UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2023

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to ________________

Commission file number 1-12711

HYPERSCALE DATA, INC.

(Exact name of registrant as specified in its charter)

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

11411 Southern Highlands Pkwy, Suite 240,

Las Vegas, NV

89141

(949) 444-5464

(Address of principal executive offices)

(Zip Code)

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	GPUS	NYSE American
13.00% Series D Cumulative Redeemable Perpetual Preferred Stock, par value $0.001 per share	GPUS PRD	NYSE American

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No þ

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

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

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

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

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ¨

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ¨

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨

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

As of June 30, 2023, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $6.3 million based on the closing sale price as reported on the NYSE American of $118.7151. Shares of the registrant’s common stock held by executive officers, directors or 10% beneficial owners and by each other person who may be deemed to be an affiliate of the registrant have been excluded from this computation. This calculation does not reflect a determination that certain persons are affiliates of the registrant for any other purpose.

There were 30,065,399 shares of common stock outstanding as of April 15, 2024.

Documents incorporated by reference: None

EXPLANATORY NOTE

Hyperscale Data, Inc. (formerly known as Ault Alliance, Inc.) (the “Company”) is filing this Amendment No. 1 on Form 10-K/A (the “Amendment”) to its Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Original Filing”), which was filed with the Securities and Exchange Commission (“SEC”) on April 16, 2024, solely to correct typographical errors in the Report of Independent Registered Public Accounting Firm included in Item 8 of Part II of the Original Filing (the “Audit Reports”). The corrections to the Audit Reports were the result of inadvertent typographical errors included in the Original Filing.

As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), because the Original Report was included within Item 8 of the Original Form 10-K, this Amendment sets forth Item 8 in its entirety. Except for the correction made to the Report of Independent Registered Public Accounting Firm in the Original Report noted above, no revisions or modifications have been made to the financial statements or any other information contained within Item 8 of the Original Form 10-K.

Additionally, in accordance with Rule 12b-15, the Company is including with this Amendment currently dated certifications from its Chief Executive Officer and Chief Financial Officer. These certifications are filed or furnished, as applicable, as Exhibits 31.1, 31.2, and 32.1. The Company is also filing updated consents from Marcum LLP and Ziv Haft, BDO member firm, as Exhibits 23.1 and 23.2, respectively. This Amendment consists solely of the preceding cover page, this explanatory note, the complete text of Item 8, the complete text of Part IV, Item 15, “Exhibits and Financial Statement Schedules,” the signature page, the certifications, and the updated Marcum LLP and Ziv Haft, BDO member firm, consents, as well as updated inline XBRL exhibits.

On September 10, 2024, the Company changed its name to Hyperscale Data, Inc. and its ticker was changed to “GPUS.” The name change did not affect the rights of security holders of the Company. Except for changing the Company name on the cover page of this Amendment, the signature page to this Amendment and the certifications filed as exhibits hereto, the name of the Company reflected in this Amendment is to the former name, Ault Alliance, Inc. In addition, the exhibit index was revised solely to indicate that certain exhibits listed therein were previously filed with the Original Filing and have not been filed with this Amendment.

Except as noted above, the information contained in this Amendment does not update or reflect events occurring after the filing of the Original Form 10-K. This Amendment should be read in conjunction with the Company’s other filings with the SEC, including the Original Form 10-K.

TABLE OF CONTENTS

		Page
PART II
Item 8.	Financial Statements and Supplementary Data	F-1 – F-54
PART IV
Item 15.	Exhibits and Financial Statement Schedules	5
	Signatures	8

PART IV

ITEM 15.

EXHIBITS

Exhibit Number		Description
2.1		Agreement and Plan of Merger dated January 7, 2021. Incorporated by reference to the Current Report on Form 8-K filed on January 19, 2021 as Exhibit 3.1 thereto.
2.2		Agreement and Plan of Merger dated December 1, 2021. Incorporated by reference to the Current Report on Form 8-K filed on December 13, 2021 as Exhibit 2.1 thereto.
2.3		Agreement and Plan of Merger dated December 20, 2022. Incorporated by reference to the Current Report on Form 8-K filed on December 21, 2022 as Exhibit 2.1 thereto.
3.1		Certificate of Incorporation, dated September 22, 2017. Incorporated herein by reference to the Current Report on Form 8-K filed on December 29, 2017 as Exhibit 3.1 thereto.
3.2		Certificate of Designations of Rights and Preferences of 10% Series A Cumulative Redeemable Perpetual Preferred Stock, dated September 13, 2018. Incorporated herein by reference to the Current Report on Form 8-K filed on September 14, 2018 as Exhibit 3.1 thereto.
3.3		Certificate of Amendment to Certificate of Incorporation, dated January 2, 2019. Incorporated by reference to the Current Report on Form 8-K filed on January 3, 2019 as Exhibit 3.1 thereto.
3.4		Certificate of Amendment to Certificate of Incorporation (1-for-20 Reverse Stock Split of Common Stock), dated March 14, 2019. Incorporated herein by reference to the Current Report on Form 8-K filed on March 14, 2019 as Exhibit 3.1 thereto.
3.5		Certificate of Ownership and Merger. Incorporated by reference to the Current Report on Form 8-K filed on January 19, 2021 as Exhibit 2.1 thereto.
3.6		Certificate of Ownership and Merger, as filed with the Secretary of State of the State of Delaware on December 1, 2021. Incorporated by reference to the Current Report on Form 8-K filed on December 13, 2021 as Exhibit 3.1 thereto.
3.7		Certificate of Designation, Preferences and Rights relating to the 13.00% Series D Cumulative Redeemable Perpetual Preferred Stock, dated May 25, 2022. Incorporated by reference to the Registration Statement on Form 8-A filed on May 26, 2022 as Exhibit 3.6 thereto.
3.8		Certificate of Increase of the Designated Number of Shares of 13.00% Series D Cumulative Redeemable Perpetual Preferred Stock, dated June 10, 2022. Incorporated by reference to the Current Report on Form 8-K filed on June 14, 2022 as Exhibit 3.1 thereto.
3.9		Certificate of Correction to the Certificate of Designation, Rights and Preferences of 13.00% Series D Cumulative Redeemable Perpetual Preferred Stock, dated June 16, 2022. Incorporated by reference to the Current Report on Form 8-K filed on June 17, 2022 as Exhibit 3.1 thereto.
3.10		Certificate of Amendment to Certificate of Incorporation (1-for-300 Reverse Stock Split of Common Stock), dated May 15, 2023. Incorporated herein by reference to the Current Report on Form 8-K filed on May 16, 2023 as Exhibit 3.1 thereto.
3.11		Certificate of Elimination of the Series E convertible redeemable preferred stock of Ault Alliance, Inc. Incorporated herein by reference to the Current Report on Form 8-K filed on August 18, 2023 as Exhibit 3.1 thereto.
3.12		Certificate of Elimination of the Series F convertible redeemable preferred stock of Ault Alliance, Inc. Incorporated herein by reference to the Current Report on Form 8-K filed on August 18, 2023 as Exhibit 3.2 thereto.
3.13		Certificate of Elimination of the Series G convertible redeemable preferred stock of Ault Alliance, Inc. Incorporated herein by reference to the Current Report on Form 8-K filed on August 18, 2023 as Exhibit 3.3 thereto.
3.14		Certificate of Designation of Preferences, Rights and Limitations of Series C Cumulative Preferred Stock, dated November 15, 2023. Incorporated herein by reference to the Current Report on Form 8-K filed on November 21, 2023 as Exhibit 3.1 thereto.
3.15		Certificate of Elimination of the Series B convertible redeemable preferred stock of Ault Alliance, Inc. Incorporated herein by reference to the Current Report on Form 8-K filed on December 12, 2023 as Exhibit 3.1 thereto.
3.16		Certificate of Amendment to Certificate of Incorporation filed with the Delaware Secretary of State on January 12, 2024. Incorporated by reference to the Current Report on Form 8-K filed on January 12, 2024 as Exhibit 3.2 thereto.
3.17		Second Amended and Restated Bylaws, effective as of January 11, 2024. Incorporated by reference to the Current Report on Form 8-K filed on January 12, 2024 as Exhibit 3.1 thereto.
3.18		Certificate of Increase to Certificate Designations of Preferences, Rights and Limitations of Series C Convertible Preferred Stock. Incorporated herein by reference to the Current Report on Form 8-K filed on April 4, 2024 as Exhibit 3.1 thereto.
4.1		Form of Warrant, dated as of May 28, 2020. Incorporated by reference to the Current Report on Form 8-K filed on May 29, 2020 as Exhibit 4.3 thereto.
4.2		Form of Warrant, dated June 26, 2020. Incorporated by reference to the Current Report on Form 8-K filed on June 29, 2020 as Exhibit 4.2 thereto.
4.3		Form of Warrant. Incorporated by reference to the Current Report on Form 8-K filed on July 17, 2020 as Exhibit 4.2 thereto.
4.4		Form of Warrant, dated October 22, 2020. Incorporated by reference to the Current Report on Form 8-K filed on October 23, 2020 as Exhibit 4.2 thereto.

Exhibit Number		Description
4.5		Form of Warrant dated October 27, 2020. Incorporated by reference to the Current Report on Form 8-K filed on October 27, 2020 as Exhibit 4.3 thereto.
4.6		Form of Warrant dated October 27, 2020. Incorporated by reference to the Current Report on Form 8-K filed on October 27, 2020 as Exhibit 4.4 thereto.
4.7		Form of Warrant issued to Esousa Holdings, LLC, dated November 19, 2020. Incorporated by reference to the Current Report on Form 8-K filed on November 20, 2020 as Exhibit 4.3 thereto.
4.8		Form of Senior Indenture between BitNile Holdings, Inc. and the Trustee. Incorporated by reference to the Registration Statement on Form S-3 filed on October 29, 2021 as Exhibit 4.1 thereto.
4.9		Form of Subordinated Indenture between BitNile Holdings, Inc. and the Trustee. Incorporated by reference to the Registration Statement on Form S-3 filed on October 29, 2021 as Exhibit 4.2 thereto.
4.10		Form of Class A Warrant, dated December 29, 2021. Incorporated by reference to the Current Report on Form 8-K filed on January 3, 2022 as Exhibit 4.2 thereto.
4.11		Form of Class B Warrant, dated December 29, 2021. Incorporated by reference to the Current Report on Form 8-K filed on January 3, 2022 as Exhibit 4.3 thereto.
4.12		Form of Note. Incorporated by reference to the Current Report on Form 8-K filed on August 11, 2022 as Exhibit 4.1 thereto.
4.13		Form of Class A Warrant. Incorporated by reference to the Current Report on Form 8-K filed on November 8, 2022 as Exhibit 4.1 thereto.
4.14		Form of Class B Warrant. Incorporated by reference to the Current Report on Form 8-K filed on November 8, 2022 as Exhibit 4.2 thereto.
4.15		Form of Note. Incorporated by reference to the Current Report on Form 8-K filed on December 19, 2022 as Exhibit 4.1 thereto.
4.16		Form of amendment #1 to senior secured promissory note. Incorporated by reference to the Quarterly Report on Form 10-Q filed on May 22, 2023 as Exhibit 10.7 thereto.
4.17		Form of 7.00% Senior Note due 2024. Incorporated by reference to the Current Report on Form 8-K filed on September 1, 2023 as Exhibit 4.1 thereto.
4.18		Form of 8.50% Senior Note due 2026. Incorporated by reference to the Current Report on Form 8-K filed on September 1, 2023 as Exhibit 4.2 thereto.
4.19		Form of 10.50% Senior Note due 2028. Incorporated by reference to the Current Report on Form 8-K filed on September 1, 2023 as Exhibit 4.3 thereto.
4.20		Form of Note. Incorporated by reference to the Current Report on Form 8-K filed on September 28, 2023 as Exhibit 4.1 thereto.
4.21		Form of Warrant issued October 13, 2023. Incorporated by reference to the Current Report on Form 8-K filed on October 16, 2023 as Exhibit 4.2 thereto.
4.22		Form of Warrant. Incorporated by reference to the Current Report on Form 8-K filed on November 7, 2023 as Exhibit 10.2 thereto.
4.23		Securities Purchase Agreement, dated as of November 14, 2023, by and between Ault Alliance, Inc. and RiskOn International, Inc. Incorporated by reference to the Current Report on Form 8-K filed on November 15, 2023 as Exhibit 10.1 thereto.
4.24		Form of Certificate of Designations of Rights, Preferences and Limitations of Series D Convertible Preferred Stock of RiskOn International, Inc. Incorporated by reference to the Current Report on Form 8-K filed on November 15, 2023 as Exhibit 10.2 thereto.
4.25		Note Purchase Agreement, dated March 11, 2024, by and among the Company and the Investors. Incorporated by reference to the Current Report on Form 8-K filed on March 12, 2024 as Exhibit 10.1 thereto.
4.26		Form of Note. Incorporated by reference to the Current Report on Form 8-K filed on March 12, 2024 as Exhibit 4.1 thereto.
4.27+		Description of Capital Stock.
10.1		Loan and Security Agreement between the Company and Avalanche International Corp., dated August 21, 2017. Incorporated by reference to the Current Report on Form 8-K filed on September 7, 2017 as Exhibit 10.1 thereto.
10.2		Amendment to MTIX Limited Purchase Order Number 2121. Incorporated by reference to the Current Report on Form 8-K filed on February 25, 2020 as Exhibit 10.2 thereto.
10.3*		2021 Stock Incentive Plan. Incorporated by reference to the Company’s Definitive Proxy Statement on Form DEF 14A filed on July 6, 2021 as Appendix B thereto.
10.4*		2021 Employee Stock Purchase Plan. Incorporated by reference to the Company’s Definitive Proxy Statement on Form DEF 14A filed on July 6, 2021 as Appendix C thereto.
10.5*		Form of Stock Option Grants. Incorporated by reference to the Company’s Registration Statement on Form S-8 filed on August 26, 2021 as Exhibit 99.3 thereto.
10.6*		Form of Restricted Stock Unit Grants. Incorporated by reference to the Company’s Registration Statement on Form S-8 filed on August 26, 2021 as Exhibit 99.4 thereto.

Exhibit Number		Description
10.7		Form of Construction Loan Agreement. Incorporated by reference to the Current Report on Form 8-K filed on December 23, 2021 as Exhibit 10.1 thereto.
10.8		Form of Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing. Incorporated by reference to the Current Report on Form 8-K filed on December 23, 2021 as Exhibit 10.2 thereto.
10.9		Form of Assignment of Leases, Rents and Profits. Incorporated by reference to the Current Report on Form 8-K filed on December 23, 2021 as Exhibit 10.3 thereto.
10.10		Form of Guaranty. Incorporated by reference to the Current Report on Form 8-K filed on December 23, 2021 as Exhibit 10.4 thereto.
10.11*		2022 Stock Incentive Plan. Incorporated by reference to the Company’s Definitive Proxy Statement on Form DEF 14A filed on September 23, 2022 as Annex B thereto.
10.12		Form of Securities Purchase Agreement. Incorporated by reference to the Current Report on Form 8-K filed on December 19, 2022 as Exhibit 10.1 thereto.
10.13		Form of Guaranty. Incorporated by reference to the Current Report on Form 8-K filed on December 19, 2022 as Exhibit 10.3 thereto.
10.14		Form of Amended and Restated Amendment to Securities Purchase Agreement. Incorporated by reference to the Current Report on Form 8-K filed on January 3, 2023 as Exhibit 10.4 thereto.
10.15		Form of Share Exchange Agreement, entered into February 8, 2023. Incorporated by reference to the Current Report on Form 8-K filed on February 10, 2023 as Exhibit 10.1 thereto.
10.16		Form of Series B Preferred Stock Certificate of Designations. Incorporated by reference to the Current Report on Form 8-K filed on February 10, 2023 as Exhibit 10.2 thereto.
10.17		Form of Series C Preferred Stock Certificate of Designations. Incorporated by reference to the Current Report on Form 8-K filed on February 10, 2023 as Exhibit 10.3 thereto.
10.18		Form of Ault Alliance, Inc. Investor Agreement relating to 7.00% Senior Notes due 2024, 8.50% Senior Notes due 2026 and 10.50% Senior Notes due 2028. Incorporated by reference to the Current Report on Form 8-K filed on September 1, 2023 as Exhibit 10.1 thereto.
10.19		Securities Exchange Agreement, dated September 27, 2023, by and between the Company and the Investor. Incorporated by reference to the Current Report on Form 8-K filed on September 28, 2023 as Exhibit 10.1 thereto.
10.20		Securities Purchase Agreement, dated November 6, 2023, by and between Ault Alliance, Inc. and Ault & Company, Inc. Incorporated by reference to the Current Report on Form 8-K filed on November 7, 2023 as Exhibit 10.1 thereto.
10.21		Form of Loan and Guaranty Agreement, dated December 14, 2023. Incorporated by reference to the Current Report on Form 8-K filed on December 15, 2023 as Exhibit 10.1 thereto.
10.22		Form of Security Agreement. Incorporated by reference to the Current Report on Form 8-K filed on December 15, 2023 as Exhibit 10.2 thereto.
10.23		Form of Security Agreement. Incorporated by reference to the Current Report on Form 8-K filed on December 15, 2023 as Exhibit 10.3 thereto.
10.24		Form of Florida Mortgage. Incorporated by reference to the Current Report on Form 8-K filed on December 15, 2023 as Exhibit 10.4 thereto.
10.25		Form of Michigan Mortgage. Incorporated by reference to the Current Report on Form 8-K filed on December 15, 2023 as Exhibit 10.5 thereto.
10.26		Form of Aircraft Mortgage. Incorporated by reference to the Current Report on Form 8-K filed on December 15, 2023 as Exhibit 10.6 thereto.
10.27		Amendment to the Securities Purchase Agreement, Certificate of Designation and Series C Warrants, dated March 25, 2024. Incorporated by reference to the Current Report on Form 8-K filed on March 26, 2024 as Exhibit 10.3 thereto.
10.28+		Luxor Mining Pool Service Level Agreement, dated March 28, 2023, by and between Bitnile Inc. (n/k/a Sentinum Inc.) and Luxor Technology Corporation.
10.29+		Master Services Agreement, dated March 23, 2023, by and between Bitnile, Inc. (n/k/a Sentinum Inc.) and Core Scientific, Inc.
10.30		Amendment to the Loan and Guaranty Agreement, dated April 15, 2024. Incorporated by reference to the Current Report on Form 8-K filed on April 16, 2024 as Exhibit 10.1 thereto.
21+		List of subsidiaries.
23.1**		Consent of Marcum LLP.
23.2**		Consent of Ziv Haft, BDO member firm.
31.1**		Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).
31.2**		Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).
32.1***		Certification of Chief Executive Officer and Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code.
97.1+		Ault Alliance, Inc. Clawback Policy.
101.INS**		Inline XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH**		Inline XBRL Taxonomy Extension Schema Document.
101.CAL**		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF**		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB**		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

Previously filed.

Indicates management contract or compensatory plan or arrangement.

Filed herewith.

***

Furnished herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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: September 24, 2024

	HYPERSCALE DATA, 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 Financial and Accounting Officer)

ITEM 8.

FINANCIAL STATEMENTS

AULT ALLIANCE, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm – Marcum LLP (PCAOB ID Number 688)	F-2

Report of Independent Registered Public Accounting Firm – Ziv Haft. (PCAOB ID Number 1185)	F-4

Consolidated Balance Sheets as of December 31, 2023 and 2022	F-6

Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2023 and 2022	F-8

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2023 and 2022	F-9

Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022	F-11

Notes to Consolidated Financial Statements	F-13 – F-54

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

Ault Alliance, Inc. and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Ault Alliance, Inc. and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We did not audit the December 31, 2023 and 2022 financial statements of Enertec Systems 2001 Ltd., a wholly-owned subsidiary, which statements reflect 5% and 3% of the total consolidated assets as of December 31, 2023 and 2022, respectively, 10% and 11% of the total consolidated revenues for the year ended December 31, 2023 and 2022, respectively. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Enertec Systems 2001 Ltd., is based solely on the report of the other auditors.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

F-2

Evaluation of the Accounting for and Disclosure of Bitcoin Mining Revenue

As disclosed in Note 3, the Company participates in a digital asset mining pool by providing hash calculation services to the mining pool operator. During the years ended December 31, 2023 and 2022, the Company recognized revenue from bitcoin mining of approximately $33.1 million and $16.7 million, respectively.

We identified the auditing of revenue recognized from bitcoin mining as a critical audit matter due to the nature and extent of audit effort required to perform audit procedures over the completeness and occurrence of bitcoin mining revenue recognized by the Company.

The primary procedures we performed to address this critical audit matter included the following:

We performed site visits of the facilities where the Company’s mining hardware is located, which included observations of the physical controls and mining equipment observation procedures.

On a sample basis, we tested the hash calculation services contributed by the Company’s mining hardware.

We performed certain substantive analytical procedures developing an expectation for the amount to be recorded using hash calculation services data, the calculation prescribed in the contract with the mining pool operator and electricity consumption data and comparing our expectation to the amount recorded by the Company.

We evaluated and tested management’s valuation of bitcoin earned by obtaining independent bitcoin prices and comparing those to the prices used by the Company.

We obtained and evaluated the contract with the third-party mining pool operator and independently confirmed with the third-party mining pool operator the significant contractual terms utilized in the determination of mining revenue, total mining rewards earned, and the digital asset wallet addresses in which the rewards are deposited.

We independently obtained evidence from the Bitcoin blockchain to test the occurrence and accuracy of mining revenue.

/s/ Marcum llp

Marcum llp

We have served as the Company’s auditor since 2016.

New York, New York

April 16, 2024

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Management of Enertec systems 2001 Ltd.

Karmiel, Israel.

Opinion on the Financial Statements

We have audited the statements of financial position of Enertec systems 2001 Ltd. ("the Company") as of December 31, 2023 and 2022, the related statements of comprehensive profit /(loss), changes in shareholders' equity, and cash flows for each of the years then ended, and the related notes (collectively, the financial statements (not presented herein)). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Estimation of total contract costs to be incurred for fixed-price long-term contract revenue

As described in Note 2 to the financial statements, the Company recognizes a significant portion of its revenue over time using the cost-to-cost measure of progress, which measures a contract's progress toward completion based on the ratio of actual contract costs incurred to date to the Company’s estimated costs at completion. The cost estimation process for these contracts is based on the knowledge and experience of the Company's project managers, engineers, and financial professionals. Changes in job performance, job conditions and management’s assessment of expected variable consideration are factors that influence estimates of the total contract transaction price, total costs to complete those contracts and the Company’s revenue recognition.

F-4

We identified estimated costs to complete on certain revenue contracts as a critical audit matter. The determination of the total estimated cost and progress toward completion requires management to make significant estimates and assumptions. Total estimated costs to complete projects include various costs such as direct labor, material, and subcontract costs. Changes in these estimates can have a significant impact on the revenue recognized each period. Auditing these estimates involved especially challenging auditor judgment in evaluating the reasonableness of management’s assumptions and estimates over the duration of these contracts.

The primary procedures we performed to address this critical audit matter included:

Examining a sample of revenue contracts to evaluate the appropriateness of the Company’s identification of performance obligations and the determination of method for measuring contract progress.

Assessing the reasonableness of the estimated costs to complete by selecting a sample of open projects and (i) testing consistency of the estimated total contract costs projected in the current year versus the original or prior period, (ii) assessing the status of completion by testing of a sample of project costs incurred to date and interviewing the Company’s management to evaluate progress to date, the estimate of remaining costs to be incurred, and factors impacting the amount of time and cost to complete.

Assessing the reasonableness of changes in estimated costs to complete by comparing project profitability estimates in the current period to historical estimates and actual performance and investigating reasons for changes in expected costs and project margins.

Evaluating the reasonableness of management’s budgeting process by selecting a sample of contract budgets for projects that were completed during the period and performing a retrospective review of budget to actual variances.

	/S/ Ziv Haft.
	Certified Public Accountants (Isr.)
	BDO Member Firm

We have served as the Company’s auditor since 2012.

Tel-Aviv, Israel

April 15, 2024

F-5

AULT ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	December 31,		December 31,
	2023		2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	8,626,000	$	7,942,000
Restricted cash		4,966,000		732,000
Cash and marketable securities held in trust account		-		118,193,000
Marketable equity securities		27,000		6,590,000
Accounts receivable, net		10,839,000		19,322,000
Inventories		8,384,000		22,036,000
Investment in promissory notes and other, related party		3,968,000		2,868,000
Loans receivable, current		1,234,000		7,593,000
Prepaid expenses and other current assets		9,450,000		5,074,000
Current assets of discontinued operations		90,991,000		5,959,000
TOTAL CURRENT ASSETS		138,485,000		196,309,000

Cash and marketable securities held in trust account		2,200,000		-
Intangible assets, net		5,754,000		34,786,000
Goodwill		6,088,000		27,902,000
Property and equipment, net		108,829,000		146,779,000
Right-of-use assets		6,315,000		8,419,000
Investments in common stock, related parties		679,000		6,449,000
Investments in other equity securities		21,767,000		42,494,000
Other assets		9,073,000		5,841,000
Non-current assets of discontinued operations		-		92,535,000
TOTAL ASSETS	$	299,190,000	$	561,514,000

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable and accrued expenses	$	66,443,000	$	60,428,000
Operating lease liability, current		2,119,000		2,975,000
Notes payable, current		12,866,000		39,621,000
Notes payable, related party, current		2,375,000		352,000
Convertible notes payable, current		11,763,000		1,325,000
Redeemable non-controlling interests in equity of subsidiaries		-		117,993,000
Guarantee liability		38,900,000		-
Current liabilities of discontinued operations		70,361,000		2,631,000
TOTAL CURRENT LIABILITIES		204,827,000		225,325,000

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

F-6

AULT ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (continued)

	December 31,			December 31,
	2023			2022
LONG TERM LIABILITIES
Operating lease liability, non-current		4,402,000			5,836,000
Notes payable, non-current		18,158,000			29,831,000
Convertible notes payable, non-current		9,453,000			11,451,000
Deferred underwriting commissions of Ault Disruptive Technologies Corporation (“Ault Disruptive”) subsidiary		3,450,000			3,450,000
Non-current liabilities of discontinued operations		-			61,633,000

TOTAL LIABILITIES		240,290,000			337,526,000

COMMITMENTS AND CONTINGENCIES

Redeemable non-controlling interests in equity of subsidiaries		2,224,000			-

STOCKHOLDERS’ EQUITY
Series A Convertible Preferred Stock, $25 stated value per share, $0.001 par value – 1,000,000 shares authorized; 7,040 shares issued and outstanding at December 31, 2023 and December 31, 2022 (liquidation preference of $176,000 as of December 31, 2023 and December 31, 2022)		-			-
Series B Convertible Preferred Stock, $10 stated value per share, share, $0.001 par value – 500,000 shares authorized; 0 and 125,000 shares issued and outstanding at December 31, 2023 and 2022, respectively (liquidation preference of $0 and $1,190,000 at December 31, 2023 and 2022, respectively)		-			-
Series C Convertible Preferred Stock, $1,000 stated value per share, share, $0.001 par value – 50,000 shares authorized; 41,500 and 0 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively (liquidation preference of $41,500,000 at December 31, 2023)		-			-
Series D Cumulative Redeemable Perpetual Preferred Stock, $25 stated value per share, $0.001 par value – 2,000,000 shares authorized; 425,197 shares and 172,838 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively (liquidation preference of $10,630,000 and $4,321,000 as of December 31, 2023 and December 31, 2022, respectively)		-			-
Class A Common Stock, $0.001 par value – 500,000,000 shares authorized; 4,483,459 and 50,966 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively		4,000			-
Class B Common Stock, $0.001 par value – 25,000,000 shares authorized; 0 shares issued and outstanding at December 31, 2023 and December 31, 2022		-			-
Additional paid-in capital		644,852,000			565,905,000
Accumulated deficit		(567,469,000	)		(329,078,000	)
Accumulated other comprehensive loss		(2,097,000	)		(1,100,000	)
Treasury stock, at cost		(30,571,000	)		(29,235,000	)
TOTAL AULT ALLIANCE STOCKHOLDERS’ EQUITY		44,719,000			206,492,000

Non-controlling interest		11,957,000			17,496,000

TOTAL STOCKHOLDERS’ EQUITY		56,676,000			223,988,000

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	299,190,000		$	561,514,000

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

F-7

AULT ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS


	For the Year Ended
	December 31,
	2023			2022
Revenue	$	76,137,000		$	61,561,000
Revenue, digital currencies mining		33,107,000			16,693,000
Revenue, crane operations		49,198,000			2,739,000
Revenue, lending and trading activities		(1,998,000	)		36,644,000
Total revenue		156,444,000			117,637,000
Cost of revenue, products		57,788,000			44,508,000
Cost of revenue, digital currencies mining		36,446,000			21,508,000
Cost of revenue, crane operations		29,971,000			940,000
Cost of revenue, lending and trading activities		1,180,000			-
Total cost of revenue		125,385,000			66,956,000
Gross profit		31,059,000			50,681,000
Operating expenses
Research and development		7,234,000			2,773,000
Selling and marketing		33,529,000			29,364,000
General and administrative		77,806,000			60,302,000
Impairment of goodwill and intangible assets		47,561,000			13,064,000
Impairment of property and equipment		18,161,000			79,556,000
Impairment of deposit due to vendor bankruptcy filing		-			2,000,000
Impairment of mined digital currencies		489,000			3,099,000
Total operating expenses		184,780,000			190,158,000
Loss from operations		(153,721,000	)		(139,477,000	)
Other income (expense):
Interest and other income		5,294,000			2,594,000
Interest expense		(36,595,000	)		(37,342,000	)
Interest expense, related party		(664,000	)		-
Other expense, guarantee		(35,400,000	)		-
Loss on extinguishment of debt		(8,719,000	)		-
Loss on extinguishment of debt, related party		(4,164,000	)		-
Loss from investment in unconsolidated entity		(302,000	)		(924,000	)
Loss on deconsolidation of subsidiary		(3,040,000	)		-
Impairment of equity securities		(9,555,000	)		(11,500,000	)
Gain from bargain purchase of business		-			806,000
Gain on the sale of fixed assets		2,069,000			-
Change in fair value of warrant and derivative liabilities		4,544,000			(2,580,000	)
Total other expense, net		(86,532,000	)		(48,946,000	)
Loss before income taxes		(240,253,000	)		(188,423,000	)
Income tax provision (benefit)		337,000			(4,485,000	)
Net loss from continuing operations		(240,590,000	)		(183,938,000	)
Net loss from discontinued operations		(15,704,000	)		(5,895,000	)
Net loss		(256,294,000	)		(189,833,000	)
Net loss attributable to non-controlling interest		25,268,000			8,017,000
Net loss attributable to Ault Alliance, Inc.		(231,026,000	)		(181,816,000	)
Preferred dividends		(1,375,000	)		(393,000	)
Net loss available to common stockholders	$	(232,401,000	)	$	(182,209,000	)

Basic and diluted net loss per common share:
Continuing operations	$	(306.07	)	$	(5,877.13	)
Discontinued operations		(22.18	)		(196.50	)
Net loss per common share	$	(328.25	)	$	(6,073.63	)

Weighted average basic and diluted common shares outstanding		708,000			30,000

Comprehensive loss
Net loss available to common stockholders	$	(232,401,000	)	$	(182,209,000	)
Foreign currency translation adjustment		(997,000	)		(995,000	)
Other comprehensive loss		(997,000	)		(995,000	)
Total comprehensive loss	$	(233,398,000	)	$	(183,204,000	)

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

F-8

AULT ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY


																												Accumulated
	Preferred Stock																					Additional						Other			Non-						Total
	Series A				Series B					Series C				Series D				Class A Common Stock				Paid-In			Accumulated			Comprehensive			Controlling			Treasury			Stockholders’
	Shares		Par Amount		Shares			Par Amount		Shares		Par Amount		Shares		Par Amount		Shares		Amount		Capital			Deficit			Loss			Interest			Stock			Equity
BALANCES, January 1, 2023		7,040	$	-		125,000		$	-		-	$	-		172,838	$	-		50,966	$	-	$	565,905,000		$	(329,078,000	)	$	(1,100,000	)	$	17,496,000		$	(29,235,000	)	$	223,988,000
Issuance of Class A common stock for restricted stock awards		-		-		-			-		-		-		-		-		199		-		-			-			-			-			-			-
Issuance of Series C preferred stock, related party		-		-		-			-		41,500		-		-		-		-		-		27,042,000			-			-			-			-			27,042,000
Fair value of warrants issued in connection with Series C preferred stock, related party		-		-		-			-		-		-		-		-		-		-		10,958,000			-			-			-			-			10,958,000
Series C preferred stock issuance costs		-		-		-			-		-		-		-		-		-		-		(500,000	)		-			-			-			-			(500,000	)
Issuance of Series D preferred stock		-		-		-			-		-		-		252,359		-		-		-		2,982,000			-			-			-			-			2,982,000
Series D preferred stock offering costs		-		-		-			-		-		-		-		-		-		-		(105,000	)		-			-			-			-			(105,000	)
Series B preferred stock exchanged for convertible note, related party		-		-		(125,000	)		-		-		-		-		-		-		-		(1,190,000	)		-			-			-			-			(1,190,000	)
Stock-based compensation																							6,615,000			-			-			4,253,000			-			10,868,000
Issuance of Class A common stock for cash		-		-		-			-		-		-		-		-		4,340,336		4,000		39,411,000			-			-			-			-			39,415,000
Financing cost in connection with sales of Class A common stock		-		-		-			-		-		-		-		-		-		-		(1,344,000	)		-			-			-			-			(1,344,000	)
Issuance of Class A common stock for conversion of preferred stock liabilities		-		-		-			-		-		-		-		-		5,736		-		912,000			-			-			-			-			912,000
Issuance of Class A common stock for conversion of debt		-		-		-			-		-		-		-		-		84,632		-		527,000			-			-			-			-			527,000
Class A common stock issued in connection with issuance of notes payable		-		-		-			-		-		-		-		-		1,590		-		162,000			-			-			-			-			162,000
Warrants issued in connection with issuance of convertible notes payable, related party		-		-		-			-		-		-		-		-		-		-		4,164,000			-			-			-			-			4,164,000
Remeasurement of Ault Disruptive subsidiary temporary equity		-		-		-			-		-		-		-		-		-		-		-			(5,990,000	)		-			-			-			(5,990,000	)
Increase in ownership interest of subsidiary		-		-		-			-		-		-		-		-		-		-		13,000			-			-			(1,086,000	)		-			(1,073,000	)
Non-controlling interest in RiskOn International, Inc. (“ROI”) subsidiary acquired		-		-		-			-		-		-		-		-		-		-		-			-			-			6,357,000			-			6,357,000
Non-controlling interest in Eco Pack Technologies Limited (“Eco Pack”) subsidiary acquired		-		-		-			-		-		-		-		-		-		-		-			-			-			856,000			-			856,000
Sale of subsidiary stock to non-controlling interests		-		-		-			-		-		-		-		-		-		-		-			-			-			7,342,000			-			7,342,000
Distribution to Circle 8 Crane Services, LLC (“Circle 8”) non-controlling interest		-		-		-			-		-		-		-		-		-		-		-			-			-			(729,000	)		-			(729,000	)
Deconsolidation of The Singing Machine Company, Inc. (“SMC”)		-		-		-			-		-		-		-		-		-		-		-			-			-			(7,966,000	)		-			(7,966,000	)
Purchase of treasury stock - Ault Alpha LP (“Ault Alpha”)		-		-		-			-		-		-		-		-		-		-		-			-			-			-			(1,336,000	)		(1,336,000	)
Net loss		-		-		-			-		-		-		-		-		-		-		-			(231,026,000	)		-			-			-			(231,026,000	)
Preferred dividends				-					-				-				-		-		-		-			(1,375,000	)		-			-			-			(1,375,000	)
Foreign currency translation adjustments		-		-		-			-		-		-		-		-		-		-		-			-			(997,000	)		-			-			(997,000	)
Net loss attributable to non-controlling interest		-		-		-			-		-		-		-		-		-		-		-			-			-			(25,268,000	)		-			(25,268,000	)
Distribution of securities of TurnOnGreen, Inc. (“TurnOnGreen”) to Ault Alliance Class A common stockholders ($2.02 per share)		-		-		-			-		-		-		-		-		-		-		(10,700,000	)		-			-			10,700,000			-			-
Other		-		-		-			-		-		-		-		-		-		-		-			-			-			2,000						2,000
BALANCES, December 31, 2023		7,040	$	-		-		$	-		41,500	$	-		425,197	$	-		4,483,459	$	4,000	$	644,852,000		$	(567,469,000	)	$	(2,097,000	)	$	11,957,000		$	(30,571,000	)	$	56,676,000

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

F-9

AULT ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY


	Preferred Stock																Additional						Other			Non-						Total
	Series A				Series B				Series D				Class A Common Stock				Paid-In			Accumulated			Comprehensive			Controlling			Treasury			Stockholders’
	Shares		Par Amount		Shares		Par Amount		Shares		Par Amount		Shares		Amount		Capital			Deficit			Loss			Interest			Stock			Equity
BALANCES, January 1, 2022		7,040	$	-		125,000	$	-		-	$	-		11,246	$	-	$	385,728,000		$	(145,600,000	)	$	(106,000	)	$	1,613,000		$	(13,180,000	)	$	228,455,000
Issuance of Class A common stock for restricted stock awards		-		-		-		-		-		-		125		-		-			-			-			-			-			-
Series D preferred stock issued for cash		-		-		-		-		172,838		-		-		-		4,321,000			-			-			-			-			4,321,000
Series D preferred stock offering costs		-		-		-		-		-		-		-		-		(811,000	)		-			-			-			-			(811,000	)
Stock-based compensation														-		-		6,363,000			-			-			839,000			-			7,202,000
Issuance of Gresham Worldwide common stock for Gresham Worldwide, Inc., formerly known as Giga-tronics Incorporated (“GIGA”) acquisition		-		-		-		-		-		-		-		-		1,669,000			-			-			-			-			1,669,000
Issuance of Class A common stock for cash		-		-		-		-		-		-		38,048		-		172,253,000			-			-			-			-			172,253,000
Financing cost in connection with sales of Class A common stock		-		-		-		-		-		-		-		-		(4,210,000	)		-			-			-			-			(4,210,000	)
Issuance of Class A common stock upon exercise of warrants		-		-		-		-		-		-		1,547		-		1,196,000			-			-			-			-			1,196,000
Fair value of warrants issued in connection with notes payable		-		-		-		-		-		-		-		-		1,296,000			-			-			-			-			1,296,000
Remeasurement of Ault Disruptive subsidiary temporary equity		-		-		-		-		-		-		-		-		-			(1,268,000	)		-			-			-			(1,268,000	)
Increase in ownership interest of subsidiary		-		-		-		-		-		-		-		-		(1,900,000	)		-			-			(2,365,000	)		-			(4,265,000	)
Non-controlling interest from Avalanche International Corp. (“AVLP”) acquisition		-		-		-		-		-		-		-		-		-			-			-			7,790,000			-			7,790,000
Non-controlling interest from SMC acquisition		-		-		-		-		-		-		-		-		-			-			-			10,336,000			-			10,336,000
Non-controlling interest from GIGA acquisition		-		-		-		-		-		-		-		-		-			-			-			2,735,000			-			2,735,000
Non-controlling interest from Circle 8 acquisition		-		-		-		-		-		-		-		-		-			-			-			4,565,000			-			4,565,000
Purchase of treasury stock - Ault Alpha		-		-		-		-		-		-		-		-		-			-			-			-			(16,054,000	)		(16,054,000	)
Net loss		-		-		-		-		-		-		-		-		-			(181,816,000	)		-			-			-			(181,816,000	)
Preferred dividends				-				-				-		-		-		-			(393,000	)		-			-			-			(393,000	)
Foreign currency translation adjustments		-		-		-		-		-		-		-		-		-			-			(995,000	)		-			-			(995,000	)
Net loss attributable to non-controlling interest		-		-		-		-		-		-		-		-		-			-			-			(8,017,000	)		-			(8,017,000	)
Other		-		-		-		-		-		-		-		-		-			(1,000	)		1,000			-			(1,000	)		(1,000	)
BALANCES, December 31, 2022		7,040	$	-		125,000	$	-		172,838	$	-		50,966	$	-	$	565,905,000		$	(329,078,000	)	$	(1,100,000	)	$	17,496,000		$	(29,235,000	)	$	223,988,000

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

F-10

AULT ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the Year Ended December 31,
	2023			2022
Cash flows from operating activities:
Net loss	$	(256,294,000	)	$	(189,833,000	)
Net loss from discontinued operations		(15,704,000	)		(5,895,000	)
Net loss from continuing operations		(240,590,000	)		(183,938,000	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		26,974,000			14,676,000
Amortization of debt discount		21,507,000			29,581,000
Amortization of right-of-use assets		2,882,000			1,745,000
Other expense, guarantee		35,400,000			-
Deferred tax benefit		-			(5,000,000	)
Impairment of goodwill and intangible assets		47,561,000			13,064,000
Impairment of property and equipment		18,161,000			79,556,000
Stock-based compensation		10,868,000			7,202,000
Impairment of deposit due to vendor bankruptcy filing					2,000,000
Accretion of original issue discount on notes receivable		-			(5,549,000	)
Gain on the sale of fixed assets		(2,069,000	)		-
Impairment of equity securities		15,755,000			11,500,000
Impairment of digital currencies		489,000			3,099,000
Realized gain on the sale of digital currencies		(520,000	)		(1,045,000	)
Revenue, digital currencies mining		(33,107,000	)		(16,693,000	)
Realized gains on sale of marketable securities		(8,437,000	)		(12,111,000	)
Unrealized (gains) losses on marketable securities		(2,509,000	)		13,889,000
Unrealized losses on investments in common stock, related parties		5,785,000			11,682,000
Unrealized gains on equity securities		-			(41,994,000	)
Income from cash held in trust		(2,590,000	)		-
Loss from investment in unconsolidated entity		302,000			924,000
Loss on remeasurement of investment in unconsolidated entity		-			2,700,000
Provision for loan losses		1,180,000			-
Change in the fair value of warrant and derivative liabilities		(4,544,000	)		1,672,000
Loss on extinguishment of debt		12,883,000			-
Loss on deconsolidation of subsidiary		3,040,000			-
Other		(1,173,000	)		(1,004,000	)
Changes in operating assets and liabilities:
Proceeds from the sale of digital currencies		29,111,000			15,832,000
Marketable equity securities		46,457,000			78,951,000
Accounts receivable		(415,000	)		(58,000	)
Inventories		4,312,000			(1,068,000	)
Prepaid expenses and other current assets		3,214,000			3,802,000
Other assets		(3,232,000	)		(3,969,000	)
Accounts payable and accrued expenses		15,662,000			9,466,000
Lease liabilities		(3,187,000	)		(1,919,000	)
Net cash (used in) provided by operating activities from continuing operations		(830,000	)		26,993,000
Net cash used in operating activities from discontinued operations		(4,598,000	)		(504,000	)
Net cash (used in) provided by operating activities		(5,428,000	)		26,489,000
Cash flows from investing activities:
Purchase of property and equipment		(8,666,000	)		(99,305,000	)
Investment in promissory notes and other, related parties		-			(2,200,000	)
Investments in common stock and warrants, related parties		-			(4,901,000	)
Purchase of SMC, net of cash received		-			(8,239,000	)
Purchase of GIGA, net of cash received		-			(3,687,000	)
Cash received upon acquisition of AVLP		-			1,245,000
Purchase of Circle 8, net of cash received		-			(11,101,000	)
Purchase of Eco Pack, net of cash received		(132,000	)		-
Cash decrease upon deconsolidation of subsidiary		(6,285,000	)		-
Acquisition of non-controlling interests		(1,072,000	)		(4,265,000	)
Purchase of marketable equity securities		-			(2,017,000	)
Sales of marketable equity securities		-			11,748,000
Investments in loans receivable		(501,000	)		(11,309,000	)
Principal payments on loans receivable		-			11,050,000
Investments in non-marketable equity securities		(10,952,000	)		(26,551,000	)
Proceeds from the sale of fixed assets		4,515,000			-
Other		(78,000	)		-
Net cash used in investing activities from continuing operations		(23,171,000	)		(149,532,000	)
Net cash used in investing activities from discontinued operations		(6,347,000	)		(9,111,000	)
Net cash used in investing activities		(29,518,000	)		(158,643,000	)

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

F-11

AULT ALLIANCE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

	For the Year Ended December 31,
	2023			2022
Cash flows from financing activities:
Gross proceeds from sales of Class A common stock	$	39,415,000		$	172,253,000
Financing cost in connection with sales of Class A common stock		(1,344,000	)		(4,210,000	)
Proceeds from sales of Series D preferred stock		2,983,000			4,321,000
Financing cost in connection with sales of Series D preferred stock		(105,000	)		(811,000	)
Proceeds from sales of Series C preferred stock, related party		3,841,000			-
Financing cost in connection with sales of Series C preferred stock, related party		(500,000	)		-
Proceeds from subsidiaries’ sale of stock to non-controlling interests		7,342,000			-
Distribution to Circle 8 non-controlling interest		(729,000	)		-
Proceeds from notes payable		38,782,000			53,314,000
Proceeds from convertible notes payable, related party		4,625,000			-
Proceeds from notes payable, related party		2,337,000			-
Repayment of margin accounts		(767,000	)		(17,721,000	)
Payments on notes payable		(65,049,000	)		(73,927,000	)
Payments on convertible notes payable, related party		(150,000	)		-
Payments on notes payable, related party		(314,000	)		-
Payments of preferred dividends		(1,375,000	)		(393,000	)
Purchase of treasury stock		(1,336,000	)		(16,054,000	)
Proceeds from sales of convertible notes		5,165,000			-
Payments on convertible notes		(1,022,000	)		-
Net cash provided by financing activities from continuing operations		31,799,000			116,772,000
Net cash provided by financing activities from discontinued operations		5,237,000			7,340,000
Net cash provided by financing activities		37,036,000			124,112,000

Effect of exchange rate changes on cash and cash equivalents		(776,000	)		864,000

Net increase (decrease in cash and cash equivalents and restricted cash		1,314,000			(7,178,000	)

Cash and cash equivalents and restricted cash at beginning of period - continuing operations		8,674,000			14,842,000
Cash and cash equivalents and restricted cash at beginning of period - discontinued operations		5,381,000			6,391,000
Cash and cash equivalents and restricted cash at beginning of period		14,055,000			21,233,000

Cash and cash equivalents and restricted cash at end of period		15,369,000			14,055,000
Less cash and cash equivalents and restricted cash of discontinued operations at end of period		(1,777,000	)		(5,381,000	)
Cash and cash equivalents and restricted cash of continued operations at end of period	$	13,592,000		$	8,674,000

Supplemental disclosures of cash flow information:
Cash paid during the period for interest - continuing operations	$	4,744,000		$	8,294,000
Cash paid during the period for interest - discontinued operations	$	7,506,000		$	4,813,000

Non-cash investing and financing activities:
Settlement of accounts payable with digital currency	$	28,000		$	418,000
Conversion of investment in unconsolidated entity for acquisition of AVLP	$	-		$	20,706,000
Conversion of convertible notes payable, related party into shares of Class A common stock	$	400,000		$	400,000
Conversion of debt and equity securities to marketable securities	$	23,703,000		$	44,782,000
Conversion of loans receivable to marketable securities	$	5,430,000		$	11,502,000
Conversion of interest receivable to marketable securities	$	-		$	386,000
Recognition of new operating lease right-of-use assets and lease liabilities	$	4,372,000		$	2,198,000
Remeasurement of Ault Disruptive temporary equity	$	5,990,000		$	1,268,000
Preferred stock exchanged for notes payable	$	9,224,000		$	-
Notes payable exchanged for notes payable, related party	$	11,645,000		$	-
Redeemable non-controlling interests in equity of subsidiaries paid with cash and marketable securities held in trust account	$	120,064,000		$	-
Dividend paid in TurnOnGreen common stock in additional paid-in capital	$	10,700,000		$	-
Exchange of notes payable for preferred stock liabilities	$	8,437,000		$	-
Exchange of notes payable for preferred stock, related party	$	20,194,000		$	-
Exchange of convertible notes payable for preferred stock, related party	$	17,370,000		$	-
Exchange of preferred stock for convertible notes payable, related party	$	1,250,000		$	-
Fair value of warrants and Class A common stock issued in connection with notes	$	-		$	2,491,000
Debt discount from accrued lender profit participation rights	$	-		$	6,000,000
Prepaid expenditures capitalized to property and equipment	$	-		$	2,150,000

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

F-12

AULT ALLIANCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

1. DESCRIPTION OF BUSINESS

Ault Alliance, Inc., a Delaware corporation (“Ault Alliance” or the “Company”) 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, consumer electronics, hotel operations and textiles. In addition, the Company extends credit to select entrepreneurial businesses through a licensed lending subsidiary.

The Company has the following eight reportable segments:

Energy and Infrastructure (“Energy”) – crane operations, advanced textiles processing and oil exploration;

Technology and Finance (“Fintech”) – commercial lending, activist investing, stock trading, media, and digital learning;

SMC – consumer electronics;

Sentinum, Inc. (“Sentinum”) – digital currencies mining operations and colocation and hosting services for the emerging artificial intelligence ecosystems and other industries;

GIGA – defense industry;

TurnOnGreen – commercial electronics solutions;

ROI – immersive metaverse platform; and

Ault Disruptive – a special purpose acquisition company.

Reverse Stock Splits

On May 15, 2023, pursuant to the authorization provided by the Company’s stockholders at a special meeting of stockholders, the Company’s board of directors approved an amendment to the Certificate of Incorporation to effectuate a reverse stock split of the Company’s issued and outstanding common stock by a ratio of one-for-three hundred (the “1-for-300 Reverse Split”). The 1-for-300 Reverse Split did not affect the number of authorized shares of common stock, preferred stock or their respective par value per share. As a result of the 1-for-300 Reverse Split, each three hundred shares of common stock issued and outstanding prior to the 1-for-300 Reverse Split were converted into one share of common stock. The 1-for-300 Reverse Split became effective in the State of Delaware on May 17, 2023.

On January 12, 2024, pursuant to the authorization provided by the Company’s stockholders at the annual meeting of stockholders, the Company’s board of directors approved an amendment to the Certificate of Incorporation to effectuate a reverse stock split of the Company’s issued and outstanding common stock by a ratio of one-for-twenty-five (the “1-for-25 Reverse Split”). The 1-for-25 Reverse Split did not affect the number of authorized shares of common stock, preferred stock or their respective par value per share. As a result of the 1-for-25 Reverse Split, each twenty-five shares of common stock issued and outstanding prior to the 1-for-25 Reverse Split were converted into one share of common stock. The 1-for-25 Reverse Split became effective in the State of Delaware on January 16, 2024.

All share amounts in these financial statements have been updated to reflect the 1-for-300 Reverse Split and the 1-for-25 Reverse Split.

F-13

2. LIQUIDITY, GOING CONCERN AND MANAGEMENT’S PLANS

As of December 31, 2023, the Company had cash and cash equivalents of $8.6 million (excluding cash of discontinued operations), negative working capital of $66.3 million and a history of net operating losses. The Company has financed its operations principally through issuances of convertible debt, promissory notes and equity securities. These factors create substantial doubt about the Company’s ability to continue as a going concern for at least one year after the date that these condensed consolidated financial statements are issued.

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

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

Management expects that the Company’s existing cash and cash equivalents, accounts receivable and marketable securities as of December 31, 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

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

Principles of Consolidation

The consolidated financial statements include the accounts of Ault Alliance and its wholly owned and majority-owned subsidiaries. The consolidated financial statements also include the accounts of all entities that the Company controls as the primary beneficiary of a variable interest entity (“VIE”). All intercompany accounts and transactions have been eliminated upon consolidation.

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 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.

Variable Interest Entities

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 of which the Company 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.

F-14

Revenue Recognition

The Company recognizes revenue 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.

Sales of Products

The Company generates revenues from the sale of its products through a direct and indirect sales force. The Company’s performance obligations to deliver products are satisfied at the point in time when title transfers to the customer. Generally, products are shipped FOB shipping point and title transfers to the customer at the time the products are placed on a common carrier. The Company provides standard assurance warranties, which are not separately priced, that the products function as intended. The Company primarily receives fixed consideration for sales of products. Some of the Company’s contracts with distributors include stock rotation rights after six months for slow-moving inventory, which represents variable consideration. The Company uses an expected value method to estimate variable consideration and constrains revenue for estimated stock rotations until it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. To date, returns have been insignificant. The Company’s customers generally pay within 30 days from the receipt of an invoice.

Because the Company’s product sales agreements have an expected duration of one year or less, the Company has elected to adopt the practical expedient in ASC 606-10-50-14(a) of not disclosing information about its remaining performance obligations.

Manufacturing Services

For manufacturing services, which include revenues generated by the Company’s subsidiary, Enertec Systems 2001 Ltd. (“Enertec”), and in certain instances, revenues generated by the Company’s subsidiary, Gresham Power Electronics Ltd. (“Gresham Power”), the Company’s performance obligation for manufacturing services is satisfied over time as the Company creates or enhances an asset based on criteria that are unique to the customer and that the customer controls as the asset is created or enhanced. Generally, the Company recognizes revenue based upon proportional performance over time using a cost-to-cost method which measures progress based on the costs incurred to total expected costs in satisfying its performance obligation. This method provides a depiction of the progress in providing the manufacturing service because there is a direct relationship between the costs incurred by the Company and the transfer of the manufacturing service to the customer. Manufacturing services that are recognized based upon the proportional performance method are considered revenue from services transferred over time and to the extent the customer has not been invoiced for these revenues, as accrued revenue in the accompanying consolidated balance sheets. Revisions to the Company’s estimates may result in increases or decreases to revenues and income and are reflected in the consolidated financial statements in the periods in which they are first identified.

The Company has elected the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing component to the extent that the period between when the Company transfers its promised good or service to the customer and when the customer pays in one year or less.

Lending and Trading Activities

Lending Activities

The Fintech segment, through Ault Lending, LLC (“Ault Lending”), generates revenue from lending activities primarily through interest, origination fees and late/other fees. Interest income on these products is calculated based on the contractual interest rate and recorded as interest income as earned. The origination fees or original issue discounts are recognized over the life of the loan using the effective interest method.

F-15

Trading Activities

The Fintech segment, through Ault Lending, also generates revenue from trading activities primarily through sales of securities and unrealized gains and losses from held securities. All investment transactions are recorded on a trade date basis. Financial instruments utilized in trading activities are carried at fair value. For more information on fair value, see Note 6. Fair Value of Financial Instruments. Trading-related revenue can be volatile and is largely driven by general market conditions. Also, trading-related revenue is dependent on the volume and type of transactions, the level of risk assumed, and the volatility of price and rate movements at any given time within the ever-changing market environment. Realized and unrealized gains and losses are recognized in revenue from trading activities.

Bitcoin Mining

The Company has entered into a digital asset mining pool by executing a contract with a mining pool operator to provide hash calculation services to the mining pool. The Company’s customer, as defined in ASC 606-10-20, is the mining pool operator with which the Company has agreed to the terms of service and user service agreement. The Company supplies hash calculation services, 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 performance obligation is the provision of hash calculation services to the pool operator and this performance obligation is an output of the Company’s ordinary activities for which it decides when to provide services under the contract.

The Company’s enforceable right to compensation begins only when, and lasts as long as, the Company provides hash calculation services 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 hash calculation services. The contract with the pool operator provides both parties the unilateral enforceable right to terminate the contract at any time without penalty. The customer termination option results in a contract that continuously renews throughout the day and therefore has a duration of less than 24 hours. The implied renewal option is not a material right because there are no upfront or incremental fees in the initial contract and the terms, conditions, and compensation amount for the renewal options are at the then market rates. Providing such hash calculation services 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 are therefore not included in revenue. The mining pool operator charges fees to cover the costs of maintaining the pool and are deducted from amounts the Company may otherwise earn and are treated as a reduction to the consideration received. Fees fluctuate and historically have been approximately 0.3% per reward earned, on average.

The Company participated in mining pools that used the FPPS payout method for the year ended December 31, 2023. The Company is entitled to compensation once it begins to perform hash calculations for the pool operator in accordance with the operator’s specifications over a 24-hour period beginning midnight UTC and ending 23:59:59 UTC on a daily basis. The non-cash consideration that the Company is entitled to for providing hash calculations to the pool operator under the FPPS payout method is made up of block rewards and transaction fees less pool operator fees determined as follows:

The non-cash consideration in the form of a block reward is based on the total blocks expected to be generated on the Bitcoin network for the daily 24-hour period beginning midnight UTC and ending 23:59:59 UTC in accordance with the following formula: the daily hash calculations that the Company provided to the pool operator as a percent of the Bitcoin network’s implied hash calculations as determined by the network difficulty, multiplied by the total Bitcoin network block rewards expected to be generated for the same daily period.

The non-cash consideration in the form of transaction fees paid by transaction requestors is based on the share of standard transaction fees over the daily 24-hour period beginning midnight UTC and ending 23:59:59 UTC. The pool operator calculates the standard transaction fee during the 24-hour period using a rolling 144 block moving average of actual transaction fees.

The block reward and transaction fees earned by the Company are reduced by mining pool fees charged by the operator for operating the pool based on a rate schedule per the mining pool contract. The mining pool fee is only incurred to the extent the Company performs hash calculations and generates revenue in accordance with the pool operator’s payout formula during the same 24-hour period beginning midnight UTC daily.

F-16

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 midnight UTC 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. The Company recognizes non-cash consideration on the same day that control of the contracted service is transferred to the pool operator, which is the same day as the contract inception.

There is no significant financing component in these transactions.

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

Crane Operations - Heavy Lifting and Pump Maintenance Services

The Company generates revenue by providing heavy lifting and pump maintenance services to customers under various short-term agreements which may be hourly, daily, weekly or monthly. Each service agreement generally has one performance obligation and includes a promise to complete the service at a specified location and time and identifies the billing rate to be charged. Payment terms are identified in the terms of the contract and agreed to by both parties for each promised service within the contract prior to the commencement or performance of said services. The collectability of payment is considered probable based on management’s history with the certain type and class of customers and their ability and intention of payment. The customer simultaneously receives and consumes the benefits as the Company provides the hourly, daily, weekly or monthly service.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company’s cash is maintained in checking accounts, money market funds and certificates of deposits with reputable financial institutions. These balances exceed the United States (“U.S.”) Federal Deposit Insurance Corporation insurance limits. The Company had cash and cash equivalents of $1.5 million at both December 31, 2023 and 2022 in the United Kingdom (“U.K.”), and $1.7 million and $0.6 million, respectively, in Israel. The Company has not experienced any losses on deposits of cash and cash equivalents.

Restricted Cash

As of December 31, 2023, restricted cash included $4.3 million of cash collateral for notes payable and $0.7 million of cash held in trust related to environmental contingencies related to the Michigan data center. As of December 31, 2022, restricted cash included $0.7 million of cash held in trust related to environmental contingencies related to the Michigan data center.

Cash, cash equivalents and restricted cash consisted of the following:


	December 31,		December 31,
	2023		2022
Cash and cash equivalents	$	8,625,000	$	7,942,000
Restricted cash		4,966,000		732,000
Total cash, cash equivalents and restricted cash	$	13,591,000	$	8,674,000

Cash and Marketable Securities Held in Trust Account

As of December 31, 2023 and 2022, the Company held $2.2 million and $118.2 million, respectively, in cash and marketable securities in a trust account. Cash and marketable securities held in the trust account represents cash and money market funds that primarily invest in U.S. treasury bills that were purchased with funds raised through the initial public offering of Ault Disruptive, a consolidated special purpose acquisition company. The funds raised are held in a trust account that is restricted for use and may only be used for purposes of completing an initial business combination or redemption of the common stock of Ault Disruptive, as set forth in the trust agreement. The funds held in trust are included within Level 1 of the fair value hierarchy.

F-17

Bitcoin

Bitcoin awarded to the Company through its mining activities are accounted for in connection with the Company’s revenue recognition policy.

Bitcoin held are accounted for as intangible assets with indefinite useful lives. Bitcoin is sold on a first-in first-out basis and measured for impairment whenever indicators of impairment are identified based on the intraday low quoted price of Bitcoin. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the Bitcoin. Subsequent reversal of impairment losses is not permitted. Bitcoin is classified on our balance sheet as a current asset due to the Company’s ability to sell it in a highly liquid marketplace and its intent to liquidate most, but not all, of its Bitcoin to support operations.

Sales of Bitcoin by the Company and Bitcoin awarded to the Company are included within cash flows from operating activities on the consolidated statements of cash flows. Realized gains or losses from sales of Bitcoin are included in loss from operations on the consolidated statements of operations.

Fair Value of Financial Instruments

In accordance with ASC 820, Fair Value Measurements and Disclosures, fair value is defined as the exit price, or the amount that would be received for the sale of an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.

The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs include those that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or model-derived valuations. All significant inputs used in the Company’s valuations are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. Level 2 inputs also include quoted prices that were adjusted for security-specific restrictions which are compared to output from internally developed models such as a discounted cash flow model.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts of financial instruments carried at cost, including cash and cash equivalents, accounts receivables and accounts and other receivable – related party, investments, notes receivable, trade payables and trade payables – related party approximate their fair value due to the short-term maturities of such instruments.

The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Equity Investments

The Company’s marketable equity securities are publicly traded stocks or funds measured at fair value and classified within Level 1 and 2 in the fair value hierarchy because the Company uses quoted prices for identical assets in active markets or inputs that are based upon quoted prices for similar instruments in active markets.

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.

F-18

Other equity securities also include investments in entities that do not have a readily determinable fair value and do not report net asset value per share. These investments are accounted for using a measurement alternative under which they are measured at cost and adjusted for observable price changes and impairments. Observable price changes result from, among other things, equity transactions for the same issuer executed during the reporting period, including subsequent equity offerings or other reported equity transactions related to the same issuer. For these transactions to be considered observable price changes of the same issuer, the Company evaluates whether these transactions have similar rights and obligations, including voting rights, distribution preferences, conversion rights, and other factors, to the investments the Company holds. Any investments adjusted to their fair value by applying the measurement alternative are disclosed as nonrecurring fair value measurements, including the level in the fair value hierarchy that was used.

Accounts Receivable and Allowance for Credit Losses

The Company’s receivables are recorded when invoiced and represent claims against third parties that will be settled in cash. The Company records accounts receivable at the invoiced amount less an allowance for any potentially uncollectible accounts under the current expected credit loss impairment model and discloses the net amount of the financial instrument expected to be collected. The Company estimates the allowance for credit losses based on an ongoing review of existing economic conditions, the financial conditions of the customers, historical trends in credit losses, and the amount and age of past due accounts. Past-due receivable balances are written off when the Company’s internal collection efforts have been unsuccessful in collecting the amount due.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and trade receivables.

Cash and cash equivalents are invested in banks in the U.S., U.K. and Israel. Such deposits in the U.S. may be in excess of insured limits and are not insured in other jurisdictions.

Trade receivables of the Company and its subsidiaries are mainly derived from sales to customers located primarily in the U.S., Europe and Israel. The Company performs ongoing credit evaluations of its customers and to date has not experienced any material losses. An allowance for doubtful accounts is determined with respect to those amounts that the Company and its subsidiaries have determined to be doubtful of collection.

Inventories

Inventories are stated at the lower of cost or net realizable value. Inventory write-offs are provided to cover risks arising from slow-moving items or technological obsolescence.

Cost of inventories is determined as follows:

Raw materials, parts and supplies - using the “first-in, first-out” method; and

Work-in-progress and finished products - on the basis of direct manufacturing costs with the addition of indirect manufacturing costs.

Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. Inbound shipping and handling costs are classified as a component of cost of revenues in the consolidated statements of operations. The Company reviews the components of its inventory and its inventory purchase commitments on a regular basis for excess and obsolete inventory based on estimated future usage and sales. Write-downs in inventory value or losses on inventory purchase commitments depend on various items, including factors related to customer demand, economic and competitive conditions, technological advances or new product introductions by the Company or its customers that vary from its current expectations. Whenever inventory is written down, a new cost basis is established and the inventory is not subsequently written up if market conditions improve.

During the years ended December 31, 2023 and 2022, the Company did not record inventory write-offs within the cost of revenue.

F-19

Property and Equipment, Net

Property and equipment are stated at cost, net of accumulated depreciation. Gains or losses on disposals of property and equipment are recorded within income from operations. Repairs and maintenance costs are expensed as incurred. Significant improvements or betterments are capitalized and depreciated over the estimated life of the asset. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, at the following annual rates:


		Useful lives (in years)

Bitcoin mining equipment		3
Computer, software and related equipment		3 – 5
Office furniture and equipment		5 – 10
Crane rental equipment		7 – 10
Aircraft		7
Vehicles		5 – 7
Building and building improvements		29 – 39
Leasehold improvements		Over the term of the lease or the life of the asset, whichever is shorter.

Leases

The Company accounts for its leases under ASC 842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases. The Company only has operating leases. Operating leases are recognized as right-of-use assets, operating lease liability, current, and operating lease liability, non-current on the Company’s consolidated balance sheets. Lease assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate, the Company uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. In certain of the Company’s lease agreements, the Company receives periods of reduced rent or free rent and other incentives. The Company recognizes lease costs on a straight-line basis over the lease term without regard to deferred payment terms, such as rent holidays, that defer the commencement date of required payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the life of the lease, without assuming renewal features, if any, are exercised. The Company does not separate lease and non-lease components for the Company’s leases.

Impairment of Long-Lived Assets

Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted expected future cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by comparing the carrying amount of the assets to their fair value.

Impairment of Debt Securities

Debt securities are evaluated periodically to determine whether a decline in their value is other than temporary. The Company utilizes criteria such as the magnitude and duration of the decline, in addition to the reason underlying the decline, to determine whether the loss in value is other than temporary. The term “other than temporary” is not intended to indicate that the decline is permanent. It indicates that the prospects for a near term recovery of value are not necessarily favorable, or that there is a lack of evidence to support fair values equal to, or greater than, the carrying value of the investment. Once a decline in value is determined to be other than temporary, the value of the security is reduced and a corresponding charge to earnings is recognized.

Business Combination

The Company allocates 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. 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 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.

F-20

Goodwill

The Company evaluates its goodwill for impairment in accordance with ASC 350, Intangibles – Goodwill and Other. Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired.

Intangible Assets

The Company acquired amortizable intangibles assets as part of asset purchase agreements consisting of customer relationships, trade names and proprietary technology. The Company also has the trade names and trademarks associated with the acquisitions of Microphase Corporation (“Microphase”) and Relec Electronics Ltd. (“Relec”), which were determined to have an indefinite life.

The Company reviews intangible assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets might not be recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset over its fair value, determined based on discounted cash flows.

Common Stock Purchase Warrants and Other Derivative Financial Instruments

The Company classifies common stock purchase warrants and other free standing derivative financial instruments as equity if the contracts (i) require physical settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (iii) contain reset provisions, as either an asset or a liability. The Company assesses classification of its freestanding derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required. The Company determined that certain freestanding derivatives, which principally consist of issuance of warrants to purchase shares of common stock in connection with convertible notes and to employees of the Company, satisfy the criteria for classification as equity instruments as these warrants do not contain cash settlement features or variable settlement provisions that cause them to not be indexed to the Company’s own stock.

Fair value option

The Company has elected to record the senior secured convertible promissory note, related party (“Convertible Notes”) at fair value on the date of issuance, with gains and losses arising from changes in fair value recognized in the consolidated statements of operations at each period end while those are outstanding. Issuance costs are recognized in the consolidated statement of operations in the period in which they are incurred. The Company utilized a Monte-Carlo simulation at inception to value the Note. The Monte-Carlo simulation is calculated as the average present value over all simulated paths. The key inputs and assumptions used in the Monte-Carlo Simulation, including volatility, estimated market yield, risk-free rate, the probability of various scenarios, including held to maturity and subsequent preferred stock offering and various simulated paths.

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 instruments 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.

Convertible Instruments

The Company accounts for hybrid contracts that feature conversion options in accordance with ASC 815, Derivatives and Hedging Activities (“ASC 815”). ASC 815 requires companies to bifurcate conversion options from their host instruments and account for them as freestanding derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

Conversion options that contain variable settlement features such as provisions to adjust the conversion price upon subsequent issuances of equity or equity linked securities at exercise prices more favorable than that featured in the hybrid contract generally result in their bifurcation from the host instrument.

The Company accounts for convertible instruments, when the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, in accordance with ASC 470-20, Debt with Conversion and Other Options (“ASC 470-20”). Under ASC 470-20, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. The Company accounts for convertible instruments (when the Company has determined that the embedded conversion options should be bifurcated from their host instruments) in accordance with ASC 815.

F-21

Debt Discounts

The Company accounts for debt discount according to ASC 470-20, Debt with Conversion and Other Options. Debt discounts are amortized through periodic charges to interest expense over the term of the related financial instrument using the effective interest method.

Guarantee Liability

The Company maintains a guarantee liability that represents its exposure related to guarantees associated with related party debt. The guarantee liability is reported in current liabilities as a separate line item on the consolidated balance sheets, and the provision for guarantee liability is reported in other income (expense) as a separate line item on the consolidated statement of operations. The guarantee liability represents management’s estimate of the Company’s exposure to losses pursuant to the Company’s related party guarantee obligations.

Redeemable Non-Controlling Interests in Equity of Subsidiary

The Company records redeemable non-controlling interests in equity of subsidiaries to reflect the economic interests of the common stockholders in Ault Disruptive. These interests are presented as redeemable non-controlling interests in equity of subsidiaries within the consolidated balance sheets, outside of the permanent equity section. The common stockholders in Ault Disruptive have redemption rights that are considered to be outside of the Company’s control. As of December 31, 2023 and 2022, the carrying amount of the redeemable non-controlling interest in equity of subsidiaries was recorded at its redemption value of $2.2 million and $117.9 million, respectively. Remeasurements to the redemption value of the redeemable non-controlling interest in equity of subsidiaries are recorded within additional paid-in capital.

Activity for the years ended December 31, 2023 and 2022 reconciled in the following table:


Gross proceeds	$	115,000,000
Less:
Proceeds allocated to Ault Disruptive public warrants		(4,313,000	)
Issuance costs allocated to Ault Disruptive common stock		(6,867,000	)
Plus:
Remeasurement of carrying value to redemption value		14,173,000
Redeemable non-controlling interests in equity of subsidiaries as of December 31, 2022		117,993,000
Less:
Redemptions of Ault Disruptive common stock		(120,064,000	)
Plus:
Remeasurement of carrying value to redemption value		1,963,000
Extension proceeds paid by the Ault Disruptive sponsor		2,332,000
Redeemable non-controlling interests in equity of subsidiaries as of December 31, 2023	$	2,224,000

Treasury Stock

The Company records the aggregate purchase price of treasury stock at cost and includes treasury stock as a reduction to stockholders’ equity.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation (“ASC 718”).

The Company uses the Black-Scholes option pricing model for determining the estimated fair value for stock-based awards. The Black-Scholes model requires the use of assumptions which determine the fair value of stock-based awards, including the option’s expected term and the price volatility of the underlying stock.

Under ASC 718:

the Company recognizes stock-based expenses related to stock option awards on a straight-line basis over the requisite service period of the awards, which is generally the vesting term of two to four years;

stock-based expenses are recognized net of forfeitures as they occur;

the expected term assumption, using the simplified method, reflects the period for which the Company believes the option will remain outstanding;

the Company determined the volatility of its stock by looking at the historic volatility of its stock over the expected term of the grant; and

the risk-free rate reflects the U.S. Treasury yield for a similar expected term in effect at the time of the grant.

Income Taxes

The Company determines its income taxes under the asset and liability method in accordance with ASC 740, Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Operations and Comprehensive Loss in the period that includes the enactment date.

F-22

The Company accounts for uncertain tax positions in accordance with ASC 740-10-25, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. To the extent that the final tax outcome of these matters is different than the amount recorded, such differences impact income tax expense in the period in which such determination is made. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income tax expense. ASC 740-10-25 also requires management to evaluate tax positions taken by the Company and recognize a liability if the Company has taken uncertain tax positions that more likely than not would not be sustained upon examination by applicable taxing authorities. Management of the Company has evaluated tax positions taken by the Company and has concluded that as of December 31, 2023 and 2022, there were no uncertain tax positions taken, or expected to be taken, that would require recognition of a liability that would require disclosure in the financial statements.

Foreign Currency Translation

A substantial portion of the Company’s revenues are generated in U.S. dollars. In addition, a substantial portion of the Company’s costs are incurred in U.S. dollars. Company management has determined that the U.S. dollar is the functional currency of the primary economic environment in which it operates.

Accordingly, monetary accounts maintained in currencies other than the U.S. dollar are re-measured into U.S. dollars in accordance with FASB issued ASC 830, Foreign Currency Matters (“ASC 830”). All transaction gains and losses from the re-measurement of monetary balance sheet items are reflected in the statements of operations as financial income or expenses as appropriate.

The financial statements of Gresham Power, Relec, and Enertec, whose functional currencies have been determined to be their local currencies, the British Pound (“GBP”), GBP, and the Israeli Shekel, respectively, have been translated into U.S. dollars in accordance with ASC 830. All balance sheet accounts have been translated using the exchange rates in effect at the balance sheet date. Statement of operations amounts have been translated using the average exchange rate in effect for the reporting period. The resulting translation adjustments are reported as other comprehensive loss in the consolidated statement of comprehensive loss and accumulated comprehensive loss in statement of changes in stockholders’ equity.

Comprehensive Loss

The Company reports comprehensive loss in accordance with ASC 220, Comprehensive Income. This statement establishes standards for the reporting and presentation of comprehensive loss and its components in a full set of general purpose financial statements. Comprehensive loss generally represents all changes in equity during the period except those resulting from investments by, or distributions to, stockholders. The Company determined that its items of other comprehensive loss relate to changes in foreign currency translation adjustments and impairment of debt securities.

Accounting Estimates

The preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expense during the reporting period. Estimates are used when accounting for certain items such as valuation of securities, reserves for trade receivables and inventories, the fair value of loans receivables, intangible assets and goodwill, useful lives and the recoverability of long-lived assets, stock-based arrangements, contingent consideration, and deferred income taxes and related valuation allowance. Estimates are based on historical experience, where applicable, and assumptions that management believes are reasonable under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ.

Preferred Stock Liabilities

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

A fixed monetary amount known at inception;

Variations in something other than the fair value of the issuer’s shares; or

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

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

F-23

Discontinued Operations

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

Reclassifications

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

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments included in ASU 2016-13 require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Although the new standard, known as the current expected credit loss (“CECL”) model, has a greater impact on financial institutions, most other organizations with financial instruments or other assets (trade receivables, contract assets, lease receivables, financial guarantees, loans and loan commitments, and held-to-maturity debt securities) are subject to the CECL model and will need to use forward-looking information to better evaluate their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. The Company adopted this standard as of January 1, 2023. The adoption of this guidance did not have a material impact on the Company’s 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 an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with ASC Topic 606. The Company adopted this standard as of January 1, 2023. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements

The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement may affect the Company’s financial reporting, the Company undertakes an analysis to determine any required changes to its consolidated financial statements.

On December 14, 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires entities to disclose specific rate reconciliations, amount of income taxes separated by federal and individual jurisdiction, and the amount of income (loss) from continuing operations before income tax expense (benefit) disaggregated between federal, state, and foreign. The new standard is effective for the Company for its fiscal year beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard.

On December 13, 2023, the FASB issued ASU No. 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Topic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”). ASU 2023-08 requires entities to measure crypto assets that meet specific criteria at fair value with changes recognized in net income each reporting period. Additionally, ASU 2023-08 requires an entity to present crypto assets measured at fair value separately from other intangible assets in the balance sheets and record changes from remeasurement of crypto assets separately from changes in the carrying amounts of other intangible assets in the income statement. The new standard is effective for the Company for its fiscal year beginning January 1, 2025, with early adoption permitted. The Company early adopted ASU 2023-08 effective as of January 1, 2024, which, at the time of adoption, did not have a material impact on its consolidated financial statements.

On November 27, 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 is designed to improve the reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker. The new standard is effective for the Company for its fiscal year beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard.

F-24

4. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

Presentation of AGREE Operations

In September 2023, the Company committed to a plan for its wholly owned subsidiary AGREE to list for sale its four recently renovated Midwest hotels, the Hilton Garden Inn in Madison West, the Residence Inn in Madison West, the Courtyard in Madison West, and the Hilton Garden Inn in Rockford. The decision to sell the hotels follows the decision to also list the multifamily development site in St. Petersburg, Florida and is driven by the Company’s desire to focus on its core businesses, Energy, Fintech and Sentinum. The Company’s real estate properties, which include both hotels and land, are currently listed for sale.

In connection with the planned sale of AGREE assets, the Company concluded that the net assets of AGREE met the criteria for classification as held for sale. In addition, the proposed sale represents a strategic shift that will have a significant effect on the Company’s operations and financial results. As a result, the Company has presented the results of operations, cash flows and financial position of AGREE as discontinued operations in the accompanying consolidated financial statements and notes for all periods presented. The assets held for sale were measured at the lower of their carrying amount or fair value less cost to sell. The Company performed a fair value analysis for the disposal group utilizing an income approach for the hotels and a market approach for the land, resulting in an $8.3 million impairment of property and equipment.

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

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


	December 31,		December 31,
	2023		2022
Cash and cash equivalents	$	1,080,000	$	2,550,000
Restricted cash		697,000		2,831,000
Accounts receivable		247,000		264,000
Inventories		50,000		44,000
Property and equipment, net - current		88,525,000		-
Prepaid expenses and other current assets		392,000		270,000
Total current assets		90,991,000		5,959,000
Property and equipment, net		-		92,535,000
Total assets		90,991,000		98,494,000
Accounts payable and accrued expenses		3,099,000		2,631,000
Notes payable, current		67,262,000		-
Total current liabilities		70,361,000		2,631,000
Notes payable		-		61,633,000
Total liabilities		70,361,000		64,264,000
Net assets of discontinued operations	$	20,630,000	$	34,230,000

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

The following table presents the results of AGREE operations:


	For the Year Ended
	December 31,
	2023			2022
Revenue, hotel and real estate operations	$	16,161,000		$	16,697,000
Cost of revenue, hotel operations		12,300,000			11,406,000
Gross profit		3,861,000			5,291,000
General and administrative		3,383,000			5,982,000
Impairment of property and equipment		8,284,000			-
Total operating expenses		11,667,000			5,982,000
Loss from operations		(7,806,000	)		(691,000	)
Interest expense		(7,898,000	)		(5,204,000	)
Net loss from discontinued operations	$	(15,704,000	)	$	(5,895,000	)

F-25

The cash flow activity related to discontinued operations is presented separately on the statement of cash flows as summarized below:


	For the Year Ended December 31,
	2023			2022
Cash flows from operating activities:
Net loss	$	(15,704,000	)	$	(5,895,000	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		2,074,000			3,322,000
Amortization of debt discount		392,000			391,000
Impairment of property and equipment		8,284,000			-
Changes in operating assets and liabilities:
Accounts receivable		17,000			(213,000	)
Inventories		(6,000	)		(13,000	)
Prepaid expenses and other current assets		(122,000	)		349,000
Accounts payable and accrued expenses		467,000			2,026,000
Net cash used in operating activities		(4,598,000	)		(33,000	)
Cash flows from investing activities:
Purchase of property and equipment		(6,347,000	)		(9,111,000	)
Net cash used in investing activities		(6,347,000	)		(9,111,000	)
Cash flows from financing activities:
Proceeds from notes payable		5,237,000			7,340,000
Cash contributions from parent		2,104,000			794,000
Net cash provided by financing activities		7,341,000			8,134,000
Net decrease in cash and cash equivalents and restricted cash		(3,604,000	)		(1,010,000	)

Cash and cash equivalents and restricted cash at beginning of period		5,381,000			6,391,000

Cash and cash equivalents and restricted cash at end of period	$	1,777,000		$	5,381,000

Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	7,506,000		$	4,813,000

5. REVENUE DISAGGREGATION

The following tables summarize disaggregated customer contract revenues and the source of the revenue for the years ended December 31, 2023 and 2022. Revenues from lending and trading activities included in consolidated revenues were primarily interest, dividend and other investment income, which are not considered to be revenues from contracts with customers under GAAP.

The Company’s disaggregated revenues consisted of the following for the year ended December 31, 2023:

Schedule of disaggregated revenues
	Year ended December 31, 2023
	GIGA		TurnOnGreen		Fintech			Sentinum		SMC		Energy		ROI		Total
Primary Geographical Markets
North America	$	13,161,000	$	3,879,000	$	-		$	34,523,000	$	31,099,000	$	49,431,000	$	305,000	$	132,398,000
Europe		8,351,000		29,000		-			-		238,000		666,000		-		9,394,000
Middle East and other		16,247,000		293,000		-			-		220,000		-		-		16,760,000
Revenue from contracts with customers		37,759,000		4,201,000		-			34,523,000		31,557,000		50,097,000		305,000		158,442,000
Revenue, lending and trading activities (North America)		-		-		(1,998,000	)		-		-		-		-		(1,998,000	)
Total revenue	$	37,759,000	$	4,201,000	$	(1,998,000	)	$	34,523,000	$	31,557,000	$	50,097,000	$	305,000	$	156,444,000

Major Goods or Services
Radio frequency/microwave filters	$	8,196,000	$	-	$	-		$	-	$	-	$	-	$	-	$	8,196,000
Power supply units and systems		8,973,000		4,201,000		-			-		-		-		-		13,174,000
Healthcare diagnostic systems		4,095,000		-		-			-		-		-		-		4,095,000
Defense systems		16,495,000		-		-			-		-		-		-		16,495,000
Digital currencies mining		-		-		-			33,107,000		-		-		-		33,107,000
Karaoke machines and related consumer goods		-		-		-			-		31,557,000		-		-		31,557,000
Crane rental		-		-		-			-		-		49,198,000		-		49,198,000
Other		-		-		-			1,416,000		-		899,000		305,000		2,620,000
Revenue from contracts with customers		37,759,000		4,201,000		-			34,523,000		31,557,000		50,097,000		305,000		158,442,000
Revenue, lending and trading activities		-		-		(1,998,000	)		-		-		-		-		(1,998,000	)
Total revenue	$	37,759,000	$	4,201,000	$	(1,998,000	)	$	34,523,000	$	31,557,000	$	50,097,000	$	305,000	$	156,444,000

Timing of Revenue Recognition
Goods transferred at a point in time	$	20,647,000	$	348,000	$	-		$	34,523,000	$	31,557,000	$	999,000	$	305,000	$	88,279,000
Services transferred over time		17,112,000		3,853,000		-			-		-		49,198,000		-		70,163,000
Revenue from contracts with customers	$	37,759,000	$	4,201,000	$	-		$	34,523,000	$	31,557,000	$	50,207,000	$	305,000	$	158,442,000

F-26

The Company’s disaggregated revenues consisted of the following for the year ended December 31, 2022:

	Year ended December 31, 2022
	GIGA		TurnOnGreen		Fintech		Sentinum		SMC		Energy		Total
Primary Geographical Markets
North America	$	7,317,000	$	4,514,000	$	239,000	$	17,798,000	$	23,217,000	$	2,739,000	$	55,824,000
Europe		9,907,000		115,000		-		-		337,000		216,000		10,575,000
Middle East and other		13,031,000		893,000		-		-		670,000		-		14,594,000
Revenue from contracts with customers		30,255,000		5,522,000		239,000		17,798,000		24,224,000		2,955,000		80,993,000
Revenue, lending and trading activities (North America)		-		-		36,644,000		-		-		-		36,644,000
Total revenue	$	30,255,000	$	5,522,000	$	36,883,000	$	17,798,000	$	24,224,000	$	2,955,000	$	117,637,000

Major Goods or Services
Radio frequency/microwave filters	$	6,130,000	$	-	$	-	$	-	$	-	$	-	$	6,130,000
Power supply units and systems		11,605,000		5,522,000		-		-		-		-		17,127,000
Healthcare diagnostic systems		4,073,000		-		-		-		-		-		4,073,000
Defense systems		8,447,000		-		-		-		-		-		8,447,000
Digital currencies mining		-		-		-		16,693,000		-		-		16,693,000
Karaoke machines and related consumer goods		-		-		-		-		24,224,000		-		24,224,000
Crane rental		-		-		-		-		-		2,739,000		2,739,000
Other		-		-		239,000		1,105,000		-		216,000		1,560,000
Revenue from contracts with customers		30,255,000		5,522,000		239,000		17,798,000		24,224,000		2,955,000		80,993,000
Revenue, lending and trading activities		-		-		36,644,000		-		-		-		36,644,000
Total revenue	$	30,255,000	$	5,522,000	$	36,883,000	$	17,798,000	$	24,224,000	$	2,955,000	$	117,637,000

Timing of Revenue Recognition
Goods transferred at a point in time	$	18,430,000	$	5,519,000	$	239,000	$	17,798,000	$	24,224,000	$	216,000	$	66,426,000
Services transferred over time		11,825,000		3,000		-		-		-		2,739,000		14,567,000
Revenue from contracts with customers	$	30,255,000	$	5,522,000	$	239,000	$	17,798,000	$	24,224,000	$	2,955,000	$	80,993,000

6. FAIR VALUE OF FINANCIAL INSTRUMENTS

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


	Fair Value Measurement at December 31, 2023
	Total		Level 1		Level 2		Level 3
Assets:
Investment in common stock of Alzamend Neuro, Inc. (“Alzamend”) – a related party	$	679,000	$	679,000	$	-	$	-
Investments in marketable equity securities		27,000		27,000		-		-
Cash and marketable securities held in trust account		2,200,000		2,200,000		-		-
Total assets measured at fair value	$	2,906,000	$	2,906,000	$	-	$	-

Liabilities:
Warrant and embedded conversion feature liabilities	$	1,742,000	$	-	$	-	$	1,742,000
Convertible promissory notes		22,485,000		-		-		22,485,000
Total liabilities measured at fair value	$	24,227,000	$	-	$	-	$	24,227,000

	Fair Value Measurement at December 31, 2022
	Total		Level 1		Level 2		Level 3
Assets:
Investment in common stock of Alzamend – a related party	$	6,449,000	$	6,449,000	$	-	$	-
Investments in marketable equity securities		6,590,000		6,590,000		-		-
Cash and marketable securities held in trust account		118,193,000		118,193,000		-		-
Investments in other equity securities		13,340,000		-		-		13,340,000
Total assets measured at fair value	$	144,572,000	$	131,232,000	$	-	$	13,340,000

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

F-27

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 year ended December 31, 2023:


	Investments in other equity securities
Balance at January 1, 2023	$	13,340,000
Conversion to Level 1 marketable securities		(13,340,000	)
Balance at December 31, 2023	$	-

Equity Investments for Which Measurement Alternative Has Been Selected

As of December 31, 2023 and 2022, the Company held equity investments in other securities valued at $21.8 million and $29.2 million, respectively, that were valued using a measurement alternative. These investments are included in other equity securities in the accompanying consolidated balance sheets.

The Company has made cumulative downward adjustments for impairments for equity securities that do not have readily determinable fair values as of December 31, 2023 and 2022, totaling $15.8 million and $11.5 million, respectively. For the year ended December 31, 2023, $6.2 million of the impairment charge was recorded as an offset to revenue from lending and trading activities at Ault Lending. The remaining amount of these adjustments have been reflected in impairment of equity securities within other income (expense) on the consolidated statement of operations and comprehensive loss.

7. Marketable Securities

Marketable securities in equity securities with readily determinable market prices consisted of the following as of December 31, 2023 and 2022:

Schedule of marketable securities
	Marketable equity securities at December 31, 2023
			Gross unrealized		Gross unrealized
	Cost		gains		losses			Fair value
Common shares	$	5,119,000	$	12,000	$	(5,104,000	)	$	27,000

		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 is revalued on each balance sheet date.

F-28

8. DIGITAL CURRENCIES

The following table presents the activities of the digital currencies for the years ended December 31, 2023 and 2022:


	Digital Currencies
Balance at January 1, 2022	$	2,165,000
Additions of mined digital currencies		16,693,000
Payments to vendors		(418,000	)
Impairment of mined digital currencies		(3,099,000	)
Sales of digital currencies		(15,832,000	)
Realized gain on sales of digital currencies		1,045,000
Balance at December 31, 2022		554,000
Additions of mined digital currencies		29,100,000
Payments to vendors		(28,000	)
Impairment of mined digital currencies		(489,000	)
Sales of digital currencies		(29,111,000	)
Realized gain on sales of digital currencies		520,000
Balance at December 31, 2023	$	546,000

9. INVENTORIES

At December 31, 2023 and 2022, inventories consisted of:

Schedule of inventories
	December 31,		December 31,
	2023		2022
Raw materials, parts and supplies	$	5,247,000	$	3,653,000
Work-in-progress		1,578,000		3,836,000
Finished products		1,559,000		14,547,000
Total inventories	$	8,384,000	$	22,036,000

10. PROPERTY AND EQUIPMENT, NET

At December 31, 2023 and 2022, property and equipment consisted of:

Schedule of property and equipment
	December 31, 2023			December 31, 2022
Building, land and improvements	$	15,752,000		$	12,995,000
Bitcoin mining equipment		50,640,000			42,438,000
Crane rental equipment		34,469,000			32,453,000
Computer, software and related equipment		14,335,000			23,168,000
Aircraft		15,983,000			15,983,000
Other property and equipment		8,603,000			4,896,000
		139,782,000			131,933,000
Accumulated depreciation and amortization		(30,953,000	)		(5,882,000	)
Property and equipment placed in service, net		108,829,000			126,051,000
Construction in progress AVLP equipment		-			9,400,000
Deposits on Bitcoin mining equipment		-			11,328,000
Property and equipment, net	$	108,829,000		$	146,779,000

Summary of depreciation expense:

Schedule of depreciation
	For the Year Ended December 31,
	2023		2022
Depreciation expense	$	25,660,000	$	13,939,000

Impairment of Property and Equipment

During the year ended December 31, 2023, certain unforeseen business developments and changes in financial projections at AVLP indicated that an impairment triggering event had occurred. Testing performed indicated the estimated fair value of AVLP property and equipment as of December 31, 2023 was $0, and an impairment charge of $14.0 million was recognized.

F-29

During the year ended December 31, 2023, the Company recognized an impairment charge of $3.9 million related to property and equipment at ROI.

During the year ended December 31, 2022, adverse changes in business climate, including decreases in the price of Bitcoin and resulting decrease in the market price of miners, indicated that an impairment triggering event had occurred. Testing performed indicated the estimated fair value of the Company’s miners to be less than their net carrying value as of December 31, 2022, and an impairment charge of $79.6 million was recognized, decreasing the net carrying value of the Company’s Bitcoin mining equipment to their estimated fair value. The estimated fair value of the Company’s miners is classified in Level 2 of the fair value hierarchy due to the quoted market prices for similar assets.

Compute North Bankruptcy

On September 22, 2022, Compute North Holdings, Inc. (along with its affiliated debtors, collectively, “Compute North”), filed for bankruptcy protection. The Company had a deposit of approximately $2.0 million with Compute North for services yet to be performed by Compute North. The Company assessed this financial exposure and recorded an impairment of the deposit totaling $2 million during the year ended December 31, 2022.

11. INTANGIBLE ASSETS, NET

At December 31, 2023 and 2022, intangible assets consisted of:

Schedule of intangible asset
Definite lived intangible assets:	Useful Life	December 31, 2023			December 31, 2022
Developed technology	3-8 years	$	1,949,000		$	24,584,000
Customer list	8-10 years		3,596,000			5,865,000
Trade names	5-10 years		1,030,000			4,316,000
Domain name and other intangible assets	5 years		612,000			630,000
			7,187,000			35,395,000
Accumulated amortization			(1,910,000	)		(2,102,000	)
Total definite-lived intangible assets		$	5,277,000		$	33,293,000

Indefinite lived intangible assets:
Trade name and trademark	Indefinite life		477,000			1,493,000
Total intangible assets, net		$	5,754,000		$	34,786,000

The Company’s trademarks and certain trade names 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. Amortization expense was $1.0 million for each of the years ended December 31, 2023 and 2022.

The customer relationships, developed technology and certain trade names are subject to amortization over their estimated useful lives, which range between 5 and 10 years with an average remaining useful life of 7.9 years. The following table presents estimated amortization expense for each of the succeeding five calendar years and thereafter.


2024	$	724,000
2025		724,000
2026		724,000
2027		724,000
2028		724,000
Thereafter		1,657,000
	$	5,277,000

During the year ended December 31, 2023, the Company recognized $24.7 million and $1.5 million impairment of intangible assets related to AVLP and Microphase, respectively. During the year ended December 31, 2022, the Company recognized no impairment of intangible assets. Intangible assets decreased $3.9 million during the year ended December 31, 2023 from the deconsolidation of SMC.

12. GOODWILL

The following table summarizes the changes in the Company’s goodwill for the years ended December 31, 2023 and 2022:

Schedule of goodwill
	Goodwill
Balance as of January 1, 2022	$	10,090,000
Acquisition of AVLP		18,570,000
Acquisition of SMC		3,184,000
Acquisition of GIGA		9,881,000
Impairment of goodwill		(13,064,000	)
Effect of exchange rate changes		(759,000	)
Balance as of December 31, 2022		27,902,000
Impairment of goodwill		(21,387,000	)
Effect of exchange rate changes		(427,000	)
Balance as of December 31, 2023	$	6,088,000

F-30

During the year ended December 31, 2023, the Company recognized $18.6 million and $3.2 million in impairment of goodwill related to AVLP and Microphase, respectively. During the year ended December 31, 2022, the Company recognized $3.2 million and $9.9 million impairment of goodwill related to SMC and GIGA, respectively.

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 AVLP was determined using an income approach methodology of valuation. The income approach is based on the projected cash flows discounted to their present value using discount rates, that in the Company’s judgment, consider the timing and risk of the forecasted cash flows using internally developed forecasts and assumptions. Under the income approach, the discount rate used is the average estimated value of a market participant’s cost of capital and debt, derived using customary market metrics. The analysis included assumptions regarding AVLP’s revenue forecast and discount rates of 26.7% using a weighted average cost of capital analysis. The market approach was also considered; however, the income approach was chosen as the Company determined it was a better representation of AVLP’s projected long-term performance.

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 year ended December 31, 2023.

Impairment of Microphase Goodwill

During the fourth quarter of 2023, Microphase experienced a significant decline in sales and, as a result, the Company performed a goodwill impairment test as of December 31, 2023.

The valuation of Microphase was determined using an income approach methodology of valuation. The income approach is 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. The market approach was also considered; however, the income approach was chosen as the Company determined it was a better representation of Microphase’s projected long-term performance.

The results of the quantitative test indicated the fair value of the Microphase reporting unit did not exceed its carrying amounts, including goodwill, in excess of the carrying value of the goodwill. As a result, the entire $3.2 million carrying amount of Microphase’s goodwill was recognized as a non-cash impairment charge during the year ended December 31, 2023.

Impairment of SMC Goodwill

During the fourth quarter of 2022, SMC experienced adverse changes in business climate, a significant decline in sales and a drop in the trading price of its common stock.

Due to these factors, the Company determined that a triggering event had occurred, and therefore, performed a goodwill impairment assessment as of December 31, 2022. The valuation of the SMC reporting units was determined using a market approach with observable inputs, primarily based on the trading price of SMC’s common stock plus an estimated control premium of approximately 20%.

The results of the quantitative test indicated the fair value of the SMC reporting unit did not exceed its carrying amounts, including goodwill, in excess of the carrying value of the goodwill. As a result, the entire $3.2 million carrying amount of SMC’s goodwill was recognized as a non-cash impairment charge during the year ended December 31, 2022.

F-31

Impairment of GIGA Goodwill

During the fourth quarter of 2022, GIGA experienced a significant decline in sales and a drop in the trading price of its common stock.

Due to these factors, the Company determined that a triggering event had occurred, and therefore, performed a goodwill impairment assessment as of December 31, 2022. The valuation of the GIGA reporting units was determined using an income approach methodology of valuation.

The income approach is based on the projected cash flows discounted to their present value using discount rates, that in the Company’s judgment, consider the timing and risk of the forecasted cash flows using internally developed forecasts and assumptions. Under the income approach, the discount rate used is the average estimated value of a market participant’s cost of capital and debt, derived using customary market metrics. The analysis included assumptions regarding GIGA’s revenue forecast, with negligible or declining growth rates and discount rates of 17.5% using a weighted average cost of capital analysis. The market approach was also considered; however, the income approach was chosen as the Company determined it was a better representation of GIGA’s projected long-term performance.

The results of the quantitative test indicated the fair value of the GIGA reporting unit did not exceed its carrying amounts, including goodwill, in excess of the carrying value of the goodwill. As a result, the entire $9.9 million carrying amount of GIGA’s goodwill was recognized as a non-cash impairment charge during the year ended December 31, 2022.

13. INVESTMENTS – RELATED PARTIES

Investment in Promissory Note, Related Parties – Ault & Company, Inc. (“Ault & Company”)

Investments in Ault & Company, an affiliate, and Alzamend, a related party, at December 31, 2023 and 2022, were comprised of the following:

Schedule of investment
	Interest		Due		December 31,		December 31,
	Rate		Date		2023		2022
Investment in promissory note of Ault & Company		8%		Dec. 31, 2024	$	2,500,000	$	2,500,000
Accrued interest receivable Ault & Company						568,000		368,000
Other - Alzamend						900,000		-
Total investment in promissory notes and other, related parties					$	3,968,000	$	2,868,000

The Company recorded related party interest income of $0.2 million for each of the years ended December 31, 2023 and 2022 in interest income.

Investment in Common Stock, Related Parties – Alzamend

Schedule of investment of common stock
	Investments in common stock, related parties at December 31, 2023
	Cost		Gross unrealized losses			Fair value
Common shares	$	24,688,000	$	(24,009,000	)	$	679,000

	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

F-32

The following table summarizes the changes in the Company’s investments in Alzamend during the years ended December 31, 2023 and 2022:


	Investment in common stock of Alzamend			Investment in promissory notes and advances of Alzamend and Other
Balance at January 1, 2022	$	13,230,000		$	173,000
Investment in common stock of Alzamend		4,901,000			-
Alzamend stock received for marketing services		989,000			-
Unrealized loss in common stock of Alzamend		(12,671,000	)		-
Amortization of related party investment		-			(173,000	)
Balance at December 31, 2022		6,449,000			-
Investment in common stock of Alzamend		15,000			-
Unrealized loss in common stock of Alzamend		(5,785,000	)		-
Balance at December 31, 2023	$	679,000		$	-

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

14. EQUITY METHOD INVESTMENTS

Equity Investments in Unconsolidated Entity – AVLP

The following table summarizes the changes in the Company’s equity investments in an unconsolidated entity, AVLP, during the year ended December 31, 2022:



	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 December 31, 2022	$	-		$	-		$	-

Equity Investments in Unconsolidated Entity – SMC

On November 20, 2023, SMC, a consolidated VIE of the Company, completed a transaction pursuant to which SMC entered into an agreement to sell 2.2 million shares of its common stock for $2.0 million to two affiliates of SMC, both of which are existing shareholders with representation on the board of directors of SMC. As a result of the transaction, Ault Alliance’s share ownership of SMC was diluted to approximately 28%. As a result of SMC’s transaction with its affiliates, the Company initiated a derivative lawsuit against SMC and certain Board members. Due to the significant change in Ault Alliance’s ownership and voting rights, the Company determined that it no longer met the criteria of the primary beneficiary and, accordingly, the Company deconsolidated SMC as of November 20, 2023. The Company recorded a $3.0 million loss on deconsolidation for the year ended December 31, 2023.

Upon deconsolidation, the Company recorded its $2.3 million retained investment in SMC based upon the fair value of the common shares held by the Company at November 20, 2023. Due to the Company’s significant influence over SMC, the Company began accounting for its retained interest under the equity method of accounting.

The following table summarizes the changes in the Company’s equity investments in an unconsolidated entity, SMC, during the year ended December 31, 2023:


Rollforward investment in unconsolidated entity	Amount
Beginning balance - January 1, 2023	$	-
Equity method investment in SMC upon deconsolidation		2,259,000
Loss from investment in unconsolidated entity		(302,000	)
Ending balance - December 31, 2023	$	1,957,000

F-33

The following table provides summarized financial information for the Company’s ownership interest in SMC accounted for under the equity method for the December 31, 2023 period presented and has been compiled from SMC’s financial statements. Amounts presented represent totals at the investee level and not the Company’s proportionate share:

Summarized Statements of Operations


	For the Year Ended
	December 31,
	2023
Revenue	$	32,581,000
Gross profit	$	6,964,000
Loss from operations	$	(8,290,000	)
Net loss	$	(9,384,000	)

Summarized Balance Sheet Information


	December 31,
	2023
Current assets	$	23,206,000
Non-current assets	$	4,509,000
Current liabilities	$	16,209,000
Non-current liabilities	$	3,928,000

15. CONSOLIDATED VARIABLE INTEREST ENTITY - ALPHA FUND

Alpha Fund – Consolidated Variable Interest Entity

As of December 31, 2022, the Company held an investment in the Alpha Fund. The Alpha Fund was liquidated during the year ended December 31, 2023. Alpha Fund operated as a private investment fund. The general partner of Alpha Fund, Ault Alpha GP LLC (“Alpha GP”) was owned by Ault Capital Management LLC (the “Investment Manager”), which also acted as the investment manager to Alpha Fund. The Investment Manager was owned by Ault & Company. Messrs. Ault, Horne, Nisser and Cragun, who serve as executive officers and/or directors of the Company, were executive officers of the Investment Manager, and Messrs. Ault, Horne and Nisser are executive officers and directors of Ault & Company.

Prior to the liquidation of the Alpha Fund, the Company consolidated Alpha Fund as 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 was considered the primary beneficiary of the VIE.

16. BUSINESS COMBINATIONS

ROI Acquisition

On March 6, 2023, the Company closed a share exchange agreement with ROI and sold to ROI all the outstanding shares of capital stock of the Company’s subsidiary, BitNile.com, Inc. as well as RiskOn360, Inc. (formerly known as Ault Iconic, Inc.) and the securities of Earnity, Inc. beneficially owned by BitNile.com, Inc. as of the date of the Agreement. As consideration for the acquisition, ROI issued shares of preferred stock that could have been convertible into common stock, subject to shareholder approval, of ROI representing approximately 73.2% of ROI’s outstanding common stock at the time of the transaction. Total consideration included $0.3 million purchase consideration, representing the fair value of ROI common stock acquired by the Company, and $6.4 million allocated for the fair value of the non-controlling interest.

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%.

F-34

Prior to the conversion of the convertible promissory notes, the Company accounted for its investment in AVLP as an investment in an unconsolidated entity under the equity method of accounting. In connection with the conversion of the convertible promissory notes, the Company’s consolidated financial statements now include all of the accounts of AVLP, and any significant intercompany balances and transactions have been eliminated in consolidation.

The consideration transferred for the Company’s approximate 92% ownership interest in connection with this acquisition aggregated $20.7 million, which represented the fair value of the Company’s holdings in AVLP immediately prior to conversion. The carrying amount of the Company’s holdings in AVLP immediately prior to conversion was $23.4 million, resulting in a $2.7 million loss for the related remeasurement, which was recognized in interest and other income.

The 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 trade names 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 20% 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 24.6%.

Goodwill represents the excess of the purchase price over the 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 Company invested in AVLP based on the potential global impact of the novel technology of AVLP. AVLP has developed a novel cost effective and environmentally friendly material synthesis technology for textile applications. AVLP’s Multiplex Laser Surface Enhancement is a unique technology that has the ability to treat both natural and synthetic textiles for a wide variety of functionalities, including dyeability and printing enhancements, hydrophilicity, hydrophobicity, fire retardancy and anti-microbial properties. The use of water, harmful chemicals and energy is significantly reduced in comparison to conventional textile treatment methods.

The following table presents the allocation of the consideration transferred to the assets acquired and liabilities assumed based on their fair values.


	Allocation
Total purchase consideration	$	22,143,000
Fair value of non-controlling interest		7,790,000
Total consideration	$	29,933,000

Identifiable net liabilities assumed:
Cash	$	1,245,000
Prepaid expenses and other current assets		55,000
Property and equipment		5,057,000
Intangible asset - patents/developed technology (not yet placed in service; upon being placed in service, 7 year estimated useful life)		23,984,000
Intangible asset - trademarks (9 year estimated useful life)		816,000
Accounts payable and accrued expenses		(4,689,000	)
Deferred tax liability		(5,000,000	)
Convertible notes payable, principal		(10,104,000	)
Net assets assumed		11,364,000
Goodwill	$	18,569,000

F-35

The Company consolidates the results of AVLP on a one-month lag, therefore the statements of operations include results for AVLP for the post-acquisition periods ended November 30, 2023 and 2022.

AVLP Related Party Transaction

During the period from June 2022 to November 2022, MTIX Ltd., a subsidiary of AVLP, incurred fees of $0.3 million from 313M Technology Ltd, a U.K. company (“313M”), for the use of facilities and personnel. The Managing Director of 313M is Kristina Mistry, the daughter of Pravin Mistry, who served as a director of AVLP and the Chief Executive Officer of MTIX Ltd. at the time.

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 December 31, 2022.

SMC is a NASDAQ-listed seller of consumer karaoke products. SMC leverages a top-tier global distribution network through major mass merchandisers and online retailers.

As of June 15, 2022 (“Acquisition Date”), the purchase price of the common stock acquired totaled $7.4 million and on June 15, 2022 a $3.1 million gain was recognized in interest and other income for the remeasurement of the Company’s previously held ownership interest to $10.5 million, based on the trading price of SMC common stock. The Company also recognized non-controlling interest at fair value as of the Acquisition Date in the amount of $10.3 million.

The trade names and 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 0.5% and 1.0% to the prospective revenue attributable to the intangible asset. The resulting net annual royalty payments are then discounted to present value using a discount factor of 12.0%.

The Company determined an estimated fair value of customer relationships using an income approach utilizing a discounted cash flow methodology. The analysis included assumptions regarding the development of new businesses and 3% organic growth rates, a discount rate of 12% using a weighted average cost of capital analysis, and capital expenditure requirements associated with any new initiatives developed by SMC. 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.

The goodwill resulting from this acquisition is not tax deductible.

The following table presents the allocation of the consideration transferred to the assets acquired and liabilities assumed based on their fair values.


	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 assets		756,000
Inventories		12,840,000
Property and equipment, net		529,000
Right-of-use assets		1,073,000
Intangible assets:
Trade names (10 year estimated useful life)		2,470,000
Customer relationships (10 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

F-36

Overview of GIGA Acquisition

On September 8, 2022, GIGA acquired 100% of the capital stock of Gresham Worldwide, Inc. (“GWW”) from the Company in exchange for 2.92 million shares of GIGA’s common 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 right to receive up to 749,626 shares 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 were to convert all of the Series F, 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 matured 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.

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 subsequent to the acquisition are included in the Company’s GIGA 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 (“ASC 805”). 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 controls the board of directors of GIGA following the transactions and received 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 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 to an existing loan agreement between Ault Lending and GIGA, which was deemed settled.

The total purchase price to acquire GIGA has been allocated to the assets acquired and assumed liabilities based upon 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 reports from a third-party valuation expert.

The purchase price allocation is as follows:


	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		2,930,000
Prepaid expenses and other assets		1,626,000
Accounts payable and accrued liabilities		(4,704,000	)
Loans payable, net of discounts and issuance costs		(387,000	)
Lease obligations		(491,000	)
Net liabilities assumed		(383,000	)
Goodwill	$	9,881,000

F-37

Overview of Circle 8 Acquisition

On November 17, 2022, Circle 8, a wholly owned subsidiary of Circle 8 Holdco LLC (“Circle 8 Holdco”) entered into an asset purchase agreement (“Circle 8 Purchase Agreement”) with Circle 8 Crane Services, LLC (“Seller”), to acquire substantially all of Seller’s operating assets and the recapitalization of the business into Circle 8. The Company has a 65% direct ownership in Circle 8 Holdco and a 5.8% indirect ownership via Circle 8 Crane GP.

In accordance with the Circle 8 Purchase Agreement, on December 16, 2022 (“Closing Date”), Circle 8 completed the acquisition and obtained control of the Seller. The aggregate purchase price consideration transferred from Circle 8 to the Seller totaled $31.5 million which included (i) extinguishment of debt amounting to $29.2 million (ii) rollover equity issued to the seller with an estimated fair value of $0.6 million (iii) contingent consideration of $0.9 million and (iv) Seller’s transaction expenses of $0.7 million. The following summarizes the fair value of consideration transferred at the acquisition closing:


Extinguishment of debt	$	29,234,000
Rollover equity		565,000
Contingent consideration – earn-out		922,000
Seller’s transaction expenses reimbursement		742,000
Total consideration	$	31,463,000

In conjunction with the acquisition, certain individuals of the Seller’s ownership group received rollover equity interest as purchase consideration. The rollover equity includes Circle 8 issuing to the Seller 6,000 Class D interests in Circle 8 Holdco, which is the sole owner of the equity interests of Circle 8. Management engaged a valuation specialist to estimate the fair value of the grants as of the Closing Date.

Pursuant to the terms of the Circle 8 Purchase Agreement, additional purchase consideration would be paid by Circle 8 to the Seller, contingent upon achievement of a minimum EBITDA threshold for a three-year earn-out measurement period beginning on the day following the Closing Date and ending on the date that is the 36-month anniversary of the Closing Date, which would then increase for additional EBITDA performance up to a maximum ceiling. Pursuant to the terms of the Circle 8 Purchase Agreement, the earn-out would be paid to the Seller in an amount ranging from $0 up to $0.7 million based on a pro rata basis for incremental EBITDA results starting at a minimum of $5.7 million. The fair value of the earn-out was valued using the Monte Carlo simulation which estimates the fair value based on an analysis of various future outcomes. As such the fair value measurement includes significant unobservable inputs such as risk-adjusted discount rate and projected results of operations over the earn-out period, and thus, represented a Level 3 measurement. The fair value of the earn-out as of the Closing Date was $0.9 million. To date, the year one earn-out measurement period has not been surpassed and thus, no cash payments have been made from Circle 8 to the Seller for contingent purchase consideration.

The acquisition was accounted for as a business combination using the acquisition method of accounting in accordance with ASC 805. In accordance with ASU 2014-18, Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination, the Company elected not to separately recognize intangible assets that would otherwise arise from customer-related intangible assets. The value of these intangible assets is effectively subsumed into goodwill.

The purchase price has been allocated to the tangible and intangible assets acquired and liabilities assumed at their estimated fair values on the acquisition date, with the exception of the deferred income tax assets acquired and liabilities assumed which are recognized and measured in accordance with ASC 740, Income Taxes. The excess of the fair value of purchase consideration over the values of the identifiable assets and liabilities is recorded as goodwill.

The acquisition resulted in the fair value of the net assets acquired exceeding the amount of consideration transferred, which occurred as a result of negotiations with the Seller at a time of depressed EBITA as well as imposing a requirement on the Seller to provide preliminary net working capital equal to or greater than $3.0 million without the ability for adjustments up or down. ASC 805 refers to this as a “bargain purchase” and requires Circle 8 to recognize a gain for the amount that the values assigned to the net assets acquired exceed the consideration transferred and cannot recognize goodwill from the acquisition.

Consequently, the Company reassessed the recognition and measurement of identifiable assets acquired, and liabilities assumed and concluded that all acquired assets and assumed liabilities were recognized and that the valuation procedures and resulting measures were appropriate. As a result, the Company recognized a gain of $0.8 million. The gain is included in the line item “gain from bargain purchase of business” in the consolidated statement of operations.

F-38

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:


Assets
Cash and cash equivalents	$	290,000
Trade receivable, net		4,334,000
Prepaids and other current assets		1,226,000
Property and equipment, net		36,395,000
Right-of-use assets		1,558,000
Intangible assets – trade name (10 year estimated useful life)		1,030,000
Intangible assets – customer relationships (8 year estimated useful life)		1,290,000
Total Assets	$	46,123,000

Liabilities
Accounts payable and accrued liabilities	$	(1,589,000	)
Notes payable – equipment notes		(10,685,000	)
Operating lease liabilities		(1,580,000	)
Total Liabilities	$	(13,854,000	)

Net Assets Acquired	$	32,269,000

The fair value of the acquired trade accounts receivables approximates the carrying value due to the short-term nature of the expected timeframe to collect the amounts due and the contractual cash flows, which are expected to be collected related to these receivables.

As part of the purchase price allocation, the Company determined the identifiable intangible assets were: (i) trade name and (ii) customer relationships. The fair value of the intangible assets was estimated using variations of the income approach. Specifically, the relief from royalty method was utilized to estimate the fair value of the trade name and the multi-period excess earnings method was utilized to estimate the fair value of the customer relationships. The trade name relates to the overall consolidated group name and related industry recognition. The customer relationships represent a source of repeat business that is critical to the operations providing crane operators, engineering, custom rigging and transportation services for oilfield, construction, commercial and infrastructure markets. The discounted cash flows were based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital. These nonrecurring fair value measurements are primarily determined using unobservable inputs. Accordingly, these fair value measurements are classified within Level 3 of the fair value hierarchy.

Unaudited Pro Forma Financial Information

The following unaudited pro forma consolidated results of operations for the year ended December 31, 2022 have been prepared as if the AVLP, SMC, GIGA and Circle 8 acquisitions had occurred on January 1, 2022. This table has been prepared for comparative purposes only and is not indicative of the actual results that would have been attained had the acquisition occurred as of the beginning of the periods presented, nor is it indicative of future results.


	For the Year Ended December 31, 2022
Total revenues	$	214,636,000
Net loss attributable to Ault Alliance, Inc.	$	(185,957,000	)

17. STOCK-BASED COMPENSATION

The Company provides stock-based compensation to directors, employees and consultants under the (i) 2021 Stock Incentive Plan, which was approved by stockholders on August 13, 2021 at the 2021 Annual Meeting of Stockholders and which reserved 1,000 shares of common stock for grant of awards under the plan and (ii) 2022 Stock Incentive Plan, which was approved by stockholders on November 23, 2022 at the 2022 Annual Meeting of Stockholders and which reserved 10,000 shares of common stock for grant of awards under the plan.

F-39

Options granted under the plans have an exercise price equal to or greater than the fair value of the underlying common stock at the date of grant and become exercisable based on a vesting schedule determined at the date of grant. Typically, options granted generally become fully vested after four years. Any options that are forfeited or cancelled before expiration become available for future grants. The options expire between 5 and 10 years from the date of grant. Restricted stock awards granted under the plan are subject to a vesting period determined at the date of grant. As of December 31, 2023, an aggregate of 10,441 shares of the Company’s common stock were available for future grant.

The options outstanding as of December 31, 2023, have been classified by exercise price, as follows:

Outstanding

Exercisable

Weighted

Average

Weighted

Remaining

Average

Exercise

Number

Contractual

Exercise

Number

Exercise

Price

Outstanding

Life (Years)

Price

Exercisable

Price

16,091 - $19,628

421

7.8

17,546

287

17,577

Issuances outside of the Plan
$	13,425	116	6.7	$	13,425	116	$	13,425
$	19,125	242	7.3	$	19,125	242	$	2,284
$	13,425 - $19,125	358	7.1	$	17,278	358	$	17,278

Total Options
$	13,425 - $19,628				779				7.5			$	17,423				645			$	17,411

The total stock-based compensation expense related to stock options and stock awards issued to the Company’s employees, consultants and directors, included in reported net loss for the year ended December 31, 2023 and 2022, was comprised as follows:


	Year Ended December 31,
	2023		2022
General and administrative	$	10,868,000	$	7,202,000
Total stock-based compensation	$	10,868,000	$	7,202,000

A summary of option activity under the Company’s stock option plans as of December 31, 2023 and 2022, and changes during the years ended is as follows:

Schedule of option activity
			Outstanding Options
								Weighted
						Weighted		Average
	Shares					Average		Remaining		Aggregate
	Available		Number			Exercise		Contractual		Intrinsic
	for Grant		of Options			Price		Life (years)		Value
January 1, 2022		379		453		$	18,900		9.8	$	0
Authorized		10,000		-
Forfeited		31		(31	)	$	19,950
December 31, 2022		10,410		422		$	18,675		8.7	$	0
Forfeited		1		(1	)	$	39,157
December 31, 2023		10,411		421		$	17,546		7.8	$	0

As of December 31, 2023, there was $2.1 million of unrecognized compensation cost related to non-vested stock-based compensation arrangements granted under the plans. That cost is expected to be recognized over a weighted average period of 1.5 years.

F-40

18. WARRANTS

A summary of warrant activity for the years ended December 31, 2023 and 2022 is presented below.

Schedule of warrants
	Warrants			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)
Outstanding at January 1, 2022		2,669		$	23,175		4.7
Granted		1,209			4,500
Forfeited		(1	)		4,554,717
Exercised		(1,803	)		16,618
Outstanding at December 31, 2022		2,074			16,835		3.9
Granted		14,176,472			3.55
Forfeited		-			-
Exercised		-			-
Outstanding at December 31, 2023		14,178,546		$	5.10		4.7

The following table summarizes information about common stock warrants outstanding at December 31, 2023:


Outstanding								Exercisable
				Weighted
				Average		Weighted				Weighted
				Remaining		Average				Average
Exercise		Number		Contractual		Exercise		Number		Exercise
Price		Outstanding		Life (Years)		Price		Exercisable		Price
$	3.38		12,269,032		4.77	$	3.38		-
$	4.59		1,907,440		4.60	$	4.59		-
$	3,375 - $18,750		2,067		2.72	$	10,3801		2,067	$	10,381
$	66,000 - $148,500		7		0.24	$	84,643		7	$	84,643
$	3.38 - $148,500		14,178,546		4.75	$	5.10		2,074	$	10,631

Warrant Issuances During 2023

During the year ended December 31, 2023, the Company issued warrants to purchase 14.2 million shares of Class A common stock at a weighted average exercise price of $3.54 per share, subject to adjustment, in connection with the issuance of a senior secured convertible promissory note, related party (see Note 24) and Series C convertible preferred stock, related party (see Note 26).

Warrant Issuances During 2022

On November 7, 2022, the Company issued warrants to purchase 606 shares of common stock at exercise price equal to $3,375 per share and warrants to purchase 606 shares of common stock at exercise price equal to $5,625 per share, subject to adjustment in connection with the issuance of secured promissory notes in the aggregate principal face amount of $18.9 million.

The Company has valued the warrants issued at their date of grant utilizing the Black-Scholes option pricing model. This model is dependent upon several variables such as the warrants’ remaining contractual term, exercise price, current stock price, risk-free interest rate and estimated volatility of the Company’s stock over the contractual term of the warrants. The risk-free interest rate used in the calculations is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the contractual life of the warrants.

The Company utilized a variety of pricing models and the weighted average assumptions used during the years ended December 31, 2023 and 2022 were as follows:


	December 31, 2023			December 31, 2022
Exercise price	$	3.54		$	4,500
Contractual term in years		5.0			4.0
Volatility		168	%		176	%
Dividend yield		0	%		0	%
Risk-free interest rate		4.0	%		4.5	%

F-41

19. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Other current liabilities at December 31, 2023 and 2022 consisted of:

Schedule of other current liabilities
	December 31,		December 31,
	2023		2022
Accounts payable	$	32,592,000	$	20,027,000
Accrued payroll and payroll taxes		9,779,000		9,789,000
Financial instrument liabilities		832,000		651,000
Interest payable		4,197,000		3,207,000
Accrued legal		2,340,000		3,168,000
Accrued lender profit participation rights		-		6,000,000
Other accrued expenses		16,703,000		17,586,000
Total liabilities	$	66,443,000	$	60,428,000

The following table summarizes the changes in financial instrument liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) for the years ended December 31, 2023 and 2022:


	For the Year Ended
	December 31,
	2023			2022
Beginning balance	$	651,000		$	4,249,000
Recognition of financial instrument liabilities		7,262,000			290,000
Change in fair value		(7,081,000	)		377,000
Transfer out of level 3		-			(4,265,000	)
Ending balance	$	832,000		$	651,000

20. LEASES

The Company has operating leases for office space. The Company’s leases have remaining lease terms of 12 months to 9.5 years, some of which may include options to extend the leases perpetually, and some of which may include options to terminate the leases within one year.

The following table provides a summary of leases by balance sheet category as of December 31, 2023 and 2022:


	December 31, 2023		December 31, 2022
Operating right-of-use assets	$	6,315,000	$	8,419,000
Operating lease liability - current		2,119,000		2,975,000
Operating lease liability - non-current		4,402,000		5,836,000

The components of lease expenses for the years ended December 31, 2023 and 2022, were as follows:

Schedule of lease expenses
	Year Ended December 31,
	2023		2022
Operating lease cost	$	3,677,000	$	2,716,000
Short-term lease cost		-		-

The following tables provides a summary of other information related to leases for the years ended December 31, 2023 and 2022:


	December 31, 2023			December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3,699,000		$	2,554,000
Right-of-use assets obtained in exchange for new operating lease liabilities	$	885,000		$	3,791,000
Weighted-average remaining lease term - operating leases		3.7 years			4.1 years
Weighted-average discount rate - operating leases		8.0	%		7.0	%

Maturity of lease liabilities under the Company’s non-cancellable operating leases as of December 31, 2023, were as follows:


Payments due by period
2024	$	2,674,000
2025		2,205,000
2026		1,258,000
2027		414,000
2028		357,000
Thereafter		759,000
Total lease payments		7,667,000
Less interest		(1,146,000	)
Present value of lease liabilities	$	6,521,000

F-42

21. NOTES PAYABLE

Notes payable at December 31, 2023 and 2022, were comprised of the following:

Schedule of notes payable
	Collateral		Guarantors		Interest rate		Due date		December 31, 2023			December 31, 2022
Circle 8 revolving credit facility		Circle 8 cranes with a book value of $31.7 million		-		8.4%		December 16, 2025	$	15,907,000		$	14,724,000
8.5% secured promissory notes		-		-		8.5%		May 7, 2024		-			17,389,000
16% promissory note (in default at December 31, 2023)		-		Ault & Company and Milton C. Ault, III		16.0%		December 16, 2023		2,572,000			17,456,000
Circle 8 equipment financing notes		Circle 8 equipment with a book value of $3.9 million		-		0.0%		March 15, 2024 through November 15, 2026		5,629,000			10,677,000
3% secured promissory notes		-		-		3.0%				-			5,672,000
8% demand loans		-		-		8.0%		Upon demand		950,000			-
Short-term bank credit facilities		-		-		5.9%		Renews monthly		1,464,000			1,702,000
XBTO note payable (in default at December 31, 2023 and repaid in March 2024)		2,482 Antminers with a book value of $3.4 million		-		12.5%		December 30, 2023		1,067,000			2,749,000
10% secured promissory notes		-		-		10.0%				-			8,789,000
Other ($0.9 million in default at December 31, 2023)		-		-						3,518,000			2,619,000
Total notes payable		-		-					$	31,107,000		$	81,777,000
Less:		-		-
Unamortized debt discounts		-		-						(83,000	)		(12,325,000	)
Total notes payable, net		-		-					$	31,024,000		$	69,452,000
Less: current portion		-		-						(12,866,000	)		(39,621,000	)
Notes payable – long-term portion		-		-					$	18,158,000		$	29,831,000

During the year ended December 31, 2023, the holders of $8.4 million 10% secured promissory notes exchanged their notes and accrued interest for Series E, Series F and Series G preferred stock liabilities. The Company recorded a loss on extinguishment of debt of $0.1 million related to the transaction. When the Series E, Series F and Series G preferred stock liabilities converted to Series A Common stock, the Company recorded a loss on extinguishment of $1.5 million.

During the year ended December 31, 2023, the holders of $10.5 million 10% demand promissory notes and $1.1 million 12% demand promissory notes exchanged their notes for notes from Ault & Company (see Note 22), resulting in a loss on extinguishment of debt of $0.4 million.

In connection with the December 2023 Series C Preferred Stock offering (see Note 26), the Company paid $20.4 million to pay the $20.2 million outstanding balance of the 8% senior secured promissory notes, plus $0.2 million accrued interest payable. The 8% senior secured promissory notes had an unamortized debt discount of $3.2 million outstanding, which was recorded as a loss on extinguishment of debt.

The Company recorded a $2.0 million loss on extinguishment of debt related to the April 2023 restructuring related to one of the 16% promissory notes payable.

F-43

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 December 31, 2023 were:

Schedule Of maturities
Year
2024	$	12,866,000
2025		17,721,000
2026		418,000
2027		51,000
2028		51,000
	$	31,107,000

Interest Expense

Schedule of interest expense
	For the Year Ended
	December 31,
	2023		2022
Contractual interest expense	$	9,619,000	$	6,780,000
Forbearance fees		5,469,000		1,453,000
Amortization of debt discount		21,507,000		29,109,000
Total interest expense	$	36,595,000	$	37,342,000

22. NOTES PAYABLE, RELATED PARTY

Notes payable, related party at December 31, 2023 and December 31, 2022, were comprised of the following:


	Interest rate	Due date	December 31, 2023		December 31, 2022
Notes from officers - AAI	18%	February 1, 2024*	$	98,000	$	-
Notes from officers - TurnOnGreen	14%	Past due		51,000		25,000
Notes from board member - ROI	18%	January 19, 2024*		90,000		-
Ault & Company advances	No interest	Upon demand		1,909,000		-
Advances from officers - AAI	No interest	Upon demand		-		300,000
Advances from officers - TurnOnGreen	No interest	Upon demand		-		14,000
Advances from officers - GIGA	8%	Upon demand		52,000		-
Other related party advances	No interest	Upon demand		175,000		13,000
Total notes payable			$	2,375,000	$	352,000

F-44

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 December 31, 2023, $4.6 million has been advanced under the loan agreement and was exchanged for a senior secured convertible promissory note with Ault & Company (see Note 24).

In August 2023, Ault & Company assumed $11.6 million of secured promissory notes previously issued by the Company for which the Company has issued term notes to Ault & Company in the same amount. One term note has a principal amount of $1.1 million and bears interest at 12% and the second term note has a principal amount of $10.5 million and bears interest at 10%. These assumed loans were exchanged for a senior secured convertible promissory note with Ault & Company (see Note 24).

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


	For the Year Ended
	December 31,
	2023		2022
Interest expense, related party	$	664,000	$	-

23. CONVERTIBLE NOTES PAYABLE

Convertible notes payable at December 31, 2023 and 2022, were comprised of the following:

Schedule of convertible notes payable
	Conversion price per share	Interest rate	Due date	December 31, 2023			December 31, 2022
Convertible promissory note	$4.00	4%	May 10, 2024	$	-		$	660,000
Convertible promissory note – original issue discount (“OID”) only	90% of 5-day VWAP	OID Only	September 28, 2024		1,673,000			-
AVLP convertible promissory notes, principal	$0.35 (AVLP stock)	7%	August 22, 2025		9,911,000			9,911,000
GIGA senior secured convertible notes - in default	$0.25 (GIGA stock)	18%	October 11, 2024		4,388,000			-
ROI senior secured convertible note	$0.11 (ROI stock)	OID Only	April 27, 2024		6,513,000			-
Fair value of embedded conversion options					910,000			2,316,000
Total convertible notes payable					23,395,000			12,887,000
Less: unamortized debt discounts					(2,179,000	)		(111,000	)
Total convertible notes payable, net of financing cost, long term				$	21,216,000		$	12,776,000
Less: current portion					(11,763,000	)		(1,325,000	)
Convertible notes payable, net of financing cost – long-term portion				$	9,453,000		$	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 December 31, 2023, were:

Schedule of contractual maturities
Year	Principal
2024	$	12,574,000
2025		10,821,000
	$	23,395,000

Significant inputs associated with the embedded conversion options include:


	December 31, 2023		December 31, 2022		At Inception
Contractual term in years		0.3		2.7		1.0
Volatility		138%		82%		111%
Dividend yield		0%		0%		0%
Risk-free interest rate		3.8%		4.0%		3.5%

F-45

The following table summarizes the changes in embedded conversion option derivative liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) for the years ended December 31, 2023 and 2022:

Schedule of derivative liabilities
	For the Year Ended
	December 31,
	2023			2022
Beginning balance	$	2,316,000		$	-
Fair value of embedded conversion options issued or acquired		1,652,000			5,851,000
Change in fair value		(3,058,000	)		(3,535,000	)
Ending balance	$	910,000		$	2,316,000

The following table summarizes the changes in convertible notes payable measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) for the years ended December 31, 2023 and 2022:

Schedule of convertible notes payable
	For the Year Ended
	December 31,
	2023			2022
Beginning balance	$	10,571,000		$	660,000
Convertible notes from acquisitions		-			9,911,000
Issuance of convertible notes		12,441,000			-
Transfer out of level 3		(527,000	)		-
Ending balance	$	22,485,000		$	10,571,000

In October 2023 GIGA entered into an exchange and waiver agreement related to its senior secured convertible promissory notes, which resulted in a loss on extinguishment of debt of $1.4 million.

24. SENIOR SECURED CONVERTIBLE NOTE, RELATED PARTY

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

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

The Note had a principal face amount of $17.5 million and had a maturity date of October 12, 2028 (the “Maturity Date”). The Note bore interest at the rate of 10% per annum. The Note was repaid in full in December 2023 and the Company recorded a $4.2 million loss on extinguishment for the year ended December 31, 2023.

The Warrants grant Ault & Company the right to purchase 1.9 million shares of common stock. The Warrants have a five-year term, expiring on the fifth anniversary of the A&C Closing Date, and become exercisable on the first business day after the six-month anniversary of the A&C Closing Date. The exercise price of the Warrants is $4.5925, which is subject to adjustment in the event of customary stock splits, stock dividends, combinations or similar events.

The Company elected the fair value option and utilized a Monte-Carlo simulation at inception to value the Note. The Monte-Carlo simulation is calculated as the average present value over all simulated paths. The key inputs and assumptions used in the Monte-Carlo Simulation, including volatility, estimated market yield, risk-free rate, the probability of various scenarios, including held to maturity and subsequent preferred stock offering and various simulated paths, were utilized to estimate the fair value at $17.8 million or approximately the principal amount outstanding as of inception. The value of the 2023 Note was calculated as the average present value over 25,000 simulated paths. Given the Notes were fully satisfied in connection with issuance of the Series C convertible preferred stock, the Company calculated the fair value on the date of extinguishment as the total principal plus accrued interest outstanding.

F-46

The following table summarizes some of the significant inputs and assumptions used in the Monte-Carlo simulation:


Senior secured convertible promissory note		Amounts
Principal outstanding at valuation date		$17.5 million
Volatility		80%
Interest rate		10.0%
Risk-free interest rate range		4.7% to 5.6%
Estimated yield		19.5% to 21.0%

The Company computed the fair value of the warrants using the Black-Scholes option pricing model and, as a result of this calculation, recorded debt discount in the amount of $4.2 million based on the estimated fair value of the Warrants.

In addition to a 21% discount for lack of marketability, significant inputs associated with the calculation of the fair value of the Warrants included the following:

Schedule of convertible note
Contractual term in years		5.0
Volatility		167.3%
Dividend yield		0%
Risk-free interest rate		4.7%

The rollforward of the senior secured convertible promissory note notes is as follows:


Senior secured convertible promissory note	Total
Balance as of December 31, 2022	$	-
Exchange of loan agreement with Ault & Company		4,625,000
Ault & Company note from exchange of 12% demand promissory note		1,100,000
Ault & Company note from exchange of 10% demand promissory note		10,545,000
Exchange of Series B convertible preferred stock		1,250,000
Cash payments of senior secured convertible promissory note		(150,000	)
Payment from issuance of Series C preferred stock		(17,370,000	)
Balance as of December 31, 2023	$	-

25. COMMITMENTS AND CONTINGENCIES

Contingencies

Litigation Matters

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

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

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

As of December 31, 2023 the Company has accrued $2.3 million as a loss contingency related to litigation matters.

F-47

26. STOCKHOLDERS’ EQUITY

Preferred Stock

The Company is authorized to issue 25.0 million shares of preferred stock, $0.001 par value. As of December 31, 2023, the Board has designated 1,000,000 shares as Series A Convertible Preferred Stock (the “Series A Preferred Stock”), 50,000 shares as Series C Convertible Preferred Stock (the “Series C Preferred Stock”) and 2,000,000 shares as 13.00% Series D Cumulative Redeemable Perpetual Preferred Stock (the “Series D Preferred Stock”). As of December 31, 2023, the rights, preferences, privileges and restrictions on the remaining authorized 22.0 million shares of preferred stock have not been determined. The Board is authorized to designate a new series of preferred shares and determine the number of shares, as well as the rights, preferences, privileges and restrictions granted to or imposed upon any series of preferred shares.

On January 23, 2023, the Company filed a Certificate of Elimination of the certificate of designations of preferred stock with the Secretary of State of the state of Delaware with respect to the Company’s Series C convertible preferred stock, par value $0.001 per share.

On November 15, 2023, the Company filed a new Certificate of Designations of Preferences, Rights and Limitations of Series C Convertible Preferred Stock with the Secretary of State of the State of Delaware to establish the preferences, limitations and relative rights of the Series C Preferred Stock.

On December 8, 2023, the Company filed a Certificate of Elimination of the certificate of designations of preferred stock with the Secretary of State of the state of Delaware with respect to the Company’s Series B convertible preferred stock, par value $0.001 per share.

Common Stock

Common stock confers upon the holders the rights to receive notice to participate and vote at any meeting of stockholders of the Company, to receive dividends, if and when declared, and to participate in a distribution of surplus of assets upon liquidation of the Company. The Class B common stock carries the voting power of 10 shares of Class A common stock, referred to herein as the common stock.

2023 Issuances

Common ATM Offerings

On February 25, 2022, the Company entered into an At-The-Market issuance sales agreement with Ascendiant Capital Markets, LLC (“Ascendiant Capital”) to sell shares of common stock having an aggregate offering price of up to $200 million from time to time, through an “at the market offering” program (the “2022 Common ATM Offering”). During the three months ended March 31, 2023, the Company sold an aggregate of 4,268 shares of common stock pursuant to the 2022 Common ATM Offering for gross proceeds of $4.2 million. Effective March 17, 2023, the 2022 Common ATM Offering was terminated.

On 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”). On July 13, 2023 and September 8, 2023, the sales agreement was amended increasing the size of the 2023 ATM Offering to $20 million and $50 million, respectively. During the year ended December 31, 2023, the Company sold an aggregate of 4.3 million shares of common stock pursuant to the 2023 Common ATM Offering for gross proceeds of $35.3 million.

Preferred ATM Offering

On June 14, 2022, the Company entered into an At-The-Market sales agreement with Ascendiant Capital under which it may sell, from time to time, shares of its Series D Preferred Stock for aggregate gross proceeds of up to $46.4 million (the “2022 Preferred ATM Offering”). During the year ended December 31, 2023, the Company sold an aggregate of 252,359 shares of Series D Preferred Stock pursuant to the 2022 Preferred ATM Offering for net proceeds of $2.9 million. Effective June 16, 2023, the 2022 Preferred ATM Offering was terminated.

Issuance of Common Stock Upon Conversion of Preferred Stock

During the year ended December 31, 2023, the Investors converted 1,000 shares of Series F Preferred Stock and 6,756 shares of Series G Preferred Stock into an aggregate of 5,736 shares of the Company’s common stock. A loss on extinguishment of $0.3 million was recognized on the issuance of common stock based on the fair value of the Company’s common stock at the date of the conversions.

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

During the year ended December 31, 2023, SMC and ROI sold an aggregate of $7.3 million of common stock to non-controlling interests.

Series C Convertible Preferred Stock Offering, Related Party

On December 14, 2023, pursuant to the November 2023 SPA entered into with Ault & Company on November 6, 2023, the Company sold to Ault & Company, in three separate closings that occurred on the closing date, an aggregate of 41,500 shares of Series C Preferred Stock and Warrants to purchase 12.3 million shares of common stock, for a total purchase price of $41.5 million.

F-48

The proceeds from the sale of Series C Preferred Stock were used in part to pay $17.5 million to satisfy the outstanding balance on the outstanding senior secured convertible promissory note with Ault & Company. The senior secured convertible promissory note with Ault & Company had an unamortized debt discount of $4.2 million outstanding, which was recorded as a loss on extinguishment of debt.

In addition, the Company paid $20.4 million to pay the $20.2 million outstanding balance of the 8% senior secured promissory notes, plus $0.2 million accrued interest payable. The 8% senior secured promissory notes had an unamortized debt discount of $3.2 million outstanding, which was recorded as a loss on extinguishment of debt.

On December 14, 2023, the Company, along with its wholly owned subsidiaries Sentinum, Third Avenue, ACS, BNI Montana, Ault Lending, Ault Aviation, LLC (“Ault Aviation”) and AGREE (collectively with the Company, Sentinum, Third Avenue, ACS, BNI Montana, Ault Lending and Ault Aviation, the “Guarantors”) entered into a Loan and Guaranty Agreement (the “Loan Agreement”) with institutional lenders, pursuant to which Ault & Company borrowed $36 million and issued secured promissory notes to the lenders in the aggregate amount of $38.9 million (collectively, the “Secured Notes”; and the transaction, the “Loan”).

Pursuant to the Loan Agreement, the Guarantors, as well as Milton C. Ault, III, the Company’s Executive Chairman and the Chief Executive Officer of Ault & Company, agreed to act as guarantors for repayment of the Secured Notes. In addition, certain Guarantors entered into various agreements as collateral in support of the guarantee of the Secured Notes, including (i) a security agreement by Sentinum, pursuant to which Sentinum granted to the Lenders a security interest in (a) 19,226 Antminers (the “Miners”), (b) all of the digital currency mined or otherwise generated from the Miners and (c) the membership interests of ACS, (ii) a security agreement by the Company, Ault Lending, BNI Montana and AGREE, pursuant to which those entities granted to the lenders a security interest in substantially all of their assets, as well as a pledge of equity interests in Ault Aviation, AGREE, Sentinum, Third Avenue, Ault Energy, LLC, the Company’s wholly owned subsidiary, ADTC, Eco Pack Technologies, Inc., the Company’s wholly owned subsidiary, and Circle 8 Holdco, (iii) a mortgage and security agreement by Third Avenue on the real estate property owned by Third Avenue in St. Petersburg, Florida (the “Florida Property”), (iv) a future advance mortgage by ACS on the real estate property owned by ACS in Dowagiac, Michigan (the “Michigan Property”), (v) an aircraft mortgage and security agreement by Ault Aviation on a private aircraft owned by Ault Aviation (the “Aircraft”), and (vi) deposit account control agreements over certain bank accounts held by certain of the Company’s subsidiaries.

In addition, pursuant to the Loan Agreement, the Company agreed to establish a segregated deposit account (the “Segregated Account”), which would be used as a further guarantee of repayment of the Secured Notes. $3.5 million of cash was paid into the Segregated Account on the closing date. The Company is required to have the minimum balance in the Segregated Account be not less than $7 million, $15 million, $20 million and $27.5 million on the four-month, nine-month, one-year and two-year anniversaries of the closing date, respectively. In addition, starting on March 31, 2024, the Company is required to deposit $0.3 million monthly into the Segregated Account, which increases to $0.4 million monthly starting March 31, 2025. Further, the Company agreed to deposit into the Segregated Account, (i) up to the first $7 million of net proceeds, if any, from the sale of the Hilton Garden Inn in Madison West, the Residence Inn in Madison West, the Courtyard in Madison West, and the Hilton Garden Inn in Rockford; (ii) 50% of cash dividends (on a per dividend basis) received from Circle 8 on or after June 30, 2024; (iii) 30% of the net proceeds from any bond offerings the Company conducts, which shall not exceed $9 million in the aggregate; and (iv) 25% of the net proceeds from cash flows, collections and revenues from loans or other investments made by Ault Lending (including but not limited to sales of loans or investments, dividends, interest payments and amortization payments), which shall not exceed $5 million in the aggregate. In addition, if the Company decides to sell certain assets, the Company further agreed to deposit funds into the Segregated Account from the sale of those assets, including, (i) $15 million from the sale of the Florida Property, (ii) $11 million from the sale of the Aircraft, (iii) $17 million from the sale of the Michigan Property, (iv) $350 per Miner, subject to a de minimis threshold of $1 million, and (v) $10 million from the sale of Circle 8.

Pursuant to the Company’s financial guarantee obligations noted above, the Company recorded a guarantee liability of $38.9 million using the practical expedient to fair value as set forth in ASC 460-10-30-2(a) and recorded an expense of $35.4 million (the amount of the guarantee liability, less the $3.5 million restricted cash in the Segregated Account) within other income (expense) on the consolidated statement of operations and comprehensive loss for the year ended December 31, 2023.

The guarantee written by the Company represents a variable interest in Ault & Company. Ault & Company, Inc, founded in 2015, is a private holding company focused on acquiring undervalued assets and disruptive technologies within the commercial, defense, aerospace, industrial, hospitality, technology and real estate sectors. Mr. Ault is the Founder and Executive Chairman of its Board of Directors. Ault & Company has demonstrated its ability to raise capital independently, on a limited basis, however given the nature of its strategic investment policy, there is no requirement for it to raise additional capital until and unless a strategic opportunity presents itself that requires additional capital. The nature and amount of the financing that the Company guaranteed indicates that Ault & Company’s lender required the Company’s collateral and support to close the December 2023 financing.

The accounting guidance requires the Company to perform an analysis to determine whether its variable interest gives it a controlling financial interest in Ault & Company. The Company performed a VIE analysis and determined that given the control structure and ownership of Ault & Company that the Company would not be able to remove the key operating decision maker, Mr. Ault, from his leadership role at Ault & Company and therefore the Company does not meet the power criterion to be considered the primary beneficiary of Ault & Company.

2022 Issuances

2022 ATM Offering – Common Stock

On February 25, 2022, 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 $200 million from time to time, through an “at the market offering” program (the “2022 Common ATM Offering”). As of December 31, 2022, the Company had sold an aggregate of approximately 38,000 shares of common stock pursuant to the 2022 Common ATM Offering for gross proceeds of $172.4 million.

F-49

Public Offering of Series D Preferred Stock

The Company has designated 2.0 million 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.

2022 ATM Offering – Preferred Stock

On June 14, 2022, the Company entered into an At-The-Market equity offering program with Ascendiant Capital under which it may sell, from time to time, shares of its Series D Preferred Stock for aggregate gross proceeds of up to $46.4 million (the “2022 Preferred ATM Offering”). As of December 31, 2022, the Company had sold an aggregate of 28,838 shares of Series D Preferred Stock pursuant to the 2022 Preferred ATM Offering for gross proceeds of $0.5 million.

27. INCOME TAXES

The following is a geographical breakdown of income/loss before the provision for income tax, for the years ended December 31, 2023 and 2022:


	2023			2022
Pre-tax loss
U.S. Federal	$	(256,824,000	)	$	(189,899,000	)
Foreign		867,000			(4,419,000	)
Total	$	(255,957,000	)	$	(194,318,000	)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes. Significant components of the Company’s deferred tax assets are as follows:

Schedule of deferred tax assets
	2023			2022
Deferred tax asset:
Allowance for doubtful accounts	$	315,000		$	439,000
Unrealized losses		13,859,000			11,082,000
Obsolete inventory		1,996,000			2,816,000
Stock compensation		13,383,000			3,581,000
Other carryforwards		311,000			317,000
Net operating loss carryforwards		94,899,000			17,878,000
Lease liability		1,224,000			1,979,000
Impairment		29,702,000			22,822,000
Accrued expenses		2,360,000			3,648,000
Interest expense		14,713,000			8,668,000
Outside basis difference		9,308,000			-
Other		2,095,000			404,000
Total deferred tax asset		184,165,000			73,634,000

Deferred tax liability:
Right-of-use assets		(1,112,000	)		(1,865,000	)
Fixed assets, net		(15,289,000	)		(1,575,000	)
Intangible assets, net		42,000			(6,638,000	)
Bargain gain/loss		-			(225,000	)
Total deferred income tax liabilities		(16,359,000	)		(10,303,000	)

Net deferred income tax assets		167,806,000			63,331,000
Valuation allowance		(167,806,000	)		(63,304,000	)
Deferred tax asset (liability), net		-		$	27,000

F-50

At December 31, 2023, the Company had federal net operating loss carryforwards (“NOLs”) for income tax purposes of approximately $215.4 million related to the year after December 31, 2017 that does not have an expiration under current tax law and $132.5 million that expire between 2024 and 2037 after application of limitation set forth in Section 382 of the Internal Revenue Code (“§382”). The Company had state NOLs for income tax purposes of approximately $251.6 million as of December 31, 2023. The state NOLs may be used to offset future taxable income and will begin to expire in 2038, unless previously utilized. In accordance with §382, future utilization of the Company’s NOLs is subject to an annual limitation as a result of ownership changes that occurred previously. The Company also maintains NOLs in various foreign jurisdictions.

At December 31, 2023, Ault Disruptive, an entity not consolidated for income tax purposes, utilized its remaining NOLs. The Company has not completed a formal §382 study and completion of such an analysis in future periods may yield income tax provision impacts in subsequent financial statements.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not some portion or all deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax assets, projected future taxable income and tax planning strategies in making this assessment. After consideration of all positive and negative evidence, including the Company’s generation of NOLs in current and prior periods, there is substantial doubt regarding the Company’s ability to utilize its deferred tax assets, therefore, the Company recorded a full valuation allowance. For the year ended December 31, 2023, the valuation allowance increased by $104.5 million.

The net income tax provision (benefit) consisted of the following:


	2023			2022
Current
U.S. Federal	$	221,000		$	244,000
U.S. State		(99,000	)		143,000
Foreign		188,000			132,000
Total current provision		310,000			519,000
Deferred
U.S. Federal		0			(4,977,000	)
U.S. State		27,000			(27,000	)
Foreign		0			0
Total deferred provision (benefit)		27,000			(5,004,000	)
Total provision (benefit) for income taxes	$	337,000		$	(4,485,000	)

The Company’s effective tax rates were (0.3)% and 2.3% for the years ended December 31, 2023 and 2022, respectively. During the year ended December 31, 2023, the effective tax rate differed from the U.S. federal statutory rate primarily due to the change in valuation allowance. The reconciliation of income tax attributable to operations computed at U.S. Federal statutory income tax rates of 21% to income tax expense is as follows:


	2023			2022
Expected federal income tax benefit		21.0	%		21.0	%
State taxes net of federal benefit		-1.1	%		7.3	%
Effect of change in valuation allowance		-15.8	%		-22.1	%
Permanent differences		1.0	%		-1.0	%
Goodwill impairment		-2.3	%		-1.4	%
IRC Section 162(m) compensation limitation		0.0	%		-0.3	%
Excess tax benefit - windfall/(shortfall)		-0.2	%		-0.2	%
Guarantee loss		-2.9	%		-
Other		0.2	%		-0.9	%
Income tax benefit		-0.1	%		2.3	%

The Company accounts for uncertain tax positions in accordance with ASC 740-10-25. ASC 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. To the extent that the final tax outcome of these matters is different than the amount recorded, such differences impact income tax expense in the period in which such determination is made. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income tax expense. ASC 740-10-25 also requires management to evaluate tax positions taken by the Company and recognize a liability if the Company has taken uncertain tax positions that more likely than not would not be sustained upon examination by applicable taxing authorities. Management of the Company has evaluated tax positions taken by the Company and has concluded that as of December 31, 2023 and 2022, there are no uncertain tax positions taken, or expected to be taken, that would require recognition of a liability that would require disclosure in the financial statements.

F-51

In general, the Company’s statute of limitations remains open for various taxable years, in various U.S. federal, U.S. state and foreign jurisdictions. However, if and when the Company claims net operating loss carryforwards against future taxable income, those losses may be examined by taxing authorities. The Company will perform an analysis to determine the effect, if any, of these loss limitations rules on the NOL carryforward balances. Earnings in all foreign jurisdictions are permanently reinvested.

28. 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, 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 common stock, consisted of the following at December 31, 2023 and 2022:

Schedule of net loss per share
	December 31,
	2023		2022
Warrants		14,179,000		2,000
Convertible preferred stock		8,137,000		-
Convertible notes		1,339,000		-
Stock options		1,000		1,000
Total		23,656,000		3,000

29. SEGMENT AND CUSTOMERS INFORMATION

The Company has eight and seven reportable segments and the holding company as of December 31, 2023 and 2022, respectively; 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 operating segments and presented in accordance with ASC 280.

Segment information for the year ended December 31, 2023:

Schedule of operating segments
	GIGA			TurnOn Green			Fintech			Sentinum			Ault Disruptive			SMC			Energy			ROI			Holding Company			Total
Revenue, product	$	37,759,000		$	4,201,000		$	-		$	1,416,000		$	-		$	31,557,000		$	899,000		$	305,000		$	-		$	76,137,000
Revenue, digital currencies mining		-			-			-			33,107,000			-			-			-			-			-			33,107,000
Revenue, lending and trading activities		-			-			(1,998,000	)		-			-			-			-			-			-			(1,998,000	)
Revenue, crane operations		-			-			-			-			-			-			49,198,000			-			-			49,198,000
Total revenues	$	37,759,000		$	4,201,000		$	(1,998,000	)	$	34,523,000		$	-		$	31,557,000		$	50,743,000		$	305,000		$	-		$	156,444,000

Depreciation and amortization expense	$	1,097,000		$	93,000		$	-		$	18,295,000		$	-		$	884,000		$	4,377,000		$	173,000		$	2,055,000		$	26,974,000

Impairment of goodwill and intangible assets	$	4,681,000		$	-		$	-		$	-		$	-		$	-		$	42,880,000		$	-		$	-		$	47,561,000

Impairment of property and equipment	$	-		$	-		$	-		$	-		$	-		$	-		$	14,025,000		$	4,136,000		$	-		$	18,161,000

Impairment of mined digital currencies	$	-		$	-		$	-		$	489,000		$	-		$	-		$	-		$	-		$	-		$	489,000

Income (loss) from operations	$	(12,227,000	)	$	(4,381,000	)	$	(3,416,000	)	$	(2,583,000	)	$	(1,325,000	)	$	(6,972,000	)	$	(51,351,000	)	$	(44,353,000	)	$	(27,113,000	)	$	(153,721,000	)

Interest expense	$	843,000		$	124,000		$	-		$	221,000		$	-		$	338,000		$	2,344,000		$	4,383,000		$	28,342,000		$	36,595,000

Capital expenditures for the year ended December 31, 2023	$	271,000		$	145,000		$	-		$	2,019,000		$	-		$	383,000		$	3,603,000		$	479,000		$	2,757,000		$	9,657,000

Segment identifiable assets as of December 31, 2023	$	32,470,000		$	4,995,000		$	17,027,000		$	59,903,000		$	2,347,000		$	-		$	51,254,000		$	9,937,000		$	31,266,000			208,199,000
Assets of discontinued operations																													90,991,000
Total identifiable assets as of December 31, 2023																												$	299,190,000

F-52

Segment information for the year ended December 31, 2022:


	GIGA			TurnOn Green			Fintech		Sentinum			Ault Disruptive			SMC			Energy			Holding Company			Total
Revenue	$	30,255,000		$	5,522,000		$	239,000	$	1,105,000		$	-		$	24,224,000		$	216,000		$	-		$	61,561,000
Revenue, digital currencies mining		-			-			-		16,693,000			-			-			-			-			16,693,000
Revenue, crane operations		-			-			-		-			-			-			2,739,000			-			2,739,000
Revenue, lending and trading activities		-			-			36,644,000		-			-			-			-			-			36,644,000
Total revenues	$	30,255,000		$	5,522,000		$	36,883,000	$	17,798,000		$	-		$	24,224,000		$	2,955,000		$	-		$	117,637,000

Depreciation and amortization expense	$	1,713,000		$	497,000		$	475,000	$	12,396,000		$	-		$	503,000		$	281,000		$	556,000		$	16,421,000

Impairment of goodwill and intangible assets	$	9,881,000			-		$	-	$	-		$	-		$	3,183,000		$	-		$	-		$	13,064,000

Impairment of property and equipment	$	-		$	-		$	-	$	79,556,000		$	-		$	-		$	-		$	-		$	79,556,000

Impairment of deposit due to vendor bankruptcy filing	$	-		$	-		$	-	$	2,000,000		$	-		$	-		$	-		$	-		$	2,000,000

Impairment of mined digital currencies	$	-		$	-		$	-	$	3,099,000		$	-		$	-		$	-		$	-		$	3,099,000

Income (loss) from operations	$	(13,951,000	)	$	(3,843,000	)	$	4,430,000	$	(91,614,000	)	$	(1,420,000	)	$	(4,973,000	)	$	(546,000	)	$	(27,560,000	)	$	(139,477,000	)

Interest expense	$	745,000		$	7,000		$	3,000	$	233,000		$	7,000		$	271,000		$	1,457,000		$	34,619,000		$	37,342,000

Capital expenditures for the year ended December 31, 2022	$	600,000		$	266,000		$	17,374,000	$	80,799,000		$	-		$	93,000		$	31,000		$	142,000		$	99,305,000

Segment identifiable assets as of December 31, 2022	$	38,520,000		$	6,959,000		$	82,944,000	$	75,731,000		$	118,791,000		$	27,508,000		$	96,255,000		$	16,312,000		$	463,020,000
Assets of discontinued operations																									98,494,000
Total identifiable assets as of December 31, 2022																								$	561,514,000

30. CONCENTRATIONS OF CREDIT AND REVENUE RISK

2023 Concentrations of Credit and Revenue Risk

Accounts receivable are concentrated with a certain large customer. At December 31, 2023, one Circle 8 customer in North America accounted for 11% of consolidated accounts receivable.

For the year ended December 31, 2023, one customer, a mining pool operator in North America, represented 11% of consolidated revenues.

2022 Concentrations of Credit and Revenue Risk

Accounts receivable are concentrated with a certain large customer. At December 31, 2022, one SMC customer in North America accounted for 14% of consolidated accounts receivable.

For the year ended December 31, 2022, one customer, a mining pool operator in North America, represented 14% of consolidated revenues.

F-53

31. SUBSEQUENT EVENTS

2023 Common ATM Offering

During the period between January 1, 2024 through April 16, 2024, the Company sold an aggregate of 25.6 million shares of common stock pursuant to the 2023 Common ATM Offering for gross proceeds of $14.6 million.

6% Convertible Promissory Notes

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

Additional Closings of Series C Preferred Stock, Related Party

On each of March 7, 2024, March 8, 2024, March 18, 2024 and March 19, 2024 pursuant to the November 2023 SPA entered into with Ault & Company on November 6, 2023, the Company sold to Ault & Company 500 shares of Series C Preferred Stock and Warrants to purchase 147,820 shares of common stock, for a total purchase price of $0.5 million. As of March 19, 2024, Ault & Company has purchased an aggregate of 43,500 shares of Series C Convertible Preferred Stock and Series C Warrants to purchase an aggregate of 12,860,312 Warrant Shares, for an aggregate purchase price of $43.5 million. The November 2023 SPA provides that Ault & Company may purchase up to $75.0 million of Series C Convertible Preferred Stock and Series C Warrants in one or more closings.

Amendment to the November 2023 SPA and Series C Designation of Preferences, Rights and Limitations

On March 25, 2024, the November 2023 SPA entered into with Ault & Company was amended to increase the amount of Series C Preferred Stock and Series C Warrants that may be purchase under the agreement from $50.0 million to $75.0 million and an extension of the date to closing the final tranche of the financing to June 30, 2024. On April 3, 2024, the Company filed a Certificate of Increase to the Series C Designation of Preferences, Rights and Limitations to increase the number of authorized shares of Series C Preferred Stock from 50,000 to 75,000.

Ault Lending Investment in Alzamend Series A Convertible Preferred Stock and Warrants

On January 31, 2024, Ault Lending entered into a securities purchase agreement with Alzamend pursuant to which Alzamend agreed to sell Ault Lending up to 6,000 shares of Alzamend Series A convertible preferred stock and warrants to purchase shares of the Alzamend common stock. The Agreement provides that Ault Lending may purchase up to $6 million of Alzamend Series A Convertible Preferred Stock in one or more closings.

On January 31, 2024, Alzamend sold 1,220 shares of its Series A convertible preferred stock and warrants to purchase 1.2 million shares of its common stock to Ault Lending, for a total purchase price of $1.2 million. On March 26, 2024, Alzamend sold an additional 780 shares of its Series A convertible preferred stock and warrants to purchase 0.8 million shares of its common stock to Ault Lending, for a total purchase price of $0.8 million.

Amendment to the Loan Agreement

On April 15, 2024, the Loan Agreement was amended to extend the deadline, from the four-month anniversary to the five-month anniversary of the closing date of the Loans, by which the Company is required to have the minimum balance in the Segregated Account be not less than $7 million.

Final Distribution of TurnOnGreen Securities Announced

The Company established a record date of April 15, 2024 for its final distribution of TurnOnGreen securities. Stockholders as of this date are entitled to 0.83 shares of TurnOnGreen common stock and warrants to purchase 0.83 shares of TurnOnGreen common stock for every share of the Company’s common stock they held on the record date. The Company will distribute 25.0 million TurnOnGreen securities in the final distribution.

F-54