EQUITY METHOD INVESTMENTS

12 Months Ended

Dec. 31, 2023

Equity Method Investments and Joint Ventures [Abstract]

EQUITY METHOD INVESTMENTS

14. EQUITY METHOD INVESTMENTS

Equity Investments in Unconsolidated Entity – AVLP

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

	Investment in			Investment in
	warrants and			promissory notes			Total
	common stock			and advances			investment
Balance at January 1, 2022	$	39,000		$	22,091,000		$	22,130,000
Investment in convertible promissory notes		-			2,200,000			2,200,000
Loss from equity investment		(39,000	)		(885,000	)		(924,000	)
Accrued interest		-			143,000			143,000
Loss on remeasurement upon conversion		-			(2,700,000	)		(2,700,000	)
Conversion of AVLP convertible promissory notes		-			(17,040,000	)		(17,040,000	)
Elimination of intercompany debt after conversion		-			(3,809,000	)		(3,809,000	)
Balance at December 31, 2022	$	-		$	-		$	-

Equity Investments in Unconsolidated Entity – SMC

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

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

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

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

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

Summarized Statements of Operations

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

Summarized Balance Sheet Information

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