What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-16 compared with 2024-05-20 · 504 added, 178 removed, 146 unchanged (82% of the section changed)

11 unchanged sentences

Recent Events and Developments

On December 14, 2023, we,

along with our wholly owned subsidiaries Sentinum, Third Avenue, ACS, BNI Montana, Ault Lending, Ault Aviation and AGREE (collectively

with our company, Sentinum, Third Avenue, ACS, BNI Montana, Ault Lending and Ault Aviation, the “Guarantors”) entered into

a Loan and Guaranty Agreement (the “2023 Loan Agreement”) with institutional lenders, pursuant to which Ault & Company,

(“Ault & Company”), a related party, borrowed $36 million and issued secured promissory notes to the lenders in the

aggregate amount of $38.9 million (collectively, the “Secured Notes”;

and the transaction, the “Loan”).

Loan Agreement was amended as of April 15, 2024.

Pursuant to the 2023 Loan

Agreement, the Guarantors, as well as Milton C.

Ault, III, our Executive Chairman and the Chief Executive Officer of Ault & Company,

agreed to act as guarantors for repayment of the Secured Notes.

In addition, certain Guarantors entered into various agreements as collateral

in support of the guarantee of the Secured Notes, including (i) a security agreement by Sentinum, pursuant to which Sentinum granted to

the Lenders a security interest in (a) 19,226 Antminers (the “Miners”), (b) all of the digital currency mined or otherwise

generated from the Miners and (c) the membership interests of ACS, (ii) a security agreement by the Company, Ault Lending, BNI Montana

and AGREE, pursuant to which those entities granted to the lenders a security interest in substantially all of their assets, as well as

a pledge of equity interests in Ault Aviation, AGREE, Sentinum, Third Avenue, Ault Energy, LLC, our wholly owned subsidiary (“Ault

Energy”), ADTC, Eco Pack, and Circle 8 Holdco, (iii) a mortgage and security agreement by Third Avenue on the real estate property

owned by Third Avenue in St.

Petersburg, Florida (the “Florida Property”), (iv) a future advance mortgage by ACS on the real

estate property owned by ACS in Dowagiac, Michigan (the “Michigan Property”), (v) an aircraft mortgage and security agreement

by Ault Aviation on a private aircraft owned by Ault Aviation (the “Aircraft”), and (vi) deposit account control agreements

over certain bank accounts held by certain of our subsidiaries.

In addition, pursuant to the

2023 Loan Agreement, we agreed to establish a segregated deposit account (the “Segregated Account”), which would be used as

a further guarantee of repayment of the Secured Notes.

$3.5 million of cash was paid into the Segregated Account on the closing date.

We are required to have the minimum balance in the Segregated Account be not less than $7 million, $15 million, $20 million and $27.5

million on the five-month, nine-month, one-year and two-year anniversaries of the closing date, respectively.

In addition, starting on

March 31, 2024, we were required to deposit $0.3 million monthly into the Segregated Account, which increases to $0.4 million monthly

starting March 31, 2025.

Further, we agreed to deposit into the Segregated Account, (i) up to the first $7 million of net proceeds, if

any, from the sale of the Hilton Garden Inn in Madison West, the Residence Inn in Madison West, the Courtyard in Madison West, and the

Hilton Garden Inn in Rockford;

(ii) 50% of cash dividends (on a per dividend basis) received from Circle 8 on or after June 30, 2024;

(iii) 30% of the net proceeds from any bond offerings we conduct, which shall not exceed $9 million in the aggregate;

and (iv) 25% of

the net proceeds from cash flows, collections and revenues from loans or other investments made by Ault Lending (including but not limited

to sales of loans or investments, dividends, interest payments and amortization payments), which shall not exceed $5 million in the aggregate.

In addition, if we decide to sell certain assets, we further agreed to deposit funds into the Segregated Account from the sale of those

assets, including, (i) $15 million from the sale of the Florida Property, (ii) $11 million from the sale of the Aircraft, (iii) $17 million

from the sale of the Michigan Property, (iv) $350 per Miner, subject to a de minimis threshold of $1 million, and (v) $10 million from

the sale of Circle 8.

On May 15, 2024, the 2023

Loan Agreement was amended to extend the date by which we were required to have a specified minimum balance in the Segregated Account

from May 15, 2024 to July 22, 2024 and the specified minimum balance to be in the account as of such date was increased from $7 million

to $7.4 million.

On July 25, 2024, the 2023 Loan Agreement was further amended to extend the date by which we were required to have a

specified minimum balance in the Segregated Account from July 22, 2024 to July 31, 2024 and to require that we deposit $600,000 in the Segregated account on July 25, 2024.

On August 16, 2024, we agreed

to deposit, by no later than September 1, 2024, an additional $1.5 million into the Segregated Account as well as make a modification

payment to the institutional lenders in the amount of $0.3 million by no later than September 15, 2024.

As a result of the foregoing amendments,

we are required to deposit additional incremental amounts such that at or prior to the nine-month anniversary, the one-year anniversary

and the two-year anniversary of December 14, 2023, we shall have deposited the required funds such that the balance in the Segregated

Account shall not be less than $15.0 million, $20.0 million and $27.5 million, respectively.

On January 12, 2024, pursuant

to the approval provided by our stockholders at the annual meeting of stockholders, we filed an Amendment to our Certificate of Incorporation

with the State of Delaware to effectuate a reverse stock split of our common stock affecting both the authorized and issued and outstanding

number of such shares by a ratio of one-for-twenty-five.

The reverse stock split became effective on January 16, 2024.

All share amounts

in this report have been updated to reflect the reverse stock split.

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.

Lending entered into a securities purchase agreement (the “January 2024 SPA”) with Alzamend Neuro, Inc.

(“Alzamend”),

pursuant to which Alzamend agreed to sell, in one or more closings, to Ault Lending up to 6,000 shares of Series B convertible preferred

stock (the “ALZN Series B Preferred”) and warrants to purchase up to 6.0 million shares of Alzamend common stock (the “ALZN

Series B Warrants”) for a total purchase price of up to $6.0 million.

On January 31, 2024, Ault Lending purchased 1,220 shares

of ALZN Series B Preferred and warrants to purchase 122,000 shares for a total purchase price of $1.22 million.

The purchase price

was paid by the cancellation of $1.22 million of cash advances made by Ault Lending to Alzamend between November 9, 2023 and January 31,

Each share of ALZN Series B Preferred has a stated value of $1.00 per share and is convertible into a number of shares of Alzamend’s

common stock determined by dividing the stated value by $10.00, subject to adjustment in the event of an issuance of Alzamend common stock

at a price per share lower than the conversion price, as well as upon customary stock splits, stock dividends, combinations or similar

The ALZN Series B Warrants are exercisable on the first business day after the six-month anniversary of issuance

and have a five-year term, expiring on the fifth anniversary of the initial exercise date.

The exercise price of the ALZN Series

B Warrants is $12.00, subject to adjustment in the event of an issuance of Alzamend 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.

On each of March 7, 2024,

March 8, 2024, March 18, 2024, March 19, 2024 and April 17, 2024 pursuant to the securities purchase agreement we entered into with Ault

& Company, dated as of November 6, 2023 (the “November 2023 SPA”), we sold to Ault & Company 500 shares of Series

C Convertible Preferred Stock and warrants to purchase 147,820 shares of common stock to the Purchaser,

for a purchase price of $0.5 million.

On August 2, 2024, pursuant to the November 2023 SPA, we sold to Ault & Company 300

shares of Series C Convertible Preferred Stock and warrants to purchase 88,692 shares of common stock to

the Purchaser, for a purchase price of $500,000.

As of the date of this report, Ault & Company has purchased an aggregate

of 44,300 shares of Series C Convertible Preferred Stock and warrants to purchase an aggregate of 13,096,823 shares of common stock,

for an aggregate purchase price of $44.3 million.

On March 11, 2024, we entered

into a note purchase agreement with two institutional investors (the “Buyers”) pursuant to which the Buyers purchased from

the Company, on March 12, 2024 in a registered direct offering to the Buyers an aggregate of $2.0 million principal face amount convertible

promissory notes (the “Notes”).

The Notes were sold to the Buyers for an aggregate purchase price of $1.8 million, which

reflects an original issue discount of $0.2 million.

