,000
Cost of revenue, products 20,193,000 5,011,000 30,985,000 16,011,000
Cost of revenue, cryptocurrency mining 5,255,000 260,000 12,206,000 646,000
Cost of revenue, hotel operations 3,230,000 - 8,350,000 -
Total cost of revenue 28,678,000 5,271,000 51,541,000 16,657,000
Gross profit 21,100,000 (36,065,000 ) 48,429,000 27,923,000

Operating expenses
Research and development 521,000 524,000 1,945,000 1,657,000
Selling and marketing 7,428,000 1,993,000 20,888,000 4,740,000
General and administrative 15,947,000 11,292,000 48,666,000 24,376,000
Impairment of deposit due to vendor bankruptcy filing

2,000,000

-

2,000,000

-

Impairment of mined cryptocurrency 515,000 - 2,930,000 -
Total operating expenses 26,411,000 13,809,000 76,429,000 30,773,000
Loss from operations (5,311,000 ) (49,874,000 ) (28,000,000 ) (2,850,000 )
Other income (expenses)
Interest and other income 725,000 125,000 1,255,000 176,000
Change in fair value of equity securities, related party -
(4,849,000
) - (7,773,000 )
Accretion of discount on note receivable, related party - 4,210,000 4,210,000
Interest expense (3,972,000 ) (140,000 ) (35,827,000 ) (475,000 )
Change in fair value of marketable equity securities 114,000 (750,000 ) 355,000 (705,000 )
Realized gain on digital currencies and marketable securities 595,000 30,000 661,000 428,000
Loss from investment in unconsolidated entity - - (924,000 ) -
Gain on extinguishment of debt - - - 929,000
Change in fair value of warrant liability (3,000 ) 259,000 (27,000 ) (130,000 )
Total other expenses, net (2,541,000 ) (1,115,000 ) (34,507,000 ) (3,340,000 )
Loss before income taxes (7,852,000 ) (50,989,000 ) (62,507,000 ) (6,190,000 )
Income tax (provision) benefit (144,000 ) 3,366,000 (361,000 ) (144,000 )
Net loss (7,996,000 ) (47,623,000 ) (62,868,000 ) (6,334,000 )
Net loss (income) attributable to non-controlling interest 725,000 (96,000 ) 1,061,000 (93,000 )
Net loss attributable to Ault Alliance, Inc. (7,271,000 ) (47,719,000 ) (61,807,000 ) (6,427,000 )
Preferred dividends (190,000 ) (4,000 ) (239,000 ) (13,000 )
Net loss available to common stockholders $ (7,461,000 ) $ (47,723,000 ) $ (62,046,000 ) $ (6,440,000 )
Basic net (loss) income per common share $ (0.03 ) $ (0.81 ) $ (0.27 ) $ (0.13 )
Diluted net (loss) income per common share $ (0.03 ) $ (0.81 ) $ (0.27 ) $ (0.13 )
Weighted average basic common shares outstanding 294,141,000 58,987,000 225,662,000 49,714,000
Weighted average diluted common shares outstanding 294,141,000 58,987,000 225,662,000 49,714,000
Comprehensive (loss) income
Net loss available to common stockholders $ (7,461,000 ) $ (47,723,000 ) $ (62,046,000 ) $ (6,440,000 )
Other comprehensive income (loss)
Foreign currency translation adjustment 306,000 (182,000 ) (1,452,000 ) (141,000 )
Other comprehensive income (loss) 306,000 (182,000 ) (1,452,000 ) (141,000 )
Total comprehensive loss $ (7,155,000 ) $ (47,905,000 ) $ (63,498,000 ) $ (6,581,000 )

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

~~F-3~~

~~AULT ALLIANCE, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY~~

~~(Unaudited)~~

~~Three Months Ended September 30, 2022~~

Series A, B & D Additional Other Non- Total
Preferred Stock Common Stock Paid-In Accumulated Comprehensive Controlling Treasury Stockholders’
Shares Amount Shares Amount Capital Deficit Loss Interest Stock Equity
BALANCES, July 1, 2022 278,658 $ - 324,440,579 $ 324,000 $ 549,713,000 $ (200,184,000 ) $ (1,863,000 ) $ 18,048,000 $ (20,639,000 ) $ 345,399,000
Preferred stock issued 8,310 - - - 207,000 - - - - 207,000
Preferred stock offering costs - - - - (65,000 ) - - - - (65,000 )
Stock-based compensation - - - - 1,563,000 - - 479,000 - 2,042,000
Issuance of Gresham Worldwide common stock
for GIGA acquisition - - - - 1,669,000 - - - - 1,669,000
Issuance of common stock for cash - - 17,006,403 17,000 4,540,000 - - - - 4,557,000
Financing cost in connection with sales of
common stock - - - - (79,000 ) - - - - (79,000 )
Increase in ownership interest of subsidiary - - - - (132,000 ) - - (1,539,000 ) - (1,671,000 )
Non-controlling interest from GIGA acquisition - - - - - - - 2,735,000 - 2,735,000
Purchase of treasury stock - Ault Alpha - - - - - - - - (8,148,000 ) (8,148,000 )
Net loss - - - - - (7,271,000 ) - - - (7,271,000 )
Preferred dividends - - - - - (190,000 ) - - - (190,000 )
Foreign currency translation adjustments - - - - - - 306,000 - - 306,000
Net loss attributable to non-controlling interest - - - - - - - (725,000 ) - (725,000 )
Other - - - - 2,000 (2,000 ) - (2,000 ) (1,000 ) (3,000 )
BALANCES, September 30, 2022 286,968 $ - 341,446,982 $ 341,000 $ 557,418,000 $ (207,647,000 ) $ (1,557,000 ) $ 18,996,000 $ (28,788,000 ) $ 338,763,000

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

AULT ALLIANCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~CHANGES IN STOCKHOLDERS’ EQUITY (RESTATED)~~OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

~~Three Months Ended September 30, 2021~~


	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	)

Series A & B Additional Other Total
Preferred Stock Common Stock Paid-In Accumulated Comprehensive Non-Controlling Treasury Stockholders’
Shares Amount Shares Amount Capital Deficit Loss Interest Stock Equity
BALANCES, July 1, 2021 132,040 $ - 56,159,963 $ 56,000 $ 311,759,000 $ (81,047,000 ) $ (743,000 ) $ 1,364,000 $ - $ 231,389,000
Issuance of common stock for restricted stock awards - - 449,373 - - - - - - -
Stock-based compensation:
Options - - - - 1,794,000 - - - - 1,794,000
Restricted stock awards - - - - 2,312,000 - - - - 2,312,000
Issuance of stock options at Gresham Worldwide - - - - - - - 42,000 - 42,000
Issuance of common stock for cash - - 6,737,585 7,000 16,432,000 - - - - 16,439,000
Financing cost in connection with sales of common
stock - - - - (411,000 ) - - - - (411,000 )
Adjustment to treasury stock for holdings in
investment partnerships - - - - - - - - (2,773,000 ) (2,773,000 )
Comprehensive loss:
Net loss - - - - - (47,719,000 ) - - - (47,719,000 )
Preferred dividends - - - - - (4,000 ) - - - (4,000 )
Foreign currency translation adjustments - - - - - - (182,000 ) - - (182,000 )
Net income attributable to non-controlling interest - - - - - - - 96,000 - 96,000
Other - - - - - (2,000 ) - - - (2,000 )
BALANCES, September 30, 2021 132,040 $ - 63,346,921 $ 63,000 $ 331,886,000 $ (128,772,000 ) $ (925,000 ) $ 1,502,000 $ (2,773,000 ) $ 200,981,000

~~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)~~

~~Nine Months Ended September 30, 2022~~

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)

~~Nine~~Three Months Ended ~~September~~June 30, ~~2021~~2023

Series A & B Additional Other Total
Preferred Stock Common Stock Paid-In Accumulated Comprehensive Non-Controlling Treasury Stockholders’
Shares Amount Shares Amount Capital Deficit Loss Interest Stock 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
Issuance of common stock for restricted stock awards - - 449,373 - - - - - - -
Stock-based compensation:
Options - - - - 1,833,000 - - - - 1,833,000
Restricted stock awards - - - - 2,312,000 - - - - 2,312,000
Issuance of stock options at Gresham Worldwide - - - - - - - 587,000 - 587,000
Issuance of common stock for cash - - 34,684,910 35,000 160,448,000 - - - - 160,483,000
Financing cost in connection with sales of common stock - - - - (4,952,000 ) - - - - (4,952,000 )
Adjustment to treasury stock for holdings in investment
partnerships - - - - - - - - (2,773,000 ) (2,773,000 )
Issuance of common stock for conversion
of convertible notes payable

-

-

183,214

-

449,000

-

-

-

-

449,000

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

-

-

275,862

-

400,000

-

-

-

-

400,000

Comprehensive loss: - -
Net income - - - - - (6,427,000 ) - - - (6,427,000 )
Preferred dividends - - - - (13,000 ) - - - (13,000 )
Foreign currency translation adjustments - - - - - - (141,000 ) - - (141,000 )
Net income attributable to non-controlling interest - - - - - - - 93,000 - 93,000
Other - - - - - (3,000 ) 1,000 - - (2,000 )
BALANCES, September 30, 2021 132,040 $ - 63,346,921 $ 63,000 $ 331,886,000 $ (128,772,000 ) $ (925,000 ) $ 1,502,000 $ (2,773,000 ) $ 200,981,000


															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

(Unaudited)

Three Months Ended June 30, 2022

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-6
AULT ALLIANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
Six Months Ended June 30, 2022
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, 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
Issuance of common stock for restricted stock awards - - 441,879 - - - - - - -
Preferred stock issued for cash 146,618 - - - 3,666,000 - - - - 3,666,000
Preferred stock offering costs - - - - (537,000 ) - - - - (537,000 )
Stock-based compensation - - - - 3,627,000 - - 77,000 - 3,704,000
Sale of common stock - - 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 )
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 - - - - - - - - (7,459,000 ) (7,459,000 )
Net loss - - - - - (54,536,000 ) - - - (54,536,000 )
Preferred dividends - - - - (49,000 ) - - - (49,000 )
Foreign currency translation adjustments - - - - - - (1,758,000 ) - - (1,758,000 )
Net loss attributable to non-controlling interest - - - - - - - (336,000 ) - (336,000 )
Other - - - - (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
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 Nine Months Ended September 30,
				2021			For the Six Months Ended June 30,
	2022			Restated			2023			2022
Cash flows from operating activities:
Net (loss) income	$	(62,868,000	)	$	(6,334,000	)
Adjustments to reconcile net (loss) income to net cash provided by (used in) 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		11,977,000			1,713,000			14,383,000			6,618,000
Interest expense – debt discount		26,958,000			61,000
Gain on extinguishment of debt		-			(929,000	)
Change in fair value of warrant liability		(917,000	)		(259,000	)
Accretion of original issue discount on notes receivable – related party		-			(4,213,000	)
Accretion of original issue discount on notes receivable		(618,000	)		(366,000	)
Increase in accrued interest on notes receivable – related party		(148,000	)		(119,000	)
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		5,746,000			4,732,000			6,607,000			3,704,000
Impairment of deposit due to vendor bankruptcy filing		2,000,000			-
Gain on the sale of fixed assets								(2,761,000	)		-
Impairment of equity securities								11,555,000			-
Impairment of cryptocurrencies		2,930,000			-			263,000			2,415,000
Realized gains on sale of marketable securities		(19,194,000	)		(15,154,000	)
Unrealized losses on marketable securities		16,937,000			6,353,000
Unrealized losses (gains) on investments in equity securities, related parties
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		(32,949,000	)		(2,795,000	)		-			(17,021,000	)
Income from cash held in trust								(2,533,000	)		-
Loss from investment in unconsolidated entity		924,000			-			-			924,000
Loss on remeasurement of investment in unconsolidated entity		2,700,000			-			-			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		68,532,000			(34,196,000	)		41,197,000			50,734,000
Accounts receivable		(3,022,000	)		(1,270,000	)		6,088,000			(2,311,000	)
Accrued revenue		(109,000	)		(166,000	)
Inventories		(5,867,000	)		(492,000	)		1,124,000			(2,646,000	)
Prepaid expenses and other current assets		1,780,000			(5,155,000	)		(1,077,000	)		2,399,000
Digital currencies		(12,227,000	)		-
Other assets		(2,944,000	)		(407,000	)		(211,000	)		(384,000	)
Accounts payable and accrued expenses		8,974,000			(1,082,000	)		8,148,000			4,706,000
Other current liabilities		-			2,210,000
Lease liabilities		(1,334,000	)		(666,000	)		(1,532,000	)		(626,000	)
Net cash provided by (used in) operating activities		12,937,000			(56,911,000	)
Net cash provided by operating activities								12,913,000			19,380,000
Cash flows from investing activities:
Purchase of property and equipment		(84,500,000	)		(28,145,000	)		(11,346,000	)		(72,779,000	)
Investment in promissory notes and other, related parties		(2,200,000	)		(4,994,000	)		-			(2,200,000	)
Investments in common stock and warrants, related parties		(4,840,000	)		(19,590,000	)		-			(4,663,000	)
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	)		-			-			(8,239,000	)
Purchase of GIGA, net of cash received		(3,687,000	)		-
Cash received upon acquisition of AVLP		1,245,000			-			-			1,245,000
Acquisition of non-controlling interests		(3,901,000	)		-			-			(2,230,000	)
Purchase of marketable equity securities		(1,981,000	)		(2,144,000	)		-			(1,981,000	)
Sales of marketable equity securities		11,748,000			430,000			-			11,733,000
Investments in loans receivable		(7,081,000	)		-			(181,000	)		(2,728,000	)
Principal payments on loans receivable		10,525,000			-			-			10,525,000
Sale of digital currencies		8,952,000			-
Investments in equity securities		(22,449,000	)		(14,287,000	)		(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		(106,408,000	)		(68,730,000	)		(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 Nine Months Ended September 30,
				2021			For the Six Months Ended June 30,
	2022			Restated			2023			2022
Cash flows from financing activities:
Gross proceeds from sales of common stock	$	167,983,000		$	160,483,000		$	4,912,000		$	163,426,000
Financing cost in connection with sales of common stock		(4,103,000	)		(4,952,000	)		(132,000	)		(4,024,000	)
Proceeds from sales of preferred stock		3,873,000			-			6,309,000			3,666,000
Financing cost in connection with sales of preferred stock		(602,000	)		-			(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		18,565,000			724,000			30,665,000			4,945,000
Repayment of margin accounts		(16,111,000	)		-			(767,000	)		(18,488,000	)
Payments on notes payable		(67,698,000	)		(2,263,000	)		(34,057,000	)		(65,999,000	)
Payments of preferred dividends		(239,000	)		(13,000	)		(550,000	)		(49,000	)
Purchase of treasury stock		(15,607,000	)		(2,773,000	)		(685,000	)		(7,459,000	)
Payments on revolving credit facilities, net		-			(125,000	)
Proceeds from sales of convertible notes								7,817,000			-
Payments on convertible notes								(360,000	)		-
Net cash provided by financing activities		86,061,000			151,081,000			12,793,000			75,481,000

Effect of exchange rate changes on cash and cash equivalents		920,000			(73,000	)		(98,000	)		(152,000	)

Net (decrease) increase in cash and cash equivalents and restricted cash		(6,490,000	)		25,367,000
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		21,233,000			18,680,000			14,055,000			21,233,000

Cash and cash equivalents and restricted cash at end of period	$	14,743,000		$	44,047,000		$	20,797,000		$	28,805,000

Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	5,202,000		$	712,000		$	4,658,000		$	4,104,000

Non-cash investing and financing activities:
Conversion of convertible notes payable into shares of common stock	$	-		$	449,000
Settlement of accounts payable with digital currency	$	417,000		$	119,000		$	13,000		$	413,000
Conversion of investment in unconsolidated entity for acquisition of AVLP	$	20,706,000		$	-		$	-		$	23,406,000
Conversion of convertible notes payable, related party into shares of common stock	$	400,000		$	400,000		$	400,000		$	400,000
Conversion of debt and equity securities to marketable securities	$	40,324,000		$	2,656,000		$	23,703,000		$	24,828,000
Conversion of loans receivable to marketable securities	$	3,650,000		$	-		$	5,430,000		$	3,600,000
Conversion of interest receivable to marketable securities	$	250,000		$	-		$	-		$	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		$	-		$	-		$	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 ~~seven~~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, ~~advanced textiles processing technology,~~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., ~~to be renamed~~d/b/a TurnOnGreen, Inc. (“TurnOnGreen”) – commercial electronics solutions;

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

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 nine months ended September 30, 2022, that was originally filed with the U.S. Securities~~Company’s issued and ~~Exchange Commission on November 21, 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 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.~~Reverse Split.

~~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
September 30, 2021
As Reported Adjustment As Restated
Revenue $ 7,803,000 $ - $ 7,803,000
Revenue, cryptocurrency mining, net 272,000 272,000
Revenue, lending and trading activities (38,869,000 ) (38,869,000 )
Total revenue (30,794,000 ) - (30,794,000 )
Cost of revenue, products 5,011,000 5,011,000
Cost of revenue, cryptocurrency mining 260,000 260,000
Total cost of revenue 5,271,000 5,271,000
Gross profit (36,065,000 ) - (36,065,000 )

Operating expenses
Research and development 524,000 524,000
Selling and marketing 1,993,000 1,993,000
General and administrative 11,292,000 11,292,000
Total operating expenses 13,809,000 - 13,809,000
Loss from operations (49,874,000 ) (49,874,000 )
Other income (expenses)
Interest and other income 125,000 125,000
Change in fair value of equity securities, related party - (4,849,000 ) (4,849,000 )
Accretion of discount on note receivable, related party 4,210,000 4,210,000
Interest expense (140,000 ) (140,000 )
Change in fair value of marketable equity securities (750,000 ) (750,000 )
Realized gain on marketable securities 30,000 30,000
Change in fair value of warrant liability 259,000 259,000
Total other income (expenses), net 3,734,000 (4,849,000 ) (1,115,000 )
Loss before income taxes (46,140,000 ) (4,849,000 ) (50,989,000 )
Income tax provision 3,366,000 3,366,000
Net loss (42,774,000 ) (4,849,000 ) (47,623,000 )
Net income attributable to non-controlling interest (96,000 ) (96,000 )
Net loss attributable to Ault Alliance, Inc. (42,870,000 ) (4,849,000 ) (47,719,000 )
Preferred dividends (4,000 ) (4,000 )
Net loss available to common stockholders $ (42,874,000 ) $ (4,849,000 ) $ (47,723,000 )

Basic net income (loss) per common share $ (0.73 ) $ (0.81 )
Diluted net income (loss) per common share $ (0.73 ) $ (0.81 )

Weighted average basic common shares outstanding 58,987,000 58,987,000
Weighted average diluted common shares outstanding 58,987,000 58,987,000

Comprehensive loss
Net loss available to common stockholders $ (42,874,000 ) $ (4,849,000 ) $ (47,723,000 )
Other comprehensive income (loss)
Foreign currency translation adjustment (182,000 ) (182,000 )
Net unrealized gain on derivative securities of related party (4,849,000 ) 4,849,000 -
Other comprehensive (loss) income (5,031,000 ) 4,849,000 (182,000 )
Total comprehensive loss $ (47,905,000 ) $ - $ (47,905,000 )

For the Nine Months Ended
September 30, 2021
As Reported Adjustment As Restated
Revenue $ 24,272,000 $ - $ 24,272,000
Revenue, cryptocurrency mining, net 693,000 693,000
Revenue, lending and trading activities 19,615,000 19,615,000
Total revenue 44,580,000 - 44,580,000
Cost of revenue, products 16,011,000 16,011,000
Cost of revenue, cryptocurrency mining 646,000 646,000
Total cost of revenue 16,657,000 16,657,000
Gross profit 27,923,000 - 27,923,000

Operating expenses
Research and development 1,657,000 1,657,000
Selling and marketing 4,740,000 4,740,000
General and administrative 24,376,000 24,376,000
Total operating expenses 30,773,000 - 30,773,000
Loss from operations (2,850,000 ) (2,850,000 )
Other income (expenses)
Interest and other income 176,000 176,000
Change in fair value of equity securities, related party - (7,773,000 ) (7,773,000 )
Accretion of discount on note receivable, related party 4,210,000 4,210,000
Interest expense (475,000 ) (475,000 )
Change in fair value of marketable equity securities (705,000 ) (705,000 )
Gain on extinguishment of debt 929,000 929,000
Realized gain on marketable securities 428,000 428,000
Change in fair value of warrant liability (130,000 ) (130,000 )
Total other income (expenses), net 4,433,000 (7,773,000 ) (3,340,000 )
Loss before income taxes 1,583,000 (7,773,000 ) (6,190,000 )
Income tax provision (144,000 ) (144,000 )
Net loss 1,439,000 (7,773,000 ) (6,334,000 )
Net income attributable to non-controlling interest (93,000 ) (93,000 )
Net loss attributable to Ault Alliance, Inc. 1,346,000 (7,773,000 ) (6,427,000 )
Preferred dividends (13,000 ) (13,000 )
Net loss available to common stockholders $ 1,333,000 $ (7,773,000 ) $ (6,440,000 )

Basic net income (loss) per common share $ 0.03 $ (0.13 )
Diluted net income (loss) per common share $ 0.03 $ (0.13 )

Weighted average basic common shares outstanding 49,714,000 49,714,000
Weighted average diluted common shares outstanding 50,145,000 49,714,000

Comprehensive loss
Net loss available to common stockholders $ 1,333,000 $ (7,773,000 ) $ (6,440,000 )
Other comprehensive income (loss)
Foreign currency translation adjustment (141,000 ) (141,000 )
Net unrealized gain on derivative securities of related party (7,773,000 ) 7,773,000 -
Other comprehensive (loss) income (7,914,000 ) 7,773,000 (141,000 )
Total comprehensive loss $ (6,581,000 ) $ - $ (6,581,000 )

~~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

July 1, 2021
As Reported Adjustment As Restated
STOCKHOLDERS’ EQUITY
Common stock $ 56,000 $ - $ 56,000
Additional paid-in capital 311,759,000 311,759,000
Accumulated deficit (77,190,000 ) (3,857,000 ) (81,047,000 )
Accumulated other comprehensive loss (4,600,000 ) 3,857,000 (743,000 )
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

September 30, 2021
As Reported Adjustment As Restated
STOCKHOLDERS’ EQUITY
Common stock $ 63,000 $ - $ 63,000
Additional paid-in capital 331,886,000 331,886,000
Accumulated deficit (120,066,000 ) (8,706,000 ) (128,772,000 )
Accumulated other comprehensive loss (9,631,000 ) 8,706,000 (925,000 )
Treasury stock, at cost (2,773,000 ) (2,773,000 )
TOTAL AULT ALLIANCE STOCKHOLDERS’ EQUITY 199,479,000 - 199,479,000

Non-controlling interest 1,502,000 1,502,000

TOTAL STOCKHOLDERS’ EQUITY $ 200,981,000 $ - $ 200,981,000

~~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 Nine Months Ended
September 30, 2021
As Reported Adjustment As Restated
Cash flows from operating activities:
Net income (loss) $ 1,439,000 $ (7,773,000 ) $ (6,334,000 )
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 1,713,000 1,713,000
Interest expense – debt discount 61,000 61,000
Gain on extinguishment of debt (929,000 ) (929,000 )
Change in fair value of warrant liability (259,000 ) (259,000 )
Accretion of original issue discount on notes receivable – related party (4,213,000 ) (4,213,000 )
Accretion of original issue discount on notes receivable (366,000 ) (366,000 )
Increase in accrued interest on notes receivable – related party (119,000 ) (119,000 )
Stock-based compensation 4,732,000 4,732,000
Realized gains on sale of marketable securities (15,154,000 ) (15,154,000 )
Unrealized losses on marketable securities 6,353,000 6,353,000
Unrealized losses (gains) on equity securities, related parties (6,150,000 ) 7,773,000 1,623,000
Unrealized gains on equity securities (2,795,000 ) (2,795,000 )
Changes in operating assets and liabilities:
Marketable equity securities (34,196,000 ) (34,196,000 )
Accounts receivable (1,270,000 ) (1,270,000 )
Accrued revenue (166,000 ) (166,000 )
Inventories (492,000 ) (492,000 )
Prepaid expenses and other current assets (5,155,000 ) (5,155,000 )
Other assets (407,000 ) (407,000 )
Accounts payable and accrued expenses (1,082,000 ) (1,082,000 )
Other current liabilities 2,210,000 2,210,000
Lease liabilities (666,000 ) (666,000 )
Net cash used in operating activities $ (56,911,000 ) $ - $ (56,911,000 )

2. LIQUIDITY AND FINANCIAL CONDITION

As of ~~September~~June 30, ~~2022,~~2023, the Company had cash and cash equivalents of $~~10.1~~19.7 million, ~~and~~negative working capital of $~~25.7~~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 ~~nine~~six months ended ~~September~~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 is recorded as goodwill. The purchase price allocation process requires management to make significant estimates and assumptions at the acquisition date with respect to intangible assets. 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. Direct transaction costs associated with the business combination are expensed as incurred. 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~~Company’s 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.~~

~~Oil and Gas Properties~~

The Company uses the successful efforts method of accounting for oil and natural gas producing properties, as further defined under Accounting Standards Codification (“ASC”) 932, Extractive Activities - Oil and Natural Gas. Under this method, costs to acquire mineral interests in oil and natural gas properties are capitalized. The costs of non-producing mineral interests and associated acquisition costs are capitalized as unproved properties pending the results of leasing efforts and drilling activities of exploration and production (“E&P”) operators on our interests. As unproved properties are determined to have proved reserves, the related costs are transferred to proved oil and gas properties. Capitalized costs for proved oil and natural gas mineral interests are depleted on a unit-of-production basis over total proved reserves. For depletion of proved oil and gas properties, interests are grouped in a reasonable aggregation of properties with common geological structural features or stratigraphic conditions.

~~Impairment of Oil and Gas Properties~~

The Company evaluates its producing properties for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When assessing proved properties for impairment,shares. Instead, the Company ~~compares the expected undiscounted future cash flows of the proved properties~~is using its own equity shares as currency to the carrying amount of the proved properties to determine recoverability. If the carrying amount of proved properties exceeds the expected undiscounted future cash flows, the carrying amount is written down to the properties’ estimated fair value, which is measured as the present value of the expected future cash flows of such properties. The factors used to determine fair value include estimates of proved reserves, future commodity prices, timing of future production, andsettle a risk-adjusted discount rate. The proved property impairment test is primarily impacted by future commodity prices, changes in estimated reserve quantities, estimates of future production, overall proved property balances, and depletion expense. If pricing conditions decline or are depressed, or if there is a negative impact on one or more of the other components of the calculation, we may incur proved property impairments in future periods.

Unproved oil and gas properties are assessed periodically for impairment of value, and a loss is recognized at the time of impairment by charging capitalized costs to expense. Impairment is assessed when facts and circumstances indicate that the carrying value may not be recoverable, at which point an impairment loss is recognized to the extent the carrying value exceeds the estimated recoverable value. Factors used in the assessment include but are not limited to commodity price outlooks and current and future operator activity in the respective basins. The Company recognized no impairment of unproved properties for the three and nine months ended September 30, 2022 and 2021.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.

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 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.

4. REVENUE DISAGGREGATION

The following tables summarize disaggregated customer contract revenues and the source of the revenue for the three and ~~nine~~six months ended ~~September~~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 ~~September~~June 30, ~~2022:~~2023 (excludes Ault Disruptive, as that segment has no revenue):

Schedule of disaggregated revenues															Schedule of disaggregated revenues
	Three months ended September 30, 2022
	GWW		TurnOn Green		Ault Alliance		SMC		BNI		AGREE		Total			GIGA		TurnOn Green		Fintech		Sentinum		AGREE		SMC		BMI		Energy		Total
Primary Geographical Markets
North America	$	2,472,000	$	1,428,000	$	-	$	16,138,000	$	4,146,000	$	5,513,000	$	29,697,000		$	2,856,000	$	541,000	$	-	$	8,693,000	$	4,384,000	$	2,625,000	$	45,000	$	12,590,000	$	31,734,000
Europe		2,288,000		32,000		201,000		306,000		-		-		2,827,000			2,270,000		7,000		-		-		-		-		-		82,000		2,359,000
Middle East and other		3,022,000		202,000		-		670,000		-		-		3,894,000			3,614,000		176,000		-		-		-		-		-		-		3,790,000
Revenue from contracts with customers		7,782,000		1,662,000		201,000		17,114,000		4,146,000		5,513,000		36,418,000			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)		-		-		13,360,000		-		-		-		13,360,000			-		-		9,525,000		-		-		-		-		-		9,525,000
Total revenue	$	7,782,000	$	1,662,000	$	13,561,000	$	17,114,000	$	4,146,000	$	5,513,000	$	49,778,000		$	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
Power supply units	$	2,799,000	$	1,480,000	$	-	$	-	$	-	$	-	$	4,279,000
Digital currency mining, net		-		-		-		-		3,874,000		-		3,874,000
Hotel operations		-		-		-		-		-		5,513,000		5,513,000
Karaoke machines and related		-		-		-		17,114,000		-		-		17,114,000
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		4,983,000		182,000		201,000		-		272,000		-		5,638,000			204,000		79,000		-		-		-		-		45,000		82,000		410,000
Revenue from contracts with customers		7,782,000		1,662,000		201,000		17,114,000		4,146,000		5,513,000		36,418,000			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		-		-		13,360,000		-		-		-		13,360,000			-		-		9,525,000		-		-		-		-		-		9,525,000
Total revenue	$	7,782,000	$	1,662,000	$	13,561,000	$	17,114,000	$	4,146,000	$	5,513,000	$	49,778,000		$	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	$	5,821,000	$	1,662,000	$	201,000	$	17,114,000	$	4,146,000	$	5,513,000	$	34,457,000		$	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		1,961,000		-		-		-		-		-		1,961,000			4,020,000		2,000		-		-		-		-		-		12,590,000		16,612,000
Revenue from contracts with customers	$	7,782,000	$	1,662,000	$	201,000	$	17,114,000	$	4,146,000	$	5,513,000	$	36,418,000		$	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 ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023 (excludes Ault Disruptive, as that segment has no revenue):

	Nine months ended September 30, 2022
	GWW		TurnOn Green		Ault Alliance		��	SMC		BNI		AGREE		Total		GIGA		TurnOn Green		Fintech		Sentinum		AGREE		SMC		BMI		Energy		Total
Primary Geographical Markets
North America	$	5,094,000	$	3,262,000	$	19,000		$	16,138,000	$	12,220,000	$	12,809,000	$	49,542,000	$	5,190,000	$	1,326,000	$	-	$	16,498,000	$	6,627,000	$	6,008,000	$	45,000	$	25,675,000	$	61,369,000
Europe		7,007,000		79,000		201,000			306,000		-		-		7,593,000		4,711,000		11,000		-		-		-		-		-		107,000		4,829,000
Middle East and other		9,429,000		512,000		-			670,000		-		-		10,611,000		7,547,000		263,000		-		-		-		-		-		-		7,810,000
Revenue from contracts with customers		21,530,000		3,853,000		220,000			17,114,000		12,220,000		12,809,000		67,746,000		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)		-		-		32,224,000			-		-		-		32,224,000		-		-		4,586,000		-		-		-		-		-		4,586,000
Total revenue	$	21,530,000	$	3,853,000	$	32,444,000		$	17,114,000	$	12,220,000	$	12,809,000	$	99,970,000	$	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
Power supply units	$	6,928,000	$	3,592,000	$	-		$	-	$	-	$	-	$	10,520,000
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		2,285,000		-		-			-		-		-		2,285,000		2,238,000		-		-		-		-		-		-		-		2,238,000
Defense systems		6,842,000		-		-			-		-		-		6,842,000		6,564,000		-		-		-		-		-		-		-		6,564,000
Digital currency mining		-		-		-			-		11,398,000		-		11,398,000		-		-		-		15,715,000		-		-		-		-		15,715,000
Hotel operations		-		-		-			-		-		12,809,000		12,809,000
Karaoke machines and related		-		-		-			17,114,000		-		-		17,114,000
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		5,475,000		261,000		220,000			-		822,000		-		6,778,000		749,000		130,000		-		-		-		-		45,000		546,000		1,470,000
Revenue from contracts with customers		21,530,000		3,853,000		220,000			17,114,000		12,220,000		12,809,000		67,746,000		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		-		-		32,224,000			-		-		-		32,224,000		-		-		4,586,000		-		-		-		-		-		4,586,000
Total revenue	$	21,530,000	$	3,853,000	$	32,444,000		$	17,114,000	$	12,220,000	$	12,809,000	$	99,970,000	$	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	$	12,934,000	$	3,853,000	$	220,000		$	17,114,000	$	12,220,000	$	12,809,000	$	59,150,000	$	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		8,596,000		-		-			-		-		-		8,596,000		7,322,000		5,000		-		-		-		-		-		25,236,000		32,563,000
Revenue from contracts with customers	$	21,530,000	$	3,853,000	$	220,000		$	17,114,000	$	12,220,000	$	12,809,000	$	67,746,000	$	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 ~~September~~June 30, ~~2021:~~2022:

	Three Months ended September 30, 2021											Three months ended June 30, 2022
	GWW		TurnOnGreen			Ault Alliance			Total			GWW		TurnOnGreen		Fintech		Sentinum		AGREE		Total
Primary Geographical Markets
North America	$	1,415,000	$	1,103,000		$	608,000		$	3,126,000		$	1,111,000	$	822,000	$	12,000	$	4,248,000	$	4,598,000	$	10,791,000
Europe		1,848,000		(97,000	)		-			1,751,000			2,540,000		28,000		-		-		-		2,568,000
Middle East		2,949,000		-			-			2,949,000
Other		161,000		88,000			-			249,000
Middle East and other													2,852,000		212,000		-		-		-		3,064,000
Revenue from contracts with customers		6,373,000		1,094,000			608,000			8,075,000			6,503,000		1,062,000		12,000		4,248,000		4,598,000		16,423,000
Revenue, lending and trading activities (North America)		-		-			(38,869,000	)		(38,869,000	)		-		-		943,000		-		-		943,000
Total revenue	$	6,373,000	$	1,094,000		$	(38,261,000	)	$	(30,794,000	)	$	6,503,000	$	1,062,000	$	955,000	$	4,248,000	$	4,598,000	$	17,366,000
Major Goods
Power supply units	$	1,256,000	$	1,094,000		$	-		$	2,350,000

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		2,940,000		-			-			2,940,000			953,000		-		-		-		-		953,000
Digital currency mining		-		-			272,000			272,000			-		-		-		3,976,000		-		3,976,000
Hotel and real estate operations													-		-		-		272,000		4,598,000		4,870,000
Other		2,177,000		-			336,000			2,513,000			692,000		46,000		12,000		-		-		750,000
Revenue from contracts with customers		6,373,000		1,094,000			608,000			8,075,000			6,503,000		1,062,000		12,000		4,248,000		4,598,000		16,423,000
Revenue, lending and trading activities		-		-			(38,869,000	)		(38,869,000	)		-		-		943,000		-		-		943,000
Total revenue	$	6,373,000	$	1,094,000		$	(38,261,000	)	$	(30,794,000	)	$	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	$	3,336,000	$	1,094,000		$	607,000		$	5,037,000		$	3,601,000	$	1,062,000	$	12,000	$	4,248,000	$	4,598,000	$	13,521,000
Services transferred over time		3,037,000		-			-			3,037,000			2,902,000		-		-		-		-		2,902,000
Revenue from contracts with customers	$	6,373,000	$	1,094,000		$	607,000		$	8,074,000		$	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 ~~nine~~six months ended ~~September~~June 30, ~~2021:~~2022:

Nine Months Ended September 30, 2021
GWW TurnOnGreen Ault Alliance Total
Primary Geographical Markets
North America $ 5,444,000 $ 3,600,000 $ 1,459,000 $ 10,503,000
Europe 5,600,000 318,000 — 5,918,000
Middle East 7,845,000 — — 7,845,000
Other 309,000 390,000 — 699,000
Revenue from contracts with customers 19,198,000 4,308,000 1,459,000 24,965,000
Revenue, lending and trading activities
(North America) 19,615,000 19,615,000
Total revenue $ 19,198,000 $ 4,308,000 $ 21,074,000 $ 44,580,000
Major Goods
Power supply units $ 1,734,000 $ 4,308,000 $ — $ 6,042,000
Power supply systems 5,253,000 — — 5,253,000
Defense systems 7,731,000 — — 7,731,000
Digital currency mining 693,000 693,000
Other 4,480,000 — 766,000 5,246,000
Revenue from contracts with customers 19,198,000 4,308,000 1,459,000 24,965,000
Revenue, lending and trading activities 19,615,000 19,615,000
Total revenue $ 19,198,000 $ 4,308,000 $ 21,074,000 $ 44,580,000

Timing of Revenue Recognition
Goods transferred at a point in time $ 10,957,000 $ 4,308,000 $ 1,459,000 $ 16,724,000
Services transferred over time 8,241,000 — — 8,241,000
Revenue from contracts with customers $ 19,198,000 $ 4,308,000 $ 1,459,000 $ 24,965,000

	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 September 30, 2022
Fair value, assets measured on recurring basis
	Total		Level 1		Level 2		Level 3		Fair Value Measurement at June 30, 2023
									Total		Level 1		Level 2		Level 3
Assets:
Investment in common stock of Alzamend Neuro, Inc. (“Alzamend”) – a related party	$	12,394,000	$	12,394,000	$	-	$	-	$	5,836,000	$	5,836,000	$	-	$	-
Investments in marketable equity securities		8,561,000		8,561,000		-		-		653,000		653,000		-		-
Cash and marketable securities held in trust account		117,421,000		117,421,000		-		-		2,143,000		2,143,000		-		-
Investments in other equity securities		3,916,000		-		-		3,916,000
Total assets measured at fair value	$	142,292,000	$	138,376,000	$	-	$	3,916,000	$	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, 2021								Fair Value Measurement at December 31, 2022
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Investment in common stock of Alzamend – a related party		13,230,000		13,230,000		-		-	$	6,449,000	$	6,449,000	$	-	$	-
Investments in marketable equity securities		40,380,000		40,380,000		-		-		6,590,000		6,590,000		-		-
Cash and marketable securities held in trust account		116,725,000		116,725,000		-		-		118,193,000		118,193,000		-		-
Investments in other equity securities		9,215,000		-		-		9,215,000		13,340,000		-		-		13,340,000
Total assets measured at fair value	$	179,550,000	$	170,335,000	$	-	$	9,215,000	$	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 ~~nine~~six months ended ~~September~~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 6,495,000
Change in fair value of financial instruments 25,850,000
Conversion to marketable securities (37,644,000 )
Balance at September 30, 2022 $ 3,916,000

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	$	-

~~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~~Equity Investments 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.Which Measurement Alternative Has Been Selected

As of ~~September~~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 $41.6~~ ~~million and $21.4~~ ~~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 certain assets measured at~~Company has made cumulative downward adjustments for impairments for equity securities that do not have readily determinable fair ~~value on a recurring basis by level within the fair value hierarchy~~values as of ~~September~~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. There were no observable price changes or indicators~~$2.0 million of ~~impairment for~~ these ~~investments during~~adjustments related to Fintech lending operations and have been recorded against revenue from lending and trading activities on the ~~nine months ended September 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 September 30, 2022
Investments in other equity securities that do not report net asset
value $ 41,641,000 $ - $ - $ 41,641,000

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 ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:

Schedule of marketable equity securities	Marketable equity securities at September 30, 2022
Schedule of marketable securities
										Marketable equity securities at June 30, 2023
			Gross unrealized		Gross unrealized							Gross unrealized		Gross unrealized
	Cost		gains		losses			Fair value		Cost		gains		losses			Fair value
Common shares	$	16,182,000	$	281,000	$	(7,902,000	)	$	8,561,000	$	5,131,000	$	9,000	$	(4,487,000	)	$	653,000

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

	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.

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

8. PROPERTY AND EQUIPMENT, NET

At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, property and equipment consisted of:

Schedule of property and equipment	September 30, 2022			December 31, 2021
Cryptocurrency machines and related equipment	$	131,141,000		$	10,763,000
							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		20,315,000			8,884,000			27,358,000			23,168,000
Aircraft								15,983,000			15,983,000
Vehicles								4,702,000			3,314,000
Office furniture and equipment		2,750,000			702,000			3,210,000			2,854,000
Oil and natural gas properties, unproved properties		972,000			-			3,564,000			972,000
Land		25,646,000			25,696,000
Building and improvements		76,012,000			68,959,000
		256,836,000			115,004,000			250,943,000			227,930,000
Accumulated depreciation and amortization		(14,180,000	)		(5,096,000	)		(23,083,000	)		(9,344,000	)
Property and equipment placed in service, net		242,656,000			109,908,000			227,860,000			218,586,000
Deposits on cryptocurrency machines		11,328,000			64,117,000			-			11,328,000
Property and equipment, net	$	253,984,000		$	174,025,000		$	227,860,000		$	229,914,000

Summary of depreciation expense:

Schedule of summary of depreciation expenses	For the Three Months Ended				For the Nine Months Ended
Schedule of depreciation
									For the Three Months Ended				For the Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Depreciation expense	$	3,942,000	$	265,000	$	10,229,000	$	711,000	$	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

~~Ault Energy Oil and Gas Properties~~Impairment of AVLP Intangible Assets

~~On July 11, 2022, the Company announced the formation~~Due to indicators of Ault Energy, LLC (“Ault Energy”), as an indirect wholly-owned subsidiary of the Company through Ault Alliance. Ault Energy is partnering with White River Holdings Corp. (“White River”), a wholly owned subsidiary of Ecoark Holdings, Inc. (“Ecoark”), on drilling projects across 30,000 acres in Texas, Louisiana and Mississippi. Ault Energy, as the designee of Ault Lending, LLC (“Ault Lending”), 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. In August 2022, Ault Energy purchased a 40% working interest of the Harry O’Neal 20-9 No.1 drilling project in Mississippiimpairment, AVLP intangible assets were tested for ~~$972,000 included in property and equipment.~~ ~~The Company has not recorded any depletion as the Harry O’Neal 20-9 No.1 drilling project was considered an unproved property~~impairment as of ~~September~~June 30, ~~2022.~~

~~Compute North Bankruptcy~~

~~On September 22, 2022, Compute North Holdings, Inc. (along with its affiliated debtors, collectively, “Compute North”), filed for chapter 11 bankruptcy protection in~~2023. Based on internally developed forecasts of undiscounted expected future cash flows, it was determined that the U.S. Bankruptcy Court for the Southern District of Texas under Chapter 11 of the U.S. Bankruptcy Code (11 U.S. Code section 101 et seq.). At the time of Compute North’s bankruptcy filing, BitNile had 6,572 Bitcoin miners with a carrying amount of ~~$38.0 million, classified within property~~the assets were not recoverable and, ~~equipment~~based on ~~the consolidated balance sheet, with Compute North at the Wolf Hollow hosting facility in Texas. Additionally, the Company has a deposit~~an assessment of approximately $2.0 million with Compute North for services yet to be performed by Compute North. The ultimate outcome of the bankruptcy process, and its impact on the deposit held by the Company, remains to be determined. The Company assessed this financial exposure and recorded an impairment of the deposit totaling $2 million during the three months ended September 30, 2022. The Company has inspected the Bitcoin miners that are installed at the hosting facility in Texas. No impairment on the mining equipment was recorded as of September 30, 2022. The Company has retained counsel to assist in this matter.

8. ~~BUSINESS COMBINATIONS~~

~~Avalanche International Corp. (“AVLP”) Acquisition~~

~~On June 1, 2022, the Company converted the principal amount under the convertible promissory notes issued to it by AVLP and accrued 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~~assets, impairment of ~~the Company’s holdings in AVLP immediately prior to conversion was $23.4~~$17.0 million ~~resulting in a $2.7 million loss for the related remeasurement, which~~ was recognized ~~in interest and other income.~~

The Company estimated the fair values of assets acquired and liabilities assumed using valuation techniques, such as the income, cost and market approaches. The fair values are based on available historical information and on future expectations and assumptions deemed reasonable by management but are inherently uncertain. The income method to measure the fair value of intangible assets, is based on forecasts of the expected future cash flows attributable to the respective assets. Significant estimates and assumptions inherent in the valuations reflected a consideration of other marketplace participants and included the amount and timing of future cash flows (including expected growth rates and profitability), the underlying product or technology life cycles, economic barriers to entry and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and circumstances could affect the accuracy or validity of the estimates and assumptions.

~~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~~non-cash impairment charge during 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. Goodwill represents the excess of the purchase price over the preliminary fair value of identifiable assets acquired and liabilities assumed at the acquisition date and is primarily attributable to the assembled workforce and expected synergies at the time of the acquisition. The goodwill resulting from this acquisition is not tax deductible.

~~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 final allocation Preliminary
allocation
Total purchase consideration $ 20,706,000
Fair value of non-controlling interest 6,738,000
Total consideration $ 27,444,000

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 (5,018,000 )
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 (13,446,000 )
Goodwill $ 40,890,000

~~The Company consolidates the results of AVLP on a one-month lag, therefore the statements of operations include results for AVLP for the three~~six months ended ~~August 31, 2022.~~

~~Overview of SMC Acquisition~~

~~Beginning in~~ June 2022, the Company, through its subsidiary Ault 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 stood at approximately 57% as of September~~ 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.~~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 ~~between~~ of ~~0.5%~~18% for patents and ~~1.0% to the prospective revenue attributable to the intangible asset.~~developed technology and 0.25% for trademarks. The resulting net annual royalty payments are ~~tax-affected and~~ then discounted to present ~~value.~~value using a discount factor of 25.7%.

10. GOODWILL

The following table summarizes the changes in the Company’s goodwill for the six months ended June 30, 2023:

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

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 anusing 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 ~~fair~~ value of ~~customer relationships~~a market participant’s cost of capital and debt, derived using ~~an income approach utilizing a discounted cash flow methodology.~~customary market metrics. The analysis included assumptions regarding ~~the development~~AVLP’s revenue forecast and discount rates of ~~new businesses and organic growth rates, a discount rate of~~ 1226.7%% using a weighted average cost of capital ~~analysis, and capital expenditure requirements associated with any new initiatives developed by SMC. Significant assumptions~~analysis. The market approach utilized in the ~~income approach were based on~~guideline public company ~~specific information and projections which are not observable in~~method.

The results of the ~~market and are therefore considered Level 3~~quantitative test indicated the fair value ~~measurements.~~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.

~~The allocation of~~

F-19

11. CONSOLIDATED VARIABLE INTEREST ENTITY - SMC

During the ~~total consideration transferred to~~quarter ended June 30, 2023, the ~~assets acquired, including intangible assets and goodwill, and~~Company’s voting interest in SMC was less than 50%. As a result, the ~~liabilities assumed, is preliminary and could be revised as~~Company assessed its interest in SMC under the Variable Interest Entity Model. As a result of ~~additional information obtained~~that assessment, the Company consolidates SMC as a variable interest entity (a “VIE”) due to the ~~finalization~~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 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 withinresult, the ~~measurement period, which will not exceed one year from~~Company is considered the ~~Acquisition Date. The goodwill resulting from this acquisition is not tax deductible.~~primary beneficiary of the VIE.

~~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 preliminary allocation 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:
Tradenames (19 year estimated useful life) 2,470,000
Customer relationships (16 year estimated useful life) 1,380,000
Proprietary technology (3 year estimated useful life) 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~~12. BUSINESS COMBINATION

~~The following unaudited pro forma consolidated results of operations for the nine months ended September 30, 2022 have been prepared as if the SMC acquisition had occurred on January 1, 2022.~~

Schedule of pro forma consolidated results of operations Nine Months Ended
September 30, 2022
Total revenues $ 131,609,000
Net loss attributable to BitNile Holdings, Inc. $ (62,202,000 )

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.

~~Overview of GIGA acquisition~~BMI Acquisition

On ~~September 8, 2022, Giga-tronics Incorporated (“GIGA”~~March 6, 2023, the Company closed a Share Exchange Agreement (the “Agreement”) ~~acquired 100%~~with BMI and sold to BMI all of the outstanding shares of capital stock of ~~GWW from~~the Company’s 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 ~~in exchange~~as BMI is a publicly traded company and provides BitNile.com access to capital markets as the primary focus for ~~2.92 million shares~~BMI to fund the expected growth of ~~GIGA’s common~~the BMI metaverse platform. In addition, there are certain synergies between the Company’s Bitcoin mining operations and BMI’s Agora Digital mining business.

The holders of preferred stock and 514.8 shares of GIGA’s Series F Convertible Preferred Stock (“Series F”) that are convertible into an aggregate of 3.96 million shares of GIGA’s common stock. GIGA also assumed GWW’s outstanding equity awards representing the rightwill be entitled to receive ~~up to 749,626 shares~~dividends at a rate of ~~GIGA’s common stock, on an as-converted basis. The transaction described above resulted in a change of control of GIGA. Assuming the Company was to convert all~~5% of the ~~Series F,~~stated value of the ~~common stock owned by the Company after such conversion would result in the Company owning approximately 71.2% of GIGA’s outstanding shares.~~

~~On September 8, 2022, the Company loaned GIGA $4.25~~ million by purchasing a convertible note that carries an interest rate of 10% per annum and matures on February 14, 2023. The convertible note between the Company and GIGA is eliminated in consolidation beginning on September 8, 2022. The Company received the right to appoint four members of a seven member GIGA board of directors. These factors contributed to the Company’s determination that GWW be treated as the accounting acquirer.preferred stock.

The Company believes there are synergies between GIGA and GWW. GIGA manufactures specialized electronics equipment for use in both military test and airborne operational applications. GIGA focuses on the design and manufacture of custom microwave products for military airborne, sea, and ground applications as well as the design and manufacture of high-fidelity signal simulation and recording solutions for RADAR and electronic warfare test applications. GIGA’s results of operations subsequentis entitled to ~~the acquisition are included in the Company’s GWW defense business segment.~~

In respect of the above transactions, the acquired assets and assumed liabilities, together with acquired processes and employees, represent a business as defined in ASC 805, Business Combinations. The transactions were accounted for as a reverse acquisition using the acquisition method of accounting with GIGA treated as the legal acquirer and GWW treated as the accounting acquirer. In identifying GWW as the acquiring entity for accounting purposes, GIGA and GWW took into account a number of factors, including the relative voting rights, executive management and the corporate governance structure of the Company. GWW is considered the accounting acquirer since the Company controlsappoint three members to the board of directors of ~~GIGA~~BMI and, following ~~the transactions and received~~shareholder approval, a ~~71.2~~% beneficial ownership interest in GIGA. However, no single factor was the sole determinant in the overall conclusion that GWW is the acquirer for accounting purposes; rather all factors were considered in arriving at such conclusion.

~~The fair value~~majority of the ~~purchase consideration was $9.5~~ ~~million, consisting of $4.0~~ ~~million for GIGA’s common stock and prefunded warrants, $0.4~~ ~~million fair value of vested stock incentives, $3.7~~ ~~million cash and $1.3~~ ~~million related~~board, in each case subject to ~~an existing loan agreement between Ault Lending and GIGA, which was deemed settled.~~

~~The tradenames and developed technology intangible assets were valued using~~ the ~~relief-from-royalty method. The relief-from-royalty method is one~~approval 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 between ~~1.0% and~~ ~~7.0% to the prospective revenue attributable to the intangible asset. The resulting annual royalty payments are tax-affected and then discounted to present value.~~Nasdaq Stock Market.

The Company ~~determined an estimated fair value~~consolidates BMI as a VIE due to its significant level of ~~customer relationships using an income approach utilizing a discounted cash flow methodology.~~influence and control of BMI, the size of its investment, and its ability to participate in policy making decisions. The ~~analysis included assumptions regarding~~Company is considered the ~~development~~primary beneficiary of new businesses and organic growth rates, a discount rate of 22% using a weighted average cost of capital analysis, and capital expenditure requirements associated with any new initiatives developed by GIGA. Significant assumptions utilized in the ~~income approach were based on company specific information and projections which are not observable in the market and are therefore considered Level 3 fair value measurements.~~VIE.

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

The total purchase price to acquire ~~GIGA~~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 ~~assisted,~~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 ~~this transaction~~the Transaction on the consolidated financial position and results of operations of the Company.

The preliminary purchase price allocation is as follows:

Schedule of preliminary purchase price allocation Preliminary allocation
Total purchase consideration $ 6,763,000
Fair value of non-controlling interest 2,735,000
Total consideration $ 9,498,000

Identifiable net assets acquired (liabilities assumed):
Cash $ 107,000
Trade accounts receivable 536,000
Inventories 5,180,000
Prepaid expenses 116,000
Accrued revenue 363,000
Property and equipment 331,000
Right-of-use asset 370,000
Other long-term assets 446,000
Intangible assets:
Tradename (12 year estimated useful life) 1,040,000
Developed Technology (8 year estimated useful life) 1,410,000
Existing customer relationships (10-15 year estimated useful life) 3,910,000
Accounts payable (2,831,000 )
Loans payable, net of discounts and issuance costs (387,000 )
Accrued payroll and benefits (1,488,000 )
Lease obligations (491,000 )
Other current liabilities (368,000 )
Other non-current liabilities (17,000 )
Net assets acquired 8,227,000
Goodwill $ 1,271,000

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

9. ~~GOODWILL~~

~~The following table summarizes the changes in the Company’s goodwill for the nine months ended September 30, 2022:~~

Schedule of goodwill Goodwill
Balance as of January 1, 2022 $ 10,090,000
Acquisition of AVLP 40,890,000
Acquisition of SMC 3,184,000
Acquisition of GIGA 1,271,000
Effect of exchange rate changes (891,000 )
Balance as of September 30, 2022 $ 54,544,000

~~10.~~ ~~INCREASE IN OWNERSHIP INTEREST OF SUBSIDIARIES~~

~~On May 12, 2022, BNI closed a $1.8~~ ~~million membership interest purchase agreement whereby BNI acquired the~~ 30% minority interest of Alliance Cloud Services, LLC (“ACS”) which BNI did not previously own, resulting in ACS becoming a wholly-owned subsidiary of BNI. ACS owns and operates the Company’s Michigan data center, where BNI conducts the Company’s Bitcoin mining operations.

~~Between June 15, 2022 and September 30, 2022, Ault Lending increased the Company’s ownership interest in SMC through the open market purchase of approximately~~ ~~274,000~~ ~~shares for $2.1~~ ~~million.~~

~~11.~~13. INVESTMENTS – RELATED PARTIES

Investments in Alzamend and Ault & Company, Inc. (“Ault & Company”) at ~~September~~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	September 30,		December 31,
							Interest		June 30,		December 31,
	rate	date	2022		2021		rate	Due Date	2023		2022
Investment in promissory note of Ault & Company	8%	December 31, 2022	$	2,500,000	$	2,500,000	8%	December 31, 2023	$	2,500,000	$	2,500,000
Accrued interest receivable, Ault & Company				318,000		170,000				468,000		368,000
Other				-		172,000
Total investment in promissory note, related party			$	2,818,000	$	2,842,000			$	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

September 30, December 31,
2022 2021
Investment in common stock and options of Alzamend $ 12,394,000 $ 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 during the nine months ended September 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 4,840,000 -
Unrealized loss in common stock of Alzamend (5,676,000 ) -
Amortization of related party investment - (173,000 )
Accrued interest - 149,000
Balance at September 30, 2022 $ 12,394,000 $ 2,818,000

~~Investments in Alzamend Common Stock~~

The following table summarizes the changes in the Company’s investments in Alzamend common stock during the ~~nine~~three months ended ~~September~~June 30, ~~2022:~~

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 801,000 $ 1.05 840,000
Unrealized loss in common stock of Alzamend (5,676,000 )
Balance at September 30, 2022 10,415,000 $ 1.19 $ 12,394,000

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 Ault Lending for $10.0 million, or $1.50 per share, and issue to Ault 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, Ault 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 nine months ended September 30, 2022.

~~12.~~ ~~INVESTMENT IN UNCONSOLIDATED ENTITY – AVLP~~2023 and 2023:

~~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

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 ~~equity~~ investments in ~~the then unconsolidated entity, AVLP,~~Alzamend common stock during the ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023 and 2023:

Schedule of changes 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 September 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

Unrealized loss in common stock of Alzamend is recorded within revenue from lending and trading activities on the condensed consolidated statements of operations.

~~13.~~ ~~CONSOLIDATED VARIABLE INTEREST ENTITY - ALPHA FUND~~

~~Alpha Fund – Consolidated Variable Interest Entity~~

As of September 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 September 30, 2022, Ault Lending subscribed for $~~33 ~~million or approximately~~ ~~100% of the limited partnership interests in Alpha Fund, the full amount of which was funded, an increase of $~~16 ~~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 September 30, 2022, Alpha Fund owned~~ ~~45,049,871~~ ~~shares of the Company’s common stock and~~ ~~91,033~~ ~~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 September 30, 2022.~~

14. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Other current liabilities at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 consisted of:

Schedule of other current liabilities
	June 30,		December 31,
	2023		2022
Accounts payable	$	30,841,000	$	21,347,000
Accrued payroll and payroll taxes		11,625,000		9,939,000
Accrued legal		5,736,000		3,168,000
Short position marketable equity securities		5,253,000		-
Interest payable		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		17,874,000		17,980,000
	$	81,131,000	$	62,644,000

Schedule of other current liabilities September 30, December 31,
2022 2021
Accounts payable 22,467,000 $ 6,902,000
Accrued payroll and payroll taxes 9,531,000 5,027,000
Financial instrument liabilities 937,000 4,249,000
Accrued legal 1,787,000 2,637,000
Interest payable 4,140,000 187,000
Other accrued expenses 11,745,000 3,753,000
Total $ 50,607,000 $ 22,755,000

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 September 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 4.1 % 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 fixed monetary amount known at inception. The Company elected the fair value option to record the Preferred Shares with changes in fair value recorded through earnings.

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 Company’s common stock. During the six months ended June 30, 2023, the Company recorded a loss of $91,000 on the conversions of Series F Preferred Stock and Series G Preferred Stock.

Preferred stock ~~price, contractual term, volatility factor and dividend rate as defined in~~liability at June 30, 2023 was comprised of 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.~~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 ~~sets forth a summary of~~summarizes the changes in the ~~estimated fair~~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.

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 ~~the financial instruments during the nine months ended September 30, 2022 and 2021:~~$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.

Schedule of fair value of the financial instruments September 30, 2022 September 30, 2021
Beginning balance $ 4,249,000 $ 4,192,000
Change in fair value 27,000 388,000
Extinguishment (3,339,000 ) -
Ending balance $ 937,000 $ 4,580,000

~~15.~~18. NOTES PAYABLE

Notes payable at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, were comprised of the following:

Schedule of notes payable
	Collateral	Guarantors	Interest rate	Due date	June 30, 2023			December 31, 2022
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	SMC assets	-	8.0%	October 14, 2025		-			1,761,000
Other***	-	Ault & Company				4,595,000			858,000
Total notes payable	-	-			$	137,799,000		$	144,172,000
Less:	-	-
Unamortized debt discounts	-	-				(3,804,000	)		(13,087,000	)
Total notes payable, net	-	-			$	133,995,000		$	131,085,000
Less: current portion	-	-				(46,434,000	)		(39,621,000	)
Notes payable – long-term portion	-	-			$	87,561,000		$	91,464,000

Schedule of notes payable Interest
rate Due date September 30,
2022 December 31,
2021
Short-term notes payable 12.0% Nov. 2022 $ 35,000 $ 118,000
10% original issue discount senior secured notes - 65,972,000
AGREE Madison secured construction loans 7.0% January 1, 2025 58,351,000 55,055,000
SMC line of credit 15.5% June 11, 2023 2,500,000 -
SMC installment notes 7.6% June 18, 2024 177,000 -
SMC notes payable 6.0% Sept. 2024-Feb. 2025 353,000 -
XBTO note payable 12.5% December 30, 2023 3,384,000 -
10% secured promissory notes 10.0% August 10, 2023 10,093,000 -
Short-term bank line of credit 4.7% Renews monthly 2,325,000 960,000
Total notes payable $ 77,218,000 $ 122,105,000
Less:
Unamortized debt discounts (1,776,000 ) (27,496,000 )
Total notes payable, net $ 75,442,000 $ 94,609,000
Less: current portion (17,132,000 ) (39,554,000 )
Notes payable – long-term portion $ 58,310,000 $ 55,055,000

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.

Notes Payable Maturities

The contractual maturities of the Company’s notes payable, assuming the exercise of all extensions that are exercisable solely at the Company’s option, as of 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

Ault & Company Loan Agreement

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

~~On August 10, 2022, the Company, through its BNI subsidiary, entered into a note purchase agreement providing for the issuance of~~The 10% secured promissory notes ~~with~~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 ~~aggregate principal face amount of $11,000,000~~ ~~and~~additional 30 days for a $0.25 million extension fee for each extension period, with 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 $~~10 ~~million~~16% and principal amount outstanding of ~~marketable securities and investments and certain Bitcoin mining equipment with a carrying amount of $23.1~~$2.5 million. ~~million. The secured promissory notes are further secured by a guaranty provided by the Company, Ault Lending and by Milton C. Ault, the Executive Chairman of the Company.~~

The maturity date of the secured promissory notes is August 10, 2023. 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. Provided that the Company makes the first six monthly payments in full and on a timely basis, 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 by one month for each forbearance. The Company may not elect forbearance in consecutive months.

~~SMC Debt Security Interest~~

~~The SMC debt is secured by a perfected security interest in all SMC assets including a first-priority security interest in SMC accounts receivable and inventory.~~

~~Amortization of Debt Discount of~~3% Secured Promissory Notes

During the ~~three months~~quarter ended ~~March 31, 2022,~~June 30, 2023, the $66holders 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 ~~Secured Promissory Notes were repaid~~under the same terms as the existing notes, of which $5.5 million was outstanding and ~~the Company fully amortized the related debt discount of $26.3~~ ~~million, which is included within interest expense on the condensed consolidated statements of operations.~~

~~The following table summarizes the principal maturity schedule for our notes payable outstanding~~past due as of ~~September~~June 30, ~~2022:~~

Schedule of principal maturity
Year Principal
2022 $ 18,049,000
2023 818,000
2024 -
2025 58,351,000
Total $ 77,218,000

2023. The 3% secured promissory notes were fully paid in July 2023.

~~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 ~~September~~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	September 30, 2022			December 31, 2021
										Conversion price per share	Interest rate		Due date	June 30, 2023			December 31, 2022
Convertible promissory note	$4.00	4%	May 10, 2024	$	660,000		$	660,000		$4.00		4%	May 10, 2024	$	300,000		$	660,000
AVLP convertible promissory notes	$0.35 (AVLP stock)	15%	August 22, 2025		9,911,000			-		$0.35 (AVLP stock)		7%	August 22, 2025		9,911,000			9,911,000
Fair value of embedded options and derivatives					4,908,000			-
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					(132,000	)		(192,000	)						(6,705,000	)		(111,000	)
Total convertible notes payable, net of financing cost				$	15,347,000		$	468,000
Total convertible notes payable, net of financing cost, long term														$	15,275,000		$	12,776,000
Less: current portion					(1,469,000	)		-							(3,326,000	)		(1,325,000	)
Total convertible notes payable, net of financing cost, long term				$	13,878,000		$	468,000
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~~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~~three months ended June 30, 2023.

Activity related to the ~~market price, provided that such discount shall be increased by dividing it by~~embedded conversion option derivative liability for the ~~quotient that shall be obtained by dividing $35 million by~~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 ~~Market Cap at the time of~~BMI embedded 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.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.~~

~~On September 2, 2022, the Company and its subsidiary filed an answer to the Amended Complaint and asserted numerous affirmative defenses.~~

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.~~

On November 1, 2022, the parties informed the Court that they reached a settlement in principle and requested an extension of time, until November 22, 2022, to file motions for summary judgment to allow the parties time to draft formal settlement documents. The Court granted the parties’ request and the deadline for the Company and Mr. Ault to file their summary judgment is November 22, 2022.

~~Based on the terms of the settlement in principle, the Company believes its current legal accrual is adequate to cover the cost of settlement.~~

~~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 September 30, 2022,~~During the three months ended March 31, 2023, the Company ~~had~~ sold an aggregate of ~~256.7~~0.1 million shares of common stock pursuant to the 2022 Common ATM Offering for gross proceeds of $~~168.0~~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 September~~During the six months ended June 30, ~~2022,~~2023, the Company ~~had~~ sold an aggregate of ~~10,928~~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 $~~207,000~~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 ~~0.6~~3.0%% and ~~(9.1%)~~0.8% for the ~~nine~~three months ended ~~September~~June 30, 2023 and 2022, respectively, and ~~2021,~~1.2% and 0.4% for the six months ended June 30, 2023 and 2022, respectively. The Company anrecorded income tax provision of $~~0.4~~1.4 million and $~~0.1~~0.2 million for the ~~nine~~three months ended ~~September~~June 30, 2023 and 2022, respectively, and ~~2021,~~$1.1 million and $0.2 million for the six months ended June 30, 2023 and 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 PER SHARE

Net loss per share is computed by dividing the net loss to common stockholders by the weighted average number of common shares outstanding. The calculation of the basic and diluted earnings per share is the same for all periods presented ~~excluding the nine months ended September 30, 2021,~~ as the effect of the potential common stock equivalents is anti-dilutive due to the Company’s net loss position for all periods presented. Anti-dilutive securities, which are convertible into or exercisable for the Company’s common stock, ~~consist~~consisted of the following at ~~September~~June 30, ~~2022~~2023 and ~~2021:~~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

Schedule of net loss per share
September 30,
2022 2021
Stock options 6,396,000 4,761,000
Restricted stock grants 2,085,000 -
Warrants 18,493,000 5,936,000
Convertible notes 165,000 165,000
Convertible preferred stock 2,000 2,000
Total 27,141,000 10,864,000

F-30

~~21.~~24. SEGMENT AND CUSTOMERS INFORMATION

The Company had ~~seven~~nine reportable segments as of ~~September~~June 30, ~~2022~~2023 and ~~five~~seven as of ~~September~~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 ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023:

Schedule of operating segments
	Nine Months Ended September 30, 2022																								Six Months Ended June 30, 2023
	GWW			TurnOn Green			Ault Alliance		BNI			AGREE		Ault Disruptive			SMC		Holding Company			Total			GWW			TurnOn Green			Fintech		Sentinum			AGREE			Ault Disruptive			SMC			Energy			BMI			Holding Co.			Total
Revenue	$	21,530,000		$	3,853,000		$	220,000	$	-		$	-	$	-		$	17,114,000	$	-		$	42,717,000		$	17,448,000		$	1,600,000		$	-	$	-		$	-		$	-		$	6,008,000		$	546,000		$	45,000		$	-		$	25,647,000
Revenue, cryptocurrency mining		-			-			-		11,398,000			-		-			-		-			11,398,000			-			-			-		15,715,000			-			-			-			-			-			-			15,715,000
Revenue, commercial real estate leases		-			-			-		822,000			-		-			-		-			822,000			-			-			-		783,000			-			-			-			-			-			-			783,000
Revenue, lending and trading activities		-			-			32,224,000		-			-		-			-		-			32,224,000			-			-			4,586,000		-			-			-			-			-			-			-			4,586,000
Revenue, crane operations																										-			-			-		-			-			-			-			25,236,000			-			-			25,236,000
Revenue, hotel operations		-			-			-		-			12,809,000		-			-		-			12,809,000			-			-			-		-			6,627,000			-			-			-			-			-			6,627,000
Total revenues	$	21,530,000		$	3,853,000		$	32,444,000	$	12,220,000		$	12,809,000	$	-		$	17,114,000	$	-		$	99,970,000		$	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	$	1,259,000		$	403,000		$	240,000	$	6,949,000		$	2,487,000	$	-		$	166,000	$	473,000		$	11,977,000		$	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	$	(1,881,000	)	$	(2,577,000	)	$	4,212,000	$	(6,138,000	)	$	149,000	$	(1,100,000	)	$	597,000	$	(19,262,000	)	$	(26,000,000	)	$	(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 nine months ended September 30, 2022	$	612,000		$	176,000		$	1,739,000	$	77,299,000		$	4,444,000	$	-		$	66,000	$	164,000		$	84,500,000
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

Three Months Ended September 30, 2022
GWW
TurnOn
Green
Ault
Alliance BNI AGREE Ault
Disruptive SMC Holding
Company Total
Revenue $ 7,781,000 $ 1,662,000 $ 201,000 $ - $ - $ - $ 17,114,000 $ - $ 26,758,000
Revenue, cryptocurrency mining - - - 3,874,000 - - - - 3,874,000
Revenue, commercial real estate leases - - - 273,000 - - - - 273,000
Revenue, lending and trading activities - - 13,360,000 - - - - - 13,360,000
Revenue, hotel operations - - - - 5,513,000 - - - 5,513,000
Total revenues $ 7,781,000 $ 1,662,000 $ 13,561,000 $ 4,147,000 $ 5,513,000 $ - $ 17,114,000 $ - $ 49,778,000

Depreciation and amortization expense $ 740,000 $ 393,000 $ 172,000 $ 2,809,000 $ 832,000 $ - $ 166,000 $ (264,000 ) $ 4,848,000

Income (loss) from operations $ (661,000 ) $ (957,000 ) $ 3,786,000 $ (2,321,000 ) $ 1,697,000 $ (314,000 ) $ 597,000 $ (5,138,000 ) $ (3,311,000 )

Capital expenditures for the three
months ended September 30, 2022 $ 327,000 $ 51,000 $ 890,000 $ 5,915,000 $ 4,425,000 $ - $ 66,000 $ 47,000 $ 11,721,000

~~AVLP, SMC and GIGA Segment Information~~

~~The AVLP and SMC acquisitions were completed in June 2022 and the GIGA acquisition was completed in September 2022. As of September 30, 2022, identifiable assets for AVLP, SMC and GIGA were $47.5~~ ~~million, $40.0~~ ~~million and $19.2~~ ~~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 ~~nine~~six months ended ~~September~~June 30, ~~2021:~~2022:


	Nine Months Ended September 30, 2021																				Three Months Ended June 30, 2022
	GWW			TurnOnGreen			Ault Alliance		BNI			Ault Disruptive			Holding Company			Total			GWW			TurnOnGreen			Fintech			Sentinum			AGREE			Ault Disruptive			Holding Company			Total
Revenue	$	19,198,000		$	4,308,000		$	236,000										$	23,742,000		$	6,503,000		$	1,062,000		$	12,000		$	-		$	-		$	-		$	-		$	7,577,000
Revenue, cryptocurrency mining		-			-					693,000									693,000			-			-			-			3,976,000			-			-			-			3,976,000
Revenue, commercial real estate leases		-			-					530,000									530,000			-			-			-			272,000			-			-			-			272,000
Revenue, lending and trading activities		-			-			19,615,000											19,615,000			-			-			943,000			-			-			-			-			943,000
Revenue, hotel operations		-			-														-			-			-		��	-			-			4,598,000			-			-			4,598,000
Total revenues	$	19,198,000		$	4,308,000		$	19,851,000	$	1,223,000		$	-		$	-		$	44,580,000		$	6,503,000		$	1,062,000		$	955,000		$	4,248,000		$	4,598,000		$	-		$	-		$	17,366,000

Depreciation and amortization expense	$	951,000		$	69,000		$	146,000	$	250,000		$	-		$	297,000		$	1,713,000		$	298,000		$	4,000		$	34,000		$	2,613,000		$	827,000		$	-		$	711,000		$	4,487,000

Income (loss) from operations	$	(766,000	)	$	(490,000	)	$	12,390,000	$	(839,000	)	$	(331,000	)	$	(12,814,000	)	$	(2,850,000	)
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 nine months ended September 30, 2021	$	686,000		$	-		$	-	$	27,459,000		$	-		$	-		$	28,145,000
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


	Three Months Ended September 30, 2021																				Six Months Ended June 30, 2022
	GWW		TurnOn Green			Ault Alliance			BNI			Ault Disruptive			Holding Company			Total			GWW			TurnOnGreen			Fintech		Sentinum			AGREE			Ault Disruptive			Holding Company			Total
Revenue	$	6,373,000	$	1,094,000		$	110,000		$	-		$	-		$	-		$	7,577,000		$	13,748,000		$	2,191,000		$	19,000	$	-		$	-		$	-		$	-		$	15,958,000
Revenue, cryptocurrency mining		-		-			-			272,000			-			-			272,000			-			-			-		7,524,000			-			-			-			7,524,000
Revenue, commercial real estate leases		-		-			-			226,000			-			-			226,000			-			-			-		550,000			-			-			-			550,000
Revenue, lending and trading activities		-		-			(38,869,000	)		-			-			-			(38,869,000	)		-			-			18,864,000		-			-			-			-			18,864,000
Revenue, hotel operations		-		-			-			-			-			-			-			-			-			-		-			7,296,000			-			-			7,296,000
Total revenues	$	6,373,000	$	1,094,000		$	(38,759,000	)	$	498,000		$	-		$	-		$	(30,794,000	)	$	13,748,000		$	2,191,000		$	18,883,000	$	8,074,000		$	7,296,000		$	-		$	-		$	50,192,000

Depreciation and amortization expense	$	523,000	$	56,000		$	118,000		$	98,000		$	-		$	281,000		$	1,076,000		$	519,000		$	183,000		$	68,000	$	4,140,000		$	1,655,000		$	-		$	53,000		$	6,618,000

Income (loss) from operations	$	19,000	$	(408,000	)	$	(41,390,000	)	$	(339,000	)	$	(143,000	)	$	(7,613,000	)	$	(49,874,000	)	$	(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 three months ended September 30, 2021	$	120,000	$	-					$	22,435,000		$	-		$	-		$	22,555,000
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 September~~customers as of June 30, ~~2022, approximately~~ 36~~% 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 September 30, 2022, one customer represented~~percentage of total revenues attributable to customers from which 1510%~~% and one customer represented 10%~~ 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 ~~October~~July 1, ~~2022~~2023 through ~~November~~August 18, ~~2022,~~2023, the Company sold an aggregate of ~~14.8~~3.9 million shares of common stock pursuant to the ~~2022~~2023 Common ATM Offering for gross proceeds of $~~2.6~~15.6 million.

~~2022 Preferred ATM Offering~~Advances under Ault & Company Loan Agreement

~~During the period between October 1, 2022 through November 18, 2022,~~An additional $3.9 million has been advanced by Ault & Company to the Company ~~sold an aggregate of~~ ~~8,933~~ ~~shares of Series D Preferred Stock pursuant to~~under the ~~2022 Preferred ATM Offering for gross proceeds of $124,000~~.loan agreement entered into June 8, 2023.

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

~~During~~Effective August 10, 2023, the ~~period between October 1, 2022 through November 18, 2022,~~Company assigned the Term Note to Ault ~~Lending purchased an additional~~& 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 ~~$0.2~~ million ~~of limited partnership interests in Alpha Fund.~~(the “Second Demand Note”) to Ault & Company.

~~SMC Credit and Security Agreement with Fifth Third Bank~~Second Partial Distribution of TurnOnGreen Securities

On ~~October 14, 2022, SMC entered into~~July 24, 2023, the Company established a ~~credit agreement with Fifth Third Bank.~~ ~~The credit agreement provides~~record date for ~~a three-year secured revolving credit facility in an aggregate principal amount~~its second partial distribution of ~~up to $15 million decreased to $7.5 million during the non-peak period of January 1 through July 31 of each year. The credit agreement matures on October 14, 2025.~~

~~The revolving credit facility bears interest of the Prime Rate plus~~ ~~0.50% or the 30-day term secured overnight financing rate plus~~ ~~3.00~~%.

~~Under the credit agreement:~~

~~Accounts receivable advance rate up to an~~ 85~~% against SMC’s eligible accounts receivable;~~

~~Inventory advance of up to~~ 85~~% of SMC’s eligible inventory; and~~

~~SMC must maintain a minimum fixed charge coverage of 1.05 to 1.~~

~~Availability under the credit agreement was approximately $4.0~~ ~~million~~TurnOnGreen Securities. Stockholders as of ~~November 18, 2022.~~

~~Secured Debt Financing~~

~~On November 7, 2022,~~ ~~the Company and certain~~this date were entitled to 40 shares of its subsidiaries borrowed $18.9 million of principal amount of term loans (the “Loans”) from a group of institutional investors (the “Financing”). The Loans mature in 18 months, which may be extended to 24 months, accrue interest at the rate of 8.5% per annum and are secured by certain assets of the Company and various subsidiaries. Starting in January 2023, the lenders have the right to require the Company to make monthly payments of $0.6 million, which will increase to $1.1 million in November 2023. The Loans were issued with an original issue discount of $1.89 million.

~~The lenders received warrants to purchase approximately~~ ~~4.5~~ ~~million shares~~TurnOnGreen Securities for every share of the Company’s common stock ~~exercisable for four years at $0.45~~ ~~per share and warrants to purchase another approximately~~ ~~4.5~~ ~~million shares of~~they held on the ~~Company’s common stock, exercisable for four years at $0.75~~ ~~per share, subject to adjustment.~~

~~On November~~record date. The second distribution was finalized on August 7, ~~2022, Ault Aviation used proceeds from the Loans to purchase a private aircraft for a total purchase price of $15.8~~ ~~million. In addition,~~2023, whereby the Company ~~and certain~~relinquished control of ~~its subsidiaries entered into various agreements as collateral for the repayment of the Loans, including (i) a security interest in certain Bitcoin mining equipment, (ii) a pledge of the membership~~voting interests of ~~Third Avenue Apartments, LLC, a wholly owned subsidiary of~~TurnOnGreen. The Company distributed 56.4 million TurnOnGreen Securities in the Company (“Third Apartments”), (iii) a pledge of the membership interests of Alliance Cloud Services, LLC, a wholly owned subsidiary of the Company (“Alliance Cloud”), (iv) a pledge of the membership interests of Ault Aviation, LLC, a wholly owned subsidiary of the Company (“Ault Aviation”), (v) a pledge in a segregated deposit account of $1.5 million of cash, (vi) a mortgage and security agreement by Third Avenue on the real estate property owned by Third Avenue in St. Petersburg, Florida, (vii) a future advance mortgage by Alliance Cloud on the real estate property owned by Alliance Cloud in Dowagiac, Michigan, and (viii) an aircraft mortgage and security agreement by Ault Aviation on the private aircraft purchased by Ault Aviation on November 7, 2022. The Loans are further secured by a guaranty provided by Ault Lending and Milton C. Ault, the Executive Chairman of the Company.

~~3% Secured Promissory Notes~~

On November 18, 2022, the Company, through its BNI subsidiary, entered into a note purchase agreement providing for the issuance of secured promissory notes with an aggregate principal face amount of $~~8,181,819~~ ~~and an interest rate of~~ 3~~%. The purchase price (proceeds to the Company) for the secured promissory notes was $8.2~~ ~~million. The secured promissory notes have a security interest in certain marketable securities to be acquired by BNI (the “Collateral”).~~

The maturity date of the secured promissory notes is May 18, 2023. When the Company sells the Collateral, the Company is required to make a payment towards the secured promissory notes equal to 45% of the realized gains. After the secured promissory notes have been repaid in full and until all of the Collateral is sold, when the Company sells any remaining Collateral, the Company is required to give the investors a profits participation interest equal to 45% of the realized gains.second distribution.

~~Amendment to 10% Secured Promissory Notes~~

On November 18, 2022, the Company’s BNI subsidiary entered into an amendment to the 10% secured promissory notes issued on August 10, 2022, whereby the investors permitted the Company to (i) elect to utilize one of the six monthly forbearances under the notes for the November 2022 monthly payment and (ii) make the forbearance payment with the December 2022 monthly payment.

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 ~~September 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 ~~256.7~~3.8 million shares of common stock pursuant to the ~~2022~~2023 Common ATM Offering for gross proceeds of ~~$168.0~~$16.1 million.

On ~~March 20, 2022,~~June 26, 2023, we ~~and~~established a record date for our ~~majority owned subsidiary Imperalis Holding Corp. (“IMHC”) entered into a securities purchase agreement (the “Agreement”) with~~initial distribution of TurnOnGreen ~~Inc. (“TurnOnGreen”), a wholly owned subsidiary~~securities. Stockholders as of ~~ours. According~~this date were entitled to ~~the Agreement, which closed on September 6, 2022. we (i) delivered to IMHC all of the outstanding~~40 shares of TurnOnGreen common stock, of TurnOnGreen that we own, and (ii) eliminated the intracompany accounts between us and TurnOnGreen evidencing historical equity investments made by us in TurnOnGreen, in the approximate amount of $36 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”),along with each such share having a stated value of $1,000. The IMHC Preferred Stock has an aggregate liquidation preference of $25 million, is convertible into shares of IMHC’s common stock, par value $0.001 per share (the “IMHC Common Stock”) at our option, is redeemable by us, and entitles us to vote with the IMHC Common Stock on an as-converted basis. On September 5, 2022, we, IMHC and TurnOnGreen entered into an amendment to the Agreement (the “Amendment”), pursuant to which IMHC agreed to (i) use commercially reasonable efforts to effectuate a distribution by us of approximately 140 million shares of IMHC Common Stock beneficially owned by us (the “Distribution”), including the filing of a registration statement (the “Distribution Registration Statement”) with the Securities and Exchange Commission (the “SEC”), (ii) to issue our warrants to purchase ~~an equivalent number of~~40 shares of IMHC Common Stock to be issued in the Distribution (the “Warrants”), and (iii) to register the Warrants and the shares of IMHC Common Stock issuable upon exercise of the Warrants on the Distribution Registration Statement. IMHC and us will mutually agree to the terms and conditions of the Warrants and the Distribution Registration Statement after the Closing Date.

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 entered into an Asset Purchase Agreement (the “Asset Purchase 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 all of the assets of EYP (such assets, the “Assets,” and such transaction, the “Asset Purchase”). On April 24, 2022, EYP filed 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 the 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 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, Ault Lending, LLC (“Ault 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, Ault Lending entered into a securities purchase agreement (the “SPA”) with Alzamend to invest $10 million in AlzamendTurnOnGreen common stock and warrants, subject to the achievement of certain milestones. Ault 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(the “TurnOnGreen Securities”) for AL001. On April 26, 2022, Ault 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. Ault 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 a 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 September 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 perevery 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 Ault 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 Ault Lending entered into a Note Purchase Agreement (the “NPA”) with two accredited investors (the “Investors”) providing for the issuance of secured promissory notes (the “Notes”). 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 an aggregate of $250,000 to the two Investors (each, a “Monthly Forbearance”) in lieu 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 and accrued but unpaid interest at any time, provided that if BNI prepays the Notes, BNI is required to pay the Investors the 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.

Pursuant to the NPA, BNI, Ault Lending and Helios Funds LLC, as the collateral agent on behalf of the Investors (the “Agent”) entered into a security agreement (the “Security Agreement”), pursuant to which (i) Ault Lending granted to the Investors a security interest in marketable securities, investments and other property having a value of $10 million in an Ault 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 forth in the Security Agreement. In addition, pursuant to a subsidiary guaranty, Ault 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 approximately 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. We paid Compute North a deposit of approximately $2.0 million (the “Deposit”) to be used towards the Monthly Service Fee. As of the date of this filing, none of the Hosted Miners are in operation as we are awaiting the energization of the Hosted Miners at the facility.

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 the amount of fees that BNI would have been required to pay through the end of the Term.

On September 22, 2022, Compute North (along with its affiliated debtors), filed for chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of Texas under Chapter 11 of the U.S. Bankruptcy Code (11 U.S. Code section 101 et seq.). The ultimate outcome of the bankruptcy process, and its impact on the Deposit, remains to be determined. We assessed this financial exposure and recorded an impairment of the Deposit totaling $2 million during the three months ended September 30, 2022. We have retained counsel to assist in this matter.

On November 7, 2022, we and certain of our subsidiaries borrowed $18.9 million of principal amount of term loans (the “Loans”) from a group of institutional investors (the “Financing”). The Loans mature in 18 months, which may be extended to 24 months, accrue interest at the rate of 8.5% per annum and are secured by certain of our assets and our various subsidiaries. Starting in January 2023, the lenders have the right to require us to make monthly payments of $0.6 million, which will increase to $1.1 million in November 2023. The Loans were issued with an original issue discount of $1.89 million.

~~The lenders received warrants to purchase approximately 4.5 million shares~~ of our common stock ~~exercisable~~they held on the record date. The initial distribution was finalized in July 2023.

On July 24, 2023, we established a record date for ~~four years at $0.45 per share and warrants~~our second partial distribution of TurnOnGreen Securities. Stockholders as of this date were entitled to ~~purchase another approximately 4.5 million~~40 shares of ~~our~~TurnOnGreen Securities for every share of the Company’s common stock ~~exercisable for four years at $0.75 per share, subject to adjustment.~~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 ~~November 7, 2022, Ault Aviation used proceeds from the Loans to purchase a private aircraft for a total purchase price of $15.8 million. In addition,~~July 19, 2023 we ~~and~~along with certain of our subsidiaries entered into ~~various agreements as collateral for the repayment of the Loans, including (i)~~ a security interest in certain Bitcoin mining equipment, (ii) a pledge of the membership interests of Third Avenue Apartments, LLC, our wholly owned subsidiary (“Third Apartments”), (iii) a pledge of the membership interests of Alliance Cloud Services, LLC, our wholly owned subsidiary (“Alliance Cloud”), (iv) a pledge of the membership interests of Ault Aviation, LLC, our wholly owned subsidiary (“Ault Aviation”), (v) a pledge in a segregated deposit account of $1.5 million of cash, (vi) a mortgageFirst Amendment and security agreement by Third Avenue on the real estate property owned by Third Avenue in St. Petersburg, Florida, (vii) a future advance mortgage by Alliance Cloud on the real estate property owned by Alliance Cloud in Dowagiac, Michigan,Joinder to Loan and (viii) an aircraft mortgage and security agreement by Ault Aviation on the private aircraft purchased by Ault Aviation on November 7, 2022. The Loans are further secured by a guaranty provided by Ault Lending and Milton C. Ault, our Executive Chairman.

~~On November 18, 2022, BNI entered into another Note Purchase~~Guarantee Agreement (the ~~“November NPA”~~“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.

Effective August 3, 2023, we and the Investors ~~providing for~~entered into an Exchange Agreement (the “Exchange Agreement”) pursuant to which the ~~issuance~~Investors exchanged all of ~~secured promissory~~their Preferred Shares as well as their demand notes (the ~~“November~~“Demand Notes”)~~. The November~~ issued to the Investors by us on or about May 20, 2023, with each Demand Note having a principal outstanding amount of approximately $0.8 million for two new 10% Secured OID Promissory Notes ~~have~~(the “Exchange Notes”), each with a principal face amount of ~~$8,181,819~~$5.3 million, for an aggregate of amount owed of $10.5 million (the “Principal Amount”). We and ~~bear interest at 3% per annum pursuant to~~Milton “Todd” Ault, III, our Executive Chairman, entered into guaranty agreements with the ~~terms~~Investors guaranteeing repayment by Ault & Company, Inc., a related party (“Ault & Company”) of the ~~November~~Exchange Notes. The maturity date of the November Notes is May 18, 2023. When BNI sells the Collateral (as defined below), BNI is required to make a payment towards the November Notes equal to 45% of the realized gains. After the November Notes have been repaid in full and until all of the Collateral is sold, when BNI sells any remaining Collateral, BNI is required to give the investors a profits participation interest equal to 45% of the realized gains.

~~Pursuant~~Effective as of August 3, 2023, we assigned the Exchange Notes to Ault & Company. As consideration for Ault & Company assuming the ~~November NPA, BNI,~~Exchange Notes from us, we issued a 10% demand promissory note in the principal face amount of $10.5 million (the “First A&C Demand Note”) to Ault Lending and the Agent entered into a security agreement (the “November Security Agreement”), pursuant to which BNI and Ault Lending granted to the Investors a security interest in marketable securities to be acquired by BNI (the “Collateral”).& Company.

~~On November 18, 2022, BNI and~~Effective as of August 10, 2023, we assigned the ~~Investors also entered into an amendment~~Term Note to Ault & Company. As consideration for Ault & Company assuming the ~~Notes~~Term Note from us, we issued a 12% demand promissory note in ~~August 2022, whereby~~ the ~~Investors permitted BNI~~principal face amount of $1.1 million (the “Second Demand Note”) to ~~(i) elect to utilize one of the six monthly forbearances under the Notes for the November 2022 monthly payment and (ii) make the forbearance payment with the December 2022 monthly payment.~~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 ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022

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

	For the Three Months Ended September 30,
	2022			2021			For the Three Months Ended June 30,
							2023			2022
Revenue	$	27,031,000		$	7,803,000		$	12,216,000		$	7,577,000
Revenue, cryptocurrency mining		3,874,000			272,000			8,368,000			3,976,000
Revenue, hotel operations		5,513,000			-
Revenue, hotel and real estate operations								4,709,000			4,870,000
Revenue, crane operations								12,590,000			-
Revenue, lending and trading activities		13,360,000			(38,869,000	)		9,525,000			943,000
Total revenue		49,778,000			(30,794,000	)		47,408,000			17,366,000
Cost of revenue, products		20,193,000			5,011,000			9,036,000			5,044,000
Cost of revenue, cryptocurrency mining		5,255,000			260,000			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		3,230,000			-			7,641,000			-
Cost of revenue, lending and trading activities								-			-
Total cost of revenue		28,678,000			5,271,000			29,523,000			12,369,000
Gross profit (loss)		21,100,000			(36,065,000	)
Gross profit								17,885,000			4,997,000
Total operating expenses		26,411,000			13,809,000			68,390,000			28,716,000
Loss from operations		(5,311,000	)		(49,874,000	)		(50,505,000	)		(23,719,000	)
Other income (expense):
Interest and other income		725,000			125,000			2,382,000			81,000
Change in fair value of equity securities, related party		-			(4,849,000	)
Accretion of discount on note receivable, related party		-			4,210,000
Interest expense		(3,972,000	)		(140,000	)		(15,927,000	)		(2,031,000	)
Change in fair value of marketable equity securities		114,000			(750,000	)
Realized gain on digital currencies and marketable securities		595,000			30,000
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		(3,000	)		259,000			3,217,000			(6,000	)
Loss income before income taxes		(7,852,000	)		(50,989,000	)
Income tax (provision) benefit		(144,000	)		3,366,000
Loss before income taxes								(62,884,000	)		(25,868,000	)
Income tax provision								1,368,000			217,000
Net loss		(7,996,000	)		(47,623,000	)		(64,252,000	)		(26,085,000	)
Net loss (income) attributable to non-controlling interest		725,000			(96,000	)
Net loss attributable to non-controlling interest								3,569,000			321,000
Net loss attributable to Ault Alliance, Inc.		(7,271,000	)		(47,719,000	)		(60,683,000	)		(25,764,000	)
Preferred dividends		(190,000	)		(4,000	)		(321,000	)		(44,000	)
Net loss available to common stockholders	$	(7,461,000	)	$	(47,723,000	)	$	(61,004,000	)	$	(25,808,000	)
Comprehensive loss
Net loss available to common stockholders	$	(7,461,000	)	$	(47,723,000	)	$	(61,004,000	)	$	(25,808,000	)
Other comprehensive income (loss)
Other comprehensive loss
Foreign currency translation adjustment		306,000			(182,000	)		(520,000	)		(1,471,000	)
Other comprehensive income (loss)		306,000			(182,000	)
Other comprehensive loss								(520,000	)		(1,471,000	)
Total comprehensive loss	$	(7,155,000	)	$	(47,905,000	)	$	(61,524,000	)	$	(27,279,000	)

Revenues

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

	For the Three Months Ended Sept 30,										For the Three Months Ended June 30,				Increase
	2022		2021			Increase		%			2023		2022		(Decrease)			%
GWW	$	7,782,000	$	6,373,000		$	1,409,000		22	%
GIGA											$	8,740,000	$	6,503,000	$	2,237,000			34	%
TurnOnGreen		1,662,000		1,094,000			568,000		52	%		724,000		1,062,000		(338,000	)		-32	%
SMC		17,114,000		-			17,114,000		—			2,625,000		-		2,625,000			-
BNI
Sentinum
Revenue, cryptocurrency mining		3,874,000		272,000			3,602,000		1324	%		8,368,000		3,976,000		4,392,000			110	%
Revenue, commercial real estate leases		272,000		249,000			23,000		9	%		325,000		272,000		53,000			19	%
Ault Global Real Estate Equities, Inc. (“AGREE”)		5,513,000		-			5,513,000		—
Ault Alliance:
AGREE												4,384,000		4,598,000		(214,000	)		-5	%
Fintech:
Revenue, lending and trading activities		13,360,000		(38,869,000	)		52,229,000		-134	%		9,525,000		943,000		8,582,000			910	%
Other		201,000		87,000			114,000		131	%		45,000		12,000		33,000			275	%
Energy												12,672,000		-		12,672,000			-
Total revenue	$	49,778,000	$	(30,794,000	)	$	80,572,000		-262	%	$	47,408,000	$	17,366,000	$	30,042,000			173	%

~~Our revenues increased by $80.6~~GIGA

The $2.2 million ~~to $49.8 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 ~~30, 2022, from negative $30.8 million~~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 ~~September~~June 30, ~~2021.~~2023, as businesses rebound in the post-pandemic COVID-19 economy.

~~GWW~~

GWW revenues increased by $1.4 million, or 22%, to $7.8 million for the three months ended September 30, 2022, from $6.4 million for the three months ended September 30, 2021. The increase in revenue from our GWW segment for customized solutions for the military markets reflects $0.9 million from GIGA, which was acquired on September 8, 2022 and $0.5 million higher revenues from Gresham UK, a GWW subsidiary, related to naval power projects that had previously been delayed.

TurnOnGreen

TurnOnGreen revenues ~~for the three months ended September 30, 2022 of $1.7 million increased $0.6 million, or 52%, from $1.1~~were down $0.3 million for the three months ended ~~September~~June 30, ~~2021,~~2023, compared to the three months ended June 30, 2022 due to ~~increased sales to defense customers.~~a large project in 2022 that was cancelled.

SMC

SMC revenues increased by ~~$17.1~~$2.6 million ~~for the three months ended September 30, 2022, compared to $0 for the three months ended September 30, 2021,~~ due to the acquisition of SMC in June 2022.

~~BNI~~Sentinum

Revenues from ~~BNI’s~~Sentinum’s cryptocurrency mining operations ~~were $3.9~~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 ~~September~~June 30, ~~2022,~~2023, compared to $0.3 million for three months ended September 30, 2021. During 2021, we began to purchase Bitcoin mining equipment, which were primarily delivered in 2022, 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 $5.5 million for~~ the three months ended ~~September~~June 30, 2022, ~~compared~~due to ~~$0 for~~interruptions in business operations as the ~~three months ended September 30, 2021.~~ ~~On December 22, 2021, AGREE acquired four hotel~~ properties ~~for $71.3 million, consisting~~were being renovated through the end 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.~~April 2023.

~~Ault Alliance~~Fintech

Revenues from our lending and trading activities ~~increased~~were $9.5 million due to ~~$13.4 million~~significant realized gains for the three months ended ~~September~~June 30, 2022, from negative revenues of $38.9 million for the three months ended September 30, 2021, which is attributable to significant realized and unrealized gains in the current year period and unrealized losses in the prior year period2023 from our investment portfolio. During the three months ended ~~September~~June 30, 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 Ault Lending in certain financing transactions. Revenue from lending and trading activities ~~during~~for the three months ended ~~September~~June 30, ~~2022~~2023 included an approximate ~~$2.5~~$0.9 million unrealized gain from our investment in Alzamend. Under its business model, Ault 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 ~~September~~June 30, 2021 included significant unrealized losses from market price changes related to Alzamend. During the three months ended September 30, 2021, we recorded an unrealized loss of $27.4 million related to our investment in Alzamend common stock. During the three months ended September 30, 2021, we recorded an unrealized loss on our investment in warrants of Alzamend of $6.0 million. Our investment in Alzamend will be revalued on each balance sheet date.

~~Revenues from our trading activities during the three months ended September 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 ~~were 42.4%~~increased to 38% for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~117.1%~~29% for the three months ended ~~September~~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 ~~42.4%~~38% recognized during the three months ended ~~September~~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 ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022 would have been ~~27.6%~~33% and ~~35.8%~~36%, ~~respectively, with gross margins for the three months ended September 30, 2022 slightly lower than our historical averages due to gross margins from SMC, which were 23.8%.~~respectively.

Research and Development

Research and development expenses ~~were flat at $0.5~~increased by $1.1 million for the three months ended ~~September~~June 30, ~~2022 and 2021.~~2023, due to expenditures related to development work on the BMI metaverse platform.

Selling and Marketing

Selling and marketing expenses were ~~$7.4~~$9.6 million for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~$2.0~~$7.0 million for the three months ended ~~September~~June 30, ~~2021,~~2022, an increase of ~~$5.4~~$2.6 million, or ~~273%~~37%. The increase was the result of ~~$4.2~~$3.6 million higher ~~marketing~~advertising and promotion costs ~~at Ault Alliance, including $3.2 million~~ related to ~~an advertising sponsorship agreement as well as~~BMI’s metaverse platform, partially offset by a ~~$0.9~~$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 costs from SMC, which was acquired in June 2022 and $0.2 million from GIGA, which was acquired in September 2022.

General and Administrative

General and administrative expenses were ~~$15.9~~$21.3 million for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~$11.3~~$19.0 million for the three months ended ~~September~~June 30, ~~2021,~~2022, an increase of ~~$4.7~~$2.3 million, or ~~41%~~12%. General and administrative expenses increased from the comparative prior period, mainly due ~~to:~~to increases from new acquisitions:

general and administrative costs of ~~$2.6~~$3.4 million 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;~~2022.

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

~~general and administrative costs of $0.6 million from our hotel operations, which were acquired in December 2021;~~

$~~2.2~~5.0 million ~~increase in the accrual of a~~lower performance bonus related to realized gains on trading ~~activities during the period;~~activities;

~~increased costs of $0.6~~$1.2 million ~~in part related to the efforts to spin off TurnOnGreen~~lower corporate legal fees;

$1.0 million lower corporate bonuses;

$0.8 million lower general and ~~GWW;~~administrative expenses at AGREE;

$0.7 million lower corporate consulting fees;

$0.7 million lower corporate audit fees; and

~~partially offset by~~$0.5 million lower ~~non-cash stock compensation costs~~corporate board of ~~$2.5 million.~~directors fees.

Impairment of AVLP Goodwill and Intangible Assets

Goodwill

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

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

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 was $0.1 million and $2.0 million, respectively. Impairment losses are attributable to the volatility of the Bitcoin market as market price of Bitcoin drops below our carrying value within the respective periods. The impairment of mined cryptocurrency for the three months ended June 30, 2023 is lower than the comparable prior year period 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 ~~$0.7~~$2.4 million for the three months ended ~~September~~June 30, ~~2022~~2023, compared to $0.1 million for the three months ended ~~September~~June 30, ~~2021.~~2022. The increase in interest and other income is primarily due to higher interest rates resulting in higher income from ~~Ault Disruptive from~~ADRT’s cash and marketable securities held in the trust account.

~~Change in fair value of equity securities, related party~~Interest Expense

~~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~~Interest expense was ~~nil for the three months ended September 30, 2022, compared to a loss of $4.8~~$15.9 million for the three months ended ~~September~~June 30, ~~2021.~~2023, compared to $2.0 million for the three months ended June 30, 2022. The $15.9 million interest expense for the three months ended June 30, 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 $2.0 million interest expense for the three months ended June 30, 2022 included amortization of debt discount of $32,000 and contractual interest of $2.0 million.

~~Accretion~~Loss on Extinguishment of ~~discount on note receivable, related party~~Debt

~~Accretion~~Loss on extinguishment of ~~discount on note receivable, related party~~debt was $0.1 million for the three months ended June 30, 2023, compared to $0 for the three months ended June 30, 2022.

Loss From Investment in Unconsolidated Entity

Loss from investment in unconsolidated entity was $0 for the three months ended ~~September~~June 30, ~~2022 and $4.2~~2023, compared to $0.4 million for the three months ended September 30, 2021. The prior year amount was due to the significant decline in the value of warrants in AVLP, accretion of the warrant discount was accelerated, resulting in a discount of $0 related to warrants issued in conjunction with the convertible promissory note of AVLP as of September 30, 2021.

~~Interest Expense~~

~~Interest expense was $4.0 million for the three months ended September~~June 30, 2022, compared to $0.1 million for the three months ended September 30, 2021. The increase in interest expense is due primarily to interest on the $58.4 million construction loans related to the hotel properties purchased in December 2021 and interest on the $11 million secured promissory notes issued in August 2022.

~~Change in Fair Value~~representing our share of ~~Warrant Liability~~

Change in fair value of warrant liability was a loss of $3,000 for the three months ended September 30, 2022, compared to a gain of $0.3 million for the three months ended September 30, 2021. During the three months ended September 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~~losses from our equity securities was a gain of $0.1 million for the three months ended September 30, 2022, compared to a loss of $0.8 million for the three months ended September 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 as well as the loss on anmethod investment in AVLP ~~common stock.~~prior to the June 1, 2022 acquisition.

~~Realized Gain on Digital Currencies and Marketable Securities~~

Realized gain on digital currencies and marketable securities was $0.6 million for the three months ended September 30, 2022, compared to $30,000 for the three months ended September 30, 2021. Realized gain for the three months ended September 30, 2022 related primarily to gains on the sale of Bitcoin by BNI.

~~Other Comprehensive Income (loss)~~

Other comprehensive income was $0.3 million for the three months ended September 30, 2022, compared to other comprehensive loss of $0.2 million for the three months ended September 30, 2021. Other comprehensive income (loss) 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 ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022

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

	For the Nine Months Ended September 30,
	2022			2021			For the Six Months Ended June 30,
							2023			2022
Revenue	$	43,539,000		$	24,272,000		$	25,647,000		$	15,958,000
Revenue, cryptocurrency mining		11,398,000			693,000			15,715,000			7,524,000
Revenue, hotel operations		12,809,000			-
Revenue, hotel and real estate operations								7,410,000			7,846,000
Revenue, crane operations								25,236,000			-
Revenue, lending and trading activities		32,224,000			19,615,000			4,586,000			18,864,000
Total revenue		99,970,000			44,580,000			78,594,000			50,192,000
Cost of revenue, products		30,985,000			16,011,000			18,823,000			10,792,000
Cost of revenue, cryptocurrency mining		12,206,000			646,000			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		8,350,000			-			15,029,000			-
Cost of revenue, lending and trading activities								1,180,000			-
Total cost of revenue		51,541,000			16,657,000			58,669,000			22,863,000
Gross profit		48,429,000			27,923,000			19,925,000			27,329,000
Total operating expenses		76,429,000			30,773,000			101,848,000			50,018,000
Loss from operations		(28,000,000	)		(2,850,000	)		(81,923,000	)		(22,689,000	)
Other income (expense):
Interest and other income		1,255,000			176,000			3,579,000			530,000
Change in fair value of equity securities, related party		-			(7,773,000	)
Accretion of discount on note receivable, related party		-			4,210,000
Interest expense		(35,827,000	)		(475,000	)		(29,657,000	)		(31,855,000	)
Change in fair value of marketable equity securities		355,000			(705,000	)
Gain on extinguishment of debt		-			929,000
Realized gain on digital currencies and marketable securities		661,000			428,000
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	)		-			-			(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		(27,000	)		(130,000	)		3,217,000			(24,000	)
Loss before income taxes		(62,507,000	)		(6,190,000	)		(111,976,000	)		(54,655,000	)
Income tax provision		(361,000	)		(144,000	)		1,105,000			217,000
Net loss		(62,868,000	)		(6,334,000	)		(113,081,000	)		(54,872,000	)
Net loss (gain) attributable to non-controlling interest		1,061,000			(93,000	)
Net loss attributable to non-controlling interest								3,752,000			336,000
Net loss attributable to Ault Alliance, Inc.		(61,807,000	)		(6,427,000	)		(109,329,000	)		(54,536,000	)
Preferred dividends		(239,000	)		(13,000	)		(550,000	)		(49,000	)
Net loss available to common stockholders	$	(62,046,000	)	$	(6,440,000	)	$	(109,879,000	)	$	(54,585,000	)
Comprehensive loss
Net loss available to common stockholders	$	(62,046,000	)	$	(6,440,000	)	$	(109,879,000	)	$	(54,585,000	)
Other comprehensive loss
Foreign currency translation adjustment		(1,452,000	)		(141,000	)		(350,000	)		(1,758,000	)
Other comprehensive loss		(1,452,000	)		(141,000	)		(350,000	)		(1,758,000	)
Total comprehensive loss	$	(63,498,000	)	$	(6,581,000	)	$	(110,229,000	)	$	(56,343,000	)

Revenues

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

For the Nine Months Ended September 30, Increase
2022 2021 (Decrease) %
GWW $ 21,530,000 $ 19,198,000 $ 2,332,000 12 %
TurnOnGreen 3,853,000 4,308,000 (455,000 ) -11 %
SMC 17,114,000 - 17,114,000 —
BNI
Revenue, cryptocurrency mining 11,398,000 693,000 10,705,000 1545 %
Revenue, commercial real estate leases 822,000 530,000 292,000 55 %
AGREE 12,809,000 - 12,809,000 —
Ault Alliance:
Revenue, lending and trading activities 32,224,000 19,615,000 12,609,000 64 %
Other 220,000 236,000 (16,000 ) -7 %
Total revenue $ 99,970,000 $ 44,580,000 $ 55,390,000 124 %

~~Our revenues increased by $55.4 million, or 124%, to $100.0 million for the nine months ended September 30, 2022, from $44.6 million for the nine months ended September 30, 2021.~~

	For the Six Months Ended June 30,				Increase
	2023		2022		(Decrease)			%
GIGA	$	17,448,000	$	13,748,000	$	3,700,000			27	%
TurnOnGreen		1,600,000		2,191,000		(591,000	)		-27	%
SMC		6,008,000		-		6,008,000			—
Sentinum
Revenue, cryptocurrency mining		15,715,000		7,524,000		8,191,000			109	%
Revenue, commercial real estate leases		783,000		550,000		233,000			42	%
AGREE		6,627,000		7,296,000		(669,000	)		-9	%
Fintech:
Revenue, lending and trading activities		4,586,000		18,864,000		(14,278,000	)		-76	%
Other		45,000		19,000		26,000			137	%
Energy		25,782,000		-		25,782,000			—
Total revenue	$	78,594,000	$	50,192,000	$	28,402,000			57	%

~~GWW~~GIGA

~~GWW revenues increased by $2.3~~The $3.7 million ~~or 12%, to $21.5 million~~increase in our GIGA segment revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2022, from $19.2~~2023 included $1.1 million ~~for the nine months ended September 30, 2021. The increase in revenue from~~attributable to our ~~GWW segment for customized solutions for the military markets reflects $0.9 million from GIGA, which was acquired~~acquisition of Giga-tronics Incorporated on September 8, ~~2022~~2022. Continued conflicts and ~~$0.7 million higher revenues from Gresham~~tensions worldwide are driving defense-related investments in force protection technologies at GIGA across the United States, UK, ~~a GWW subsidiary, related to naval power projects that had previously been delayed,~~Europe, Asia, and ~~$0.5 million higher revenues from Relec.~~the Middle East. Additionally, demand for key electronics solutions, particularly for customers in medicine and telecommunications, accelerated in the six months ended June 30, 2023, as businesses rebound in the post-pandemic COVID-19 economy.

TurnOnGreen

TurnOnGreen revenues ~~for the nine months ended September 30, 2022 of $3.9 million declined $0.5 million, or 11%, from $4.2~~were down $0.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2023, compared to the six months ended June 30, 2022 due to ~~supply chain challenges~~a large project in ~~the first half of the year partially offset by increased sales to defense customers in the third fiscal quarter of 2022.~~2022 that was cancelled.

SMC

SMC revenues increased by ~~$17.1~~$6.0 million ~~for the nine months ended September 30, 2022, compared to $0 for the nine months ended September 30, 2021,~~ due to the acquisition of SMC in June 2022.

~~BNI~~Sentinum

Revenues from ~~BNI’s~~Sentinum’s cryptocurrency mining operations ~~were $11.4~~increased $8.2 million ~~for the nine months ended September 30, 2022, compared to $0.7 million for nine months ended September 30, 2021. During 2021,~~as we ~~began to purchase Bitcoin mining equipment, which were primarily delivered in 2022, and~~ increased our cryptocurrency mining ~~activities. Our decision to~~activities from the prior period, partially offset by lower Bitcoin prices and an increase ~~our cryptocurrency~~in Bitcoin mining ~~operations~~difficulty level 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.~~current year period.

AGREE

~~AGREE~~AGREE’s revenues ~~were $12.8~~decreased by $0.7 million for the ~~nine~~six months ended ~~September~~June 30, 2023, compared to the six months ended June 30, 2022, ~~compared~~due to ~~$0 for~~interruptions in business operations as the ~~nine~~properties were being renovated during the six months ended ~~September~~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 ~~increased~~were $4.6 million due to ~~$32.2 million~~realized gains for the ~~nine~~six months ended ~~September~~June 30, 2022, from $19.6 million for the nine months ended September 30, 2021, which is primarily attributable to significant realized and unrealized gains in the current year period and unrealized gains in the prior year period2023 from our investment portfolio. During the ~~nine~~six months ended ~~September~~June 30, 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 Ault Lending in certain financing transactions. Revenue from lending and trading activities ~~during~~for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 included ~~a $4.8~~an approximate $0.6 million unrealized loss ~~from our investment in Alzamend. Revenue from lending and trading activities during the nine months ended September 30, 2021 included a $3.8 million unrealized gain~~ from our investment in Alzamend. Under its business model, Ault Lending also generates revenue through origination fees charged to borrowers and interest generated from each loan.

Revenues from our trading activities ~~during~~for the ~~nine~~six months ended ~~September~~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 ~~48.4%~~25% for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~62.6%~~54% for the ~~nine~~six months ended ~~September~~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 ~~48.4%~~25% recognized during the ~~nine~~six months ended ~~September~~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 ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 would have been ~~29.2%~~33% and ~~34.0%~~36%, ~~respectively, with gross margins for the three months ended September 30, 2022, slightly lower than our historical averages due to gross margins from SMC, which were 23.8%.~~respectively.

Research and Development

Research and development expenses increased by ~~$0.3 million to 1.9~~$2.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022, from $1.7 million for the nine months ended September 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 ~~$20.9~~$18.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~$4.7~~$13.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, an increase of ~~$16.1~~$4.9 million, or ~~341%~~36%. The increase was the result of ~~$14.7~~$5.3 million higher advertising and promotion costs ~~at Ault Alliance, including $9.4 million~~ related to ~~an advertising sponsorship agreement as well as~~BMI’s metaverse platform, partially offset by a $1.8 million ~~increase~~decline in ~~sales~~employee related costs and ~~marketing personnel and a $0.9 million increase in travel expense.~~consulting expenses. The increase is also attributable to ~~a $0.7 million increase in costs incurred at TurnOnGreen to grow our selling and marketing infrastructure related to our electric vehicle charger products as well as a $0.9~~$1.3 million increases in sales and marketing 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 ~~$48.7~~$44.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~$24.4~~$32.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, an increase of ~~$24.3~~$11.3 million, or ~~100%~~34%. General and administrative expenses increased from the comparative prior period, mainly due ~~to:~~to increases from new acquisitions:

general and administrative costs of ~~$4.3~~$6.4 million from ~~our hotel operations,~~Circle 8, which ~~were~~was acquired in December ~~2021;~~2022;

general and administrative costs of ~~$2.6~~$5.1 million from SMC, which was acquired in June 2022;

general and administrative costs of ~~$0.6~~$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;~~2022.

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

~~increased general and administrative costs of $0.8 million from Ault Disruptive, a SPAC which completed its IPO in December 2021;~~

~~non-cash stock compensation costs of $1.0 million;~~

$~~5.0~~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 $1.6 million;~~

~~higher audit fees of $1.6 million;~~

~~increased costs of $1.9~~$2.2 million ~~related to the Michigan data center and Bitcoin mining operations;~~lower corporate legal fees; and

~~increased legal fees of $2.2~~$1.5 million ~~including $0.7 million related to the efforts to acquire EYP, Inc.~~lower general and administrative expenses at AGREE.

Impairment of AVLP Goodwill and Intangible Assets

Goodwill

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

Intangible Assets

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 was $0.3 million and $2.4 million, respectively. Impairment losses are attributable to the volatility of the Bitcoin market as market price of Bitcoin drops below our carrying value within the respective periods. The impairment of mined cryptocurrency for the six months ended June 30, 2023 is lower than the comparable prior year period as the average amount of digital currency held decreased during the first half of 2023 as we generally sold our mined digital currency the next business day.

Interest and Other Income

Interest and other income was ~~$1.3~~$3.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~$0.2~~$0.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The increase in interest and other income is primarily due to higher interest rates resulting in higher income from ~~Ault Disruptive from~~ADRT’s cash and marketable securities held in the trust account. Other income for the nine months ended September 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 nine months ended September 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 nine months ended September 30, 2022, compared to a loss of $7.8 million for the nine months ended September 30, 2021.

~~Accretion of discount on note receivable, related party~~

Accretion of discount on note receivable, related party was $0 for the nine months ended September 30, 2022, compared to $4.2 million for the nine months ended September 30, 2021. The prior year amount was due to the significant decline in the value of warrants in AVLP, accretion of the warrant discount was accelerated, resulting in a discount of $0 related to warrants issued in conjunction with the convertible promissory note of AVLP as of September 30, 2021.

Interest Expense

Interest expense was ~~$35.8~~$29.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023, compared to ~~$0.5~~$31.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The ~~increase in~~$29.7 million interest expense ~~relates~~for the six months ended June 30, 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 $29.8 million interest expense 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 in interest expense includes interest on the $58.4~~$66.0 million ~~construction loans related to the hotel properties purchased~~of senior notes issued in December 2021, ~~and interest on the $11 million secured promissory notes issued~~which were fully paid in ~~August~~March 2022.

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

~~Change in fair value~~Loss on extinguishment of ~~warrant liability~~debt was ~~a loss of $27,000 for the nine months ended September 30, 2022, compared to a loss of $0.1~~$0.2 million for the ~~nine~~six months ended ~~September~~June 30, 2021. 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 $0.4 million~~2023, compared to $0 for the ~~nine~~six months ended ~~September~~June 30, 2022, compared to a loss of $0.7 million for the nine months ended September 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 as well as the loss on an investment in AVLP common stock.

~~Realized Gain on Digital Currencies and Marketable Securities~~

Realized gain on marketable securities was $0.7 million for the nine months ended September 30, 2022, compared to $0.4 million for the nine months ended September 30, 2021. Realized gain for the nine months ended September 30, 2022 related primarily to gains on the sale of Bitcoin by BNI. Realized gains in the prior year period related to realized gains from an investment in marketable securities held by Microphase, a portion of which was sold during the nine months ended September 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 ~~nine~~six months ended ~~September~~June 30, 2022, ~~compared to $0 for the nine months ended September 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 nine months ended September~~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 nine months ended September 30, 2021. The prior year gain on extinguishment of debt represents forgiveness of Paycheck Protection Program loans.~~ 2023 were $9.6 million.

~~Other Comprehensive Loss~~

Other comprehensive loss was $1.5 million for the nine months ended September 30, 2022, compared to other comprehensive loss of $0.1 million for the nine months ended September 30, 2021. Other comprehensive loss 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 ~~September~~June 30, ~~2022,~~2023, we had cash and cash equivalents of ~~$10.1~~$19.7 million (excluding restricted cash of ~~$4.6~~$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 ~~decrease~~increase in cash and cash equivalents was primarily due ~~the payment of debt~~cash provided by operating activities and ~~purchases of property and equipment partially offset by~~ cash provided by financing activities related to the sale of common and preferred stock, as well as proceeds from convertible notes ~~payable~~partially offset by the payment of debt, purchases of property and ~~cash provided by operating activities.~~equipment and investments in equity securities.

Net cash provided by operating activities totaled $12.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~net cash used in operating activities of $56.9~~$19.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. Cash provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 included ~~$68.5~~$41.2 million net cash provided by marketable securities from trading activities related to the operations of Ault 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 ~~$106.4~~$21.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~$68.7~~$87.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022, which included $72.8 million of capital expenditures, primarily for Bitcoin mining equipment. Net cash used in investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2022 included $84.5 million of capital expenditures~~2023 was primarily related to ~~Bitcoin mining equipment, $22.4 million for investments in equity securities, $8.2 million for~~capital expenditures and the purchase of ~~SMC and $3.7 million for the purchase of GIGA, 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 $9.0 million proceeds from the sale~~fixed assets of ~~digital currencies.~~

$4.5 million.

Net cash provided by financing activities was ~~$86.1~~$12.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~$151.1~~net cash provided by financing activities of $75.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, and primarily reflects the following transactions:

2022 Common ATM Offering – ~~On February 25, 2022,~~During the six months ended June 30, 2023, 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, through the 2022 Common ATM Offering. As of September 30, 2022, we had sold an aggregate of ~~256.7~~0.1 million shares of common stock pursuant to the 2022 Common ATM Offering for gross proceeds of ~~$168 million. Net proceeds to us, after payment of commissions, were $164 million.~~$4.2 million and effective March 17, 2023, the 2022 Common ATM Offering was terminated;

~~Public 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.

2022 Preferred ATM Offering– OnDuring the six months ended June ~~14, 2022,~~30, 2023, we entered into an At-The-Market equity offering program with Ascendiant Capital under which we may sell, from time to time, shares of our Series D Preferred Stock for aggregate gross proceeds of up to $46,400,000. As of September 30, 2022, we had sold an aggregate of ~~10,928~~162,175 shares of Series D Preferred Stock pursuant to the 2022 Preferred ATM Offering for ~~gross~~net proceeds of ~~$0.2 million.~~$3.0 million and effective June 16, 2023, the 2022 Preferred ATM Offering was terminated;

~~December 2021 Secured Promissory Notes~~2023 Common ATM Offering ~~– On December 30, 2021,~~–On June 9, 2023, we entered into ~~a securities purchase agreement~~the 2023 Common ATM Offering with ~~certain accredited investors providing for~~Ascendiant Capital. During the ~~issuance of Senior Notes that bore interest at 8% per annum with~~six months ended June 30, 2023, we sold an aggregate ~~principal face amount~~ of ~~$66.0 million. The Senior Notes were repaid in March 2022.~~0.1 million shares of common stock pursuant to the 2023 Common ATM Offering for gross proceeds of $0.8 million;

~~Margin Accounts Payable~~ ~~– During the year ended December 31, 2021, we entered into leverage agreements~~$34.1 million payments on ~~certain brokerage accounts, whereby we borrowed $18.5 million. The margin accounts~~notes payable, ~~were repaid during the three months ended March 31, 2022. During the quarter ended September 30, 2022, we borrowed $2.4~~partially offset by $30.7 million ~~on our margin account.~~proceeds from notes payable; and

~~10% Secured Promissory Notes~~ ~~– On August 10, 2022, we, through our BNI subsidiary, entered into a note purchase agreement providing for the issuance of secured promissory~~$7.8 million proceeds from convertible notes ~~with an aggregate principal face amount of $11,000,000 and an interest rate of 10%. The purchase price (proceeds to us) for the secured promissory~~payable, partially offset by $0.4 million payments on convertible 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 us, Ault Lending and Milton C. Ault, our Executive Chairman. The maturity date of the secured promissory notes is August 10, 2023. We are required to make monthly payment (principal and interest) of $1,000,000 on the tenth calendar day of each month, starting in September 2022. Provided that we make the first six monthly payments in full and on a timely basis, after six months, we 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 by one month for each forbearance. We may not elect forbearance in consecutive months.

~~Purchase of Treasury Stock~~ – During the nine months ended September 30, 2022, Alpha Fund purchased 38.9 million shares of our common stock for $13.4 million and 91,033 shares of our Series D Preferred Stock for $2.2 million, accounted for as treasury stock as of September 30, 2022.payable.

Financing Transactions Subsequent to ~~September~~June 30, ~~2022~~2023

Financing transactions subsequent to ~~September~~June 30, ~~2022 include~~2023 included the following:

~~2022~~2023 Common ATM Offering

During the period between ~~October~~July 1, ~~2022~~2023 through ~~November 18, 2022,~~August 14, 2023, we sold an aggregate of ~~14.8~~3.9 million shares of common stock pursuant to the ~~2022~~2023 Common ATM Offering for gross proceeds of ~~$2.6~~$15.6 million.

~~2022 Preferred ATM Offering~~

~~During the period between October 1, 2022 through November 18, 2022, we sold an aggregate of 8,933 shares of Series D Preferred Stock pursuant~~Amendment to ~~the 2022 Preferred ATM Offering for gross proceeds of $124,000.~~

~~SMC Credit and Security Agreement with Fifth Third Bank~~8.5% Secured Promissory Notes

On October 14, 2022, SMC entered into a credit agreement with Fifth Third Bank. The credit agreement provides for a three-year secured revolving credit facility in an aggregate principal amount of up to $15 million decreased to $7.5 million during the non-peak period of January 1 through July ~~31 of each year. The credit agreement matures on October 14, 2025.~~

~~The revolving credit facility bears interest of the Prime Rate plus 0.50% or the 30-day term secured overnight financing rate plus 3.00%.~~

~~Under the credit agreement:~~

~~Accounts receivable advance rate up to an 85% against SMC’s eligible accounts receivable;~~

~~Inventory advance of up to 85% of SMC’s eligible inventory; and~~

~~SMC must maintain a minimum fixed charge coverage of 1.05 to 1.~~

~~Availability under the credit agreement was approximately $4.0 million as of November 18, 2022.~~

~~Secured Debt Financing~~

On November 7, 2022, we and certain of our subsidiaries borrowed $18.9 million of principal amount of term loans (the “Loans”) from a group of institutional investors (the “Financing”). The Loans mature in 18 months, which may be extended to 24 months, accrue interest at the rate of 8.5% per annum and are secured by certain of our assets and the assets of our various subsidiaries. Starting in January19, 2023, the lenders have the right to require us to make monthly payments of $0.6 million, which will increase to $1.1 million in November 2023. The Loans were issued with an original issue discount of $1.89 million.

The lenders received warrants to purchase approximately 4.5 million shares of our common stock, exercisable for four years at $0.45 per share and warrants to purchase another approximately 4.5 million shares of our common stock, exercisable for four years at $0.75 per share, subject to adjustment.

~~On November 7, 2022, Ault Aviation used proceeds from the Loans to purchase a private aircraft for a total purchase price of $15.8 million. In addition,~~ we and certain of our subsidiaries entered into ~~various agreements as collateral for~~an amendment agreement with the ~~repayment~~institutional investors and increased the principal balance of the ~~Loans, including (i) a security interest in certain Bitcoin mining equipment, (ii) a pledge of~~secured promissory notes by an additional $8.8 million. The net proceeds to us from the membership interests of Third Avenue Apartments, LLC, our wholly owned subsidiary (“Third Apartments”), (iii) a pledge of the membership interests of Alliance Cloud Services, LLC, our wholly owned subsidiary (“Alliance Cloud”), (iv) a pledge of the membership interests of Ault Aviation, LLC, our wholly owned subsidiary (“Ault Aviation”), (v) a pledge in a segregated deposit account of $1.5 million of cash, (vi) a mortgage and securityamendment agreement by Third Avenue on the real estate property owned by Third Avenue in St. Petersburg, Florida, (vii) a future advance mortgage by Alliance Cloud on the real estate property owned by Alliance Cloud in Dowagiac, Michigan, and (viii) an aircraft mortgage and security agreement by Ault Aviation on the private aircraft purchased by Ault Aviation on November 7, 2022. The Loans are further secured by a guaranty provided by Ault Lending and Milton C. Ault, our Executive Chairman.were $7.5 million.

~~3% Secured Promissory Notes~~Advances under Ault & Company Loan Agreement

~~On November 18, 2022, BNI~~Subsequent to 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 Assignment of Secured Note

Effective August 3, 2023, we and the Investors entered into the ~~November NPA with~~Exchange Agreement pursuant to which the Investors ~~providing~~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 ~~issuance of the November Notes. The November~~Exchange Notes, ~~have~~each with a principal face amount of ~~$8,181,819~~approximately $5.3 million, for an aggregate of amount owed of $10.5 million. We and ~~bear interest at 3% per annum pursuant to~~Milton “Todd” Ault, III, our Executive Chairman issued entered into guaranty agreements with the ~~terms~~Investors guaranteeing Ault & Company’s repayment of the ~~November~~Exchange Notes. The maturity date of the November Notes is May 18, 2023. When BNI sells the Collateral, BNI is required to make a payment towards the November Notes equal to 45% of the realized gains. After the November Notes have been repaid in full and until all of the Collateral is sold, when BNI sells any remaining Collateral, BNI is required to give the investors a profits participation interest equal to 45% of the realized gains.

Assignment of Term Note

Effective as of August 10, 2023, we assigned the ~~Agent entered into~~Term Note to Ault & Company. As consideration for Ault & Company assuming the ~~November Security Agreement pursuant to which BNI and Ault Lending granted to the Investors~~Term Note from us , we issued a ~~security interest~~12% demand promissory note in the ~~Collateral.~~principal face amount of $1.1 million (the “Second Demand Note”) to Ault & Company.

We believe our current cash on hand combined with the proceeds from the 2022 ATM Offering are sufficient to meet our operating and capital requirements for at least the next twelve months from the date the financial statements for the nine months ended September 30, 2022 are issued.

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.

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;

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;

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

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 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.~~

~~On September 2, 2022, the Company and its subsidiary filed an answer to the Amended Complaint and asserted numerous affirmative defenses.~~

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.~~

On November 1, 2022, the parties informed the Court that they reached a settlement in principle and requested an extension of time, until November 22, 2022, to file motions for summary judgment to allow the parties time to draft formal settlement documents. The Court granted the parties’ request and the deadline for us and Mr. Ault to file their summary judgment is November 22, 2022.

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

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 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 of updated risk factors filed in our Quarterly Report on Form 10-Q10-K/A for the ~~quarter~~year ended ~~June 30, 2022, and the first risk factor under the “~~~~Risks Related to Ownership of Our Common Stock~~~~” section of Risk Factors section of our 2021 Annual Report on Form 10-K, which is hereby amended and restated in its entirety to read as follows:~~December 31, 2022.

“~~If we do not continue to satisfy the NYSE American continued listing requirements, our common stock could be delisted from NYSE American.~~

~~The listing of our common stock on the NYSE American is contingent on our compliance with the NYSE American’s conditions for continued listing. On November 2, 2022, we~~ ~~received a deficiency letter (the “~~~~Letter~~~~”) from the NYSE American LLC (the “~~~~NYSE American~~~~” or the “~~~~Exchange~~~~”) indicating that we are not in compliance with the Exchange’s continued listing standard set forth in Section 1003(f)(v) of the NYSE American Company Guide (the “~~~~Company Guide~~”) because our shares of common stock for a substantial period of time have been selling at a low price per share, which the Exchange determined to be a 30-trading day average price of less than $0.20 per share. The Letter has no immediate effect on the listing or trading of our common stock and our common stock will continue to trade on the NYSE American under the symbol “NILE”. Additionally, the Letter does not result in the immediate delisting of our common stock from the NYSE American.

Pursuant to Section 1003(f)(v) of the Company Guide, the NYSE American staff determined that our continued listing is predicated on us demonstrating sustained price improvement within a reasonable period of time or effecting a reverse stock split of our common stock, which the staff determined to be no later than May 2, 2023. We intend to regain compliance with the NYSE American’s continued listing standards by undertaking a measure or measures that are in our best interests and our stockholders.

We intend to closely monitor the price of our common stock and consider available options if our common stock does not trade at a consistent level likely to result in us regaining compliance by May 2, 2023. We are actively engaged in discussions with the Exchange and are developing plans to regain compliance with the NYSE American’s continued listing standards within the cure period.

If we should fail to achieve compliance with NYSE American low-priced continued listing standard or fail to meet any other NYSE American listing requirement, then our common stock will be subject to delisting. In the event our common stock is no longer listed for trading on the NYSE American, our trading volume and share price may decrease and we may experience further difficulties in raising capital which could materially affect our operations and financial results. Further, delisting from the NYSE American could also have other negative effects, including potential loss of confidence by partners, lenders, suppliers and employees and could also trigger various defaults under our lending agreements and other outstanding agreements. Finally, delisting could make it harder for us to raise capital and sell securities. You may experience future dilution as a result of future equity offerings. In order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock.

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

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

From ~~July~~April 1, ~~2022~~2023 through ~~September~~June 30, ~~2022,~~2023, Ault Alpha LP purchased ~~21,024,871~~19,659 shares of common ~~stock and 9,025 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, 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		-		-

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
July 1, 2022 – July 31, 2022 7,063,221 $ 0.33
August 1, 2022 – August 31, 2022 10,432,136 $ 0.34
September 1, 2022 – September 30, 2022 3,529,541 $ 0.24
Total 21,024,871 $ 0.32 - -

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

~~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
July 1, 2022 – July 31, 2022 37,000 $ 24.30
August 1, 2022 – August 31, 2022 - $ -
September 1, 2022 – September 30, 2022 1,000 $ 13.89
Total 38,000 $ 24.02 - -

~~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 ~~Note~~ ~~Purchase Agreement.~~Designation of Series E Convertible Preferred Stock. Incorporated by reference to the Current Report on Form 8-K filed on A~~ugust 11, 2022~~March 30, 2023 as Exhibit ~~10.1~~3.1 thereto.
~~10.2~~3.14		~~Form~~Certificate of ~~Note~~.Designation of Series F Convertible Preferred Stock. Incorporated by reference to the Current Report on Form 8-K filed on A~~ugust 11, 2022~~March 30, 2023 as Exhibit ~~4.1~~3.2 thereto.
~~10.3~~3.15		~~Form~~Certificate of ~~Security~~ ~~Agreement.~~Designation of Series G Convertible Preferred Stock. Incorporated by reference to the Current Report on Form 8-K filed on A~~ugust 11, 2022~~March 30, 2023 as Exhibit ~~10.2~~3.3 thereto.
~~10.4~~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.~~Subsidiary Guaranty~~
.10.1	Securities Purchase Agreement, dated May 1, 2023. Incorporated by reference to the Current Report on Form 8-K filed on A~~ugust 11, 2022~~May 2, 2023 as Exhibit ~~10.3~~10.1 thereto.
~~10.5~~10.2		Form of ~~Parent Guaranty~~.Warrant. Incorporated by reference to the Current Report on Form 8-K filed on A~~ugust 11, 2022~~May 2, 2023 as Exhibit ~~10.4~~10.2 thereto.
~~10.6~~10.3		~~Form of~~ ~~Master~~ ~~Agreement.~~At-The-Market Issuance Sales Agreement, dated June 9, 2023, with Ascendiant Capital Markets, LLC. Incorporated by reference to the Current Report on Form 8-K filed on A~~ugust 16, 2022~~June 9, 2023 as Exhibit 10.1 thereto.
~~10.7~~10.4		Form of ~~Order Form~~.Loan Agreement, dated June 8, 2023. Incorporated by reference to the Current Report on Form 8-K filed on A~~ugust 16, 2022~~June 14, 2023 as Exhibit ~~10.2~~10.1 thereto.
~~10.8~~		~~Form of Note Purchase Agreement, dated November 18, 2022. Incorporated by reference to the Quarterly Report on Form 10-Q filed on November 21, 2022 as Exhibit 10.8 thereto.~~
~~10.9~~		~~Form of Note issued November 18, 2022. Incorporated by reference to the Quarterly Report on Form 10-Q filed on November 21, 2022 as Exhibit 10.9 thereto.~~
~~10.10~~		~~Form of Security Agreement, dated November 18, 2022. Incorporated by reference to the Quarterly Report on Form 10-Q filed on November 21, 2022 as Exhibit 10.10 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)

2420

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

~~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

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

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PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	F-1

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

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

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

	Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~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	1615

Item 4.	Controls and Procedures	1615

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	1817
Item 1A.	Risk Factors	2017
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2017
Item 3.	Defaults Upon Senior Securities	2118
Item 4.	Mine Safety Disclosures	2118
Item 5.	Other Information	2118
Item 6.	Exhibits	2218

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

	For the quarterly period ended ~~September~~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 ________.


	Series A & B								Additional						Other								Total
	Preferred Stock				Common Stock				Paid-In			Accumulated			Comprehensive			Non-Controlling		Treasury			Stockholders’
	Shares		Amount		Shares		Amount		Capital			Deficit			Loss			Interest		Stock			Equity
BALANCES, July 1, 2021		132,040	$	-		56,159,963	$	56,000	$	311,759,000		$	(81,047,000	)	$	(743,000	)	$	1,364,000	$	-		$	231,389,000
Issuance of common stock for restricted stock awards		-		-		449,373		-		-			-			-			-		-			-
Stock-based compensation:
Options		-		-		-		-		1,794,000			-			-			-		-			1,794,000
Restricted stock awards		-		-		-		-		2,312,000			-			-			-		-			2,312,000
Issuance of stock options at Gresham Worldwide		-		-		-		-		-			-			-			42,000		-			42,000
Issuance of common stock for cash		-		-		6,737,585		7,000		16,432,000			-			-			-		-			16,439,000
Financing cost in connection with sales of common stock		-		-		-		-		(411,000	)		-			-			-		-			(411,000	)
Adjustment to treasury stock for holdings in investment partnerships		-		-		-		-		-			-			-			-		(2,773,000	)		(2,773,000	)
Comprehensive loss:
Net loss		-		-		-		-		-			(47,719,000	)		-			-		-			(47,719,000	)
Preferred dividends		-		-		-		-		-			(4,000	)		-			-		-			(4,000	)
Foreign currency translation adjustments		-		-		-		-		-			-			(182,000	)		-		-			(182,000	)
Net income attributable to non-controlling interest		-		-		-		-		-			-			-			96,000		-			96,000
Other		-		-		-		-		-			(2,000	)		-			-		-			(2,000	)
BALANCES, September 30, 2021		132,040	$	-		63,346,921	$	63,000	$	331,886,000		$	(128,772,000	)	$	(925,000	)	$	1,502,000	$	(2,773,000	)	$	200,981,000

Schedule of condensed consolidated statements of operations and comprehensive loss
	For the Three Months Ended
	September 30, 2021
	As Reported			Adjustment			As Restated
Revenue	$	7,803,000		$	-		$	7,803,000
Revenue, cryptocurrency mining, net		272,000						272,000
Revenue, lending and trading activities		(38,869,000	)					(38,869,000	)
Total revenue		(30,794,000	)		-			(30,794,000	)
Cost of revenue, products		5,011,000						5,011,000
Cost of revenue, cryptocurrency mining		260,000						260,000
Total cost of revenue		5,271,000						5,271,000
Gross profit		(36,065,000	)		-			(36,065,000	)

Operating expenses
Research and development		524,000						524,000
Selling and marketing		1,993,000						1,993,000
General and administrative		11,292,000						11,292,000
Total operating expenses		13,809,000			-			13,809,000
Loss from operations		(49,874,000	)					(49,874,000	)
Other income (expenses)
Interest and other income		125,000						125,000
Change in fair value of equity securities, related party		-			(4,849,000	)		(4,849,000	)
Accretion of discount on note receivable, related party		4,210,000						4,210,000
Interest expense		(140,000	)					(140,000	)
Change in fair value of marketable equity securities		(750,000	)					(750,000	)
Realized gain on marketable securities		30,000						30,000
Change in fair value of warrant liability		259,000						259,000
Total other income (expenses), net		3,734,000			(4,849,000	)		(1,115,000	)
Loss before income taxes		(46,140,000	)		(4,849,000	)		(50,989,000	)
Income tax provision		3,366,000						3,366,000
Net loss		(42,774,000	)		(4,849,000	)		(47,623,000	)
Net income attributable to non-controlling interest		(96,000	)					(96,000	)
Net loss attributable to Ault Alliance, Inc.		(42,870,000	)		(4,849,000	)		(47,719,000	)
Preferred dividends		(4,000	)					(4,000	)
Net loss available to common stockholders	$	(42,874,000	)	$	(4,849,000	)	$	(47,723,000	)

Basic net income (loss) per common share	$	(0.73	)				$	(0.81	)
Diluted net income (loss) per common share	$	(0.73	)				$	(0.81	)

Weighted average basic common shares outstanding		58,987,000						58,987,000
Weighted average diluted common shares outstanding		58,987,000						58,987,000

Comprehensive loss
Net loss available to common stockholders	$	(42,874,000	)	$	(4,849,000	)	$	(47,723,000	)
Other comprehensive income (loss)
Foreign currency translation adjustment		(182,000	)					(182,000	)
Net unrealized gain on derivative securities of related party		(4,849,000	)		4,849,000			-
Other comprehensive (loss) income		(5,031,000	)		4,849,000			(182,000	)
Total comprehensive loss	$	(47,905,000	)	$	-		$	(47,905,000	)

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


	July 1, 2021
	As Reported			Adjustment			As Restated
STOCKHOLDERS’ EQUITY
Common stock	$	56,000		$	-		$	56,000
Additional paid-in capital		311,759,000						311,759,000
Accumulated deficit		(77,190,000	)		(3,857,000	)		(81,047,000	)
Accumulated other comprehensive loss		(4,600,000	)		3,857,000			(743,000	)
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 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 September 30, 2022
Investments in other equity securities that do not report net asset value	$	41,641,000	$	-	$	-	$	41,641,000

Schedule of final allocation	Preliminary allocation
Total purchase consideration	$	20,706,000
Fair value of non-controlling interest		6,738,000
Total consideration	$	27,444,000

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		(5,018,000	)
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		(13,446,000	)
Goodwill	$	40,890,000

Schedule of preliminary allocation	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:
Tradenames (19 year estimated useful life)		2,470,000
Customer relationships (16 year estimated useful life)		1,380,000
Proprietary technology (3 year estimated useful life)		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

Schedule of pro forma consolidated results of operations	Nine Months Ended
	September 30, 2022
Total revenues	$	131,609,000
Net loss attributable to BitNile Holdings, Inc.	$	(62,202,000	)

Schedule of goodwill	Goodwill
Balance as of January 1, 2022	$	10,090,000
Acquisition of AVLP		40,890,000
Acquisition of SMC		3,184,000
Acquisition of GIGA		1,271,000
Effect of exchange rate changes		(891,000	)
Balance as of September 30, 2022	$	54,544,000

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		4,840,000			-
Unrealized loss in common stock of Alzamend		(5,676,000	)		-
Amortization of related party investment		-			(173,000	)
Accrued interest		-			149,000
Balance at September 30, 2022	$	12,394,000		$	2,818,000

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		801,000	$	1.05		840,000
Unrealized loss in common stock of Alzamend						(5,676,000	)
Balance at September 30, 2022		10,415,000	$	1.19	$	12,394,000

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

Schedule of financial instrument	September 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		4.1	%		1.3	%

Schedule of principal maturity
Year	Principal
2022	$	18,049,000
2023		818,000
2024		-
2025		58,351,000
Total	$	77,218,000

Schedule of net loss per share
	September 30,
	2022		2021
Stock options		6,396,000		4,761,000
Restricted stock grants		2,085,000		-
Warrants		18,493,000		5,936,000
Convertible notes		165,000		165,000
Convertible preferred stock		2,000		2,000
Total		27,141,000		10,864,000

	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
July 1, 2022 – July 31, 2022		7,063,221	$	0.33
August 1, 2022 – August 31, 2022		10,432,136	$	0.34
September 1, 2022 – September 30, 2022		3,529,541	$	0.24
Total		21,024,871	$	0.32		-		-