What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-20 compared with 2023-08-21 · 449 added, 337 removed, 386 unchanged (67% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In this quarterly report,

the “Company,” “AAI,” “we,” “us” and “our” refer to Ault Alliance, Inc., a

Delaware corporation.

AAI is a diversified holding company pursuing growth by acquiring undervalued businesses and disruptive technologies

with a global impact.

Through our wholly and majority owned subsidiaries and strategic investments, we own and operate a data center at

which we mine Bitcoin and 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.

we own and operate hotels and extend credit to select entrepreneurial businesses through a licensed lending subsidiary.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

In this quarterly report, the “Company,”

“AAI,” “we,” “us” and “our” refer to Ault Alliance, Inc., a Delaware corporation.

is a diversified holding company pursuing growth by acquiring undervalued businesses and disruptive technologies with a global impact.

Through our wholly and majority owned subsidiaries and strategic investments, we own and operate a data center at which we mine Bitcoin

and offer colocation and hosting services for the emerging artificial intelligence ecosystems and other industries, and provide mission-critical

products that support a diverse range of industries, including metaverse platform, oil exploration, crane services, defense/aerospace,

industrial, automotive, medical/biopharma, consumer electronics, hotel operations and textiles.

In addition, we own and operate hotels

and extend credit to select entrepreneurial businesses through a licensed lending subsidiary.

Recent Events and Developments

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preferred stock (“Series C Preferred Stock”) which, effective upon filing, eliminated the Series C Preferred Stock.

On February 8, 2023, we entered

into a Share Exchange Agreement (the “Agreement”) with BMI and the other signatories thereto.

The Agreement provides that,

subject to the terms and conditions set forth therein, BMI will acquire all of the outstanding shares of capital stock of our then subsidiary,

BitNile.com, Inc.

(“BitNile.com”), of which we owned approximately 86%, and the remaining 14% was owned by minority shareholders

(the “Minority Shareholders”), as well as Ault Iconic, (formerly Ault Media Group) and the securities of Earnity beneficially

owned by BitNile.com (which represented approximately 19.9% of the outstanding equity securities of Earnity as of the date of the Agreement),

in exchange for the following:

(i) 8,637.5 shares of newly designated Series B Convertible Preferred Stock of BMI to be issued to our

company (the “Series B Preferred”), and (ii) 1,362.5 shares of newly designated Series C Convertible Preferred Stock of BMI

to be issued to the to the Minority Shareholders (the “Series C Preferred,” and together with the Series B Preferred, the

“Preferred Stock”).

The Series B Preferred and the Series C Preferred each have a stated value of $10,000 per share (the “Stated

Value”), for a combined stated value of the Preferred Stock to be issued by BMI of $100 million, and subject to adjustment, are

convertible into an aggregate of 400 million shares of common stock of BMI (the “BMI Common Stock”), which represent and pursuant

to the Agreement will represent approximately 92.4% of BMI’s outstanding BMI Common Stock on a fully-diluted basis as of the date

of the Agreement.

However, pending approval of the transaction by BMI’s shareholders and the Nasdaq Stock Market, the Preferred

Stock is subject to a 19.9% beneficial ownership limitation, including the Series A Convertible Preferred Stock that we acquired from

BMI in June of 2022.

The Agreement provides that BMI will seek shareholder approval (the “Shareholder Approval”) following

On February 8, 2023, we entered into a Share

Exchange Agreement (the “Agreement”) with ROI and the other signatories thereto.

The Agreement provides that, subject to the

terms and conditions set forth therein, ROI will acquire all of the outstanding shares of capital stock of our then subsidiary, BitNile.com,

(“BitNile.com”), of which we owned approximately 86%, and the remaining 14% was owned by minority shareholders (the “Minority

Shareholders”), as well as Ault Iconic, (formerly Ault Media Group) and the securities of Earnity beneficially owned by BitNile.com

(which represented approximately 19.9% of the outstanding equity securities of Earnity as of the date of the Agreement), in exchange for

the following:

(i) 8,637.5 shares of newly designated Series B Convertible Preferred Stock of ROI to be issued to our company (the “Series

B Preferred”), and (ii) 1,362.5 shares of newly designated Series C Convertible Preferred Stock of ROI to be issued to the to the

Minority Shareholders (the “Series C Preferred,” and together with the Series B Preferred, the “Preferred Stock”).

The Series B Preferred and the Series C Preferred each have a stated value of $10,000 per share (the “Stated Value”), for

a combined stated value of the Preferred Stock to be issued by ROI of $100 million, and subject to adjustment, are convertible into an

aggregate of 13.3 million shares of common stock of ROI (the “ROI Common Stock”).

ROI received approval of the Series A Convertible

Preferred Stock transaction by its’s shareholders and the Nasdaq Stock Market to exceed the 19.9% beneficial ownership limitation.

Pursuant to the Certificates

of Designations of the Rights, Preferences and Limitations of the Series B Preferred and the Series C Preferred (collectively, the “Preferred

Stock Certificates”), each share of Preferred Stock will be convertible into a number of shares of BMI Common Stock determined by

dividing the Stated Value by $0.25 (the “Conversion Price”), or 40,000 shares of BMI Common Stock.

Stock Certificates”), each share of Preferred Stock will be convertible into a number of shares of ROI Common Stock determined by

dividing the Stated Value by $7.50 (the “Conversion Price”), or 1,333 shares of ROI Common Stock.

The Conversion Price will

be subject to certain adjustments, including potential downward adjustment if BMI closes a qualified financing resulting in at least $25

be subject to certain adjustments, including potential downward adjustment if ROI closes a qualified financing resulting in at least $25

million in gross proceeds at a price per share that is lower than the Conversion Price then in effect.

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than cash, and thereafter dividends will be payable in either additional shares of Preferred Stock or cash as each holder may elect.

BMI fails to make a dividend payment as required by the Preferred Stock Certificates, the dividend rate will be increased to 12% for as

ROI fails to make a dividend payment as required by the Preferred Stock Certificates, the dividend rate will be increased to 12% for as

long as such default remains ongoing and uncured.

Each share of Preferred Stock will also have an $11,000 liquidation preference in the

event of a liquidation, change of control event, dissolution or winding up of BMI, and will rank senior to all other capital stock of

BMI with respect thereto, except that the Series B Preferred and Series C Preferred shall rank pari passu.

event of a liquidation, change of control event, dissolution or winding up of ROI, and will rank senior to all other capital stock of

ROI with respect thereto, except that the Series B Preferred and Series C Preferred shall rank pari passu.

Each share of Series B Preferred

was originally entitled to vote with the BMI Common Stock at a rate of 10 votes per share of Common Stock into which the Series B Preferred

was originally entitled to vote with the ROI Common Stock at a rate of 10 votes per share of Common Stock into which the Series B Preferred

is convertible, but that provision was subsequently eliminated.

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The Agreement closed on March 6, 2023.

On March 28, 2023, we entered

into a securities purchase agreement (the “Purchase Agreement”) with certain institutional investors (the “Investors”),

pursuant to which we agreed to issue and sell, in a private placement, an aggregate of 100,000 shares of our preferred stock, with each

such share having a stated value of $100.00 and consisting of (i) 83,000 shares of Series E Convertible Preferred Stock (the “Series

E Preferred Stock”), (ii) 1,000 shares of Series F Convertible Preferred Stock (the “Series F Preferred Stock”) and

(iii) 16,000 shares of Series G Convertible Preferred Stock (the “Series G Preferred Stock” and collectively, the “Preferred

The Preferred Shares will be convertible into shares of our common stock at the option of the holders and, in certain

circumstances, by us.

On March 28, 2023, we entered into a securities

purchase agreement (the “Purchase Agreement”) with certain sophisticated investors (the “Investors”), pursuant

to which we agreed to issue and sell, in a private placement, an aggregate of 100,000 shares of our preferred stock, with each such share

having a stated value of $100.00 and consisting of (i) 83,000 shares of Series E Convertible Preferred Stock (the “Series E Preferred

Stock”), (ii) 1,000 shares of Series F Convertible Preferred Stock (the “Series F Preferred Stock”) and (iii) 16,000

shares of Series G Convertible Preferred Stock (the “Series G Preferred Stock” and collectively, the “Preferred Shares”).

Each share of Series E Preferred

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The initial distribution was finalized in July 2023.

We distributed 58.7 million

TurnOnGreen Securities in the first distribution.

On July 24, 2023, we established

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Ault & Company.

October 13, 2023 (the “Closing Date”), we entered into a note purchase agreement with Ault & Company, pursuant to which

we sold to the Purchaser (i) a senior secured convertible promissory note in the principal face amount of $17.5 million (the “Note”)

and warrants (the “Warrants”) to purchase shares of our common stock for a total purchase price of up to $17.5 million (the

“Transaction”).

purchase price was comprised of the following:

(i) cancellation of $4.6 million of cash loaned by Ault & Company to us since June

8, 2023 pursuant to the loan agreement;

(ii) cancellation of $11.6 million of term loans made by us to Ault & Company in exchange

for Ault & Company assuming liability for the payment of $11.6 million of secured notes;

and (iii) the retirement of $1.25 million

stated value of 125,000 shares of our Series B Convertible Preferred Stock (representing all shares issued and outstanding of that series)

being transferred from Ault & Company to us.

Note has a principal face amount of $17.5 million and has a maturity date of October 12, 2028 (the “Maturity Date”).

bears interest at the rate of 10% per annum.

Interest is payable, at the Purchaser’s option, in cash or shares of Common Stock at

the applicable Conversion Price (as defined below).

Accrued interest is payable on the Maturity Date, provided, however, that Ault &

Company has the option, on not less than 10 calendar days’ notice to us, to require payment of accrued but unpaid interest on a

monthly basis in arrears.

Note is convertible into shares of common stock at a conversion price equal to the greater

of (i) $0.10 per share (the “Floor Price”), and (ii) the lesser of (A) $0.2952 or (B) 105% of the volume weighted average

price of the common stock during the ten trading days immediately prior to the date of conversion (the “Conversion Price”).

The Conversion Price is subject to adjustment in the event of an issuance of common stock at a price per share lower than the Conversion

Price then in effect, as well as upon customary stock splits, stock dividends, combinations or similar events.

The Floor Price shall not

be adjusted for stock dividends, stock splits, stock combinations and other similar transactions.

Warrants grant Ault & Company the right to purchase 47,685,988 shares of common stock.

The Warrants have a five-year term, expiring

on the fifth anniversary of the Closing Date, and become exercisable on the first business day after the six-month anniversary of the

Closing Date.

The exercise price of the Warrants is $0.1837, which is subject to adjustment in the event of customary stock splits, stock

dividends, combinations or similar events.

addition, we and various of our subsidiaries granted Ault & Company a senior security

interest in substantially all of our assets as collateral for the repayment of the Note, which is subordinated to the security interest

granted to the holders of the outstanding secured promissory notes.

November 6, 2023, we entered into a securities purchase agreement (the “SPA”) with Ault & Company, pursuant to which we

agreed to sell to Ault & Company up to 50,000 shares of Series C convertible preferred stock and warrants to purchase up to 370 million

shares of common stock for a total purchase price of up to $50 million, of which up to $17.5 million of the Note may be tendered for cancellation.

The consummation of the transactions contemplated by the SPA, specifically the conversion of the Series C convertible preferred stock

and the exercise of the warrants in an aggregate number in excess of 19.99% on the execution date of the Agreement, are subject to various

customary closing conditions as well as regulatory and stockholder approval.

In addition to customary closing conditions, the closing

of the financing is also conditioned upon the receipt by Ault & Company of financing to consummate the transaction.

The SPA contains

customary termination provisions for Ault & Company under certain circumstances, and the Agreement shall automatically terminate if

the closing has not occurred prior to December 29, 2023, although such date may be extended by Ault & Company for a period of 90 days

as set forth in the SPA.

On November 15,

2023, we purchased from ROI 603.44 shares of ROI’s newly designated Series D Convertible Preferred Stock for a total purchase price

of $15.1 million.

The purchase price was paid by the cancellation of $15.1 million of cash advances made by us to ROI between January

1, 2023 and November 9, 2023.

The preferred shares each have a stated value of $25,000 per share and each preferred share is convertible

into a number of shares of ROI’s common stock determined by dividing the stated value by $0.51, or an aggregate of 29.6 million

shares of ROI common stock, subject to adjustment in the event of an issuance of ROI common stock at a price per share lower than the

conversion price, as well as upon customary stock splits, stock dividends, combinations or similar events.

The preferred shares holders

are entitled to receive dividends at a rate of 10% per annum from issuance until November 14, 2033.

In addition, for as long as at least

25% of the Preferred Shares remain outstanding, ROI must obtain our consent with respect to certain corporate events, including reclassifications,

fundamental transactions, stock redemptions or repurchases, increases in the number of directors, and declarations or payment of dividends,

and further ROI is subject to certain negative covenants, including covenants against issuing additional shares of capital stock or derivative

securities, incurring indebtedness, engaging in related party transactions, selling of properties having a value of over $50,000, altering

the number of directors, and discontinuing the business of any subsidiary, subject to certain exceptions and limitations.

of AGREE as Discontinued Operations

In September 2023, we committed

to a plan for our wholly owned subsidiary AGREE to list for sale its four recently renovated Midwest hotels, the Hilton Garden Inn in

Madison West, the Residence Inn in Madison West, the Courtyard in Madison West, and the Hilton Garden Inn in Rockford.

The decision to

sell the hotels follows the decision to also list the multifamily development site in St.

Petersburg, Florida and is driven by our desire

to focus on our core businesses, Energy, Fintech and Sentinum.

We plan to use the proceeds from

the sales of the hotel properties to pay off debt and commit more capital to our core businesses.

Our real estate properties, which

include both hotels and land are currently listed for sale.

In connection with the planned

sale of AGREE assets, we concluded that the net assets of AGREE met the criteria for classification as held for sale.

In addition, the

proposed sale represents a strategic shift that will have a major effect on our operations and financial results.

As a result, we have

presented the results of operations, cash flows and financial position of AGREE as discontinued operations in the accompanying consolidated

financial statements and notes for all periods presented.

As a holding company, our

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Results of Operations

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

Results of Operations for the Three Months Ended September 30, 2023

The following table summarizes

the results of our operations for the three months ended June 30, 2023 and 2022.

For the Three Months Ended June 30,

the results of our operations for the three months ended September 30, 2023 and 2022.

For the Three Months Ended September 30,

Revenue, cryptocurrency mining

Revenue, hotel and real estate operations

Revenue, crane operations

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Cost of revenue, cryptocurrency mining

Cost of revenue, hotel and real estate operations

Cost of revenue, hotel operations

Cost of revenue, lending and trading activities

Cost of revenue, crane operations

Total cost of revenue

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(21,903,000 )

(23,719,000 )

Other income (expense):

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Interest expense

(15,927,000 )

Loss on extinguishment of debt

Realized and unrealized (loss) gain on marketable securities

Loss from investment in unconsolidated entity

Realized and unrealized gain on marketable securities

Loss on the sale of fixed assets

Change in fair value of warrant liability

Total other expense, net

Loss before income taxes

(28,075,000 )

(25,868,000 )

Income tax provision

Income tax (benefit) provision

Net loss from continuing operations

(27,510,000 )

Net income (loss) from discontinued operations

(28,439,000 )

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(21,771,000 )

(25,764,000 )

Preferred dividends

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Revenues by segment for the

three months ended June 30, 2023 and 2022 were as follows:

For the Three Months Ended June 30,

three months ended September 30, 2023 and 2022 were as follows:

For the Three Months Ended

September 30,

Revenue, cryptocurrency mining

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Revenue, lending and trading activities

(13,609,000 )

Total revenue

The $2.2 million increase

in our GIGA segment revenue for the three months ended June 30, 2023 included $0.7 million attributable to our acquisition of Giga-tronics

Incorporated on September 8, 2022.

Continued conflicts and tensions worldwide are driving defense-related investments in force protection

technologies at GIGA across the United States, UK, Europe, Asia, and the Middle East.

Additionally, demand for key electronics solutions,

particularly for customers in medicine and telecommunications, accelerated in the three months ended June 30, 2023, as businesses rebound

in the post-pandemic COVID-19 economy.

TurnOnGreen revenues were

down $0.3 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022 due to a large project in

2022 that was cancelled.

SMC revenues increased by

$2.6 million due to the acquisition of SMC in June 2022.

GIGA revenues were up $2.5

million for the three months ended September 30, 2023, including $0.4 million growth attributable to our acquisition of Giga-tronics Incorporated

on September 8, 2022.

Continued conflicts and tensions worldwide are driving defense-related investments in force protection technologies

at GIGA across the United States, U.K., Europe, Asia, and the Middle East.

Additionally, demand for key electronics solutions, particularly

for customers in medicine and telecommunications, accelerated in the three months ended September 30, 2023.

TurnOnGreen revenues were down $0.5

million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022 due to the cancellation

of large projects that contributed to revenue in 2022.

SMC revenues decreased by

$1.2 million primarily due to timing of shipments to a large customer.

Revenues from Sentinum’s

cryptocurrency mining operations increased $4.4 million as we increased our cryptocurrency mining activities from the prior period, partially

offset by lower Bitcoin prices and an increase in Bitcoin mining difficulty level in the current year period.

AGREE’s revenues decreased

by $0.2 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, due

to interruptions in business operations as the properties were being renovated through the end of April 2023.

cryptocurrency mining operations increased $3.7 million as we increased our cryptocurrency mining activities from the prior period, and

further increased by a 32% increase in the average Bitcoin price, partially offset an 84% increase in the average Bitcoin mining difficulty

level in the current year period.

Revenues from our lending

and trading activities were $9.5 million due to significant realized gains for the three months ended June 30, 2023 from our investment

During the three months ended June 30, 2022, Ault Lending generated income from appreciation of investments in marketable securities

as well as shares of common stock underlying equity securities issued to Ault Lending in certain financing transactions.

lending and trading activities for the three months ended June 30, 2023 included an approximate $0.9 million unrealized gain from our

investment in Alzamend.

Under its business model, Ault Lending also generates revenue through origination fees charged to borrowers and

interest generated from each loan.

from our trading activities for the three months ended June 30, 2023 included net gains on equity securities, including unrealized gains

and losses from market price changes.

These gains and losses have caused, and will continue to cause, significant volatility in our periodic

and trading activities were negative $0.2 million.

Revenue from lending and trading activities for the three months ended September 30,

2023 included an approximate $3.0 million unrealized losses from our investment in Alzamend, partially offset by realized gains from our

investment portfolio for the three months ended September 30, 2023.

During the three months ended September 30, 2022, Ault Lending generated

income from appreciation of investments in marketable securities as well as shares of common stock underlying equity securities issued

to Ault Lending in certain financing transactions.

Ault Lending also generates revenue through origination fees

charged to borrowers and interest generated from each loan.

from our trading activities for the three months ended September 30, 2023 included net losses on equity securities, including unrealized

gains and losses from market price changes.

These gains and losses have caused, and will continue to cause, significant volatility in

our periodic earnings.

Energy revenues increased

by $12.7 million for the three months ended June 30, 2023, due to the acquisition of the Circle 8 crane operations in December 2022.

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

Gross Margins

Gross margins increased to

38% for the three months ended June 30, 2023, compared to 29% for the three months ended June 30, 2022.

Our gross margins of 38% recognized

during the three months ended June 30, 2023 benefited from favorable margins from our lending and trading activities and were impacted

by negative margins from our Sentinum cryptocurrency mining segment due to the decline in the price of Bitcoin coupled with an increase

in Bitcoin mining difficulty level.

Excluding the effects of margin from our lending and trading activities and cryptocurrency mining

operations, our adjusted gross margins for the three months ended June 30, 2023 and 2022 would have been 33% and 36%, respectively.

Gross margins decreased to

20% for the three months ended September 30, 2023, compared to 43% for the three months ended September 30, 2022.

Our gross margins of

21% recognized during the three months ended September 30, 2023 were negatively impacted by unfavorable margins from our lending and trading

activities and negative margins from our Sentinum cryptocurrency mining segment due to the significant increase in Bitcoin mining difficulty

Excluding the effects of margin from our lending and trading activities and cryptocurrency mining operations, our adjusted gross

margins for the three months ended September 30, 2023 and 2022 would have been 31% and 25%, respectively.

Research and Development

Research and development expenses

increased by $1.1 million for the three months ended June 30, 2023, due to expenditures related to development work on the BMI metaverse

increased by $1.2 million for the three months ended September 30, 2023, due to expenditures related to development work on ROI’s

BitNile metaverse platform.

Selling and Marketing

Selling and marketing expenses

were $9.6 million for the three months ended June 30, 2023, compared to $7.0 million for the three months ended June 30, 2022, an increase

of $2.6 million, or 37%.

The increase was the result of $3.6 million higher advertising and promotion costs related to BMI’s metaverse

platform, partially offset by a $1.4 million decline in employee related costs and consulting expenses.

The increase is also attributable

to $0.4 million increases in sales and marketing costs from SMC, which was acquired in June 2022 and $0.2 million from GIGA, which was

acquired in September 2022.

were $8.0 million for the three months ended September 30, 2023, compared to $7.4 million for the three months ended September 30, 2022,

an increase of $0.6 million, or 8%.

The increase was primarily the result of higher advertising and promotion costs related to ROI’s

BitNile metaverse platform, partially offset by a decline in employee related costs and consulting expenses.

General and Administrative

General and administrative

expenses were $21.3 million for the three months ended June 30, 2023, compared to $19.0 million for the three months ended June 30,

expenses were $17.8 million for the three months ended September 30, 2023, compared to $15.4 million for the three months ended September

30, 2022, an increase of $2.4 million, or 16%.

General and administrative expenses increased from the comparative prior period, mainly due

to increases from new acquisitions:

General and administrative expenses increased from the comparative prior period, mainly

due to increases from new acquisitions:

· general and administrative costs of $2.2 million from ROI, which was acquired in March 2023;

· general and administrative costs of $2.0 million from Circle 8, which was acquired in December 2022;

· general and administrative costs of $3.0 million from BMI, which was acquired in March 2023;

· general and administrative costs of $2.9 million from SMC, which was acquired in June 2022;

· general and administrative costs of $0.7 million from GIGA, which was acquired in September 2022.

· general and administrative costs of $0.6 million from AVLP, which was acquired in June 2022.

The increases above were partially offset by the

following decreases in general and administrative expenses:

· $5.0 million lower performance bonus related to realized gains on trading activities;

· $1.2 million lower corporate legal fees;

· $1.0 million lower corporate bonuses;

· $0.8 million lower general and administrative expenses at AGREE;

· $0.7 million lower corporate consulting fees;

· $0.7 million lower corporate audit fees;

· $0.5 million lower corporate board of directors fees.

Impairment of AVLP Goodwill and Intangible

We test the recorded amount

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

goodwill exceeds its carried value.

We performed a goodwill impairment test as of June 30, 2023 related to AVLP as there were indicators

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

The valuation of the AVLP

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

The income approach was based

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

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

Under the income approach, the discount

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

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

capital analysis.

The market approach utilized the guideline public company method.

The results of the quantitative

test indicated the fair value of the AVLP reporting unit did not exceed its carrying amounts, including goodwill, in excess of the carrying

value of the goodwill.

As a result, the entire $18.6 million carrying amount of AVLP’s goodwill was recognized as a non-cash impairment

charge during the three months ended June 30, 2023.

Intangible Assets

Due to indicators of impairment,

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

Based on internally developed forecasts of undiscounted expected

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

value of the assets, impairment of $17.0 million was recognized as a non-cash impairment charge during the three months ended June 30,

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 increases above were partially

offset by a $2.4 million decrease performance bonus related to realized gains on trading activities.

Impairment of Property and Equipment

During the three months ended

September 30, 2023, we recognized an impairment charge of $3.9 million related to property and equipment at ROI’s Agora and Bitstream

Bitcoin mining operations as they have been unable to commence Bitcoin mining operations, either for themselves or from others through

hosting arrangements.

Impairment of Deposit Due to Vendor Bankruptcy Filing

During the three months ended

September 30, 2022, Compute North Holdings, Inc.

(along with its affiliated debtors, collectively, “Compute North”), filed

for chapter 11 bankruptcy protection.

We had a deposit of approximately $2.0 million with Compute North for services yet to be performed

by Compute North.

We assessed this financial exposure and recorded an impairment of the deposit totaling $2.0 million during the three months

ended September 30, 2022.

Impairment of Mined Cryptocurrency

Impairment of mined cryptocurrency

for the three months ended June 30, 2023 and 2022 was $0.1 million and $2.0 million, respectively.

for the three months ended September 30, 2023 and 2022 was $0.1 million and $0.5 million, respectively.

Impairment losses are attributable

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The impairment

of mined cryptocurrency for the three months ended June 30, 2023 is lower than the comparable prior year period as the average amount

of digital currency held decreased during the three months ended June 30, 2023 as we generally sold our mined digital currency the next

business day.

Interest and Other Income

Interest and other income was

$2.4 million for the three months ended June 30, 2023, compared to $0.1 million for the three months ended June 30, 2022.

in interest and other income is primarily due to higher interest rates resulting in higher income from ADRT’s cash and marketable

securities held in the trust account.

Interest Expense

Interest expense was $15.9

million for the three months ended June 30, 2023, compared to $2.0 million for the three months ended June 30, 2022.

The $15.9 million

interest expense for the three months ended June 30, 2023 included amortization of debt discount of $7.2 million, forbearance and extension

fees of $6.2 million and contractual interest of $2.5 million.

The $2.0 million interest expense for the three months ended June 30, 2022

included amortization of debt discount of $32,000 and contractual interest of $2.0 million.

Loss on Extinguishment of Debt

Loss on extinguishment of

debt was $0.1 million for the three months ended June 30, 2023, compared to $0 for the three months ended June 30, 2022.

Loss From Investment in Unconsolidated Entity

Loss from investment in unconsolidated

entity was $0 for the three months ended June 30, 2023, compared to $0.4 million for the three months ended June 30, 2022, representing

our share of losses from our equity method investment in AVLP prior to the June 1, 2022 acquisition.

Results of Operations for the Six Months Ended

June 30, 2023 and 2022

of mined cryptocurrency for the three months ended September 30, 2023 is lower than the comparable prior year period as the average

amount of digital currency held decreased during the three months ended September 30, 2023 as we generally sold our mined digital currency

the next business day.

Other Expense, Net

Other expense, net was $6.2 million for

the three months ended September 30, 2023, compared to $0.9 million for the three months ended September 30, 2022.

Interest and other income was $0.3 million

for the three months ended September 30, 2023, compared to $0.7 million for the three months ended September 30, 2022.

The decrease in

interest and other income is primarily due to the decline in ADRT’s cash and marketable securities held in the trust account as

a result of redemptions that occurred in June 2023.

Interest expense was $4.4 million for the

three months ended September 30, 2023, compared to $2.4 million for the three months ended September 30, 2022.

Interest expense increased

due to higher levels of borrowing during the three months ended September 30, 2023 as compared to the three months ended September 30,

Interest expense for the three months ended September 30, 2023 included contractual interest of $3.3 million, amortization of debt

discount of $0.6 million, and forbearance and extension fees of $0.5 million.

Interest expense for the three months ended September 30,

2022 consisted primarily of contractual interest.

The $1.5 million loss on extinguishment

of debt for the three months ended September 30, 2023 related to the August 2023 exchange of preferred stock liabilities for secured notes.

The preferred stock liabilities were remeasured from their fair value prior to the exchange to the fair value of the secured notes at

the date of the exchange.

Income Tax (Benefit) Provision

Benefit from income taxes was $0.6 million

during the three months ended September 30, 2023 compared to a provision of $0.1 million during the three months ended September 30, 2022.

The effective income tax benefit rate was 2.0% for the three months ended September 30, 2023 as compared to a provision of 1.8% for the

three months ended September 30, 2022.

Results of Operations for the Nine Months Ended

September 30, 2023 and 2022

The following table summarizes

the results of our operations for the six months ended June 30, 2023 and 2022.

For the Six Months Ended June 30,

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

For the Nine Months Ended September 30,

Revenue, cryptocurrency mining

Revenue, hotel and real estate operations

Revenue, crane operations

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Cost of revenue, cryptocurrency mining

Cost of revenue, hotel and real estate operations

Cost of revenue, hotel operations

Cost of revenue, crane operations

Cost of revenue, lending and trading activities

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Impairment of equity securities

Gain on the sale of fixed assets

(Loss) gain on the sale of fixed assets

Change in fair value of warrant liability

Total other expense, net

(32,691,000 )

(30,743,000 )

Loss before income taxes

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Income tax provision

Net loss from continuing operations

(135,658,000 )

(59,254,000 )

Net income (loss) from discontinued operations

(141,520,000 )

(62,868,000 )

Net loss attributable to non-controlling interest

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Revenues by segment for the

six months ended June 30, 2023 and 2022 were as follows:

For the Six Months Ended June 30,

nine months ended September 30, 2023 and 2022 were as follows:

For the Nine Months Ended

September 30,

Revenue, cryptocurrency mining

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Total revenue

$ 119,930,000

The $6.2 million increase

in our GIGA segment revenue for the six months ended June 30, 2023 included $1.1 million attributable to our acquisition of Giga-tronics

in our GIGA segment revenue for the nine months ended September 30, 2023 included $1.6 million attributable to our acquisition of Giga-tronics

Incorporated on September 8, 2022.

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Additionally, demand for key electronics solutions,

particularly for customers in medicine and telecommunications, accelerated in the six months ended June 30, 2023, as businesses rebound

in the post-pandemic COVID-19 economy.

TurnOnGreen revenues were

down $0.6 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022 due to a large project in 2022

that was cancelled.

SMC revenues increased by

$6.0 million due to the acquisition of SMC in June 2022.

particularly for customers in medicine and telecommunications, accelerated in the nine months ended September 30, 2023.

TurnOnGreen revenues were down $1.1 million

for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022 due to the cancellation of large projects

that contributed to revenue in 2022.

SMC revenues increased by $4.8 million primarily

due to the acquisition of SMC in June 2022.

Revenues from Sentinum’s

cryptocurrency mining operations increased $11.9 million as we increased our cryptocurrency mining activities from the prior period, partially

offset by lower Bitcoin prices and an increase in Bitcoin mining difficulty level in the current year period.

AGREE’s revenues decreased

by $0.7 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, due

to interruptions in business operations as the properties were being renovated during the six months ended June 30, 2023.

The renovations

were completed in April 2023 .

Revenues from our lending

and trading activities were $4.6 million due to realized gains for the six months ended June 30, 2023 from our investment portfolio.

the six months ended June 30, 2022, Ault Lending generated income from appreciation of investments in marketable securities as well as

offset by 17% lower average Bitcoin prices and a 66% increase in average Bitcoin mining difficulty level in the current year period.

Revenues from our lending and trading activities

were $4.3 million due to realized gains for the nine months ended September 30, 2023 from our investment portfolio.

During the nine

months ended September 30, 2022, Ault Lending generated income from realized gains from investments in marketable securities as well as

shares of common stock underlying equity securities issued to Ault Lending in certain financing transactions.

Revenue from lending and

trading activities for the six months ended June 30, 2023 included an approximate $0.6 million unrealized loss from our investment in

Under its business model, Ault Lending also generates revenue through origination fees charged to borrowers and interest generated

from each loan.

from our trading activities for the six months ended June 30, 2023 included net losses on equity securities, including unrealized gains

and losses from market price changes.

These gains and losses have caused, and will continue to cause, significant volatility in our periodic

trading activities for the nine months ended September 30, 2023 included an approximate $3.6 million unrealized loss from our investment

Ault Lending also generates revenue through origination fees charged to borrowers and interest generated from each loan.

from our trading activities for the nine months ended September 30, 2023 included net losses on equity securities, including unrealized

gains and losses from market price changes.

These gains and losses have caused, and will continue to cause, significant volatility in

our periodic earnings.

Energy revenues increased

by $25.8 million for the six months ended June 30, 2023, due to the acquisition of the Circle 8 crane operations in December 2022.

by $38.7 million for the nine months ended September 30, 2023, due to the acquisition of the Circle 8 crane operations in December 2022.

Gross Margins

Gross margins decreased to

25% for the six months ended June 30, 2023, compared to 54% for the six months ended June 30, 2022.

Our gross margins of 25% recognized

during the six months ended June 30, 2023 were impacted by negative margins from our Sentinum cryptocurrency mining segment due to the

Gross margins decreased to 24% for the nine

months ended September 30, 2023, compared to 50% for the nine months ended September 30, 2022.

Our gross margins of 24% recognized during

the nine months ended September 30, 2023 were impacted by negative margins from our Sentinum cryptocurrency mining segment due to the

decline in the price of Bitcoin coupled with an increase in Bitcoin mining difficulty level, offset by favorable margins from our lending

and trading activities.

Excluding the effects of margin from our lending and trading activities and cryptocurrency mining operations,

our adjusted gross margins for the six months ended June 30, 2023 and 2022 would have been 33% and 36%, respectively.

and trading activities as compared to other segments.

Excluding the effects of margin from our lending and trading activities and cryptocurrency

mining operations, our adjusted gross margins for the nine months ended September 30, 2023 and 2022 would have been 32% and 29%, respectively.

Research and Development

Research and development expenses

increased by $2.2 million for the six months ended June 30, 2023, primarily due to expenditures related to development work on the BMI

metaverse platform.

increased by $3.5 million for the nine months ended September 30, 2023, primarily due to expenditures related to development work on ROI’s

BitNile metaverse platform.

Selling and Marketing

Selling and marketing expenses

were $18.4 million for the six months ended June 30, 2023, compared to $13.5 million for the six months ended June 30, 2022, an increase

of $4.9 million, or 36%.

The increase was the result of $5.3 million higher advertising and promotion costs related to BMI’s metaverse

platform, partially offset by a $1.8 million decline in employee related costs and consulting expenses.

The increase is also attributable

to $1.3 million increases in sales and marketing costs from SMC, which was acquired in June 2022 and $0.5 million from GIGA, which was

acquired in September 2022.

were $26.4 million for the nine months ended September 30, 2023, compared to $20.9 million for the nine months ended September 30, 2022,

an increase of $5.5 million, or 26%.

The increase was the result of $6.4 million higher advertising and promotion costs related to ROI’s

BitNile metaverse platform, partially offset by a $2.6 million decline in employee related costs and consulting expenses.

is also attributable to $1.5 million increases in sales and marketing costs from SMC, which was acquired in June 2022.

General and Administrative

General and administrative

expenses were $44.0 million for the six months ended June 30, 2023, compared to $32.7 million for the six months ended June 30, 2022,

expenses were $59.5 million for the nine months ended September 30, 2023, compared to $44.4 million for the nine months ended September

30, 2022, an increase of $15.2 million, or 34%.

General and administrative expenses increased from the comparative prior period, mainly due to increases

from new acquisitions:

General and administrative expenses increased from the comparative prior period, mainly

due to increases from new acquisitions:

· general and administrative costs of $8.4 million from Circle 8, which was acquired in December 2022;

· general and administrative costs of $5.3 million from SMC, which was acquired in June 2022;

· general and administrative costs of $5.3 million from ROI, which was acquired in March 2023;

· general and administrative costs of $4.3 million from GIGA, which was acquired in September 2022;

· general and administrative costs of $3.0 million from BMI, which was acquired in March 2023;

· general and administrative costs of $1.2 million from AVLP, which was acquired in June 2022.

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· $2.4 million lower corporate legal fees.

· $1.5 million lower general and administrative expenses at AGREE.

Impairment of AVLP Goodwill and Intangible

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As a result, the entire $18.6 million carrying amount of AVLP’s goodwill was recognized as a non-cash impairment

charge during the six months ended June 30, 2023.

charge during the nine months ended September 30, 2023.

Intangible Assets

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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.

value of the assets, impairment of $17.0 million was recognized as a non-cash impairment charge during the nine months ended September

The tradenames and patents/developed

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value using a discount factor of 25.7%.

Impairment of Property and Equipment

During the nine months ended

September 30, 2023, we recognized an impairment charge of $3.9 million related to property and equipment at ROI’s Agora and Bitstream

Bitcoin mining operations as they have been unable to commence Bitcoin mining operations, either for themselves or from others through

hosting arrangements.

Impairment of Deposit Due to Vendor Bankruptcy

During the nine months ended

September 30, 2022, Compute North filed for chapter 11 bankruptcy protection.

We had a deposit of approximately $2.0 million with Compute

North for services yet to be performed by Compute North.

We assessed this financial exposure and recorded an impairment of the deposit

totaling $2.0 million during the nine months ended September 30, 2022.

Impairment of Mined Cryptocurrency

Impairment of mined cryptocurrency

for the six months ended June 30, 2023 and 2022 was $0.3 million and $2.4 million, respectively.

Impairment losses are attributable to

the volatility of the Bitcoin market as market price of Bitcoin drops below our carrying value within the respective periods.

for the nine months ended September 30, 2023 and 2022 was $0.4 million and $2.9 million, respectively.

Impairment losses are attributable

to the volatility of the Bitcoin market as market price of Bitcoin drops below our carrying value within the respective periods.

The impairment

of mined cryptocurrency for the six months ended June 30, 2023 is lower than the comparable prior year period as the average amount of

digital currency held decreased during the first half of 2023 as we generally sold our mined digital currency the next business day.

Interest and Other Income

Interest and other income was

$3.6 million for the six months ended June 30, 2023, compared to $0.5 million for the six months ended June 30, 2022.

The increase in

interest and other income is primarily due to higher interest rates resulting in higher income from ADRT’s cash and marketable securities

held in the trust account.

Interest Expense

Interest expense was $29.7

million for the six months ended June 30, 2023, compared to $31.9 million for the six months ended June 30, 2022.

The $29.7 million interest

expense for the six months ended June 30, 2023 included amortization of debt discount of $16.2 million, forbearance and extension fees

of $7.5 million and contractual interest of $5.9 million.

The $29.8 million interest expense for the six months ended June 30, 2022 related

primarily to amortization of debt discount of $26.3 million from the issuance of warrants, a non-cash charge, and original issue discount,

in connection with the $66.0 million of senior notes issued in December 2021, which were fully paid in March 2022.

Loss on Extinguishment of Debt

Loss on extinguishment of

debt was $0.2 million for the six months ended June 30, 2023, compared to $0 for the six months ended June 30, 2022.

of mined cryptocurrency for the nine months ended September 30, 2023 is lower than the comparable prior year period as the average

amount of digital currency held decreased during the first half of 2023 as we generally sold our mined digital currency the next business

Other Expense, Net

Other expense, net was $32.7 million for

the nine months ended September 30, 2023, compared to $30.7 million for the nine months ended September 30, 2022.

Interest and other income was $3.9 million

for the nine months ended September 30, 2023, compared to $1.3 million for the nine months ended September 30, 2022.

The increase in interest

and other income is primarily due to higher interest rates resulting in higher income from ADRT’s cash and marketable securities

held in the trust account as a result of redemptions that occurred in June 2023.

Interest expense was $30.5 million for the

nine months ended September 30, 2023, compared to $32.1 million for the nine months ended September 30, 2022.

Interest expense for the

nine months ended September 30, 2023 included amortization of debt discount of $18.2 million, forbearance and extension fees of $7.3 million

and contractual interest of $5.0 million.

Interest expense for the nine months ended September 30, 2022 related primarily to amortization

of debt discount of $26.4 million, contractual interest of $4.4 million, and forbearance and extension fees of $1.2 million.

The $1.5 million loss on extinguishment

of debt for the nine months ended September 30, 2023 related to the August 2023 exchange of preferred stock liabilities for secured notes.

The preferred stock liabilities were remeasured from their fair value prior to the exchange to the fair value of the secured notes at

the date of the exchange.

Loss from investment in unconsolidated entity

Loss from investment in unconsolidated

entity was $0 for the six months ended June 30, 2023, compared to $0.9 million for the six months ended June 30, 2022, representing

was $0 for the nine months ended September 30, 2023, compared to $0.9 million for the nine months ended September 30, 2022, representing

our share of losses from our equity method investment in AVLP prior to the June 1, 2022 acquisition.

Impairment of Equity Securities

Cumulative downward adjustments

for impairments for our equity securities without readily determinable fair values held at June 30, 2023 were $9.6 million.

Cumulative downward adjustments for impairments

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

Income Tax Provision

Provision for income taxes was $0.5 million

during the three months ended September 30, 2023 compared to a provision of $0.4 million during the nine months ended September 30, 2022.

The effective income tax provision rate was 0.4% for the nine months ended September 30, 2023 as compared to a provision of 0.6% for the

nine months ended September 30, 2022.

Liquidity and Capital Resources

On June 30, 2023, we had cash

and cash equivalents of $19.7 million (excluding restricted cash of $1.1 million), compared to cash and cash equivalents of $10.5 million

(excluding restricted cash of $3.6 million) at December 31, 2022.

The increase in cash and cash equivalents was primarily due cash provided

by operating activities and cash provided by financing activities related to the sale of common and preferred stock, as well as proceeds

from convertible notes partially offset by the payment of debt, purchases of property and equipment and investments in equity securities.

Net cash provided by operating

activities totaled $12.9 million for the six months ended June 30, 2023, compared to $19.4 million for the six months ended June

Cash provided by operating activities for the six months ended June 30, 2023 included $41.2 million net cash provided by marketable

securities from trading activities related to the operations of Ault Lending and $15.0 million proceeds from the sale of cryptocurrencies

from our Sentinum Bitcoin mining operations, partially offset by operating losses and changes in working capital.

Net cash used in investing

activities was $21.8 million for the six months ended June 30, 2023, compared to $87.1 million for the six months ended June 30, 2022,

which included $72.8 million of capital expenditures, primarily for Bitcoin mining equipment.

On September 30, 2023, excluding cash and

cash equivalents from discontinued operations, we had cash and cash equivalents of $8.7 million (excluding restricted cash of $1.9 million),

compared to cash and cash equivalents of $7.9 million (excluding restricted cash of $0.7 million) at December 31, 2022.

The increase in

cash and cash equivalents was primarily due to cash provided by operating activities and cash provided by financing activities related

to the sale of common and preferred stock, as well as proceeds from convertible notes partially offset by the payment of debt, purchases

of property and equipment and investments in equity securities.

Net cash used in operating activities totaled

$2.2 million for the nine months ended September 30, 2023, compared to net cash provided by operating activities of $21.9 million

for the nine months ended September 30, 2022.

Cash used in operating activities for the nine months ended September 30, 2023 included

$71.2 million net cash provided by marketable securities from trading activities related to the operations of Ault Lending and $21.3 million

proceeds from the sale of cryptocurrencies from our Sentinum Bitcoin mining operations, offset by operating losses and changes in working

Net cash used in operating activities for the nine months ended September 30, 2023 included $3.6 million cash used in operating

activities from discontinued operations.

Net cash used in investing activities was

$22.9 million for the nine months ended September 30, 2023, compared to $115.4 million for the nine months ended September 30, 2022, which

included $80.1 million of capital expenditures, primarily for Bitcoin mining equipment.

Net cash used in investing activities for the

nine months ended September 30, 2023 was primarily related to $8.7 million capital expenditures and the $10.7 million purchase of

equity securities, partially offset by proceeds from the sale of fixed assets of $4.5 million.

Net cash used in investing activities for

the six months ended June 30, 2023 was primarily related to capital expenditures and the purchase of equity securities, partially offset

by proceeds from the sale of fixed assets of $4.5 million.

Net cash provided by financing activities

was $12.8 million for the six months ended June 30, 2023, compared to net cash provided by financing activities of $75.5 million

for the six months ended June 30, 2022, and primarily reflects the following transactions:

· 2022 Common ATM Offering – During the six months ended June 30, 2023, we sold an aggregate

the nine months ended September 30, 2023 included $6.1 million cash used in investing activities from discontinued operations.

Net cash provided by financing

activities was $23.8 million for the nine months ended September 30, 2023, compared to net cash provided by financing activities of $86.1 million

for the nine months ended September 30, 2022, and primarily reflects the following transactions:

· 2022 Common ATM Offering – During the nine months ended September 30, 2023, we sold an aggregate

of 0.1 million shares of common stock pursuant to the 2022 Common ATM Offering for gross proceeds of $4.2 million and effective March

17, 2023, the 2022 Common ATM Offering was terminated;

· 2022 Preferred ATM Offering – During the six months ended June 30, 2023, we sold an aggregate

of 162,175 shares of Series D Preferred Stock pursuant to the 2022 Preferred ATM Offering for net proceeds of $3.0 million and effective

June 16, 2023, the 2022 Preferred ATM Offering was terminated;

· 2022 Preferred ATM Offering – During the nine months ended September 30, 2023, we sold an

aggregate of 162,175 shares of Series D Preferred Stock pursuant to the 2022 Preferred ATM Offering for net proceeds of $3.0 million and

effective June 16, 2023, the 2022 Preferred ATM Offering was terminated;

· 2023 Common ATM Offering –On June 9, 2023, we entered into the 2023 Common ATM Offering with

Ascendiant Capital.

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

the 2023 Common ATM Offering for gross proceeds of $0.8 million;

During the nine months ended September 30, 2023, we sold an aggregate of 10.8 million shares of common stock pursuant

to the 2023 Common ATM Offering for gross proceeds of $21.2 million;

· $58.1 million payments on notes payable, partially offset by $40.6 million proceeds from notes payable;

1 unchanged sentence

notes payable.

Financing Transactions Subsequent to June

Net provided by financing activities for

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

Financing Transactions Subsequent to September

Financing transactions subsequent

to June 30, 2023 included the following:

to September 30, 2023 included the following:

2023 Common ATM Offering

the period between July 1, 2023 through August 14, 2023, we sold an aggregate of 3.9 million shares of common stock pursuant

to the 2023 Common ATM Offering for gross proceeds of $15.6 million.

Amendment to 8.5% Secured Promissory Notes

On July 19, 2023, we and certain

of our subsidiaries entered into an amendment agreement with the institutional investors and increased the principal balance of the secured

promissory notes by an additional $8.8 million.

The net proceeds to us from the amendment agreement were $7.5 million.

Advances under Ault

& Company Loan Agreement

to June 30, 2023, $3.9 million has been advanced by Ault & Company to us under the loan agreement entered into June 8, 2023.

Exchange of Preferred

Shares for Secured Debt and Assignment of Secured Note

August 3, 2023, we and the Investors entered into the Exchange Agreement pursuant to which the Investors exchanged all of their Preferred

Shares as well as their Demand Notes issued to the Investors by us on or about May 20, 2023, with each Demand Note having a principal

outstanding amount of approximately $0.9 million for the Exchange Notes, each with a principal face amount of approximately $5.3 million,

for an aggregate of amount owed of $10.5 million.

We and Milton “Todd” Ault, III, our Executive Chairman issued entered into

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

as of August 3, 2023, we assigned the Exchange Notes to Ault & Company.

As consideration for Ault & Company assuming the Exchange

Notes from us, we issued the First A&C Demand Note to Ault & Company.

Assignment of Term

as of August 10, 2023, we assigned the Term Note to Ault & Company.

As consideration for Ault & Company assuming the Term Note

from us , we issued a 12% demand promissory note in the principal face amount of $1.1 million (the “Second Demand Note”) to

Ault & Company.

During the period

between October 1, 2023 through November 17, 2023, we sold an aggregate of 54.2 million shares of common stock pursuant to the

2023 Common ATM Offering for gross proceeds of $10.0 million.

Senior Secured Convertible

Note, Related Party

October 13, 2023 (the “Closing Date”), we entered into a note purchase agreement with Ault & Company, pursuant to which

we sold to the Purchaser (i) a senior secured convertible promissory note in the principal face amount of $17.5 million (the “Note”)

and warrants (the “Warrants”) to purchase shares of our common stock for a total purchase price of up to $17.5 million (the

“Transaction”).

purchase price was comprised of the following:

(i) cancellation of $4.6 million of cash loaned by Ault & Company to us since June

8, 2023 pursuant to the loan agreement;

(ii) cancellation of $11.6 million of term loans made by us to Ault & Company in exchange

for Ault & Company assuming liability for the payment of $11.6 million of secured notes;

and (iii) the retirement of $1.25 million

stated value of 125,000 shares of our Series B Convertible Preferred Stock (representing all shares issued and outstanding of that series)

being transferred from Ault & Company to us.

Note has a principal face amount of $17.5 million and has a maturity date of October 12, 2028 (the “Maturity Date”).

bears interest at the rate of 10% per annum.

Interest is payable, at the Purchaser’s option, in cash or shares of Common Stock at

the applicable Conversion Price (as defined below).

Accrued interest is payable on the Maturity Date, provided, however, that Ault &

Company has the option, on not less than 10 calendar days’ notice to us, to require payment of accrued but unpaid interest on a

monthly basis in arrears.

Note is convertible into shares of common stock at a conversion price equal to the greater

of (i) $0.10 per share (the “Floor Price”), and (ii) the lesser of (A) $0.2952 or (B) 105% of the volume weighted average

price of the common stock during the ten trading days immediately prior to the date of conversion (the “Conversion Price”).

The Conversion Price is subject to adjustment in the event of an issuance of common stock at a price per share lower than the Conversion

Price then in effect, as well as upon customary stock splits, stock dividends, combinations or similar events.

The Floor Price shall not

be adjusted for stock dividends, stock splits, stock combinations and other similar transactions.

Warrants grant Ault & Company the right to purchase 47,685,988 shares of common stock.

The Warrants have a five-year term, expiring

on the fifth anniversary of the Closing Date, and become exercisable on the first business day after the six-month anniversary of the

Closing Date.

The exercise price of the Warrants is $0.1837, which is subject to adjustment in the event of customary stock splits, stock

dividends, combinations or similar events.

addition, we and various of our subsidiaries granted Ault & Company a senior security

interest in substantially all of our assets as collateral for the repayment of the Note, which is subordinated to the security interest

granted to the holders of the outstanding secured promissory notes.

Series C Preferred Purchase Agreement,

Related Party

November 6, 2023, we entered into a securities purchase agreement (the “SPA”) with Ault & Company, pursuant to which we

agreed to sell to Ault & Company up to 50,000 shares of Series C convertible preferred stock and warrants to purchase up to 370 million

shares of common stock for a total purchase price of up to $50 million, of which up to $17.5 million of the Note may be tendered for cancellation.

The consummation of the transactions contemplated by the SPA, specifically the conversion of the Series C convertible preferred stock

and the exercise of the warrants in an aggregate number in excess of 19.99% on the execution date of the Agreement, are subject to various

customary closing conditions as well as regulatory and stockholder approval.

In addition to customary closing conditions, the closing

of the financing is also conditioned upon the receipt by Ault & Company of financing to consummate the transaction.

The SPA contains

customary termination provisions for Ault & Company under certain circumstances, and the Agreement shall automatically terminate if

the closing has not occurred prior to December 29, 2023, although such date may be extended by Ault & Company for a period of 90 days

as set forth in the SPA.

Series D Preferred Purchase Agreement,

Related Party

On November 15,

2023, we purchased from ROI 603.44 shares of ROI’s newly designated Series D Convertible Preferred Stock for a total purchase price

of $15.1 million.

The purchase price was paid by the cancellation of $15.1 million of cash advances made by us to ROI between January

1, 2023 and November 9, 2023.

The preferred shares each have a stated value of $25,000 per share and each preferred share is convertible

into a number of shares of ROI’s common stock determined by dividing the stated value by $0.51, or an aggregate of 29.6 million

shares of ROI common stock, subject to adjustment in the event of an issuance of ROI common stock at a price per share lower than the

conversion price, as well as upon customary stock splits, stock dividends, combinations or similar events.

The preferred shares holders

are entitled to receive dividends at a rate of 10% per annum from issuance until November 14, 2033.

In addition, for as long as at least

25% of the Preferred Shares remain outstanding, ROI must obtain our consent with respect to certain corporate events, including reclassifications,

fundamental transactions, stock redemptions or repurchases, increases in the number of directors, and declarations or payment of dividends,

and further ROI is subject to certain negative covenants, including covenants against issuing additional shares of capital stock or derivative

securities, incurring indebtedness, engaging in related party transactions, selling of properties having a value of over $50,000, altering

the number of directors, and discontinuing the business of any subsidiary, subject to certain exceptions and limitations.

Critical Accounting Policies

14 unchanged sentences

whether it is the primary beneficiary as prescribed by the accounting guidance on the consolidation of a VIE.

The Company evaluates its

business relationships with related parties to identify potential VIEs under Accounting Standards Codification (“ASC”) 810,

Consolidation.

The Company consolidates VIEs in which it is considered to be the primary beneficiary.

Entities are considered to be the

primary beneficiary if they have both of the following characteristics:

(i) the power to direct the activities that, when taken together,

most significantly impact the VIE’s performance;

and (ii) the obligation to absorb losses and right to receive the returns from

the VIE that would be significant to the VIE.

The Company’s judgment with respect to its level of influence or control of an entity

involves the consideration of various factors including the form of its ownership interest, its representation in the entity’s governance,

the size of its investment, estimates of future cash flows, its ability to participate in policy making decisions and the rights of the

other investors to participate in the decision making process and to replace the Company as manager and/or liquidate the joint venture,

if applicable.

The Company evaluates its business relationships

with related parties to identify potential VIEs under ASC 810, Consolidation.

The Company consolidates VIEs in which it is considered

to be the primary beneficiary.

Entities are considered to be the primary beneficiary if they have both of the following characteristics:

(i) the power to direct the activities that, when taken together, most significantly impact the VIE’s performance;

obligation to absorb losses and right to receive the returns from the VIE that would be significant to the VIE.

The Company’s judgment

with respect to its level of influence or control of an entity involves the consideration of various factors including the form of its

ownership interest, its representation in the entity’s governance, the size of its investment, estimates of future cash flows, its

ability to participate in policy making decisions and the rights of the other investors to participate in the decision making process

and to replace the Company as manager and/or liquidate the joint venture, if applicable.

Business Combination

19 unchanged sentences

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What changed 10-Q

Item 2. Management’s Discussion and Analysis