The Notes accrue interest at the rate of 6% per annum, unless an event of default

(as defined in the Notes) occurs, at which time the Notes would accrue interest at 12% per annum.

The Notes were subsequently converted

in full into shares of common stock at a conversion price of $0.35 per share.

On March 26, 2024, pursuant

to the January 2024 SPA, Ault Lending purchased 780 shares of ALZN Series B Preferred Stock and ALZN Series B Warrants to

purchase 78,000 shares of Alzamend common, for a purchase price of $0.8 million.

As of the date of this report, Ault

Lending has purchased an aggregate of 2,000 shares of ALZN Series B Preferred and ALZN Series B Warrants to purchase an aggregate

of 0.2 million shares of Alzamend common stock, for an aggregate purchase price of $2.0 million.

On March 25, 2024 we entered

into an amendment to the (i) November 2023 SPA, (ii) the related Certificate of Designation of Preferences, Rights and Limitations

of the Series C Preferred Convertible Stock and (iii) the number of Series C Warrants, to provide for (A) an increase in the dollar amount

of the Series C Convertible Preferred Stock that Ault & Company may purchase from us from $50.0 million to $75.0 million and

(B) extended the date of on which the final closing may occur to June 30, 2024, subject to Ault & Company’s ability to further

extended such date for ninety days.

On April 15, 2024, we established

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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 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

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 was driven by our desire

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

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.

Effective April 29, 2024,

we issued to an accredited investor a term note with a principal face amount of $1.7 million.

The note bears interest at the rate of 15%

per annum and the note was issued with an original issuance discount.

The maturity date of the note was May 17, 2024.

The note contained

a standard and customary event of default for failure to make payments when due under the note.

The purchase price for the note was $1.6 million.

The term note was amended on May 16, 2024 to extend the maturity date to June 15, 2024 and further amended on June 18, 2024 to extend

the maturity date to July 31, 2024.

On June 4, 2024, we entered

into a Loan Agreement (the “2024 Credit Agreement”) with OREE Lending Company, LLC and Helios Funds LLC, as lenders.

Credit Agreement provides for an unsecured, non-revolving credit facility in an aggregate draw limit of up to $20.0 million, provided,

however, that at no point will we be allowed to have outstanding loans under the 2024 Credit Agreement in a principal amount received

of more than $2.0 million.

The lenders made a loan to the Company of $1.5 million on June 4, 2024.

The loans under the 2024 Credit

Agreement are due December 4, 2024, provided, however, that if on such date, we have executed an equity line of credit agreement relating

to the sale of shares of the Series D Preferred Stock, which was executed on June 20, 2024, have an effective registration statement relating

thereto and are not currently in default under such agreement, then the maturity date shall be automatically extended until June 4, 2025.

The lenders are not obligated to make any further loans under the 2024 Credit Agreement after the maturity date described above.

under the 2024 Credit Agreement will be evidenced by promissory notes (the “Promissory Notes”) and will include the addition

of an original issuance discount of 20% to the amount of each loan and all loans will bear interest at the rate of 15.0% per annum and

may be repaid at any time without penalty or premium.

June 23, 2024, Ault Disruptive entered into an Agreement and Plan of Merger (as it may be amended, supplemented or otherwise modified

from time to time, the “Merger Agreement”) by and among Ault Disruptive, ADRT Merger Sub, Inc., a Delaware corporation and

a direct, wholly owned subsidiary of Ault Disruptive (“Merger Sub”), and Gresham Worldwide, Inc., a California corporation

The transactions contemplated by the Merger Agreement are referred to herein as the “Business Combination.”

to the Merger Agreement and subject to the terms and conditions set forth therein, the Merger Sub was intended to merge with and into

GIGA (the “Merger”), with GIGA being the surviving corporation and thereby becoming a wholly owned subsidiary of Ault Disruptive.

Upon the Closing of the Business Combination (the “Effective Time”), it was expected that Ault Disruptive

be renamed Gresham Worldwide, Inc., and thereafter remain listed on the NYSE American under a new ticker symbol, “GWWI.”

on August 14, 2024, GIGA filed a petition for reorganization under Chapter XI of the bankruptcy laws.

