What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-21 compared with 2023-05-22 · 807 added, 412 removed, 776 unchanged (61% of the section changed)

13 unchanged sentences

TOTAL CURRENT ASSETS

Cash and marketable securities held in trust account

Intangible assets, net

8 unchanged sentences

Accounts payable and accrued expenses

Dividend payable in TurnOnGreen common stock

Operating lease liability, current

3 unchanged sentences

$ 100 stated value per share, $ 0.001 par value – 83,000 shares authorized;

83,000 and 0 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Series F Convertible Preferred Liability:

$ 100 stated value per share, $ 0.001 par value – 1,000 shares authorized;

1,000 and 0 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

83,000 and 0 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively (liquidation preference of $ 8,300,000 as of June 30, 2023)

Series G Convertible Preferred Liability:

$ 100 stated value per share, $ 0.001 par value – 16,000 shares authorized;

16,000 and 0 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

14,208 and 0 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively (liquidation preference of $ 1,421,000 as of June 30, 2023)

Redeemable noncontrolling interests in equity of subsidiaries

9 unchanged sentences

Convertible notes payable

Deferred underwriting commissions of Ault Disruptive subsidiary

Deferred underwriting commissions of Ault Disruptive Technologies Corporation (“Ault Disruptive”) subsidiary

TOTAL LIABILITIES

COMMITMENTS AND CONTINGENCIES

Redeemable noncontrolling interests in equity of subsidiaries

STOCKHOLDERS’ EQUITY

Series A Convertible Preferred Stock, $ 25 stated value per share, $ 0.001

par value – 1,000,000 shares authorized;

7,040 shares issued and outstanding at March 31, 2023 and December 31, 2022 (liquidation

preference of $ 176,000 as of March 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;

125,000 shares issued and outstanding at March 31, 2023 and December 31, 2022 (liquidation

preference of $ 1,190,000 as of March 31, 2023 and December 31, 2022)

Series D Cumulative Redeemable Perpetual Preferred Stock, $ 25 stated

value per share, $ 0.001 par value – 2,000,000 shares authorized;

shares authorized, 263,022 shares and 172,838 shares issued and

outstanding at March 31, 2023 and December 31, 2022, respectively (liquidation preference of $ 6,576,000 and $ 4,321,000 as of March 31,

2023 and December 31, 2022)

Series A Convertible Preferred Stock, $ 25 stated value per share, $ 0.001 par value – 1,000,000 shares authorized;

7,040 shares issued and outstanding at June 30, 2023 and December 31, 2022 (liquidation preference of $ 176,000 as of June 30, 2023 and December 31, 2022)

Series B Convertible Preferred Stock, $ 10 stated value per share, share, $ 0.001 par value – 500,000 shares authorized;

125,000 shares issued and outstanding at June 30, 2023 and December 31, 2022 (liquidation preference of $ 1,190,000 at June 30, 2023 and December 31, 2022)

Series D Cumulative Redeemable Perpetual Preferred Stock, $ 25 stated value per share, $ 0.001 par value – 2,000,000 shares authorized;

shares authorized, 425,197 shares and 172,838 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively (liquidation preference of $ 10,630,000 and $ 4,321,000 as of June 30, 2023 and December 31, 2022, respectively)

Class A Common Stock, $ 0.001 par value – 500,000,000 shares authorized;

1,385,822 and 1,274,157 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

1,526,411 and 1,274,157 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Class B Common Stock, $ 0.001 par value – 25,000,000 shares authorized;

0 shares issued and outstanding at March 31, 2023 and December 31, 2022

0 shares issued and outstanding at June 30, 2023 and December 31, 2022

Additional paid-in capital

4 unchanged sentences

( 1,450,000 )

( 1,100,000 )

Treasury stock, at cost

14 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Revenue, products

Revenue, cryptocurrency mining

Revenue, hotel operations

Revenue, hotel and real estate operations

Revenue, crane operations

Revenue, lending and trading activities

( 4,939,000 )

Total revenue

1 unchanged sentence

Cost of revenue, cryptocurrency mining

Cost of revenue, hotel operations

Cost of revenue, hotel and real estate operations

Cost of revenue, crane operations

5 unchanged sentences

General and administrative

Impairment of goodwill and intangible assets

Impairment of mined cryptocurrency

Total operating expenses

(Loss) income from operations

Loss from operations

( 50,505,000 )

( 23,719,000 )

( 81,923,000 )

( 22,689,000 )

Other income (expense):

3 unchanged sentences

( 2,031,000 )

( 29,657,000 )

( 31,855,000 )

Loss on extinguishment of debt

Realized (loss) gain on marketable securities

Realized and unrealized (loss) gain on marketable securities

Loss from investment in unconsolidated entity

1 unchanged sentence

( 9,555,000 )

Gain on the sale of fixed assets

(Loss) gain on the sale of fixed assets

( 1,754,000 )

Change in fair value of warrant liability

2 unchanged sentences

( 2,149,000 )

( 30,053,000 )

( 31,966,000 )

Loss before income taxes

1 unchanged sentence

( 25,868,000 )

Income tax benefit

( 111,976,000 )

( 54,655,000 )

Income tax provision

( 64,252,000 )

( 26,085,000 )

( 113,081,000 )

( 54,872,000 )

Net loss attributable to non-controlling interest

2 unchanged sentences

( 25,764,000 )

( 109,329,000 )

( 54,536,000 )

Preferred dividends

2 unchanged sentences

$ ( 25,808,000 )

$ ( 109,879,000 )

$ ( 54,585,000 )

Basic net loss per common share

5 unchanged sentences

$ ( 25,808,000 )

Other comprehensive income (loss)

$ ( 109,879,000 )

$ ( 54,585,000 )

Foreign currency translation adjustment

( 1,471,000 )

( 1,758,000 )

Other comprehensive loss

( 1,471,000 )

( 1,758,000 )

Total comprehensive loss

1 unchanged sentence

$ ( 27,279,000 )

$ ( 110,229,000 )

$ ( 56,343,000 )

The accompanying notes are an integral part of

4 unchanged sentences

IN STOCKHOLDERS’ EQUITY

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Series A, B & D

2 unchanged sentences

Stockholders’

BALANCES, April 1, 2023

$ 575,073,000

$ ( 378,633,000 )

$ ( 931,000 )

$ ( 29,432,000 )

$ 190,343,000

Preferred stock issued for cash

Preferred stock offering costs

( 3,388,000 )

Stock-based compensation

Issuance of common stock for cash

Financing cost in connection with sales of common stock

Issuance of common stock for conversion of preferred stock liabilities

Remeasurement of Ault Disruptive subsidiary temporary equity

( 4,736,000 )

Increase in ownership interest of subsidiary

( 1,223,000 )

( 1,221,000 )

Sale of subsidiary stock to non-controlling interests

Distribution to Circle 8 non-controlling interest

Purchase of treasury stock - Ault Alpha LP (“Ault Alpha”)

( 60,683,000 )

Preferred dividends

Foreign currency translation adjustments

Net loss attributable to non-controlling interest

( 3,569,000 )

Dividend payable in TurnOnGreen common stock ($3.52 per share)

( 5,200,000 )

BALANCES, June 30, 2023

$ 573,386,000

$ ( 444,371,000 )

$ ( 1,450,000 )

$ ( 29,919,000 )

$ 121,501,000

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

AULT ALLIANCE, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY

Three Months Ended June 30, 2022

Series A, B & D

Preferred Stock

Comprehensive

Stockholders’

BALANCES, April 1, 2022

$ 495,536,000

$ ( 174,378,000 )

$ ( 393,000 )

$ ( 14,172,000 )

$ 308,458,000

Issuance of common stock for restricted stock awards

Preferred stock issued for cash

Preferred stock offering costs

Stock-based compensation

Sale of common stock

Financing cost in connection with sales of common stock

( 1,266,000 )

Acquisition of non-controlling interests

( 1,848,000 )

( 2,230,000 )

Non-controlling interest from Avalanche International Corp.

(“AVLP”) acquisition

Non-controlling interest from The Singing Machine Company, Inc.

(“SMC”) acquisition

Purchase of treasury stock - Ault Alpha

( 6,467,000 )

( 25,764,000 )

Preferred dividends

Foreign currency translation adjustments

( 1,471,000 )

Net loss attributable to non-controlling interest

BALANCES, June 30, 2022

$ 549,713,000

$ ( 200,184,000 )

$ ( 1,863,000 )

$ ( 20,639,000 )

$ 345,399,000

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

AULT ALLIANCE, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY

Six Months Ended June 30, 2023

Series A, B & D

Preferred Stock

Comprehensive

Stockholders’

BALANCES, January 1, 2023

12 unchanged sentences

Financing cost in connection with sales of common stock

Issuance of common stock for conversion of preferred stock liabilities

Remeasurement of Ault Disruptive subsidiary temporary equity

( 5,415,000 )

Increase in ownership interest of subsidiary

Non-controlling position at BMI subsidiary acquired

( 1,245,000 )

( 1,232,000 )

Non-controlling position at BitNile Metaverse, Inc.

(“BMI”) subsidiary acquired

Sale of subsidiary stock to non-controlling interests

Distribution to Circle 8 non-controlling interest

Purchase of treasury stock - Ault Alpha

4 unchanged sentences

Net loss attributable to non-controlling interest

BALANCES, March 31, 2023

( 3,752,000 )

Dividend payable in TurnOnGreen common stock ($3.52 per share)

( 5,200,000 )

BALANCES, June 30, 2023

$ 573,386,000

$ ( 444,371,000 )

$ ( 1,450,000 )

$ ( 29,919,000 )

$ 121,501,000

The accompanying notes are an integral part of

4 unchanged sentences

IN STOCKHOLDERS’ EQUITY

Three Months Ended March 31, 2022

Six Months Ended June 30, 2022

Series A, B & D

Preferred Stock

Comprehensive

Non-Controlling

Stockholders’

6 unchanged sentences

Issuance of common stock for restricted stock awards

Preferred stock issued for cash

Preferred stock offering costs

Stock-based compensation

Issuance of common stock for cash

Sale of common stock

Financing cost in connection with sales of common stock

1 unchanged sentence

( 4,024,000 )

Acquisition of non-controlling interests

( 1,848,000 )

( 2,230,000 )

Non-controlling interest from AVLP acquisition

Non-controlling interest from SMC acquisition

Purchase of treasury stock - Ault Alpha

1 unchanged sentence

( 7,459,000 )

( 54,536,000 )

Preferred dividends

Foreign currency translation adjustments

( 1,758,000 )

Net loss attributable to non-controlling interest

BALANCES, March 31, 2022

BALANCES, June 30, 2022

$ 549,713,000

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Cash flows from operating activities:

5 unchanged sentences

Amortization of right-of-use assets

Loss on extinguishment of debt

Impairment of goodwill and intangible assets

Stock-based compensation

Gain on the sale of fixed assets

( 2,761,000 )

Impairment of equity securities

5 unchanged sentences

Realized losses on sale of marketable securities

Unrealized gains on marketable securities

( 2,946,000 )

( 18,585,000 )

Unrealized gains on marketable securities

( 3,367,000 )

Unrealized losses on investments in common stock, related parties

1 unchanged sentence

( 17,021,000 )

Income from cash held in trust

( 2,533,000 )

Loss from investment in unconsolidated entity

Loss on remeasurement of investment in unconsolidated entity

Provision for loan losses

Change in the fair value of warrant liability

( 3,217,000 )

Changes in operating assets and liabilities:

3 unchanged sentences

( 2,311,000 )

( 2,646,000 )

Prepaid expenses and other current assets

Accounts payable and accrued expenses

( 1,077,000 )

Accounts payable and accrued expenses

Lease liabilities

( 1,532,000 )

Net cash provided by operating activities

4 unchanged sentences

Investment in promissory notes and other, related parties

( 2,200,000 )

Investments in common stock and warrants, related parties

( 4,663,000 )

Purchase of SMC, net of cash received

( 8,239,000 )

Cash received upon acquisition of AVLP

Acquisition of non-controlling interests

( 2,230,000 )

Purchase of marketable equity securities

( 1,981,000 )

Sales of marketable equity securities

Investments in loans receivable

( 2,728,000 )

Principal payments on loans receivable

1 unchanged sentence

( 10,544,000 )

( 15,820,000 )

Proceeds from the sale of fixed assets

( 1,310,000 )

Net cash used in investing activities

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Cash flows from financing activities:

6 unchanged sentences

( 3,431,000 )

Proceeds from subsidiaries’ sale of stock to non-controlling interests

Distribution to Circle 8 non-controlling interest

Proceeds from notes payable

6 unchanged sentences

Purchase of treasury stock

Proceeds from convertible notes

Payments on convertible notes

Net cash (used in) provided by financing activities

( 7,459,000 )

Proceeds from sales of convertible notes

Payments on convertible notes

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Net (decrease) increase in cash and cash equivalents and restricted cash

( 2,984,000 )

Net increase in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of period

4 unchanged sentences

Settlement of accounts payable with digital currency

Conversion of investment in unconsolidated entity for acquisition of AVLP

Conversion of convertible notes payable, related party into shares of common stock

Conversion of investments in other equity securities to marketable

Conversion of debt and equity securities to marketable securities

Conversion of loans receivable to marketable securities

Conversion of interest receivable to marketable securities

Recognition of new operating lease right-of-use assets and lease liabilities

Remeasurement of Ault Disruptive temporary equity

Notes payable exchanged for series E, F and G convertible preferred stock liabilities

Preferred stock exchanged for notes payable

Redeemable noncontrolling interests in equity of Ault Disruptive paid with cash and marketable securities held in trust account

$ 120,064,000

Dividend payable in TurnOnGreen common stock in additional paid-in capital

The accompanying notes are an integral part of

5 unchanged sentences

Through its wholly- and majority-owned subsidiaries and strategic investments,

the Company owns and operates a data center at which it mines Bitcoin, 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 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

Ault Alliance was founded

8 unchanged sentences

and oil exploration;

· Technology and Finance (“Fintech”) –commercial lending, activist investing, media, and

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

digital learning;

1 unchanged sentence

(“SMC”) – consumer electronics;

· BitNile, Inc.

(“BNI”) – cryptocurrency mining operations;

· Sentinum, Inc.

(“Sentinum”) – cryptocurrency mining operations and colocation and hosting

services for the emerging artificial intelligence ecosystems and other industries;

· Giga-tronics Incorporated (“GIGA”) – defense industry;

7 unchanged sentences

· Ault Disruptive Technologies Corporation (“Ault Disruptive”) – a special purpose acquisition

company (“SPAC”).

January 3, 2023, the Company (then known as BitNile Holdings, Inc.) merged its wholly owned subsidiary, Ault Alliance, Inc.

with and into

In connection with this upstream merger, Ault Alliance, Inc.

was merged out of existence and the business of the Company continued

as it was being conducted.

Further, on January 3, 2023, the effective date of the merger, the Company changed its name to Ault Alliance,

and its ticker was changed to “AULT.” The name change did not affect the rights of security holders of the Company.

Reverse Stock Split

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 of the Company’s

board of directors approved an amendment to the Certificate of Incorporation to effectuate a reverse stock split of the Company’s

issued and outstanding common stock by a ratio of one-for-three hundred (the “Reverse Split”).

The Reverse Split did not affect

the number of authorized shares of common stock or preferred stock or their par value per share.

As a result of the Reverse Split, each

three hundred shares of common stock issued and outstanding prior to the Reverse Split were converted into one share of common stock.

the number of authorized shares of common stock, preferred stock or their respective par value per share.

As a result of the Reverse Split,

each three hundred shares of common stock issued and outstanding prior to the Reverse Split were converted into one share of common stock.

The Reverse Split became effective in the State of Delaware on May 17, 2023.

2 unchanged sentences

LIQUIDITY AND FINANCIAL

of March 31, 2023, the Company had cash and cash equivalents of $ 9.2 million and negative working capital of $ 37.9 million.

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.

of June 30, 2023, the Company had cash and cash equivalents of $ 19.7

million, negative working capital of $ 70.0 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

3 unchanged sentences

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, and obligations and debts.

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 outside the Company’s direct control

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 March 31, 2023, will not be sufficient

Company’s existing cash and cash equivalents, accounts receivable and marketable securities as of June 30, 2023, will not be sufficient

to enable the Company to fund its anticipated level of operations through one year from the date these financial statements are issued.

16 unchanged sentences

that are, in the opinion of management, necessary to provide a fair statement of results for the interim periods presented.

These condensed

consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company’s Annual

Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”), filed with the Securities and Exchange

Commission (the “SEC”) on April 17, 2023.

The condensed consolidated balance sheet as of December 31, 2022 was derived from

the Company’s audited 2022 financial statements contained in the above referenced 2022 Annual Report.

Results of the three months

ended March 31, 2023, are not necessarily indicative of the results to be expected for the full year ending December 31, 2023.

condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company’s

amended Annual Report on Form 10-K/A for the year ended December 31, 2022 (the “2022 Annual Report”), filed with the Securities

and Exchange Commission (the “SEC”) on May 22, 2023.

The condensed consolidated balance sheet as of December 31, 2022 was

derived from the Company’s audited 2022 financial statements contained in the above referenced 2022 Annual Report.

Results of the

three and six months ended June 30, 2023, are not necessarily indicative of the results to be expected for the full year ending December

Significant Accounting

1 unchanged sentence

the 2022 Annual Report.

Revenue Recognition

– Bitcoin Mining

Company recognizes revenue from Bitcon Mining under ASC 606, Revenue from Contracts with Customers (“ASC 606”).

The core principle

of ASC 606 is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that

reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

The following five steps

are applied to achieve that core principle:

Identify the contract with the customer,

Identify the performance obligations in the contract,

Determine the transaction price,

Allocate the transaction price to the performance obligations in the contract, and

Recognize revenue when the company satisfies a performance obligation.

Company has entered into a digital asset mining pool by executing a contract with a mining pool operator to provide computing power to

the mining pool.

The Company’s customer, as defined in ASC 606-10-20, is with the mining pool operator with whom the Company has

agreed to the terms of service and user service agreement.

The Company supplies computing power, in exchange for consideration, to the

pool operator who in turn provides transaction verification services to third parties via a mining pool that includes other participants.

Company’s enforceable right to compensation begins only when, and lasts as long as, the Company provides computing power to the

mining pool operator and is created as power is provided over time.

The only consideration due to the Company relates to the provision

of computing power.

The contracts are terminable at any time by and at no cost to the Company, and by the pool operator.

Providing computing

power in digital asset transaction verification services is an output of the Company’s ordinary activities.

Providing such computing

power is the only performance obligation in the Company’s contracts with mining pool operators.

transaction consideration the Company receives, if any, is non-cash consideration in the form of Bitcoin.

Changes in the fair value of

the non-cash consideration due to form of the consideration (changes in the market price of Bitcoin) are not included in the transaction

price and therefore, are not included in revenue.

The mining pool operator charges fees to cover the costs of maintaining the pool and

are deducted from amounts the Company may otherwise earn and are treated as a reduction to the consideration received.

Fees fluctuate

and historically have been approximately 0.3% per reward earned, on average.

exchange for providing computing power, the Company is entitled to a Full-Pay-Per-Share payout of Bitcoin based on a contractual formula,

which primarily calculates the hash rate provided by the Company to the mining pool as a percentage of total network hash rate, and other

The Company is entitled to consideration even if a block is not successfully placed by the mining pool operator.

is in effect until terminated by either party.

consideration pursuant to this arrangement is variable.

It is not probable that a significant reversal of cumulative revenue will occur

and the Company is able to calculate the payout based on the contractual formula, non-cash revenue is estimated and recognized based on

the spot price of the Company’s principal market for Bitcoin at the inception of each contract, which is determined to be daily.

Non-cash consideration is measured at fair value at contract inception.

Fair value of the crypto asset consideration is determined using

the spot price of the Company’s principal market for Bitcoin at the beginning of the contract period.

This amount is estimated and

recognized in revenue upon inception, which is when hash rate is provided.

is no significant financing component in these transactions.

associated with running the cryptocurrency mining business, such as equipment depreciation and electricity costs, are recorded as a component

of cost of revenues.

Preferred Stock

The Company follows ASC 480-10,

“Distinguishing Liabilities from Equity” in its evaluation of the accounting for the Preferred Shares.

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:

The Company follows Accounting

Standards Codification (“ASC”) 480-10, “Distinguishing Liabilities from Equity” in its evaluation of the accounting

for the Preferred Shares (as defined in Note 16).

ASC 480-10-25-14 requires liability accounting for certain financial instruments, including

shares that embody an unconditional obligation to transfer a variable number of 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;

34 unchanged sentences

The following tables summarize

disaggregated customer contract revenues and the source of the revenue for the three months ended March 31, 2023 and 2022.

Revenues from

lending and trading activities included in consolidated revenues were primarily interest, dividend and other investment income, which

disaggregated customer contract revenues and the source of the revenue for the three and six months ended June 30, 2023 and 2022.

from lending and trading activities included in consolidated revenues were primarily interest, dividend and other investment income, which

are not considered to be revenues from contracts with customers under GAAP.

The Company’s disaggregated

revenues consisted of the following for the three months ended March 31, 2023 (excludes segments with no revenue):

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

Schedule of disaggregated revenues

4 unchanged sentences

Revenue, lending and trading activities (North America)

( 4,939,000 )

Total revenue

$ ( 4,939,000 )

Major Goods or Services

RF/microwave filters

Detector logarithmic video amplifiers

Power supply units & systems

Healthcare diagnostic systems

Electric vehicle chargers

Defense systems

Digital currency mining

Hotel operations

Karaoke machines and related

Hotel and real estate operations

Karaoke machines and related consumer goods

Revenue from contracts with customers

Revenue, lending and trading activities

( 4,939,000 )

Total revenue

$ ( 4,939,000 )

Timing of Revenue Recognition

3 unchanged sentences

The Company’s disaggregated

revenues consisted of the following for the three months ended March 31, 2022:

revenues consisted of the following for the six months ended June 30, 2023 (excludes Ault Disruptive, as that segment has no revenue):

Primary Geographical Markets

6 unchanged sentences

RF/microwave filters

Detector logarithmic video amplifiers

Power supply units & systems

Electric vehicle chargers

Healthcare diagnostic systems

Defense systems

Digital currency mining

Hotel operations

Hotel and real estate operations

Karaoke machines and related consumer goods

Revenue from contracts with customers

5 unchanged sentences

Revenue from contracts with customers

The Company’s disaggregated

revenues consisted of the following for the three months ended June 30, 2022:

Three months ended June 30, 2022

Primary Geographical Markets

North America

Middle East and other

Revenue from contracts with customers

Revenue, lending and trading activities (North America)

Total revenue

Major Goods or Services

RF/microwave filters

Power supply units & systems

Healthcare diagnostic systems

Defense systems

Digital currency mining

Hotel and real estate operations

Revenue from contracts with customers

Revenue, lending and trading activities

Total revenue

Timing of Revenue Recognition

Goods transferred at a point in time

Services transferred over time

Revenue from contracts with customers

The Company’s disaggregated

revenues consisted of the following for the six months ended June 30, 2022:

Six months ended June 30, 2022

Primary Geographical Markets

North America

Middle East and other

Revenue from contracts with customers

Revenue, lending and trading activities (North America)

Total revenue

Major Goods or Services

RF/microwave filters

Power supply units & systems

Healthcare diagnostic systems

Defense systems

Digital currency mining

Hotel and real estate operations

Revenue from contracts with customers

Revenue, lending and trading activities

Total revenue

Timing of Revenue Recognition

Goods transferred at a point in time

Services transferred over time

Revenue from contracts with customers

FAIR VALUE OF FINANCIAL

2 unchanged sentences

Fair value, assets measured on recurring basis

Fair Value Measurement at March 31, 2023

Fair Value Measurement at June 30, 2023

Investment in common stock of Alzamend Neuro, Inc.

3 unchanged sentences

Total assets measured at fair value

$ 125,477,000

Series E, F and G preferred stock liabilities

Series E and G preferred stock liabilities

Warrant and embedded conversion feature liabilities

Convertible promissory notes

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$ 131,232,000

Warrant and embedded conversion feature liabilities

Convertible promissory notes

Total liabilities measured at fair value

The Company assesses the inputs

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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 three months ended March 31, 2023:

with the use of significant unobservable inputs (Level 3) for the six months ended June 30, 2023:

Schedule of investments

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( 13,340,000 )

Balance at March 31, 2023

Balance at June 30, 2023

Equity Investments

for Which Measurement Alternative Has Been Selected

of March 31, 2023 and December 31, 2022, the Company held equity investments in other securities, consisting of investments in preferred

of June 30, 2023 and December 31, 2022, the Company held equity investments in other securities, which consisted of investments in preferred

stock, valued at $ 25.9 million and $ 29.2 million, respectively, that were valued using a measurement alternative.

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are included in other equity securities in the accompanying condensed consolidated balance sheets.

Measurement Alternative

Company has made cumulative downward adjustments for impairments for equity securities that do not have readily determinable fair values

as of June 30, 2023, totaling $ 11.6 million.

Approximately $ 9.6 million of these adjustments have been reflected in other income

(expense) and $ 2.0 million of these adjustments related to Fintech lending operations and have been recorded against revenue from lending

and trading activities on the consolidated statement of operations and comprehensive loss.

Marketable EQUITY Securities

Marketable equity securities

with readily determinable market prices consisted of the following as of March 31, 2023 and December 31, 2022:

with readily determinable market prices consisted of the following as of June 30, 2023 and December 31, 2022:

Schedule of marketable securities

Marketable equity securities at March 31, 2023

Marketable equity securities at June 30, 2023

Gross unrealized

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The following table presents

the activities of the digital currencies (included in prepaid expenses and other current assets) for the three months ended March 31,

2023 and 2022:

the activities of the digital currencies (included in prepaid expenses and other current assets) for the six months ended June 30, 2023

Schedule of activities of the digital currencies

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Additions of mined digital currencies

Payments to vendors

Impairment of mined cryptocurrency

2 unchanged sentences

Realized gain on sale of digital currencies

Balance at March 31, 2023

Balance at June 30, 2023

Balance at January 1, 2022

2 unchanged sentences

Impairment of mined cryptocurrency

( 2,415,000 )

Sale of digital currencies

1 unchanged sentence

Realized gain on sale of digital currencies

Balance at March 31, 2022

Balance at June 30, 2022

PROPERTY AND EQUIPMENT, NET

At March 31, 2023 and December

At June 30, 2023 and December

31, 2022, property and equipment consisted of:

Schedule of property and equipment

March 31, 2023

June 30, 2023

December 31, 2022

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For the Three Months Ended

For the Six Months Ended

Depreciation expense

INTANGIBLE ASSETS, NET

At March 31, 2023 and December 31, 2022,

At June 30, 2023 and December 31, 2022,

intangible assets consisted of:

Schedule of intangible asset

Developed technology

Customer list

Trade name and trademark

Indefinite life

Customer list

Developed technology

Domain name and other intangible assets

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on a straight-line basis over their estimated useful lives.

Amortization expense was $ 0.3 million and $ 0.1 million, respectively, for

the three months ended March 31, 2023 and 2022.

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 8.2 years.

The following table presents estimated amortization expense

for each of the succeeding five calendar years and thereafter.

Schedule of indefinite-lived intangible assets

For the Three Months Ended

For the Six Months Ended

Amortization expense

of June 30, 2023, intangible assets subject to amortization have an average remaining useful life of 8.2 years.

The following

table presents estimated amortization expense for each of the succeeding five calendar years and thereafter.

Schedule of estimated amortization expense

Impairment of AVLP Intangible Assets

Due to indicators of impairment, AVLP intangible

assets were tested for impairment as of June 30, 2023.

Based on internally developed forecasts of undiscounted expected future cash flows,

it was determined that the carrying amount of the assets were not recoverable and, based on an assessment of the fair value of the assets,

impairment of $17.0 million was recognized as a non-cash impairment charge during the six months ended June 30, 2023.

The tradenames and patents/developed

technology intangible assets were valued using the relief-from-royalty method.

The relief-from-royalty method is one of the methods under

the income approach wherein estimates of a company’s earnings attributable to the intangible asset are based on the royalty rate

the company would have paid for the use of the asset if it did not own it.

Royalty payments are estimated by applying royalty rates of

18% for patents and developed technology and 0.25% for trademarks.

The resulting net annual royalty payments are then discounted to present

value using a discount factor of 25.7%.

The following table summarizes

the changes in the Company’s goodwill for the three months ended March 31, 2023:

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

Schedule of goodwill

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Acquisition of BMI

Impairment of goodwill

( 18,570,000 )

Effect of exchange rate changes

Balance as of March 31, 2023

Balance as of June 30, 2023

Impairment of AVLP Goodwill

The Company tests the recorded

amount of goodwill for impairment on an annual basis on December 31 or more frequently if there are indicators that the carrying amount

of the goodwill exceeds its carried value.

The Company performed a goodwill impairment test as of June 30, 2023 related to AVLP as there

were indicators of impairment related to certain unforeseen business developments and changes in financial projections.

The valuation of the AVLP

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

The income approach was based

on the projected cash flows discounted to their present value using discount rates, that in the Company’s judgment, consider the

timing and risk of the forecasted cash flows using internally developed forecasts and assumptions.

Under the income approach, the discount

rate used is the average estimated value of a market participant’s cost of capital and debt, derived using customary market metrics.

The analysis included assumptions regarding AVLP’s revenue forecast and discount rates of 26.7 % using a weighted average cost of

capital analysis.

The market approach utilized the guideline public company method.

results of the quantitative test indicated the fair value of the AVLP reporting unit did not exceed its carrying amounts, including

goodwill, in excess of the carrying value of the goodwill.

As a result, the entire $ 18.6

million carrying amount of AVLP’s goodwill was recognized as a non-cash impairment charge during the six months ended June

VARIABLE INTEREST ENTITY - SMC

the quarter ended June 30, 2023, the Company’s voting interest in SMC was less than 50%.

As a result, the Company assessed its

interest in SMC under the Variable Interest Entity Model.

As a result of that assessment, the Company consolidates SMC as a variable

interest entity (a “VIE”) due to the Company’s significant level of influence and control of SMC, the size of its investment,

and its ability to participate in policy making decisions.

As a result, the Company is considered the primary beneficiary of the VIE.

BUSINESS COMBINATION

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On March 6, 2023, the Company

closed into a Share Exchange Agreement (the “Agreement”) with BMI and sold to BMI all of the outstanding shares of capital

stock of the Company’s subsidiary, BitNile.com, Inc.

(“BitNile.com”) as well as the securities of Earnity, Inc.

beneficially owned by BitNile.com as of the date of the Agreement (the “Transaction”).

As consideration for the acquisition,

BMI issued shares of preferred stock convertible into common stock of BMI representing approximately 73.2% of BMI’s outstanding

common stock.

Pending approval of the transaction by BMI’s shareholders, the preferred stock combined are subject to a 19.9% beneficial

ownership limitation.

The Transaction benefits the Company as BMI is a publicly traded company and provides BitNile.com access to capital

markets as the primary focus for BMI to fund the expected growth of the BMI metaverse platform.

In addition, there are certain synergies

between the Company’s Bitcoin mining operations and BMI’s Agora Digital mining business.

closed a Share Exchange Agreement (the “Agreement”) with BMI and sold to BMI all of the outstanding shares of capital stock

of the Company’s subsidiary, BitNile.com, Inc.

(“BitNile.com”) as well as Ault Iconic, Inc.

(formerly Ault Media Group,

Inc.) and the securities of Earnity, Inc.

(“Earnity”) beneficially owned by BitNile.com as of the date of the Agreement (the

“Transaction”).

As consideration for the acquisition, BMI issued shares of preferred stock convertible into common stock of

BMI representing approximately 73.2% of BMI’s outstanding common stock.

Pending approval of the transaction by the Nasdaq Stock

Market and BMI’s shareholders, the preferred stock combined are subject to a 19.9% beneficial ownership limitation.

The Transaction

benefits the Company as BMI is a publicly traded company and provides BitNile.com access to capital markets as the primary focus for BMI

to fund the expected growth of the BMI metaverse platform.

In addition, there are certain synergies between the Company’s Bitcoin

mining operations and BMI’s Agora Digital mining business.

The holders of preferred

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The Company is entitled to

appoint three members to the board of directors of BMI and, following shareholder approval, a majority of the board.

appoint three members to the board of directors of BMI and, following shareholder approval, a majority of the board, in each case subject

to the approval of the Nasdaq Stock Market.

The Company consolidates

BMI as a variable interest entity (a “VIE”) due to its significant level of influence and control of BMI, the size of its

investment, and its ability to participate in policy making decisions.

BMI as a VIE due to its significant level of influence and control of BMI, the size of its investment, and its ability to participate

in policy making decisions.

The Company is considered the primary beneficiary of the VIE.

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asset and liability fair values that are different from the preliminary estimates included herein, it is not expected that those differences

would alter the understanding of the impact of this transaction on the consolidated financial position and results of operations of the

would alter the understanding of the impact of the Transaction on the consolidated financial position and results of operations of the

The preliminary purchase

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Schedule of recognized identified assets acquired and liabilities assumed

Preliminary Allocation

Fair value of Company interest

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Ault & Company, Inc.

(“Ault & Company”) at March 31, 2023 and December 31, 2022, were comprised of the following:

(“Ault & Company”) at June 30, 2023 and December 31, 2022, were comprised of the following:

Investment in Promissory Notes, Related

Parties – Ault & Company

Schedule of investment

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For the Three Months Ended

For the Six Months Ended

Interest income, related party

Investment in Common Stock and Options,

Related Parties

Investment in common stock of Alzamend

Investment in Common Stock, Related Parties

Schedule of investment in common stock

Investments in common stock, related parties at June 30, 2023

Gross unrealized losses

Common shares

$ ( 18,852,000 )

Investments in common stock, related parties at December 31, 2022

Gross unrealized losses

Common shares

$ ( 18,224,000 )

The following table summarizes

the changes in the Company’s investments in Alzamend during the three months ended March 31, 2023:

the changes in the Company’s investments in Alzamend common stock during the three months ended June 30, 2023 and 2023:

Schedule of investment in warrants and common stock

Investment in

common stock of

For the Three Months Ended June 30,

Balance at April 1

Investment in common stock of Alzamend

Unrealized gain (loss) in common stock of Alzamend

( 4,353,000 )

Balance at June 30

The following table summarizes

the changes in the Company’s investments in Alzamend common stock during the six months ended June 30, 2023 and 2023:

For the Six Months Ended June 30,

Balance at January 1

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( 9,048,000 )

Balance at March 31, 2023

Balance at June 30

Unrealized loss in common

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

Investments in

Alzamend Common Stock

following table summarizes the changes in the Company’s investments in Alzamend common stock during the three months ended March

Schedule of investment of common stock

Investment in

Balance at January 1, 2023

Open market purchases after initial public offering

Unrealized loss in common stock of Alzamend

( 1,598,000 )

Balance at March 31, 2023

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Other current liabilities at March 31,

Other current liabilities at June 30,

2023 and December 31, 2022 consisted of:

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Accrued payroll and payroll taxes

Interest payable

Accrued legal

Short position marketable equity securities

Interest payable

Warrant derivative liabilities

Accrued lender profit participation rights

Financial instrument liabilities

Related party advances

Other accrued expenses

Accrued Lender Profit Participation Rights

During the quarter ended March

31, 2023, the $ 6.0 million accrued lender profit participation rights obligation was paid in full.

DIVIDEND PAYABLE IN TURNONGREEN COMMON

On June 26, 2023, the Company

established a record date for its initial distribution of TurnOnGreen securities.

Stockholders as of this date were entitled

to 40 shares of TurnOnGreen common stock, along with warrants to purchase 40 shares of TurnOnGreen common stock (the “TurnOnGreen

Securities”) for every share of the Company's common stock they held on the record date.

The initial distribution was finalized

in July 2023.

The Company recorded a dividend

payable, which was directly offset against equity based on the recorded value of the TurnOnGreen Securities of $ 5.2 million.

PREFERRED STOCK LIABILITY

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of the holders and, in certain circumstances, by the Company.

The purchase price of

the Series E Preferred Stock and the Series F Preferred Stock was paid for by the Investors’ canceling outstanding secured

promissory notes in the principal amount of $8.4 million, whereas the purchase price of the shares of Series G Preferred Stock

consisted primarily of accrued but unpaid interest on these notes.

recorded a loss on extinguishment of debt of $ 0.1

million related to the transaction.

The Preferred Shares have been classified as a liability as they embody an unconditional

obligation to transfer a variable number of shares, based on a fixed monetary amount known at inception.

The Company elected the

fair value option to record the Preferred Shares with changes in fair value recorded through earnings.

In June 2023, the Investors

converted 1,000 shares of Series F Preferred Stock and 1,792 shares of Series G Preferred Stock into an aggregate of 37,493 shares of

the Company’s common stock.

During the six months ended June 30, 2023, the Company recorded a loss of $ 91,000 on the conversions

of Series F Preferred Stock and Series G Preferred Stock.

Preferred stock liability

at March 31, 2023 was comprised of the following:

at June 30, 2023 was comprised of the following:

Schedule of preferred stock liability

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Series E Convertible Preferred Liability

Series F Convertible Preferred Liability

Series G Convertible Preferred Liability

* Each Preferred

Share is convertible into such number of shares of the Company’s common stock equal to the stated value per share divided by the

conversion price, which is equal to 85% of the closing sale price of the common stock on the trading day prior to the date of conversion,

subject to a floor price of $0.10, which floor price is not affected by the recently consummated reverse split.

The purchase price of the

Series E Preferred Stock and the Series F Preferred Stock was paid for by the Investors’ canceling outstanding secured promissory

notes in the principal amount of $8.4 million, whereas the purchase price of the shares of Series G Preferred Stock consisted of accrued

but unpaid interest on these notes, as well as other good and valuable consideration.

The Company recorded a loss on extinguishment of

debt of $ 0.1 million related to the transaction.

The Preferred Shares have been classified as a liability as they embody an unconditional

obligation to transfer a variable number of shares, based on a fixed monetary amount known at inception.

The Company elected the fair

value option to record the Preferred Shares with changes in fair value recorded through earnings.

* Each Preferred Share is convertible into such number of shares of the Company’s common stock

equal to the stated value per share divided by the conversion price, which is equal to 85% of the closing sale price of the common stock

on the trading day prior to the date of conversion, subject to a floor price of $0.10, which floor price is not affected by the recently

consummated reverse split.

The following table summarizes the changes in

the Company’s preferred stock liability for the six months ended June 30, 2023:

Schedule of changes in preferred stock liability

Preferred Stock

Balance at December 31, 2022

Preferred stock issued upon extinguishment of debt

Conversion of preferred stock to common stock

Change in fair value

Balance at June 30, 2023

Subsequent Event

– Exchange of Preferred Shares for Secured Debt and Assignment of Secured Note

August 2023, the Company and the Investors entered into an Exchange Agreement (the “Exchange Agreement”) pursuant to which

the Investors exchanged all of their Preferred Shares as well as their demand notes (the “Demand Notes”) with each Demand

Note having a principal outstanding amount of approximately $0.8 million for two new 10% Secured OID Promissory Notes (the “Exchange

Notes”), each with a principal face amount of $5.3 million, for an aggregate of amount owed of $10.5 million (the “Principal

The Company and Milton “Todd” Ault, III, the Company’s Executive Chairman, entered into guaranty agreements

with the Investors guaranteeing Ault & Company’s repayment of the Exchange Notes.

the Company assigned the Exchange Notes to Ault & Company.

As consideration for Ault & Company assuming the Exchange Notes from

the Company, the Company issued a 10% demand promissory note in the principal face amount of $10.5 million to Ault & Company.

REDEEMABLE NONCONTROLLING INTERESTS IN

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noncontrolling interests in equity of subsidiaries to reflect the economic interests of the common stockholders in Ault Disruptive.

of March 31, 2023, the carrying amount of the redeemable noncontrolling interest in equity of subsidiaries was recorded at its redemption

of June 30, 2023, the carrying amount of the redeemable noncontrolling interest in equity of subsidiaries was recorded at its redemption

value of $ 2.0 million.

These redeemable noncontrolling interests are classified as current liabilities in the condensed consolidated

balance sheets.

This classification is due to the expiry of time that was allotted for Ault Disruptive to consummate its initial business

combination, which occurred on December 20, 2022.

Ault Disruptive announced two, three-month extension periods, however, the deposits

associated with these extensions have yet to be made.

Approximately 11.3 million shares of Ault Disruptive common stock were redeemed at a redemption price of $ 10.61

per share, for an aggregate redemption amount of $ 120.0 million.

NOTES PAYABLE

Notes payable at March 31,

Notes payable at June 30,

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

Schedule of notes payable

Short-term notes payable – in default

January 3, 2023

AGREE Madison secured construction loans

AGREE secured construction loans

January 1, 2025

SMC line of credit *

October 14, 2025

SMC installment notes

June 18, 2024

Circle 8 revolving credit facility

Circle 8 Crane Services, LLC (“Circle 8”) revolving credit facility

Circle 8 cranes

December 16, 2025

8.5% secured promissory notes

19,389 Antminers, BNI Montana assets, Circle 8 membership interests, Florida property, Michigan property, aircraft

Ault & Company, Ault Lending, Milton C.

16% senior secured promissory notes*

12,000 Antminers, Ault Lending securities,

Ault & Company, Sentinum, Ault Lending, Milton C.

September 15, 2023

Circle 8 equipment financing notes

Circle 8 equipment

November 16, 2026

3% secured promissory notes**

Certain Ault Lending securities

8% demand loans

Short-term bank credit facilities

Renews monthly

XBTO note payable

2,482 Antminers

December 30, 2023

16% senior secured promissory note

3% secured promissory notes

8.5% secured promissory notes

Note payable, related party

10% secured promissory notes

August 10, 2023

Short-term bank credit facilities

Renews monthly

SMC line of credit

October 14, 2025

Ault & Company

Total notes payable

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Notes payable – long-term portion

* As of March 31, 2023, SMC was in violation of a financial covenant on this line of credit.

However, SMC subsequently obtained a waiver

for this covenant violation in May 2023.

* Defaults on payment terms in July 2023.

Payments subsequent to June 30, 2023 of $10.3 million.

the loan maturity date was extended to September 15, 2023 and automatically extends for an additional 30 days for a $0.25 million extension

fee for each extension period, with an interest rate of 16% and principal amount outstanding of $2.5 million.

** Defaults on payment term as of June 30, 2023.

Paid in July 2023.

*** $3.4 million defaults on payment terms.

$3.1 million paid off in July 2023.

$0.3 million TurnOnGreen note

payable remains in default.

Notes Payable Maturities

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

as of March 31, 2023 were:

as of June 30, 2023 were:

Schedule of maturities

3 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Contractual interest expense

2 unchanged sentences

Total interest expense

Ault & Company

Loan Agreement

June 8, 2023, the Company entered into a loan agreement with Ault & Company as lender.

The loan agreement provides for an unsecured,

non-revolving credit facility in an aggregate principal amount of up to $ 10 million.

All loans under the loan agreement are due within

five business days after request by Ault & Company.

Ault & Company is not obligated to make any further advances under the

loan agreement after December 8, 2023.

Advances under the loan agreement bear interest at the rate of 9.5 % per annum and may be repaid

at any time without penalty or premium.

As of June 30, 2023, $ 750,000 has been advanced under the loan agreement.

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

Schedule of interest expense, related party

For the Three Months Ended

For the Six Months Ended

Interest income, related party

Amendment to 8.5% Secured Promissory Notes

On July 19, 2023, the Company

and certain of its subsidiaries entered into an amendment agreement with the institutional investors and increased the principal balance

of the secured promissory notes by an additional $8.8 million.

The net proceeds to the Company from the amendment agreement were $7.5

10% Secured Promissory Notes

2 unchanged sentences

Amendments to 16% Secured Promissory Notes

On April 6, 2023, the Company

entered into an amendment agreement, effective as of March 16, 2023, with the initial investor related to the December 2022 16% secured

promissory note extending the due date on the note to May 31, 2023, which will automatically extend to June 30, 2023 if the Company repays

the balance outstanding on the note as of the extension date, which was $8.3 million, by May 31, 2023.

The Company agreed to increase

the principal amount of the note by approximately $2.0 million, reflecting a $1.7 million extension fee and $0.4 million of liquidated

damages for failure to obtain an effective registration statement.

entered into several amendments subsequent to the initial lending due to certain defaults on payment terms.

The amendments included

$4.6 million in extension fees and payments subsequent to June 30, 2023 of $10.3 million.

Currently the loan maturity date was

extended to September 15, 2023 and automatically extends for an additional 30 days for a $0.25 million extension fee for each

extension period, with an interest rate of 16% and principal amount outstanding of $2.5 million.

3% Secured Promissory

the quarter ended June 30, 2023, the holders of the 3% secured promissory notes exercised their rights of future participation whereby

Sentinum issued additional promissory notes with a face amount of $10.4 million under the same terms as the existing notes, of which $5.5

million was outstanding and past due as of June 30, 2023.

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

8% Demand Promissory Notes

On May 29, 2023, the Company

entered into an amendment agreement, effective as of March 16, 2023, with the subsequent investor related to the December 2022 16% secured

promissory note extending the due date on the note to June 30, 2023.

The Company agreed to increase the principal amount of the note by

approximately $0.8 million, reflecting a $0.6 million extension fee and $0.2 million amendment fee.

issued two demand promissory notes with a total principal amount of $ 4.5 million, bearing an interest rate of 8 % .

The demand notes were

issued at a discount, with net proceeds to the Company amounting to $ 2.0 million.

The notes are due upon demand;

however no demand may

be made within 90 days of the issuance date.

CONVERTIBLE NOTES

Convertible notes payable at March 31, 2023 and

Convertible notes payable at June 30, 2023 and

December 31, 2022, were comprised of the following:

2 unchanged sentences

Convertible promissory note

AVLP convertible promissory notes, principal

AVLP convertible promissory notes

$ 0.35 (AVLP stock)

3 unchanged sentences

October 11, 2023

Fair value of embedded options and derivatives

BMI senior secured convertible notes

$ 3.28 (BMI stock)

April 27, 2024

Fair value of embedded conversion options

Total convertible notes payable

unamortized debt discounts

( 6,705,000 )

Total convertible notes payable, net of financing cost, long term

3 unchanged sentences

Convertible notes payable, net of financing cost – long-term portion

inputs associated with the embedded option include:

The contractual maturities

of the Company’s convertible notes payable, assuming the exercise of all extensions that are exercisable solely at the Company’s

option, as of June 30, 2023 were:

Schedule of contractual maturities

inputs associated with the AVLP embedded conversion option include:

Schedule of weighted average assumptions

March 31, 2023

June 30, 2023

December 31, 2022

3 unchanged sentences

Risk-free interest rate

GIGA Senior Secured Convertible Notes

On January 11, 2023,

GIGA entered into a Securities Purchase Agreement (“GIGA SPA”) with two accredited investors (the “Lenders”)

pursuant to which GIGA sold to the Lenders $ 3.3

original issue discount Senior Secured Convertible Notes (the “Notes”) and five-year warrants (the “Warrants”) to purchase

shares of common stock, no par value for total gross proceeds of $3.0 million.

The net proceeds shall be used primarily for working

The Notes are secured by the

assets of GIGA pursuant to a Security Agreement entered into for such purpose, and are senior to the indebtedness payable to Ault and

Ault Lending, pursuant to a Subordination Agreement entered into in connection with the GIGA SPA.

The Notes mature on the earlier

of (i) nine months from the issuance date, or October 11, 2023, or (ii) completion of the uplist transaction pursuant to which GIGA’s

common stock becomes listed for trading on a national securities exchange operated by The Nasdaq Stock Market or the New York Stock Exchange

(an “Uplist Transaction”).

The Notes accrue interest at a rate of 6 % per annum payable monthly, which increases to 18% upon

an event of default.

In addition, under the Notes upon an event of default GIGA is required to pay 20% of its consolidated revenues monthly

on each interest payment date in reduction of the principal amount of the Notes then outstanding.

The Notes provide for certain

events of default which include failure of the Uplist Transaction to occur by the maturity date, failure to maintain effectiveness of

the registration statement under the Registration Rights Agreement (as described below), suspension of trading of GIGA’s common

stock for five consecutive trading days, failure to timely deliver shares issuable upon conversion of the Notes or exercise of the Warrants,

failure to timely make payments under the Notes, default under other indebtedness, and certain other customary events of default, subject

to certain exceptions and limitations.

Upon an event of default,

the holders will have the right to require GIGA to prepay the Notes at a 125% premium.

Further, upon a bankruptcy event of default or

a change of control event, GIGA will be required to prepay the Notes at a premium.

If the conversion price falls below $0.25, GIGA may

also elect to prepay the notes at a 125% premium.

The Notes are convertible

upon the earlier of the Uplist Transaction and an event of default at a conversion price equal to the greater of (a) 90% of the lowest

volume weighted average price (“VWAP”) for the 10 trading days prior to the conversion date and (b) $0.25 per share, subject

to adjustment including downward adjustment upon any dilutive issuance of securities.

GIGA repaid its existing

line of credit with Western Alliance Bank which had an existing balance of approximately $ 59,000 .

Under the Notes, GIGA may enter into a factoring agreement of $2 million using GIGA’s accounts receivable as collateral.

The Warrants entitle the holders

to purchase a total of 1.7 million shares of common stock for a five-year period from issuance, at an exercise price determined as follows:

(i) beginning on the issuance date and for a period of 90 days thereafter, $0.78, (ii) if the Uplist Transaction has occurred as of the

date of exercise, the lower of (A) $0.78 and (B) 110% of the per share offering price to the public in the Uplist Transaction, and (iii)

if neither of (i) and (ii) apply, the lower of (A) $0.78 and (B) 90% of the lowest VWAP for the 10 trading days prior to the date of the

exercise, subject to adjustment including downward adjustment upon any dilutive issuance of securities.

If the Uplist Transaction is not

completed prior to the maturity date of the Notes, the number of shares of common stock that may be purchased upon exercise of the Warrants

will be doubled, without an adjustment to the exercise price.

The GIGA SPA, Warrants and

Notes require a reserve of authorized but unissued shares of common stock initially equal to approximately 15.0 million shares of common

stock, subject to reduction as the Notes and Warrants are converted and exercised, respectively.

Spartan Capital Securities,

LLC (the “Placement Agent”) served as placement agent in the offering and received a cash commission in the amount of 8% of

the gross proceeds, or $0.2 million.

In addition, GIGA agreed to pay the Placement Agent an expense allowance of $30,000.

GIGA agreed to issue the Placement Agent five-year warrants (the “Placement Agent Warrants”) to purchase a number of shares

of common stock equal to 8% of the total number of shares of common stock underlying the Notes and Warrants sold in the offering, or 1.2

million shares.

The Placement Agent Warrants have an exercise price of 110% of the Warrant exercise price.

Under the GIGA SPA, GIGA

reimbursed the Lenders a total of $ 60,000

out of the proceeds from the offering for fees and expenses incurred in connection therewith.

In connection with the GIGA

SPA, GIGA entered into a Registration Rights Agreement pursuant to which it agreed to register the resale by the Lenders of the common

stock issuable upon conversion of the Notes and Warrants.

Pursuant to the Registration Rights Agreement, the initial registration statement

on Form S-1 must be filed 30 days after the Notes become convertible, and to cause the registration statement to be declared effective

within 90 days thereafter, subject to certain limitations and exceptions.

GIGA did not complete the registration statement in a timely

manner, which is an event of default.

The Lenders required GIGA to terminate the Financing Agreement as a condition of lending it the

$3 million and GIGA’s issuance of the Notes.

BMI Senior Secured Convertible Notes

On April 27, 2023, BMI sold

million of principal face amount senior secured convertible notes with an original issue discount to sophisticated investors for

net proceeds to BMI of $ 5.5

The notes mature on April 27, 2024

and are secured by all of the assets of BMI and certain of its subsidiaries.

There is no stated interest rate on the convertible note

unless there is an event of default.

The notes are convertible into shares of BMI common stock at $ 3.28 ;

however there are provision in the convertible note that enables the holders of the notes to receive a lower conversion rate upon future

common stock issuances by BMI that fall below the $3.28 price.

As BMI does not have sufficient

authorized shares to fulfill the conversion option, the conversion option meets the criteria of a derivative instrument, and the convertible

note has been discounted $ 4.1 million for the fair value of the warrant derivative liability and $ 1.4 million for the fair value of the

embedded conversion option derivative liability at inception.

The fair value of the warrant derivative liability is updated quarterly

and is recorded within financial instrument liabilities, a component of accounts payable and accrued liabilities and the fair value of

the embedded conversion option derivative liability is updated quarterly and is recorded within convertible notes.

In addition, BMI has

recorded $1.4 million in original issue discount, which is being amortized over the interest method for the term of the BMI senior

secured convertible notes.

Amortization of discount related to the senior secured convertible notes was $ 0.2 million for the three months

ended June 30, 2023.

Activity related to the embedded

conversion option derivative liability for the three months ended June 30, 2023 is as follows:

Schedule of option derivative liability

April 27, 2023 issuances of convertible note – derivative liability

Change in fair value of convertible note derivative liability

( 1,029,000 )

Ending balance as of June 30, 2023

Level 3 inputs associated with the BMI embedded conversion option include:

Schedule of assumptions

June 30, 2023

Contractual term in years

Dividend yield

Risk-free interest rate

COMMITMENTS AND CONTINGENCIES

23 unchanged sentences

to significant uncertainties.

As of March 31, 2023, the Company

As of June 30, 2023, the Company

had accrued $ 5.3 million as a loss contingency related to litigation matters.

3 unchanged sentences

investigation referred to as In re DPW Holdings, Inc.

The Company and those parties have engaged in discussions with the SEC regarding

the matters at issue in the investigation, and those discussions have progressed.

No final resolution regarding the matters at issue in

the investigation has been reached however, and there can be no assurance as to the outcome of this matter.

The Company recorded a $1.0

million loss contingency related to this matter.

The Company and those parties have reached a settlement with the SEC to fully

resolve the SEC’s previously disclosed investigation into certain of the Company’s public disclosures and its accounting for

certain transactions, among other matters.

Under terms of the settlement,

announced on August 15, 2023, the Company, Executive Chairman Milton “Todd” Ault, III, and Chief Executive Officer William

Horne neither admit nor deny the SEC’s findings, which do not entail intentional misconduct.

The Company will pay a civil penalty

of $0.7 million that was fully accrued in the fourth quarter of 2022;

Ault will pay disgorgement of $85,504 and a civil penalty of

Horne will pay a civil penalty of $20,720.

In addition, the Company has undertaken to retain an independent consultant

to conduct a comprehensive review of the Company’s internal control over financial reporting and disclosure controls and procedures,

and to issue a report providing recommendations for improvements.

STOCKHOLDERS’ EQUITY

9 unchanged sentences

2022 Preferred ATM Offering

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”).

During the three months ended March 31, 2023, the Company sold an aggregate

shares of Series D Preferred Stock pursuant to the 2022 Preferred ATM Offering for net proceeds of $ 1.2

Company calculates its interim income tax provision in accordance with ASC Topic 270, Interim Reporting, and ASC Topic 740, Income

The Company’s effective tax rate (“ETR”) from continuing operations was ( 0.5 %) and 0 %

for the three months ended March 31, 2023 and 2022, respectively.

The Company recorded an income tax benefit of $ 0.3 million

and $ 0 for the three months ended

March 31, 2023 and 2022, respectively.

The difference between the ETR and federal statutory rate of 21 % is

primarily attributable to items recorded for GAAP but permanently disallowed for U.S.

federal income tax purposes and changes in

valuation allowance.

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”).

six months ended June 30, 2023, the Company sold an aggregate of 252,359 shares of Series D Preferred Stock pursuant to the 2022 Preferred

ATM Offering for net proceeds of $ 2.9 million.

Effective June 16, 2023, the 2022 Preferred ATM Offering was terminated.

2023 ATM Offering – Common Stock

On June 9, 2023, the Company

entered into an At-The-Market issuance sales agreement with Ascendiant Capital to sell shares of common stock having an aggregate offering

price of up to $ 10 million from time to time, through an “at the market offering” program (the “2023 Common ATM Offering”).

During the three months ended June 30, 2023, the Company sold an aggregate of 0.1 million shares of common stock pursuant to the 2023

Common ATM Offering for gross proceeds of $ 0.8 million.

Issuance of Common

Stock Upon Conversion of Preferred Stock

June 2023, the Investors converted 1,000 shares of Series F Preferred Stock and 1,792 shares of Series G Preferred Stock into an aggregate

of 37,493 shares of the Company’s common stock.

A loss on extinguishment of $0.1 million was recognized on the issuance of common

stock based on the fair value of the Company’s common stock at the date of the conversions.

Issuance of Common Stock for Restricted Stock

the six months ended June 30, 2023, the Company issued 4,974 shares of common stock upon vesting of restricted stock awards.

Series C Preferred Purchase Agreement

May 1, 2023, the Company

entered into a securities purchase agreement (the “Agreement”) with Ault & Company, pursuant to which the Company

agreed to sell to Ault & Company up to 40,000 shares of Series C convertible preferred stock and warrants to purchase up to 1.3

million shares of common stock for a total purchase price of up to $ 40

The consummation of the transactions contemplated by the Agreement are subject to various customary closing conditions and

the receipt of certain third party consents.

In addition to customary closing conditions, the closing of the transaction is

also conditioned upon the receipt by Ault & Company of financing in an amount sufficient to consummate the transaction, in whole

The Agreement contains customary termination provisions for Ault & Company under certain circumstances, and the

Agreement shall automatically terminate if the closing has not occurred prior to May 31, 2023, although such date may be extended by

Ault & Company for a period of 90 days as set forth in the Agreement.

Proceeds from Subsidiaries’ Sale of Stock

to Non-Controlling Interests

During the six months ended

June 30, 2023, SMC and BMI sold an aggregate of $ 2.3 million of common stock pursuant to their respective at-the-market

issuance sales agreements.

Company calculates its interim income tax provision in accordance with ASC Topic 270, Interim Reporting, and ASC Topic 740, Income Taxes.

The Company’s effective tax rate (“ETR”) from continuing operations was 3.0 % and 0.8 % for the three months ended June

30, 2023 and 2022, respectively, and 1.2 % and 0.4 % for the six months ended June 30, 2023 and 2022, respectively.

The Company recorded

income tax provision of $ 1.4 million and $ 0.2 million for the three months ended June 30, 2023 and 2022, respectively, and $ 1.1 million

and $ 0.2 million for the six months ended June 30, 2023 and 2022, respectively.

The difference between the ETR and federal statutory rate

of 21 % is primarily attributable to items recorded for GAAP but permanently disallowed for U.S.

federal income tax purposes and changes

in valuation allowance.

NET LOSS PER SHARE

5 unchanged sentences

Anti-dilutive securities, which are convertible into or exercisable

for the Company’s common stock, consisted of the following at March 31, 2023 and 2022:

Schedule of net loss per share

for the Company’s common stock, consisted of the following at June 30, 2023 and 2022:

Schedule of anti-dilutive securities

Stock options

3 unchanged sentences

The Company had nine reportable

segments as of March 31, 2023 and seven as of March 31, 2022;

segments as of June 30, 2023 and seven as of June 30, 2022;

see Note 1 for a brief description of the Company’s business.

The following data presents

the revenues, expenditures and other operating data of the Company’s operating segments for the three months ended March 31, 2023:

the revenues, expenditures and other operating data of the Company and its operating segments for the three and six months ended June

Schedule of operating segments

Six Months Ended June 30, 2023

Revenue, cryptocurrency mining

1 unchanged sentence

Revenue, lending and trading activities

( 4,939,000 )

Revenue, crane operations

1 unchanged sentence

Total revenues

$ ( 4,939,000 )

Depreciation and amortization expense

10 unchanged sentences

$ ( 81,923,000 )

Capital expenditures for the three months ended March 31, 2023

Identifiable assets as of March 31, 2023

Capital expenditures for the six months ended June 30, 2023

Identifiable assets as of June 30, 2023

$ 378,390,000

Three Months Ended June 30, 2023

Revenue, cryptocurrency mining

Revenue, commercial real estate leases

Revenue, lending and trading activities

Revenue, crane operations

Revenue, hotel operations

Total revenues

Depreciation and amortization expense

Income (loss) from operations

$ ( 2,445,000 )

$ ( 1,589,000 )

$ ( 1,227,000 )

$ ( 455,000 )

$ ( 2,528,000 )

$ ( 34,691,000 )

$ ( 12,219,000 )

$ ( 4,622,000 )

$ ( 50,505,000 )

Capital expenditures for the three months ended June 30, 2023

Segment information for the

three months ended March 31, 2022:

three and six months ended June 30, 2022:

Three Months Ended June 30, 2022

Revenue, cryptocurrency mining

4 unchanged sentences

Depreciation and amortization expense

Income (loss) from operations

Loss from operations

$ ( 1,076,000 )

4 unchanged sentences

$ ( 489,000 )

Capital expenditures for the three months ended March 31, 2022

Identifiable assets as of March 31, 2022

$ ( 6,603,000 )

$ ( 23,719,000 )

Capital expenditures for the three months ended June 30, 2022

Six Months Ended June 30, 2022

Revenue, cryptocurrency mining

Revenue, commercial real estate leases

Revenue, lending and trading activities

Revenue, hotel operations

Total revenues

Depreciation and amortization expense

Income (loss) from operations

$ ( 1,220,000 )

$ ( 1,620,000 )

$ ( 3,817,000 )

$ ( 1,548,000 )

$ ( 786,000 )

$ ( 14,124,000 )

$ ( 22,689,000 )

Capital expenditures for the six months ended June 30, 2022

CONCENTRATIONS OF CREDIT AND REVENUE RISK

The following table summarizes

accounts receivable that are concentrated with certain large customers as of March 31, 2023 and December 31, 2022:

accounts receivable that are concentrated with certain large customers as of June 30, 2023 and December 31, 2022:

Schedule of concentrations of credit risk

March 31, 2023

June 30, 2023

December 31, 2022

the year three months ended March 31, 2023 and 2022, no customer represented 10% or

more of consolidated revenues.

The following table provides

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

For the Three Months Ended

For the Six Months Ended

Customer X (Mining Pool Operator)

Less than 10 %

SUBSEQUENT EVENTS

2022 Preferred

the period between April 1, 2023 through May 19, 2023, the Company sold an aggregate of 105,475

shares of Series D Preferred Stock pursuant to the 2022 Preferred ATM Offering for net proceeds of $ 1.2 million .

Investments in Alpha Fund

During the period between

April 1, 2023 through May 19, 2023, Ault Lending purchased an additional $0.3 million of limited

partnership interests in Alpha Fund.

12% Term Note

On April 5, 2023, the Company

issued a term note with a principal amount of $ 1.1 million, bearing an interest rate of 12 % .

The term note was issued at a discount, with

net proceeds to the Company amounting to $ 1.0 million.

The note is scheduled to mature on June 5, 2023 .

The Company has the option to

extend the maturity date by one month, upon payment of a $30,000 extension fee.

Ault & Company, a related party, guaranteed the term

Series C Preferred Purchase Agreement

May 1, 2023, the Company entered into a securities purchase agreement (the “Agreement”) with Ault & Company, pursuant

to which the Company agreed to sell to Ault & Company up to 40,000 shares of Series C convertible preferred stock and warrants to

purchase up to 1.3 million shares of common stock for a total purchase price of up to $ 40 million.

The consummation of the transactions

contemplated by the Agreement are subject to various customary closing conditions and the receipt of certain third party consents.

addition to customary closing conditions, the closing of the transaction is also conditioned upon the receipt by Ault & Company of

financing in an amount sufficient to consummate the transaction.

The Agreement contains customary termination provisions for Ault &

Company under certain circumstances, and the Agreement shall automatically terminate if the closing has not occurred prior to May 31,

2023, although such date may be extended by Ault & Company as set forth in the Agreement.

Amendment to 16% Secured Promissory Note

On May 2, 2023, the Company

entered into a second amendment agreement, effective as of April 18, 2023, with the Initial Investor related to the December 2022 16%

secured promissory note extending the due date on the date for which the Company was required to make a payment of $1.0 million.

agreed to increase the principal amount of the note by $0.2 million as an extension fee and to grant the Investors an additional 2,000

miners as collateral for repayment of the notes.

Original Issuance Discount Term Notes

On May 15, 2023, the Company

issued a term note with a principal amount of $ 1.3 million, which does not bear interest unless there is an event of default.

note was issued at a discount, with net proceeds to the Company amounting to $ 1.0 million.

The Company is obligated to repay $1.0 million

of the note on June 15, 2023 and the remaining $0.3 million on June 30, 2023.

Upon an event of default, the Company will pledge its ownership

of the membership interests in 456 Lux Hotel NYC, LLC, which is a limited partner in NYREIC 456 LP.

Milton “Todd” Ault, III,

the Company’s Executive Chairman, and his wife, guaranteed repayment of the term note.

On May 16, 2023, the Company

issued a term note with a principal amount of $ 120,000 ,

which does not bear interest.

The term note was issued at a discount, with net proceeds to the Company amounting to $ 100,000 .

The note is scheduled to mature on June

Company has the option to extend the maturity date by 15 days, upon payment of an extension fee equal to 1% of the amount then outstanding.

On May 17, 2023, the Company

issued a term note with a principal amount of $ 1.3 million, which does not bear interest unless there is an event of default.

note was issued at a discount, with net proceeds to the Company amounting to $ 1.0 million.

The note is scheduled to mature on July 17,

Milton “Todd” Ault, III, the Company’s Executive Chairman, and Ault & Company guaranteed repayment of the

BMI Securities Purchase Agreement

On April 27, 2023, BMI entered

into a securities purchase agreement with certain accredited investors providing for the issuance of senior secured convertible notes

with an aggregate principal face amount of $ 6.9 million convertible into shares of BMI common stock and five-year warrants to purchase

an aggregate of 63.0 million shares of BMI common stock at an exercise price of $ 0.1091 per share, subject to adjustment.

The Notes are

secured by a guaranty provided by the Company, as well as by Milton “Todd” Ault, III, the Company’s Executive Chairman,

and Ault & Company guaranteed repayment of the term note.

BMI and the investors entered

into a registration rights agreement whereby BMI agreed to file a registration statement to register the conversion shares and warrant

The senior secured convertible notes bear no interest as they were issued with an original issuance discount.

The maturity date of the Notes is April 27, 2024 .

The senior secured convertible notes are convertible at a price per share equal to

the lower of (i) $0.1091 or (ii) the greater of (A) $0.0168 and (B) 85% of the lowest volume weighted average price of BMI common stock

during the 10 trading days prior to the date of conversion, subject to adjustment.

2023 Common ATM

Company and Ascendiant Capital entered into an amendment to the At-The-Market issuance sales agreement to increase the size of the 2023

Common ATM Offering from $10.0 million to $20.0 million.

During the period between July 1, 2023 through August 18, 2023, the Company sold

an aggregate of 3.9 million shares of common stock pursuant to the 2023 Common ATM Offering for gross proceeds of $ 15.6 million.

Advances under

Ault & Company Loan Agreement

additional $ 3.9 million has been advanced by Ault & Company to the Company under the loan agreement entered into June 8, 2023.

Assignment of Term

Effective August 10, 2023, the Company assigned the Term Note to Ault & Company.

As consideration for Ault & Company assuming the Term

Note from the Company, the Company issued a 12% demand promissory note in the principal face amount of $ 1.1 million

(the “Second Demand Note”) to Ault & Company.

Second Partial

Distribution of TurnOnGreen Securities

On July 24, 2023, the Company

established a record date for its second partial distribution of TurnOnGreen Securities.

Stockholders as of this date were entitled to

40 shares of TurnOnGreen Securities for every share of the Company’s common stock they held on the record date.

The second distribution

was finalized on August 7, 2023, whereby the Company relinquished control of voting interests of TurnOnGreen.

The Company distributed 56.4 million TurnOnGreen Securities in the second distribution.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements