What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-20 compared with 2023-11-20 · 227 added, 738 removed, 97 unchanged (91% 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.

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.

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

In this quarterly report on

Form 10-Q (the “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 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, 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

On January 23, 2023, we filed

a Certificate of Elimination with the Secretary of State of the State of Delaware with respect to our Series C convertible redeemable

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

On February 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 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 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.

The holders of Preferred Stock

will be entitled to receive dividends at a rate of 5% of the Stated Value per annum from issuance until February 7, 2033 (the “Dividend

During the first two years of the Dividend Term, dividends will be payable in additional shares of Preferred Stock rather

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

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 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 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.

Other than certain rights granted to the Company relating to amendments

or waiver of various negative covenants, the terms, rights, preferences and limitations of the Preferred Stock Certificates are essentially

The Agreement closed on March 6, 2023.

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

Stock and Series F Preferred Stock had a purchase price of $100.00, equal to each such share’s stated value.

The purchase price

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

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

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

Each Preferred Share is convertible into shares

of our common stock at a conversion price equal to 85% of the closing sale price of our common stock on the trading day prior to the date

of conversion, subject to a floor price of $0.10.

The Preferred Shares are convertible at the option of the holder at any time following

our receipt of stockholder approval of the Reverse Split (as defined below).

The private placement closed on March 30, 2023.

On April 6, 2023, we issued

a term note with a principal amount of $1.1 million, bearing an interest rate of 12% (the “Term Note”).

The Term Note was

issued at a discount, with net proceeds to us amounting to $1.0 million.

The Term Note was scheduled to mature on June 5, 2023.

the option to extend the maturity date by one month, by paying a $30,000 extension fee.

Ault & Company guaranteed repayment of the

On May 1, 2023, we entered

into a securities purchase agreement (the “Series C Agreement”) with Ault & Company, pursuant to which we agreed to sell

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

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

The consummation of the transactions contemplated by the Series C Agreement

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

In addition to customary closing

conditions, the closing of the transaction is also conditioned upon the receipt by Ault & Company of financing in an amount sufficient

to consummate the transaction, in whole or in part.

The Series C Agreement contains customary termination provisions for Ault & Company

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

2023, although such date may be extended by Ault & Company for a period of 90 days as set forth in the Series C Agreement.

Our stockholders approved,

at a special meeting of our stockholders called for such purpose, an amendment (the “Amendment”) to our certificate of incorporation

to authorize a reverse split of our common stock (the “Reverse Split”).

The Investors agreed in the Purchase Agreement to

not transfer, offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of the Preferred Shares until after the Reverse

Pursuant to the certificate of designation of the Series E Preferred Stock, the shares of Series E Preferred Stock have the right

to vote on such Amendment on an as converted to common stock basis.

In addition, pursuant to the certificate of designation of the Series

F Preferred Stock, the shares of Series F Preferred Stock have the right to vote on such Amendment.

Each Investor has separately agreed

to vote the shares of the Series E Preferred Stock in favor of the Amendment and that the shares of the Series F Preferred Stock shall

automatically be voted in a manner that “mirrors” the proportions on which the shares of our common stock and Series E Preferred

Stock are voted on the Amendment.

The Amendment requires the approval of the majority of the votes associated with our outstanding capital

stock entitled to vote on the proposal.

Because the Series F Preferred Stock will automatically and without further action of the purchaser

be voted in a manner that “mirrors” the proportions on which the shares of common stock and Series E Preferred Stock are voted

on the Reverse Split, abstentions by common stockholders will not have any effect on the votes cast by the holders of the Series F Preferred

The Series G Preferred Stock does not carry any voting rights, except as required by law or expressly provided by its certificate

of designation.

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

The loan agreement provides for an unsecured, non-revolving

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

All loans under the loan agreement are due within five business

days after request by Ault & Company and Ault & Company is not obligated to make any further advances under the loan agreement

after December 8, 2023.

Advances under the loan agreement bear interest at the rate of 9.5% per annum and may be repaid at any time without

penalty or premium.

As of the date of this report, $4.7 million has been advanced under the loan agreement and not repaid.

June 9, 2023, we entered into an At-the-Market Issuance Sales Agreement with Ascendiant Capital Markets, LLC, as sales agent (“Ascendiant

Capital”) to sell shares of our common stock having an aggregate offering price of up to $10,000,000 (the “Shares”)

from time to time, through an “at the market offering” (the “2023 Common ATM Offering”).

On July 12, 2023, we

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.

Through August 14, 2023, we have sold an aggregate of 3.8 million shares of

common stock pursuant to the 2023 Common ATM Offering for gross proceeds of $16.1 million.

On June 26, 2023, we established

a record date for our initial distribution of TurnOnGreen securities.

On January 31, 2024, Ault

Lending entered into a securities purchase agreement with Alzamend pursuant to which Alzamend agreed to sell Ault Lending up to 6,000

shares of Alzamend Series A convertible preferred stock and warrants to purchase shares of the Alzamend common stock.

The Agreement provides

that Ault Lending may purchase up to $6 million of Alzamend Series A Convertible Preferred Stock in one or more closings.

On January 31, 2024, Alzamend

sold 1,220 shares of its Series A convertible preferred stock and warrants to purchase 1.2 million shares of its common

stock to Ault Lending, for a total purchase price of $1.2 million.

On March 26, 2024, Alzamend sold an additional 780 shares

of its Series A convertible preferred stock and warrants to purchase 0.8 million shares of its common stock to Ault Lending,

for a total purchase price of $0.8 million.

2024, we entered into a note purchase agreement with two institutional investors pursuant to which the investors agreed to acquire, and

we agreed to issue and sell in a registered direct offering to the investors, an aggregate of $2.0 million convertible promissory

notes, bearing interest at 6%.

The convertible promissory notes were issued at a discount, with net proceeds to us of $1.8 million.

While the convertible promissory notes are scheduled to mature on June 12, 2024, we have the option to extend the maturity date to September

12, 2024, for which we will have to pay an additional increase in the principal amount of the notes of 5%.

The notes are convertible into

shares of Class A common stock at a conversion price of $0.35 per share.

of March 7, 2024, March 8, 2024 , March 18, 2024, March 19, 2024 and April 17, 2024, pursuant to the November 2023 SPA entered

into with Ault & Company on November 6, 2023, we sold to Ault & Company 500 shares of Series C Preferred Stock and Warrants to

purchase 147,820 shares of Class A common stock, for a total purchase price of $0.5 million.

As of the date of filing of this Quarterly

Report, Ault & Company has purchased an aggregate of 44,000 shares of Series C Convertible Preferred Stock and Series C Warrants to

purchase an aggregate of 13,008,132 Warrant Shares, for an aggregate purchase price of $44.0 million.

The November 2023 SPA provides that

Ault & Company may purchase up to $75.0 million of Series C Convertible Preferred Stock and Series C Warrants in one or more closings.

2024, the November 2023 SPA entered into with Ault & Company was amended to increase the amount of Series C Preferred Stock and Series

C Warrants that may be purchase under the agreement from $50.0 million to $75.0 million and an extension of the date to closing the final

tranche of the financing to June 30, 2024.

On April 3, 2024, we filed a Certificate of Increase to the Series C Designation of Preferences,

Rights and Limitations to increase the number of authorized shares of Series C Preferred Stock from 50,000 to 75,000.

On April 15, 2024, we established

a record date for our final distribution of securities of TurnOnGreen.

Stockholders as of this date were entitled to 0.83 shares of TurnOnGreen

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share of our common stock they held on the record date.

The initial distribution was finalized in July 2023.

The final distribution was paid on April 29, 2024.

We distributed 25.0 million

TurnOnGreen Securities in the first distribution.

On July 24, 2023, we established

a record date for our second partial distribution of TurnOnGreen Securities.

Stockholders as of this date were entitled to 15 shares of

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

The second distribution was finalized

on August 7, 2023, whereby we relinquished control of voting interests of TurnOnGreen.

We distributed 56.4 million TurnOnGreen Securities

in the second distribution.

July 19, 2023 we along with certain of our subsidiaries entered into a First Amendment and Joinder to Loan and Guarantee Agreement (the

“Amendment”) with the institutional investors pursuant to which the (i) Loan and Guarantee Agreement, dated November 7, 2022,

entered into between us and the institutional investors (the “Loan Agreement”) and (ii) Security Agreement, dated November

7, 2022, entered into between the institutional investors and Sentinum (the “Security Agreement”) was amended.

the Amendment, we borrowed an additional $8.8 million.

The net proceeds of the additional loan amount were $7.5 million.

August 3, 2023, we 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”) issued to the Investors by us on

or about May 20, 2023, with each Demand Note having a principal outstanding amount of approximately $0.8 million for two new 10% Secured

OID Promissory Notes (the “Exchange Notes”), each with a principal face amount of $5.3 million, for an aggregate of amount

owed of $10.5 million (the “Principal Amount”).

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

into guaranty agreements with the Investors guaranteeing repayment by Ault & Company, Inc., a related party (“Ault & Company”)

of the Exchange Notes.

Effective as of August 3,

2023, we assigned the Exchange Notes to Ault & Company.

As consideration for Ault & Company assuming the Exchange Notes from us,

we issued a 10% demand promissory note in the principal face amount of $10.5 million (the “First A&C Demand Note”) to

Ault & Company.

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.

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

TurnOnGreen Securities in the final distribution.

On April 29, 2024, we entered into a $1.7 million term

note agreement with an institutional investor bearing interest of 15%.

The term note was issued at a discount, with net proceeds to us

of $1.6 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.

The term note was scheduled to mature May 17, 2024.

The term note was not paid on its scheduled maturity date and we

are working with the institutional investor to obtain a waiver or amend the terms of the note.

of AGREE as Discontinued Operations

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

Petersburg, Florida and is driven by our desire

Petersburg, Florida and was 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

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financial statements and notes for all periods presented.

On April 30, 2024, we had

a change in plan of sale for our four hotels owned and operated by AGREE.

As a result, as of April 30, 2024, the assets will no longer

meet the held for sale criteria and will be required to be reclassified as held and used at the lower of adjusted carrying value or the

fair value at the date of the subsequent decision not to sell.

As a holding company, our

business objective is designed to increase stockholder value.

Under the strategy we have adopted, we are focused on managing and financially

supporting our existing subsidiaries and partner companies, with the goal of pursuing monetization opportunities and maximizing the value

returned to stockholders.

business objective is to increase stockholder value through developing and growing our subsidiaries.

Under the strategy we have adopted,

we are focused on managing and financially supporting our existing subsidiaries and partner companies, with the goal of pursuing monetization

opportunities and maximizing the value returned to stockholders.

We have, are and will consider initiatives including, among others:

public offerings, the sale of individual

partner companies, the sale of certain or all partner company interests in secondary market transactions, or a combination thereof, as

well as other opportunities to maximize stockholder value.

We anticipate returning value to stockholders after satisfying our debt obligations

and working capital needs.

offerings, the sale of individual partner companies, the sale of certain or all partner company interests in secondary market transactions,

or a combination thereof, as well as other opportunities to maximize stockholder value.

We anticipate returning value to stockholders

after satisfying our debt obligations and working capital needs.

From time to time, we engage

3 unchanged sentences

supported by a different ownership structure or if we otherwise believe it is in our stockholders’ best interests, we will seek

to sell some or all of our position in the subsidiary or partner company.

to sell all or a portion of our position in the subsidiary or partner company.

These sales may take the form of privately negotiated sales

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Results of Operations

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 September 30, 2023 and 2022.

For the Three Months Ended September 30,

Revenue, cryptocurrency mining

Revenue, crane operations

Revenue, lending and trading activities

Total revenue

Cost of revenue, products

Cost of revenue, cryptocurrency mining

Cost of revenue, crane operations

Total cost of revenue

Total operating expenses

Loss from operations

(21,903,000 )

Other income (expense):

Interest and other income

Interest expense

Loss on extinguishment of debt

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 )

Income tax (benefit) provision

Net loss from continuing operations

(27,510,000 )

Net income (loss) from discontinued operations

(28,439,000 )

Net loss attributable to non-controlling interest

Net loss attributable to Ault Alliance, Inc.

(21,771,000 )

Preferred dividends

Net loss available to common stockholders

$ (22,184,000 )

$ (7,461,000 )

Comprehensive loss

Net loss available to common stockholders

$ (22,184,000 )

$ (7,461,000 )

Other comprehensive loss

Foreign currency translation adjustment

Other comprehensive loss

Total comprehensive loss

$ (22,835,000 )

$ (7,155,000 )

Revenues by segment for the

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

For the Three Months Ended

September 30,

Revenue, cryptocurrency mining

Revenue, commercial real estate leases

Revenue, lending and trading activities

(13,609,000 )

Total revenue

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 $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 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 $12.9 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 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 $1.2 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 $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 $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 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 $0.7 million from GIGA, which was acquired in September 2022.

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 September 30, 2023 and 2022 was $0.1 million and $0.5 million, respectively.

Impairment losses are attributable

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

The impairment

of mined cryptocurrency for the three months ended 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

Results of Operations for the Three Months Ended March 31, 2024

The following table summarizes

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

the results of our operations for the three months ended March 31, 2024 and 2023.

For the Three Months Ended March 31,

Revenue, digital assets mining

Revenue, crane operations

2 unchanged sentences

Cost of revenue, products

Cost of revenue, cryptocurrency mining

Cost of revenue, digital assets mining

Cost of revenue, crane operations

2 unchanged sentences

Total operating expenses

Loss from operations

(102,427,000 )

Income (loss) from operations

(29,863,000 )

3 unchanged sentences

(12,100,000 )

(32,063,000 )

Gain on conversion of investment in equity securities to marketable equity securities

Loss on extinguishment of debt

Realized and unrealized (loss) gain on marketable securities

Loss from investment in unconsolidated entity

Impairment of equity securities

(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

(135,118,000 )

(58,893,000 )

Income tax provision

Net loss from continuing operations

(135,658,000 )

Provision for loan losses, related party

Gain on the sale of fixed assets

Total other income (expense), net

(16,006,000 )

Net income (loss) from discontinued operations

Income (loss) before income taxes

(45,869,000 )

Income tax benefit

Net income (loss) from continuing operations

(45,606,000 )

Net loss attributable to non-controlling interest

Net loss attributable to Ault Alliance, Inc.

Net loss from discontinued operations

Net income (loss)

(48,829,000 )

Net (income) loss attributable to non-controlling interest

Net income (loss) attributable to Ault Alliance, Inc.

(48,646,000 )

Preferred dividends

Net loss available to common stockholders

$ (132,063,000 )

Net income (loss) available to common stockholders

$ (48,875,000 )

2 unchanged sentences

$ (48,875,000 )

$ (62,046,000 )

Other comprehensive loss

Other comprehensive income (loss)

Foreign currency translation adjustment

Other comprehensive loss

Total comprehensive loss

$ (133,064,000 )

Other comprehensive income

Total comprehensive income (loss)

$ (48,705,000 )

Revenues by segment for the

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

For the Nine Months Ended

September 30,

Revenue, cryptocurrency mining

three months ended March 31, 2024 and 2023 were as follows:

For the Three Months Ended March 31,

Revenue, digital assets mining

Revenue, commercial real estate leases

Revenue, crane operations

Revenue, lending and trading activities

(27,887,000 )

Total revenue

$ 119,930,000

The $6.2 million increase

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.

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

digital assets mining operations increased $4.1 million due primarily to a 134% increase in the average Bitcoin price, partially offset

a 94% increase in the average Bitcoin mining difficulty level in the current quarter period.

On April 19, 2024, a Bitcoin

halving event occurred on the Bitcoin network.

Halving is a key part of the Bitcoin protocol and serves to control the overall supply

and reduce the risk of inflation in digital assets using a proof-of-work consensus algorithm.

The Bitcoin halving event reduced the block

subsidy by half from 6.25 to 3.125 Bitcoin.

Transaction fees are not directly impacted by the halving.

Energy revenues from the Circle

8 crane operations increased by $0.3 million, or 2%, for the three months ended March 31, 2024.

Revenues from our lending and trading activities were $9.1 million

for the three months ended March 31, 2024.

On February 14, 2024, ROI transferred 2.5 million shares of White River common stock with a

recorded value of $0.5 million and a fair value of $7.5 million at the date of transfer to Ault Lending.

As of March 31, 2024, the 2.5

million shares of White River common stock held by Ault Lending had a fair value of $9.4 million and Ault Lending recorded an unrealized

gain of $8.9 million during the quarter ended March 31, 2024 included in revenue from lending and trading activities.

Revenues from our

lending and trading activities were negative for the three months ended March 31, 2023, due to a $2.0 million impairment related to investments

in equity securities, a $1.5 million unrealized loss from our investment in Alzamend and $1.7 million of realized and unrealized losses

from our investment portfolio.

from our trading activities for the three months ended March 31, 2024 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

For the three-month period

ending March 31, 2024, GIGA revenues increased by $0.9 million.

This growth is driven by ongoing global conflicts and tensions, which

have spurred investments in force protection technologies in the United States, U.K., Europe, Asia and the Middle East.

to the significant change in our ownership and voting rights, we determined that we no longer met the criteria of the primary beneficiary

and, accordingly, we deconsolidated SMC as of November 20, 2023.

SMC revenues were $0 for the three months ended March 31, 2024,

a decrease of $3.4 million compared to the corresponding period in 2023.

TurnOnGreen's revenues increased

by $0.3 million for the three months ended March 31, 2024, compared to the corresponding period in 2023.

This rise was primarily due to

higher sales from a single, higher-margin customer in the defense industry during the period ended March 31, 2024.

Gross Margins

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 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.

Gross margins increased to 43% for the three months ended March 31,

2024, compared to 9% for the three months ended March 31, 2023.

Our gross margins of 43% recognized during the three months ended March

31, 2024 and 2023 were impacted by margins from our lending and trading activities, with a positive impact during the three months ended

March 31, 2024 and a negative impact during the three months ended March 31, 2023.

Excluding the effects of margin from our lending and

trading activities, our adjusted gross margins for the three months ended March 31, 2024 and 2023 would have been 29% and 25%, respectively.

Our gross margins improved, in part, due to lower margin revenue from SMC during the three months ended March 31, 2023.

We deconsolidated

SMC as of November 20, 2023.

Research and Development

Research and development expenses

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

decreased by $0.8 million for the three months ended March 31, 2024, due to lower expenditures related to development work on ROI’s

BitNile metaverse platform.

1 unchanged sentence

Selling and marketing expenses

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.

were $4.7 million for the three months ended March 31, 2024, compared to $8.8 million for the three months ended March 31, 2023, a decrease

of $4.1 million, or 47%.

The decrease was primarily the result of a $3.4 million decrease in sales and marketing expenses at ROI primarily

due to lower advertising and promotion costs and a $0.8 million decrease in sales and marketing expenses from SMC due to the deconsolidation

of SMC as of November 20, 2023 .

General and Administrative

General and administrative

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 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 $1.2 million from AVLP, which was acquired in June 2022.

The increases above were partially offset by the

following decreases in general and administrative expenses:

expenses were $13.4 million for the three months ended March 31, 2024, compared to $21.6 million for the three months ended March

31, 2023, a decrease of $8.2 million, or 38%.

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

due to the following:

· $5.2 million lower stock compensation expense;

· $2.6 million decrease in general and administrative expenses from SMC due to the deconsolidation

of SMC as of November 20, 2023 ;

· $0.7 million lower performance bonus related to realized gains on trading activities.

· $2.4 million lower corporate legal 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 nine months ended September 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 nine months ended September

The tradenames and patents/developed

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

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

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

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

Royalty payments are estimated by applying royalty rates of

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

The resulting net annual royalty payments are then discounted to present

value using a discount factor of 25.7%.

Impairment of 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 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 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

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.

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.

Other income, net was $11.3 million for the three months ended March

31, 2024, compared to other expense, net of $16.0 million for the three months ended March 31, 2023.

Interest and other income

was $0.6 million for the three months ended March 31, 2024, compared to $1.1 million for the three months ended March 31, 2023.

in interest and other income is primarily due to the decline in Ault Disruptive’s cash and marketable securities held in the trust

account as a result of redemptions of Ault Disruptive common stock subject to possible redemption.

Interest expense was $4.9

million for the three months ended March 31, 2024, compared to $12.1 million for the three months ended March 31, 2023.

Interest expense

for the three months ended March 31, 2024 included contractual interest of $1.3 million, amortization of debt discount of $2.1 million,

and forbearance and extension fees of $1.5 million.

Interest expense for the three months ended March 31, 2023 included amortization of

debt discount of $10.4 million, contractual interest of $1.1 million, and forbearance and extension fees of $0.6 million.

Gain on conversion of investment

in equity securities to marketable equity securities of $17.9 million relates to ROI conversion of White River common stock.

quarter ended March 31, 2024, ROI transferred 6.7 million shares of White River common stock with a fair value of $19.2 million at the

date of transfer.

In conjunction with the transfers, ROI converted a portion of their White River’s Series A Convertible Preferred

Stock into common stock and recorded a noncash $17.9 million gain on conversion.

During the three months ended

March 31, 2024, ROI converted $2.3 million of ROI senior secured convertible notes that had a fair value of $0.9 million at the time of

conversion and recognized a $1.4 million gain on extinguishment of debt.

Loss from investment in unconsolidated

entity was $0.7 million for the three months ended March 31, 2024, representing our share of losses from our equity method investment

For the three months ended March 31, 2024, the provision for loan

losses on the related party note receivable from Ault & Company was $3.1 million, due to uncertainties regarding collection.

compares to no provision for the same period in 2023.

Income Tax Benefit

The income tax benefit was

$44,000 and $0.3 million during the three months ended March 31, 2024 and 2023, respectively.

The effective income tax benefit rate was

0.4% and (0.6%) for the three months ended March 31, 2024 and 2023, respectively.

Liquidity and Capital Resources

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

On March 31, 2024, excluding

cash and cash equivalents from discontinued operations, we had cash and cash equivalents of $9.4 million (excluding restricted cash of

$5.5 million), compared to cash and cash equivalents of $8.6 million (excluding restricted cash of $5.0 million) at December 31, 2023.

The increase in cash and cash equivalents was primarily due cash provided by financing activities related to the sale of common and preferred

stock, as well as proceeds from notes payable and convertible notes, partially offset by the payment of debt, purchases of property and

equipment and cash used in operating activities.

Net cash used in operating

activities totaled $10.2 million for the three months ended March 31, 2024, compared to net cash provided by operating activities of $7.7 million

for the three months ended March 31, 2023.

Cash used in operating activities for the three months ended March 31, 2024 included $8.6 million

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

Net cash used in operating activities for the three months ended March 31, 2024 included $1.7 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 nine months ended September 30, 2023 included $6.1 million cash used in investing activities from discontinued operations.

Net cash used in investing

activities was $1.7 million for the three months ended March 31, 2024, compared to $2.8 million for the three months ended March 31, 2023.

Net cash used in investing activities for the three months ended March 31, 2024 was primarily related to $0.9 million capital expenditures

and $0.6 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 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 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;

activities was $13.0 million for the three months ended March 31, 2024, compared to net cash used in financing activities of $8.1 million

for the three months ended March 31, 2023, and primarily reflects the following transactions:

· During the period between January 1, 2024 through March 13, 2024,

we sold an aggregate of 25.6 million shares of common stock pursuant to the 2023 Common ATM Offering for gross proceeds of $14.6 million

and effective March 14, 2024, the 2023 Common ATM Offering was terminated ;

· $2.0 million proceeds from sales of Series C preferred stock, related

· $1.5 million proceeds from subsidiaries’ sale of stock to

non-controlling interests;

· $1.9 million payments on notes payable, related party;

· $1.3 million payments of preferred dividends;

· $5.2 million payments on notes payable, partially offset by $2.3 million proceeds from notes payable;

1 unchanged sentence

notes payable.

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 September 30, 2023 included the following:

2023 Common ATM Offering

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

Variable Interest Entities

The accounting guidance requires

an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling

financial interest in a variable interest entity;

to require ongoing reassessments of whether an enterprise is the primary beneficiary

of a Variable Interest Entity (“VIE”);

to eliminate the solely quantitative approach previously required for determining the

primary beneficiary of a VIE;

to add an additional reconsideration event for determining whether an entity is a VIE when any changes in

facts and circumstances occur such that holders of the equity investment at risk, as a group, lose the power from voting rights or similar

rights of those investments to direct the activities of the entity that most significantly impact the entity’s economic performance;

and to require enhanced disclosures that will provide readers of financial statements with more transparent information about an enterprise’s

involvement in a VIE.

For VIEs, the Company assesses

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

The Company evaluates its business relationships

with related parties to identify potential VIEs under 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

We allocate the purchase price

of an acquired business to the tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values

on the acquisition date.

Any excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill.

customer relations, technology, trade names and know how are recognized at fair value.

The purchase price allocation process requires

management to make significant estimates and assumptions, especially at the acquisition date with respect to intangible assets.

transaction costs associated with the business combination are expensed as incurred.

The allocation of the consideration transferred in

certain cases may be subject to revision based on the final determination of fair values during the measurement period, which may be up

to one year from the acquisition date.

We include the results of operations of the business that we have acquired in our consolidated

results prospectively from the date of acquisition.

If the business combination

is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquire is re-measured

to fair value at the acquisition date;

any gains or losses arising from such re-measurement are recognized in profit or loss.

Net provided by financing

activities from discontinued operations was $1.1 million and $2.5 million for the three months ended March 31, 2024 and 2023, respectively.

Financing Transactions Subsequent to March

On April 17, 2024, we sold

to Ault & Company 500 shares of Series C Preferred Stock and Warrants to purchase 0.1 million shares of Class A common stock, for

a total purchase price of $0.5 million.

2024, we entered into a $1.7 million term note agreement with an institutional investor bearing interest of 15%.

The term note was issued

at a discount, with net proceeds to us of $1.6 million.

The term note was scheduled to mature May 17, 2024.

On May 16, 2024, the due date

was extended to June 15, 2024.

On May 16, 2024, we entered into a $0.5 million term note agreement with an institutional investor bearing interest

The term note is scheduled to mature June 15, 2024.

Critical Accounting Estimates

have been no material changes to our critical accounting estimates previously disclosed in the 2023 Annual Report.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Item 2. Management’s Discussion and Analysis