Consequently, Ault Disruptive was

required to terminate the Merger Agreement, which it did on August 15, 2024.

Ault Disruptive does not presently intend to enter

into a new agreement and plan of merger with a third party.

On July 18, 2024, we entered

into a note purchase agreement with an institutional investor pursuant to which the institutional investor agreed to acquire, and we agreed

to issue and sell in a registered direct offering to the institutional investor, a $5.4 million 10% OID Convertible Promissory Note (the

The OID Note was sold to the institutional investor for a purchase price of $4.9 million, an original issue

discount of $0.5 million.

The OID Note will accrue interest at the rate of 15% per annum, unless an event of default occurs, at which

time the OID Note would accrue interest at 18% per annum.

The OID Note will mature on October 19, 2024.

In addition, the OID Note is convertible

at any time after NYSE American approval of a Supplemental Listing Application into shares of our common stock at a conversion price of

$0.22 per share (the “OID Conversion Price”), subject to adjustment.

However, we may not issue shares of common stock upon

conversion of the OID Note to the extent such issuance would result in an aggregate number of shares of common stock exceeding 19.99%

of the total shares of common stock issued and outstanding as of July 18, 2024, in accordance with the rules and regulations of the New

York Stock Exchange (the “NYSE Limit”) unless we first obtain stockholder approval (“Stockholder Approval”).

If, on September 2, 2024 (the

“Adjustment Date”), the closing bid price of our common stock is lower than the OID Conversion Price, then the OID Conversion

Price will be reduced to 85% of the closing bid price of the common stock on September 2, 2024.

However, if after July 19, 2024, and prior

to the date on which Stockholder Approval is obtained, the holder of the OID Note has converted a portion of the outstanding amount under

the OID Note into shares of our common stock in an aggregate amount equal to the NYSE Limit, then the Adjustment Date will be extended

by such number of days between such date and the date on which we obtain Stockholder Approval.

Change in Plan of Sales of AGREE Hotel Properties

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 result, as of April 30, 2024, the assets no longer met

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

at the date of the not to sell.

For presentation purposes,

the assets and liabilities previously held for sale as of December 31, 2023, were reclassified in the December 31, 2023 balance sheet

in the accompanying financial statements back to their original asset and liability groups at their previous carrying values.

In connection

with this change in plan of sale, we recorded a loss on impairment of property and equipment related to the real estate assets of AGREE

of $8.0 million during the three months ended June 30, 2024.

As a holding company, our

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capital and relevant expertise to fuel the growth of businesses in metaverse platform, oil exploration, crane services, defense/aerospace,

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

We have provided capital to subsidiaries

as well as partner companies in which we have an equity interest or may be actively involved, influencing development through board representation

and management support.

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

We have provided capital to subsidiaries as well as partner

companies in which we have an equity interest or may be actively involved, influencing development through board representation and management

We are a Delaware corporation

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Results of Operations

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

Results of Operations for the Three Months Ended June 30, 2024 and

The following table summarizes

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

For the Three Months Ended March 31,

the results of our operations for the three months ended June 30, 2024 and 2023.

For the Three Months Ended June 30,

Revenue, digital assets mining

Revenue, hotel and real estate operations

Revenue, crane operations

3 unchanged sentences

Cost of revenue, digital assets mining

Cost of revenue, hotel and real estate operations

Cost of revenue, crane operations

1 unchanged sentence

Total cost of revenue

Operating expenses

Research and development

Selling and marketing

General and administrative

Impairment of property and equipment

Impairment of goodwill and intangible assets

Impairment of mined digital assets

Total operating expenses

Income (loss) from operations

Loss from operations

(26,925,000 )

(50,505,000 )

Other income (expense):

2 unchanged sentences

(15,927,000 )

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

Loss on extinguishment of debt

1 unchanged sentence

Impairment of equity securities

Provision for loan losses, related party

Change in fair value of warrant liability

Gain on the sale of fixed assets

1 unchanged sentence

(12,830,000 )

Income (loss) before income taxes

(12,379,000 )

Income tax benefit

Net income (loss) from continuing operations

Loss before income taxes

(39,755,000 )

Net loss from discontinued operations

Net income (loss)

(62,884,000 )

Income tax provision

(39,779,000 )

(64,252,000 )

Net (income) loss attributable to non-controlling interest

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

Net loss attributable to Ault Alliance, Inc.

(33,927,000 )

(60,683,000 )

Preferred dividends

Net income (loss) available to common stockholders

Net loss available to common stockholders

$ (35,235,000 )

$ (61,004,000 )

Comprehensive loss

1 unchanged sentence

$ (35,235,000 )

$ (61,004,000 )

Other comprehensive income (loss)

1 unchanged sentence

Other comprehensive income

Total comprehensive income (loss)

Total comprehensive loss

$ (35,671,000 )

$ (61,524,000 )

Revenues by segment for the

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

For the Three Months Ended March 31,

three months ended June 30, 2024 and 2023 were as follows:

For the Three Months Ended June 30,

Revenue, digital assets mining

2 unchanged sentences

Revenue, lending and trading activities

(19,288,000 )

The Singing Machine Company, Inc.

Total revenue

$ (19,004,000 )

Revenues from Sentinum’s

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.

digital assets mining operations increased $0.1 million due primarily to a $1.2 million increase in revenue from Sentinum digital mining

equipment hosted at third-party facilities and a 134% increase in the average Bitcoin price, partially offset by a 71% increase in the

average Bitcoin mining difficulty level and the estimated $4.4 million unfavorable impact of the April 19, 2024 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

The Bitcoin halving event reduced the block subsidy by half from 6.25 to 3.125 Bitcoin.

Transaction fees were 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

8 crane operations decreased by $0.9 million, or 7%, for the three months ended June 30, 2024.

This decrease was primarily due to lower

utilization of the crane fleet, as five cranes were out of service during the three months ended June 30, 2024.

from our lending and trading activities were negative $9.8 million for the three months ended June 30, 2024, primarily due to a $9.4 million

unrealized loss on 2.5 million shares of White River Energy Corp.

(“White River”) common stock and a $0.5 million unrealized

loss from our investment in Alzamend included in revenue from lending and trading activities.

Revenues from our lending and trading activities

were $9.5 million for the three months ended June 30, 2023, due to an aggregate $6.6 million of net realized gains and $1.5 million of

net unrealized gains on our investments in marketable equity securities, and a $1.5 million unrealized gain from our investment in Alzamend.

from our trading activities for the three months ended June 30, 2024 included net gains on equity securities, including unrealized gains

and losses from market price changes.

1 unchanged sentence

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.

ending June 30, 2024, GIGA revenues increased by $1.9 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,

SMC revenues were $0 for the three months ended June 30, 2024,

a decrease of $2.6 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.

by $0.5 million for the three months ended June 30, 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.

higher sales from a single, higher-margin customer in the defense industry during the three months ended June 30, 2024.

Gross Margins

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.

Gross margins decreased to

(2%) for the three months ended June 30, 2024, compared to 38% for the three months ended June 30, 2023.

Our gross margins recognized during

the three months ended June 30, 2024 and 2023 were impacted by margins from our lending and trading activities, with a negative impact

during the three months ended June 30, 2024 and a positive impact during the three months ended June 30, 2023.

Excluding the effects of

margin from our lending and trading activities, our adjusted gross margins for the three months ended June 30, 2024 and 2023 would have

been 24% and 22%, respectively.

Our gross margins (excluding the effects of margin from our lending and trading activities) improved,

in part, due to high margin revenue from Sentinum digital mining equipment hosted at third-party facilities.

Research and Development

Research and development expenses

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

decreased by $1.0 million for the three months ended June 30, 2024, due to lower expenditures related to development work on ROI’s

BitNile metaverse platform.

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Selling and marketing expenses

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

were $4.0 million for the three months ended June 30, 2024, compared to $9.6 million for the three months ended June 30, 2023, a decrease

of $5.6 million, or 58%.

4 unchanged sentences

General and administrative

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

expenses were $13.5 million for the three months ended June 30, 2024, compared to $21.3 million for the three months ended June 30,

2023, a decrease of $7.8 million, or 37%.

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

due to the following:

· $5.2 million lower stock compensation expense;

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

to the following:

· $3.0 million lower professional fees;

· $2.9 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.

Other Expense, Net

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.

· $1.0 million lower salaries and benefits;

· $0.6 million lower operating expenses at ROI primarily related to ceased operations at Agora Digital Holdings,

(“Agora Digital”), ROI’s wholly owned subsidiary;

· $0.4 million lower stock compensation.

Other Income (Expense), Net

Other expense, net was $12.8

million for the three months ended June 30, 2024, compared to other expense, net of $12.4 million for the three months ended June 30,

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.

was $0.8 million for the three months ended June 30, 2024, compared to $2.2 million for the three months ended June 30, 2023.

in interest and other income is primarily due to the decline in Ault Disruptive’s interest income as a result of the decline in

cash and marketable securities held in the trust account as a result of redemptions of Ault Disruptive common stock subject to possible

Interest expense was $5.4

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

million for the three months ended June 30, 2024, compared to $15.9 million for the three months ended June 30, 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,

for the three months ended June 30, 2024 included contractual interest of $3.3 million, amortization of debt discount of $1.3 million

and forbearance and extension fees of $0.8 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.

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.

During the three months ended

June 30, 2024, holders of our convertible notes converted $2.0 million of convertible notes that had a fair value of $2.7 million at the

time of conversion and recognized a $0.7 million loss on extinguishment of debt.

Loss from investment in unconsolidated

entity was $1.3 million for the three months ended June 30, 2024, representing our share of losses from our equity method investment in

Cumulative downward adjustments

for impairments for our equity securities without readily determinable fair values held at were $6.3 million for the three months ended

June 30, 2024.

Income Tax Provision

The income tax provision was

$24,000 and $1.4 million during the three months ended June 30, 2024 and 2023, respectively.

The effective income tax provision rate was

0.1% and 2.2% for the three months ended June 30, 2024 and 2023, respectively.

The lower income tax provision during the three months

ended June 30, 2024 related primarily to lower dividend income compared to the prior year period as a result of the decline in cash and

marketable securities held in the trust account as a result of redemptions of Ault Disruptive common stock subject to possible redemption.

Results of Operations for the Six Months Ended June 30, 2024 and

The following table summarizes

the results of our operations for the six months ended June 30, 2024 and 2023.

For the Six Months Ended June 30,

Revenue, digital assets mining

Revenue, hotel and real estate operations

Revenue, crane operations

Revenue, lending and trading activities

Total revenue

Cost of revenue, products

Cost of revenue, digital assets mining

Cost of revenue, hotel and real estate operations

Cost of revenue, crane operations

Cost of revenue, lending and trading activities

Total cost of revenue

Operating expenses

Research and development

Selling and marketing

General and administrative

Impairment of property and equipment

Impairment of goodwill and intangible assets

Impairment of mined digital assets

Total operating expenses

Loss from operations

(26,306,000 )

(81,923,000 )

Other income (expense):

Interest and other income

Interest expense

(12,306,000 )

(29,657,000 )

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

Gain (loss) on extinguishment of debt

Loss from investment in unconsolidated entity

Impairment of equity securities

Provision for loan losses, related party

Change in fair value of warrant liability

Gain on the sale of fixed assets

Total other income (expense), net

(30,053,000 )

Loss before income taxes

(29,838,000 )

(111,976,000 )

Income tax provision (benefit)

(29,818,000 )

(113,081,000 )

Net (income) loss attributable to non-controlling interest

Net loss attributable to Ault Alliance, Inc.

(30,210,000 )

(109,329,000 )

Preferred dividends

Net loss available to common stockholders

$ (32,778,000 )

$ (109,879,000 )

Comprehensive loss

Net loss available to common stockholders

$ (32,778,000 )

$ (109,879,000 )

Other comprehensive income (loss)

Foreign currency translation adjustment

Other comprehensive income

Total comprehensive loss

$ (33,178,000 )

$ (110,229,000 )

Revenues by segment for the

six months ended June 30, 2024 and 2023 were as follows:

For the Six Months Ended June 30,

Revenue, digital assets mining

Revenue, commercial real estate leases

Revenue, crane operations

Revenue, lending and trading activities

Total revenue

$ (2,252,000 )

Revenues from Sentinum’s

digital assets mining operations increased $4.2 million due primarily to a $3.7 million increase in revenue from Sentinum digital mining

equipment hosted at third-party facilities and a 134% increase in the average Bitcoin price, partially offset by an 84% increase in the

average Bitcoin mining difficulty level and the impact of the April 19, 2024 Bitcoin halving event occurred on the Bitcoin network.

Energy revenues from the Circle

8 crane operations increased by $0.6 million, or 2%, for the six months ended June 30, 2024.

This increase reflects higher crane service

utilization from Circle 8’s largest customer during the six months ended June 30, 2024.

from our lending and trading activities were negative $0.7 million for the six months ended June 30, 2024, primarily due to a $0.4 million

unrealized loss from our investment in Alzamend included in revenue from lending and trading activities.

Revenues from our lending and

trading activities were $4.6 million for the six months ended June 30, 2023, due to an aggregate $6.8 million of net realized and unrealized

gains on our investments in marketable equity securities, a $0.6 million unrealized loss from our investment in Alzamend, and a $2.0 million

impairment related to investments in equity securities.

from our trading activities for the six months ended June 30, 2024 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

For the six-month period ending

June 30, 2024, GIGA revenues increased by $2.7 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 six months ended June 30, 2024, a

decrease of $6.0 million compared to the corresponding period in 2023.

TurnOnGreen's revenues increased

by $0.9 million for the six months ended June 30, 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 six months ended June 30, 2024.

Gross Margins

Gross margins were 25% for

the six months ended June 30, 2024, compared to 25% for the six months ended June 30, 2023.

Our gross margins during the six months ended

June 30, 2024 and 2023 were unfavorably impacted by margins from our lending and trading activities.

Excluding the effects of margin from

our lending and trading activities, our adjusted gross margins for the six months ended June 30, 2024 and 2023 would have been 26% and

22%, respectively.

Our gross margins improved, in part, due to high margin revenue from Sentinum digital mining equipment hosted at third-party

Research and Development

Research and development expenses

decreased by $1.7 million for the six months ended June 30, 2024, due to lower expenditures related to development work on ROI’s

BitNile metaverse platform.

Selling and Marketing

Selling and marketing expenses

were $8.7 million for the six months ended June 30, 2024, compared to $18.4 million for the six months ended June 30, 2023, a decrease

of $9.7 million, or 53%.

The decrease was primarily the result of an $8.2 million decrease in sales and marketing expenses at ROI primarily

due to lower advertising and promotion costs and a $1.3 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 $26.8 million for the six months ended June 30, 2024, compared to $44.0 million for the six months ended June 30, 2023,

a decrease of $17.2 million, or 39%.

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

· $5.1 million decrease in general and administrative expenses from SMC due to the deconsolidation

of SMC as of November 20, 2023 ;

· $4.6 million lower stock compensation expense;

5 million lower professional fees;

· $1.0 million lower salaries and benefits;

· $1.0 million lower performance bonus related to realized gains on trading activities;

· $0.6 million lower filings fees;

· $0.6 million lower operating expenses at ROI primarily related to ceased operations at Agora Digital.

Other Income (Expense), Net

Other expense, net was $3.5

million for the six months ended June 30, 2024, compared to other expense, net of $30.1 million for the six months ended June 30, 2023.

Interest and other income

was $1.4 million for the six months ended June 30, 2024, compared to $3.3 million for the six months ended June 30, 2023.

in interest and other income is primarily due to the decline in Ault Disruptive’s interest income as a result of the decline in

cash and marketable securities held in the trust account as a result of redemptions of Ault Disruptive common stock subject to possible

Interest expense was $12.3

million for the six months ended June 30, 2024, compared to $29.7 million for the six months ended June 30, 2023.

Interest expense for

the six months ended June 30, 2024 included contractual interest of $6.6 million, amortization of debt discount of $3.4 million, and forbearance

and extension fees of $2.3 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.

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.

six months ended June 30, 2024, ROI transferred 14.5 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

3 unchanged sentences

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

During the three months ended June 30, 2024, holders of our convertible

notes converted $2.0 million of convertible notes that had a fair value of $2.7 million at the time of conversion and recognized a $0.7

million loss 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.

entity was $2.0 million for the six months ended June 30, 2024, representing our share of losses from our equity method investment in

For the six months ended June

30, 2024, the provision for loan losses on the related party note receivable from Ault & Company was $3.1 million, due to uncertainties

regarding collection.

This compares to no provision for the same period in 2023.

Cumulative downward adjustments

for impairments for our equity securities without readily determinable fair values held at were $6.3 million for the six months ended

June 30, 2024.

Income Tax Provision (Benefit)

The income tax provision (benefit)

was ($20,000) and $1.1 million during the six months ended June 30, 2024 and 2023, respectively.

The effective income tax (benefit) provision

rate was (0.1%) and 1.0% for the six months ended June 30, 2024 and 2023, respectively.

The lower income tax provision during the six

months ended June 30, 2024 related primarily to lower dividend income compared to the prior year period as a result of the decline in

cash and marketable securities held in the trust account as a result of redemptions of Ault Disruptive common stock subject to possible

Liquidity and Capital Resources

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.

On June 30, 2024, we had cash

and cash equivalents of $9.6 million (excluding restricted cash of $7.3 million), compared to cash and cash equivalents of $9.7 million

(excluding restricted cash of $5.7 million) at December 31, 2023.

The decrease in cash and cash equivalents was primarily due to the payment

of debt, purchases of property and equipment and cash used in operating activities, partially offset by cash provided by financing activities

related to the sale of common and preferred stock, as well as proceeds from notes payable and convertible notes.

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

activities totaled $13.9 million for the six months ended June 30, 2024, compared to net cash provided by operating activities of $12.9 million

for the six months ended June 30, 2023.

Cash used in operating activities for the six months ended June 30, 2024 included $15.5 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 $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.

activities was $3.8 million for the six months ended June 30, 2024, compared to $18.9 million for the six months ended June 30, 2023.

Net cash used in investing activities for the six months ended June 30, 2024 was primarily related to $3.9 million capital expenditures.

Net cash provided by financing

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:

activities was $18.8 million for the six months ended June 30, 2024, compared to $12.8 million for the six months ended June 30,

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 ;

we sold an aggregate of 25.6 million shares of common stock pursuant to the At-The-Market issuance sales agreement, as amended, entered

into with Ascendiant Capital Markets, LLC in 2023 (the “2023 Common ATM Offering”) for gross proceeds of $14.6 million and

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

· $10.7 million proceeds from notes payable, partially offset by $5.9 million payments on notes payable;

· $2.5 million proceeds from sales of Series C preferred stock, related

1 unchanged sentence

non-controlling interests;

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

· $1.8 million proceeds from convertible notes payable, partially offset by $1.2 million payments on notes

· $2.6 million payments of preferred dividends;

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

· $1.8 million proceeds from convertible notes payable, partially offset by $1.0 million payments on convertible

notes payable.

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.

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

Financing Transactions Subsequent to June

2024, we entered into a term note agreement with institutional investors of up to $2.6 million, of which the principal amount of $1.8

million was immediately funded.

The term note was issued at a discount, with net proceeds to us of $1.5 million.

The term note does not

accrue any interest.

The term note was scheduled to mature on August 2, 2024.

The term note is guaranteed by Mr.

The term note is

in default and a default fee of $0.2 million accrues monthly until the term note is paid in full.

On July 18, 2024, we entered

into a note purchase agreement with an institutional investor pursuant to which the institutional investor agreed to acquire, and we agreed

to issue and sell in a registered direct offering to the institutional investor, the OID Note.

The OID Note was sold to the institutional

investor for a purchase price of $4.9 million, an original issue discount of $0.5 million.

The OID Note will accrue interest at the

rate of 15% per annum, unless an event of default occurs, at which time the OID Note would accrue interest at 18% per annum.

will mature on October 19, 2024.

In addition, the OID Note is convertible at any time after NYSE American approval of a Supplemental Listing

Application into shares of our common stock at the OID Conversion Price, subject to adjustment.

However, we may not issue shares of common

stock upon conversion of the OID Note to the extent such issuance would result in an aggregate number of shares of common stock exceeding

the NYSE Limit unless we first obtain Stockholder Approval.

2, 2024, we sold to Ault & Company 300 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 $0.3 million.

Critical Accounting Estimates

3 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis