AULT ALLIANCE, INC.

11411 Southern Highlands Parkway, Suite 240

Las Vegas, Nevada 89141

, 2023

To the Holders of Common Stock of Ault Alliance, Inc.:

Ault Alliance, Inc., (formerly known as BitNile Holdings, Inc.) (“Ault”) is hereby distributing shares of common stock of Giga-tronics Incorporated (soon to change its name to Gresham Worldwide, Inc.) (the “Company”), a publicly-traded company currently engaged in the design, manufacture, and distribution of specialized electronic solutions, automated test solutions, power electronics, supply and distribution solutions, and radio, microwave and millimeter wave communication systems and components for a variety of applications with a focus on the global defense industry for military airborne, sea and ground applications, on a pro rata basis to the holders of Ault common stock pursuant to the enclosed Prospectus (the “Distribution”).

The Prospectus sets forth information about the Company, its organization, business and properties and the background of its recent acquisition of Gresham Holdings, Inc. (formerly Gresham Worldwide, Inc.) on September 8, 2022, together with historical and pro forma financial statements. Due to the importance of the information contained in this document, you are urged to read it carefully.

As explained in the Prospectus, each holder of record of Ault common stock on , 2023, the record date for the Distribution, is receiving one share of the Company’s common stock for approximately every 64 shares of Ault common stock held as of such date. No fractional shares of the Company’s common stock are being issued. In lieu of receiving fractional shares, holders of Ault common stock who would otherwise be entitled to receive fractional shares of the Company’s common stock will be receiving cash from Ault for their fractional interests. The Company’s stock certificate or book-entry statement and, if applicable, a check for fractional interests, are enclosed herewith.

The shares of the Company’s common stock that you are receiving have been registered with the Securities and Exchange Commission, which permits you, subject to certain securities laws and rules discussed in the Prospectus, to sell these securities from time to time in either public or privately negotiated transactions. This Prospectus is being sent as information to all Ault stockholders of record on the record date for the Distribution. Holders are not required to do anything to become entitled to participate in this Distribution.

Sincerely,

MILTON C. (TODD) AULT III

Executive Chairman

The information in this preliminary prospectus is not complete and may be changed. WeThese securities may not sell these securitiesbe sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities andnor does it is not solicitingseek an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.

[●]

GIGA-TRONICS INCORPORATED

6,880,128 Shares of Common Stock

GIGA-TRONICS INCORPORATED

 

We are offering [●]This prospectus (the “Prospectus”) relates to the shares of ourcommon stock, no par value per share of Giga-tronics Incorporated (to be renamed “Gresham Worldwide, Inc.”), a California corporation (the “Company”), to be distributed as a dividend payable to the stockholders of record of common stock, par value $0.001 per share, of Ault Alliance, Inc., a Delaware corporation (“Ault”), at the close of business on                      , 2023, the record date for the distribution, on the basis of one share of the Company’s common stock for approximately every 64 shares of Ault common stock, owned of record at the close of business on that date (the “Distribution”). No fractional shares of the Company’s common stock will be issued in the Distribution. In lieu of receiving fractional shares, holders who would otherwise be entitled to receive fractional shares of the Company’s common stock in the Distribution will receive cash for their fractional interests. For Ault stockholders who own Ault common stock in registered form, in most cases the transfer agent, acting as the distribution agent, will credit their shares of the Company’s common stock to book-entry accounts established to hold the Company’s common stock.

We expect The distribution agent will mail these stockholders a statement reflecting the public offering price to be between $[●] and $[●] per share.

OurCompany’s common stock is quotedownership on the OTCQB tieror about                      , 2023. For stockholders who own Ault common stock through a broker, bank or other nominee, their shares of the OTC Market underCompany’s common stock will be credited to their accounts by that broker, bank or other nominee.

On September 8, 2022, we acquired Gresham Holdings, Inc. (formerly Gresham Worldwide, Inc.) (“Gresham”), which was a wholly owned subsidiary of Ault. Pursuant to the symbol GIGA.Share Exchange Agreement, the Company acquired all of the outstanding shares of capital stock of Gresham and in exchange the Company issued Ault 2,920,085 shares of its common stock and 514.8 shares of Series F Convertible Preferred Stock (the “Series F”) that were convertible into an aggregate of 3,960,043 shares of its common stock, subject to potential adjustments (the “Business Combination”). The high and low bid prices forDistribution to which this Prospectus relates takes into account the conversion in full by Ault of the Series F on or about                      , 2023. Based on 5,931,582 shares of our common stock outstanding on [●], 2019, were $[●] and $[●] per share, respectively, based upon bids that represent prices quoted by broker-dealers on the OTC Market. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions.

The offering is being underwritten on a firm commitment basis. We have granted the underwriter an option to buy up to an additional [●]February 6, 2023, 6,880,128 shares of common stock from us to cover over-allotments. The underwriter may exercise this option at any time and from time to time during the 30-day period from the date of this prospectus.

Total

Per Share

No Exercise of Over- Allotment

Full Exercise of Over- Allotment

Public offering price

$

$

$

Underwriting discounts

$

$

$

Proceeds to us, before expenses

$

$

$

Investing in our common stock held by Ault, representing 69.6% of our then outstanding shares will be distributed when the Distribution is highly speculative and involves a high degree of risk. You should carefully considereffected.

“Our common stock is currently quoted on the risks and uncertainties describedOTCQB, under the heading “Risk Factors” beginning on page [*]symbol “GIGA.” On February 3, 2023, the closing price per share of this prospectus, together with the other risks and uncertainties described in this prospectus, before making a decision to purchase our common stock.stock as reported by the OTCQB was $0.86 per share. See “Trading and Dividend Information.”

The shares of the Company’s common stock, which are the subject of the Distribution are being registered under the Securities Act of 1933 (the “Securities Act”), since Ault is deemed by the Securities and Exchange Commission to be an underwriter with respect to the Distribution.

 

Stockholders Should Be Aware Of Certain Risks Related To The Ownership Of The Company’s Common Stock. See “Risk Factors.”

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESETHE SECURITIES OR PASSED UPON THE ACCURACYDETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR ADEQUACY OF THIS PROSPECTUS.COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

Delivery of the shares is expected to be made to the purchasers on or about [●], 2019.

Roth Capital Partners

The date of this prospectusProspectus is                     [●], 20192023.

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TABLE OF CONTENTS

 

	Page No.
About This Prospectus		v
PAGE
Prospectus SummaryPROSPECTUS SUMMARY			1
Summary of the OfferingRISK FACTORS	5
	8
Incorporation of Certain Information by ReferenceCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	6
	34
Risk FactorsTRADING AND DIVIDEND INFORMATION	7
	35
Cautionary Note Regarding Forward-Looking StatementTHE DISTRIBUTION	17
	36
CapitalizationQUESTIONS AND ANSWERS ABOUT THE DISTRIBUTION	18
	39
DilutionUSE OF PROCEEDS	19
	42
Use of ProceedsDIVIDEND POLICY	20
	42
Market for Registrant’s Common Equity and Related Shareholder MattersCAPITALIZATION	21
	42
BusinessMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21
	45
ManagementUNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	30
	58
Security Ownership of Certain Beneficial Owners and ManagementBUSINESS	31
	67
UnderwritingMANAGEMENT	34
	88
Description of SecuritiesPRINCIPAL STOCKHOLDERS	38
	91
Legal MattersRELATED PARTY TRANSACTIONS	42
	94
ExpertsDESCRIPTION OF GIGA-TRONICS’ CAPITAL STOCK	42
	96
Where You Can Find More InformationLEGAL MATTERS	42		102
EXPERTS			103
WHERE YOU CAN FIND MORE INFORMATION			104
INDEX TO FINANCIAL STATEMENTS			F-1

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ABOUT THIS PROSPECTUS

In this prospectus, unless the context suggests otherwiseNo person is authorized to give any information or unless otherwise noted, references to “the Company,” “we,” “us,” and “our” refer to Giga-tronics Incorporated and its consolidated subsidiaries.

This prospectus describes the specific details regarding this offering and the terms and conditions of the common stock being offered hereby and the risks of investing in our common stock. You should read this prospectus, any free writing prospectus and the additional information about us described in the section entitled ‘‘Where You Can Find More Information’’ before making your investment decision.

Neither we, nor any of our officers, directors, agents or representatives make any representation not contained in this Prospectus and, if given or made, such information or representation must not be relied upon as having been authorized. This prospectus does not constitute an offer to you about the legalitysell, or a solicitation of an investmentoffer to purchase, the securities offered by this prospectus, or an offer or solicitation to any person in our common stock. You should not interpretany jurisdiction in which such offer or solicitation is unlawful. Neither the contentsdelivery of this prospectus to be legal, business, investmentnor any exchange or tax advice. You should consult with your own advisors forsale hereunder shall, under any circumstances, create any implication that type of advice and consult with them about the legal, tax, business, financial and other issues that you should consider before investingthere has been no change in our common stock.

ADDITIONAL INFORMATION

You should rely only on the information contained herein or incorporated by reference in this prospectusthe affairs of the Company since the date as of which information is furnished or the date hereof.

Market, Industry and in any accompanying free writing prospectus. No one has been authorized to provide you with different or additional information. The shares of common stock are not being offered in any jurisdiction where the offer is not permitted. You should not assume that theOther Data

Unless otherwise indicated, information in this prospectusProspectus concerning economic conditions, our industry, our markets and our competitive position is based on a variety of sources, including information from third-party industry analysts and publications and our own estimates and research. Some of the industry and market data contained in this Prospectus are based on third-party industry publications. This information involves a number of assumptions, estimates and limitations, and you are cautioned not to give undue weight to these estimates.

The industry publications, surveys and forecasts and other public information generally indicate or any free writing prospectussuggest that their information has been obtained from sources believed to be reliable. None of the third-party industry publications used in this Prospectus were prepared on our behalf. The industry in which we operate is accurate assubject to a high degree of any dateuncertainty and risk due to a variety of factors, including those described in “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in this Prospectus.” These and other than the date on the front of such documents.factors could cause results to differ materially from those expressed in these publications.

 

TRADEMARKS AND TRADE NAMESi

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Trademarks

This prospectus includesProspectus contains references to our trademarks which are protected under applicable intellectual property laws and are our property or the property of our subsidiaries. This prospectus also contains trademarks, service marks trade names and/or copyrights ofand to those belonging to other companies, which are the property of their respective owners.entities. Solely for convenience, trademarks and trade names referred to in this prospectusProspectus may appear without the ^® or TM^™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable law, our rights or the rightrights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by any other companies.

 

INDUSTRY AND MARKET DATAii

Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including market position and market opportunity, is based on information from our management’s estimates, as well as from industry publications and research, surveys and studies conducted by third parties. The third-party sources from which we have obtained information generally state that the information contained therein has been obtained from sources believed to be reliable, but we cannot assure you that this information is accurate or complete. We have not independently verified any of the data from third-party sources nor have we verified the underlying assumptions relied upon by those third parties. However, assumptions and estimates of our future performance, and the future performance of our industry, are subject to numerous known and unknown risks and uncertainties, including those described under the heading “Risk Factors” in this prospectus and those described elsewhere in this prospectus, and the other documents we file with the Securities and Exchange Commission, or SEC, from time to time. These and other important factors could result in our estimates and assumptions being materially different from future results. You should read the information contained in, or incorporated by reference into, this prospectus completely and with the understanding that future results may be materially different and materially worse from what we expect. See the information included under the heading “Cautionary Note Regarding Forward-Looking Statements.”

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PROSPECTUS SUMMARY

The followingThis summary highlights information contained elsewhere in this prospectus. This summary mayProspectus or incorporated by reference in this Prospectus and does not contain all of the information that may be importantyou should consider before deciding to you. Youinvest in our securities. Before investing in our securities, you should carefully read this entire prospectus carefully,Prospectus and the documents incorporated by reference in this Prospectus, including the consolidated financial statements of Gresham and the related notes thereto and the information set forth under the sections entitled “Risk Factors” and our historical filings, financial statements“Management’s Discussion and related notesAnalysis of Financial Condition and Results of Operations,” in the documents incorporated intoeach case included in this prospectus by reference.Prospectus. In this prospectus,Prospectus, unless otherwise noted or the context otherwise requires, the terms “Company,” “Giga-tronics Incorporated,” “we,” “us,”“us” and “our” refer to Giga-tronics Incorporated and its consolidated subsidiaries.

The Company

Giga-tronics Incorporated consistswholly owned subsidiaries or the combined company following the completion of two business segments, the operation ofBusiness Combination, as the context suggests. We intend to change our subsidiary, Microsourcename to Gresham Worldwide, Inc., and thoseare awaiting approval thereof by the Financial Industry Regulatory Authority which approval has been delayed.

Our Company

We are engaged in three groups serving primarily the global defense industry — the Electronic Defense Solutions group, the Radio Frequency (“RF”) Solutions Group and the Power Electronics and Display Solutions Group. We design, manufacture, and distribute specialized electronic solutions, automated test solutions, power electronics, supply and distribution solutions, display solutions and radio, microwave and millimeter wave communication systems and components for a variety of our Giga-tronics Division, which we refer to as Giga-tronics. Our Microsource operation designs and manufactures custom microwave productsapplications with a focus on the global defense industry for military airborne, sea and ground applications including high fidelity signal simulation and recording solutions for Electronic Warfare (“EW”) test and training applications. We also offer bespoke technology solutions for mission critical applications in the medical, industrial, transportation and telecommunications markets.

Business Combination

On September 8, 2022 (the “Closing Date”), we acquired Gresham, which was a wholly owned subsidiary of Ault. Pursuant to the Share Exchange Agreement, the Company acquired all of the outstanding shares of capital stock of Gresham and, in exchange, the Company issued Ault 2,920,085 shares of the Company’s common stock and 514.8 shares of Series F that were convertible into an aggregate of 3,960,043 shares of the Company’s common stock, subject to potential adjustments, and the assumption of Gresham’s outstanding equity awards representing, on an as-assumed basis, 749,626 shares of the Company’s common stock (the “Business Combination”). The parties had previously entered into a Share Exchange Agreement dated December 27, 2021 (the “Agreement”) for which the Company obtained the requisite stockholder approval on September 8, 2022.

Prior to the Distribution, Ault will convert all of the Series F into shares of the Company’s common stock, and as a result, will beneficially own 69.6% of the Company’s outstanding shares as of such date (excluding shares issuable upon conversion of a convertible note and exercise of certain warrants described elsewhere in this Prospectus). Immediately following the completion of the Business Combination, Gresham became our wholly-owned subsidiary. We obtained shareholder approval to reincorporate from California into Delaware and to change our name to Gresham Worldwide, Inc., subject to the Financial Industry Regulatory Authority (“FINRA”) approval, which based on our recent communication with FINRA is unlikely to be obtained in the foreseeable future. We have changed our subsidiary Gresham’s name to Gresham Holdings, Inc. In connection with the consummation of the Business Combination, Gresham was deemed to be the accounting acquirer in the Business Combination based on an analysis of the criteria outlined in Accounting Standards Codification 805. While we were the legal acquirer in the Business Combination, because Gresham was deemed the accounting acquirer, the historical financial statements of Gresham became the historical financial statements of the combined company, upon the consummation of the Business Combination.

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2

4

5

6

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RISK FACTORS

Risk Related to our Financial Condition

An investment in our common stock involves a high degree of risk. The risks described below include all material risks to our company or to investors that are known to our company. You should carefully consider such risks before investing in our common stock. If any of the following risks actually occur, our business, financial condition and results of operations could be materially harmed. As a result, the trading price of our common stock could decline, and you might lose all or part of your investment. When determining whether to buy our common stock, you should also refer to the other information in this Prospectus, including our financial statements and the related notes included elsewhere in this Prospectus.

We have doubt about our ability to continue as a going concern.

As of September 30, 2022, we believe that there is doubt about our ability to continue as going concern because we have incurred recurring net losses, our operations have not provided cash flows, and Ault ended its support of our operations with the limited exception of the payment of approximately $1,259,000 by Ault Lending no later than May 31, 2023 in addition to approximately $1,569,000 provided by Ault lending during the three months ended December 31, 2022. The Convertible Notes issued to Ault mature on December 31, 2024. We have doubt about the ability of the Company to continue as a going concern for the year ended December 31, 2022. Our inability to continue as a going concern could have a negative impact on the Company, including our ability to obtain needed financing, and could adversely affect the trading price of our common stock.

We have historically incurred net losses and negative cash flow and our operating results may significantly vary from quarter to quarter, so we may not be able to achieve or sustain profitability.

Both the Company and Gresham have historically experienced net losses, and the Company anticipates continuing to experience some losses in the future. Our operating results are largely determined by the results of operations of Gresham because they are more significant than the Company’s prior to the Business Combination. For the years ended December 31, 2021, and 2020, Gresham reported revenue of $25,580,000 and $18,213,000 and net losses of $2,863,000 and $1,851,000, respectively. For the nine months ended September 30, 2022, we reported revenue of $21,530,000 and a total net loss of $3,361,000. We expect to continue to incur substantial expenditures to develop and market our products and services and we could continue to incur losses and negative operating cash flow for the foreseeable future.

In addition, our operating results have in the past been subject to quarter-to-quarter fluctuations, and we expect that these fluctuations will continue, and may increase in magnitude, in future periods. Demand for our products is driven by many factors, including the availability of funding for our products in our customers’ budgets. There is a trend for some of our customers to place large orders near the end of a quarter or fiscal year, in part to spend remaining available budget funds. Seasonal fluctuations in customer demand for our products driven by budgetary and other concerns can create corresponding fluctuations in period-to-period revenue, and we therefore cannot assure you that our results in one period are necessarily indicative of our revenue in any future period. In addition, the number and timing of large individual sales and the ability to obtain acceptances of those sales, where applicable, have been difficult for us to predict, and large individual sales have, in some cases, occurred in quarters subsequent to those we anticipated, or have not occurred at all. The loss or deferral of one or more significant sales in a quarter could harm our operating results for such quarter. It is possible that, in some quarters, our operating results will be below the expectations of public market analysts or investors.

Even if we are successful in integrating two different business, managements and cultures, we may not become profitable. We anticipate that our operating expenses may continue to increase. However, expanding our operations may also impose significant demands on our management, finances and other resources. Our ability to manage the anticipated future growth, should it occur, will depend upon expansion of our accounting and other

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internal management systems and the implementation and subsequent improvement of a variety of systems, procedures and controls. We cannot assure you that significant problems in these areas will not occur. Our failure to expand these areas and implement and improve such systems, procedures and controls in an efficient manner at a pace consistent with our business could have a material adverse effect on our business, financial condition and results of operations. Our attempts to expand our marketing, sales, manufacturing and customer support efforts may not succeed or generate additional sales or profits in any future period. While cost control measures that we are implementing should reduce our operating expenses, in the near future an increase in our operating expenses, along with the difficulty in forecasting revenue levels, we may experience significant fluctuations in our results of operations.

There is no assurance that we will be able to achieve a level of revenue adequate to generate sufficient cash flow from operations or obtain additional financings necessary to support our working capital requirements.

Because Ault intends to end its support, we will need additional capital to fund our operations, and our inability to generate or obtain such capital on acceptable terms, or at all, could harm our business, operating results, financial condition and prospects.

On January 11, 2023, we entered into a Securities Purchase Agreement with two accredited investors (the “Buyers”) pursuant to which we sold to the Buyers $3.3 million 10% original issue discount Senior Secured Convertible Notes (the “Senior Notes”) and five-year warrants to purchase shares of our common stock for total gross proceeds of $3,000,000. The net proceeds shall be used primarily for working capital. Ault will not support us financially in the future. Other than Ault advancing up $1,259,407 no later than May 31, 2023, even with the proceeds that we recently received from the Buyers, if we do not secure additional financings or begin to generate more cash from operations, we will need to raise additional capital to support our working capital requirements and our planned growth. We presently believe that we must raise additional capital by October 11, 2023, to repay the Senior Notes. Ault currently has over 45,000 stockholders that will receive shares of our common stock in connection with the Distribution. We estimate that the cost of printing and mailing of proxy materials for an annual meeting in compliance with the Securities and Exchange Commission (the “SEC”) rules and regulations will increase by approximately $100,000 on an annual basis. This will further increase our need secure additional financing to fund our operations. Any other future financing may include shares of common stock, shares of preferred stock, warrants to purchase shares of common stock or preferred stock, debt securities, units consisting of the foregoing securities, equity investments from strategic development partners or some combination of the foregoing. There is no assurance that additional financing will be available, or if available, will be on acceptable terms. If we are unable to raise additional capital, we may be required to curtail our operations and take additional measures to reduce costs, including reducing our workforce and eliminating outside consultants in order to conserve cash in amounts sufficient to sustain operations and meet our obligations. This could in its turn have a material adverse effect on our business, operating results and future prospects. There can be no assurance that we will be able to generate any further investor interest in our securities or other types of funding, in which case you would likely lose the entirety of the value of our shares that will be distributed to you in the Distribution.

Additionally, any additional financings may be dilutive to our stockholders, and such dilution may be significant based upon the size of such financing.

Because we require Ault’s consent and the Buyers’ consent for certain debt financings and acquisitions, we may not be able to pursue these transactions if Ault and the Buyers do not consent.

We issued Ault Series F and common stock upon the consummation of the Business Combination. The term of the Series F contains negative covenants that apply until Ault completes the Distribution. Until that occurs, we must obtain Ault’s consent before, among other things, incurring indebtedness of $1,000,000 in any individual transaction or $2,500,000 in the aggregate, or acquiring any business in which the aggregate consideration payable by us is $1 million or more. In addition, if we issue further equity, subject to exceptions for certain

9

excluded securities, such limited issuances pursuant to equity incentive plans, Ault will have the right to purchase additional equity to maintain its ownership interest. Even when Ault fully converts the Series F into shares of our common stock prior to the Distribution, the Convertible Notes that we issued in connection with the Ault Financing and the transaction documents that we entered into in connection with our recent financing with the Buyers contain substantially similar covenants that are included in the Series F. These provisions could limit our ability to raise capital or make future acquisitions, particularly larger acquisitions. For more information about these negative covenants, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Our Recent Financings.”

Risks Related to the Consummation of the Business Combination and our Company

Gresham may have liabilities that are not known, probable or estimable at this time.

Gresham remains subject to certain past, current, and future liabilities. There could be unasserted claims or assessments against or affecting Gresham, including the failure to comply with applicable laws and regulations. In addition, there may be liabilities of Gresham that are neither probable nor estimable at this time that may become probable or estimable in the future, including indemnification requests received from customers of Gresham relating to claims of infringement or misappropriation of third party intellectual property or other proprietary rights, tax liabilities arising in connection with ongoing or future tax audits and liabilities in connection with other past, current and future legal claims and litigation. Any such liabilities, individually or in the aggregate, could have a material adverse effect on our financial condition. We may learn additional information about Gresham that adversely affects us, such as unknown, unasserted, or contingent liabilities and issues relating to compliance with applicable laws or infringement or misappropriation of third-party intellectual property or other proprietary rights.

The integration of our and Gresham’s business and any future acquisitions may disrupt or have a negative impact on our business.

Achieving the anticipated benefits of the Business Combination will depend in significant part upon whether we are able to integrate Gresham and our business in an efficient and effective manner. The actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized. The companies may not be able to accomplish the integration process smoothly, successfully or on a timely basis. The necessity of coordinating geographically separated organizations, managements, systems of controls, and facilities and addressing possible differences in business backgrounds, corporate cultures and management philosophies may increase the difficulties of integration. The companies operate numerous systems and controls, including those involving management information, purchasing, accounting and finance, sales, billing, employee benefits, payroll and regulatory compliance. The integration of operations following the Business Combination and future acquisitions will continue to require the dedication of significant management and external resources, which may distract management’s attention from the day-to-day business of the Company and be costly. Employee uncertainty and lack of focus during the integration process may also disrupt our business. Any inability of management to successfully and timely integrate the operations of the two companies could have a material adverse effect on our business and results of operations. For example, our former Chief Executive Officer elected to retire in January 2023, which may be perceived negatively by our legacy employees.

In addition, we plan to make additional acquisitions as part of our growth strategy. Whenever we make acquisitions, we could have difficulty integrating the acquired companies’ personnel and operations with our own. In addition, the key personnel of the acquired business may not be willing to work for us. We cannot predict the effect any expansion may have on our core business. Regardless of whether we are successful in making an acquisition, the negotiations could disrupt our ongoing business, distract our management and employees and increase our expenses. In addition to the risks described above, acquisitions are accompanied by a number of inherent risks, including, without limitation, the following:

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Our business could be severely impaired if and to the extent that we are unable to succeed in addressing any of these risks or other problems encountered in connection with these acquisitions, many of which cannot be presently identified, these risks and problems could disrupt our ongoing business, distract our management and employees, increase our expenses and adversely affect our results of operations.

Our goodwill or other intangible assets may become impaired, which could result in material non-cash charges to its results of operations.

We have goodwill and other intangible assets resulting from the Business Combination. At least annually, or whenever events or changes in circumstances indicate a potential impairment in the carrying value as defined by generally accepted accounting principles or GAAP, we will evaluate this goodwill and other intangible assets for impairment based on the fair value of each reporting unit. Estimated fair values could change if there are changes in our capital structure, cost of debt, interest rates, capital expenditure levels, operating cash flows, or market capitalization. Impairments of goodwill or other intangible assets could require material non-cash charges to our results of operations.

At September 30, 2022, Gresham carried a significant amount of goodwill on our balance sheet. To the extent our acquisition of Gresham or any of Gresham’s acquisitions during 2017-2020 do not perform as anticipated and its underlying assumptions and estimates related to the fair value determination are not met, the value of such assets may be negatively affected and we could be required to record impairment charges.

We will assess goodwill for impairment at least annually during the fourth calendar quarter and whenever facts or circumstances indicate that the carrying value of goodwill may be impaired. Impairment analysis involves comparing the estimated fair value of a reporting unit to its carrying value. If the carrying value of a reporting unit exceeds its estimated fair value, we will record an impairment charge. Determination of fair value requires considerable judgment and is sensitive to changes in underlying assumptions, estimates and market factors. If we are required to recognize noncash charges related to impairment of goodwill, our results of operations would be materially and adversely affected.

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Our utilization of our net operating loss carryforwards may be limited

As of March 26, 2022, we had a pre-tax federal net operating loss carryforward of $10,720,000 and a state net operating loss carryforward of $6,780,000 available to reduce future taxable income, if any, prior to limitations that may be imposed under Section 382 of the Internal Revenue Code (the “Code”) or otherwise. These amounts are net of a Section 382 limitation of $38,345,000 on the federal net operating loss and $19,612,000 on the state net operating loss. The Section 382 limitation was triggered due to an ownership change in 2020 year. The federal and state net operating loss carryforwards begin to expire from fiscal 2022 through 2038 and from 2029 through 2040, respectively. The federal net operating loss amount of $7,435,000 from fiscal year ended 2020 through 2022 will have an indefinite life.

As a result of the Business Combination, we generally continue to carry such NOLs, but we may be unable to fully use such NOLs, if at all. Under Section 382 of the Code, if a corporation undergoes an “ownership change” (very generally defined as a greater than 50% change, by value, in the corporation’s equity ownership by certain stockholders or groups of stockholders over a rolling three-year period), the corporation’s ability to use its pre-ownership change NOLs to offset its post-ownership change income may be limited. In addition, we may experience an ownership change in the future as a result of subsequent shifts in its stock ownership. Future regulatory changes could also limit our ability to utilize its NOLs. To the extent our NOLs are not utilized to offset future taxable income, our net income and cash flows may be adversely affected. The Tax Cuts and Jobs Act (the “Tax Act”), as modified by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), among other things, includes changes to U.S. federal tax rates and the rules governing NOL carryforwards. For U.S. federal NOLs arising in tax years beginning after December 31, 2017, with certain exceptions, the Tax Act as modified by the CARES Act limits a taxpayer’s ability to utilize NOL carryforwards in taxable years beginning after December 31, 2020, to 80% of taxable income. In addition, U.S. federal NOLs arising in tax years beginning after December 31, 2017, can be carried forward indefinitely. Deferred tax assets for NOLs will need to be measured at the applicable tax rate in effect when the NOLs are expected to be utilized. The new limitation on use of NOLs may significantly impact our ability to utilize our NOLs to offset taxable income in the future. In addition, for state income tax purposes, there may be periods during which the use of net operating loss carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

The effects of Russia’s invasion of Ukraine on the capital markets and the economy is uncertain, and we may have to deal with a recessionary economy and economic uncertainty including possible adverse effects upon the capital markets.

While the effects of Russia’s invasion of Ukraine and the resulting international sanctions are uncertain, they have already had an immediate effect on the global and United States economy by causing, among other things, continued inflation and substantial increases in the prices of oil, gas and other commodities. The conflict has created increased uncertainty in the capital markets with declines in leading market indexes. The duration of this conflict and its impacts are uncertain. We cannot predict the conflict will affect the capital markets, but the impact may be adverse and may delay or prevent us from completing future financings.

If the inflationary pressures in the United States and elsewhere where we operate continue, we could experience reduced margins and lose future business.

The current inflationary pressures are affecting our margins particularly since we have lacked the capital to accumulate material inventory. Most of our contracts (except with Relec) are fixed price, which reduces our margins when inflation occurs. Reducing our selling prices results in further reduction of our margins. This customer pricing pressure may also result in the loss of contracts and/or future business. Finally, we are experiencing rising labor costs which may further tighten margins.

We may be unable to execute our acquisition growth strategy.

We plan to make additional acquisitions as part of our growth strategy. Our acquisition growth strategy will involve a number of risks and uncertainties. We may be unable to successfully identify suitable acquisition

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targets and complete acquisitions. Our ability to execute our growth strategy depends in part on our ability to identify and acquire desirable acquisition candidates as well as our ability to successfully integrate any target’s operations into our business.

Additional factors may negatively impact our growth strategy. Our strategy may require spending significant amounts of capital. If we are unable to obtain additional needed financing on acceptable terms, we may need to reduce the scope of our acquisition growth strategy, which could have a material adverse effect on our growth prospects. If any of the aforementioned factors force management to alter our growth strategy, our growth prospects could be adversely affected.

We will have to pay cash, incur debt, or issue equity as consideration in any future acquisitions, each of which could adversely affect our financial condition or the market price of our common stock. The sale of equity or issuance of equity-linked debt to finance any future acquisitions could result in dilution to our stockholders. Incurring indebtedness may result in increased fixed obligations and could limit our flexibility in managing our business due to covenants or other restrictions contained in debt instruments. In addition, Ault, prior to the Distributions and the Buyers of the Senior Notes, will have the right to approve or disapprove of any such indebtedness and certain acquisitions.

Further, we may not be able to realize the anticipated benefits of completed acquisitions. Some acquisition targets may not have a developed business or will be experiencing inefficiencies and incur losses. Additionally, small defense contractors which we consider suitable acquisition targets may be uniquely dependent on their prior owners and the loss of such owners’ services following the completion of acquisitions may adversely affect their business. Therefore, we may lose our investment in the event that the acquired businesses do not develop as planned or that we are unable to achieve the anticipated cost efficiencies or reduction of losses. Even if we are able to do so, we may not realize the full anticipated benefits of such acquisitions, and our business, financial conditions and results of operations may suffer.

Additionally, Gresham’s acquisitions have previously required, and any similar future transactions may also require, significant management efforts and expenditures. Regardless of whether we are successful in making an acquisition, the negotiations could disrupt our ongoing business, divert the attention of our management and key employees and increase our expenses.

If we fail to effectively manage our growth, our business and operating results could be harmed.

Gresham has experienced and following the consummation of the Business Combination we are experiencing, growth in our operations. This growth will place, significant demands on our management, operational and financial infrastructure. If we do not manage our growth effectively, the quality of our products and services could suffer, which could negatively affect our operating results. To effectively manage our growth, we must continue to improve our operational, financial and management controls and reporting systems and procedures. These systems improvements may require significant capital expenditures and management resources. Failure to implement these improvements could hurt our ability to effectively manage our growth and would in its turn have a material adverse impact on our business and future operating results.

Our businesses are subject to government procurement laws and regulations.

We must comply with certain laws and regulations relating to the formation, administration and performance of government contracts. These laws and regulations affect how we conduct business with the government, including the business that we do as a subcontractor to large prime contractors that contract directly with the government. In complying with these laws and regulations, we incur additional costs. These costs may increase in the future, thereby reducing our margins, which could have an adverse effect on our business, financial condition, results of operations and cash flows. Failure to comply with these regulations and requirements could lead to fines, penalties, repayments, or compensatory or treble damages, or suspension or debarment from

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government contracting or subcontracting for a period of time. Among the causes for debarment are violations of various laws, including those related to procurement integrity, export control, government security regulations, employment practices, protection of the environment, accuracy of records, proper recording of costs and foreign corruption. The termination of a government contract or relationship as a result of any of these acts would have an adverse impact on our operations and could have an adverse effect on our standing and eligibility for future government contracts.

Some U.S. federal statutes and regulations provide for penalties, including automatic debarment based on actions such as violations of the U.S. False Claims Act or the U.S. Foreign Corrupt Practices Act. The suspension or debarment in any particular case may be limited to a facility, contract or subsidiary involved in the violation or could be applied to our entire Company in severe circumstances. Even a narrow scope suspension or debarment could result in negative publicity that could adversely affect our ability to renew contracts and to secure new contracts, both with governments and private customers, which could materially and adversely affect our business, financial condition and results of operations.

If we fail to comply with anti-bribery, anti-corruption, anti-money laundering laws, and similar laws, or allegations of such failure, it could have a material adverse effect on our business, financial condition and operating results.

We are subject to various anti-bribery, anti-corruption, anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”), the U.S. Travel Act, and the USA PATRIOT Act. In addition, we are subject to the United Kingdom Bribery Act 2010, the Proceeds of Crime Act 2002, Chapter 9 (sub-chapter 5) of the Israeli Penal Law, 1977, the Israeli Prohibition on Money Laundering Law–2000, and possibly other similar laws in countries outside of the United States in which we conduct our business or seek to sell our products. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit companies, their employees, agents, representatives, business partners, and third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector.

We, our employees, agents, representatives, business partners and third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and may be held liable for the corrupt or other illegal activities of these employees, agents, representatives, business partners or third-party intermediaries even if we do not explicitly authorize such activities.

These laws also require that we keep accurate records and maintain internal controls and compliance procedures designed to prevent any such actions. While we have policies and procedures to address compliance with such laws, we cannot assure you that none of our employees, agents, representatives, business partners or third-party intermediaries will take actions in violation of our policies and applicable law, for which we may be ultimately held responsible. In addition, we may be held liable for violations committed of the FCPA or similar foreign laws by companies that we acquire.

Any alleged or actual violation of the FCPA or other applicable anti-bribery, anti-corruption laws, and anti-money laundering laws could result in whistleblower complaints, investigations, enforcement actions, fines and other criminal or civil sanctions, adverse media coverage, loss of export privileges, or suspension or termination of government contracts. Responding to any investigation or enforcement action would require significant attention of our management and resources, including significant defense costs and other professional fees. Failure to comply with anti-bribery, anti-corruption, anti-money laundering laws, and similar laws, or allegations of such failure, could therefore have a material adverse effect on our business, results of operations, financial condition and future prospects.

Our sales and profitability may be affected by changes in economic, business and industry conditions.

If the economic climate in the United States or abroad deteriorates, customers or potential customers could reduce or delay their orders. In this environment, our customers may experience financial difficulty, reduce

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operations and fail to budget or reduce budgets for the purchase of our products. This may lead to longer sales cycles, delays in purchase decisions, payment and collection, and can also result in downward price pressures, causing our sales and profitability to decline. In addition, general economic uncertainty and general declines in capital spending in the defense electronics sector make it difficult to predict changes in the purchasing requirements of our customers and the markets we serve. There are many other factors which could affect our business, including:

These trends and factors could adversely affect our business, profitability and financial condition and diminish our ability to achieve our strategic objectives.

Our sales cycles can be long and unpredictable, and our sales efforts require considerable time and expense. As a result, our sales and revenue are difficult to predict and may vary substantially from period to period, which may cause our operating results to fluctuate significantly.

The timing of our revenues is difficult to predict. Factors that may contribute to these fluctuations include our dependence on the defense industry, and a limited number of customers, the nature and length of our sales cycles for our products and services, the duration and delivery schedules within our customer contracts and our ability to timely develop, produce and produceupgrade our products.

Most of our revenues result from a limited number of relatively large orders that we receive from prime defense contractors.contractors and government agencies. We spend substantial time and resources on our sales efforts without any assurance that our efforts will produce any sales. In addition, purchases of our products are frequently subject to budget constraints (including constraints imposed by governmental agencies), multiple approvals, and unplanned administrative, processing and other delays. Even if we receive a purchase order from a customer, there may be circumstances or terms relating to the purchase that delay our ability to recognize revenue from that purchase, which makes our revenue difficult to forecast. As a result, it is difficult to predict whether a sale will be completed, the particular fiscal period in which a sale will be completed or the fiscal period in which revenue from a sale will be recognized. For these reasons, our operating results may vary significantly from quarter to quarter. Such unpredictable operating results may adversely impact the trading price of our common stock.

Our sales are substantially dependent on the defense industry and a limited number of customers.

AllSubstantially, all of our current product and service offerings are directed towards the defense marketplace, which has a limited number of customers. If the defense market demand decreases, actual shipments couldour sales may be less than projected shipments with a resulting decline in sales.revenues. As a result, our business depends upon continued U.S., Israeli, United Kingdom and other countries’ government expenditures on defense systems for which we provide

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support. These expenditures have not remained constant over time and have been reduced in some periods. Our business, prospects, financial condition, operating results and the trading price of our common stock could be materially harmed, among other causes, by the following:

Additionally, the loss of any one customer may have a material adverse effect on future operating results and financial condition. Our product backlog also has a number of risks and uncertainties such as the cancellation or deferral of orders, dispute over performance of our products and our ability to collect amounts due under these orders. If any of these events were to occur, actual shipments could be lower than projected shipments and revenues could decline which would have an adverse effect on our operating results and liquidity.

Because our competitors have greater resources, we may not compete effectively.

Several of our competitors, including, among others, K&L Microwave, Q Microwave, Amplitech, Qorvo, Northrop Grumman, Textron, Keysight, Rohde & Schwarz and National Instruments have substantially greater research and development, manufacturing, marketing, financial, technological personnel and managerial resources than us. These resources also make these competitors better able to withstand difficult market conditions than us. We cannot provide assurance that any products developed by these competitors will not gain greater market acceptance than any developed by us.

Our products compete and will compete with similar, if not identical, products produced by our competitors. These competitive products could be marketed by well-established, successful companies that possess greater financial, marketing, distribution personnel, and other resources than we do. These companies can implement extensive advertising and promotional campaigns. They can introduce new products to new markets more rapidly. In certain instances, competitors with greater financial resources may be able to enter a market in direct competition with us, offering attractive marketing tools to encourage the sale of products that compete with our products or present cost features that customers may find attractive.

The markets for some of our products are also subject to specific competitive risks because these markets are highly price sensitive. Our competitors have competed in the past by lowering prices on certain products. If they do so again, we may be forced to respond by lowering its prices. This would reduce revenue and increase losses. Failure to anticipate and respond to price competition may also further reduce our revenue and increase our losses.

If we lose key personnel, it could have a material adverse effect on our financial condition, results of operations, and growth prospects.

Our success will depend on the continued contributions of key officers and employees. The loss of the services of key officers and employees, whether such loss is through resignation or other causes, or the inability to attract additional qualified personnel, could have a material adverse effect on our financial condition, results of operations, and growth prospects. Although we expect most of our employees will continue to remain as our employees, it is possible some employees may quit. Depending upon who they are and how many employees quit, we may be adversely affected.

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If our reputation or relationships with the U.S. federal governmentGovernment or the limited number of defense contractorscontractors with whom we work were harmed, our future revenues and cash flows would be adversely affected.

We deriveOur Original Business derives substantially all of our revenue from the U.S. federal government,Government, its agencies and several defense contractors that supply them. Approximately $19.75 million or 94.8% of consolidated revenues for the fiscal years ended March 30, 2019 and March 30, 2018 were derived from contracts with the U.S. federal government and its agencies, either directly or through defense contractors with whom with have contracted. Our reputation and relationships with various U.S. government entities and agencies, in particular with the U.S. Department of Defense and the U.S. Navy, and the limited number of defense contractors serving these agencies, are key factors in maintaining and growing these revenues and winning bids for new business. Negative press reports or publicity, regardless of accuracy, could harm our reputation. If our reputation or relationships with government agencies were to be negatively affected, or if we are suspended or debarred from contracting with government agencies for any reason, the amount of business with government and other customers would decrease and our financial condition and results of operations could be adversely affected.

Our failurefinancial condition, results of operations, and liquidity may be negatively impacted by increased levels of inflation. We are not able to comply with a varietypredict the timing and effect of complex procurement rulesinflation, or its duration and regulations could result inseverity. Inflation may cause our being liable for penalties, including termination ofcosts to purchase inventory to be higher than we planned, and we may not be able to sell our government contracts, disqualification from bidding on future government contracts and suspension or debarment from government contracting.

We must comply with various laws and regulations relatingproducts to the formation, administration and performance of government contracts, which affect how we do business with our customers at correspondingly increased prices, resulting in decreased profit margins.

Our EW test and may impose added costs on our business.

Some U.S. federal and state statutes and regulations provide for automatic debarment based on actions such as violations of the U.S. False Claims Act or the U.S. Foreign Corrupt Practices Act, or FCPA. The suspension or debarment in any particular case may be limited to the facility, contract or subsidiary involved in the violation or could be applied to our entire Company in severe circumstances. Even a narrow scope suspension or debarment could result in negative publicity that could adversely affect our ability to renew contracts and to secure new contracts, both with governments and private customers, which could materially and adversely affect our business, financial condition and results of operations.

Our markets involve rapidly changing technology and standards.

The market for electronics equipment is characterized by rapidly changing technology and evolving industry standards. We believe that our future success will depend in part upon our ability to develop and commercialize our existing products, and in part, on our ability to develop, manufacture and successfully introduce new products and product lines with improved capabilities, and to continue to enhance existing products. There can be no assurance that we will successfully complete the development of current or future products, or that such products will achieve market acceptance. The inability to develop new products in a timely manner could have a material adverse impact on our operating performance, financial condition and stock price.

Performance problems in our products or problems arising from the use of our products together with other vendors’ products may harm our business and reputation.

Products as complex as those we produce may contain unknown and undetected defects or performance problems. For example, it is possible that one of our products might not comply with stipulated specifications under all circumstances. In addition, our customers generally use our products together with their own products and products from other vendors. As a result, when problems occur in a combined equipment environment, it may be difficult to identify the source of the problem. A defect or performance problem could result in lost revenues, increased warranty costs, diversion of engineering and management time and effort, impaired customer relationships and injury to our reputation generally.

Our RADAR/EW testing system training products are complex and could have unknown defects or errors, which may increase our costs, harm our reputation with customers, give rise to costly litigation, or divert our resources from other purposes.

purposes.

Our RADAR/EW testingtest and training system products are extremely complex. Despite testing, our initial products contained defects and errors and may in the future contain defects, errors or performance problems following itsthe sale or when new versions or enhancements are released, or even after these products have been used by our customers for a period of time. These problems could result in expensive and time-consuming design modifications or warranty charges, delays in the introduction of new products or enhancements, significant increases in our service and maintenance costs, diversion of our personnel’s attention from our product development and sales efforts, exposure to liability for damages, damaged customer relationships, and harm to our reputation, any of which could have a material adverse impact on our results of operations. In addition, increased development and warranty costs could be substantial and could reduce our operating margins.

Our products contain components produced by suppliers which may be discontinued or no longer available in future periods, which could lead to production delays and adversely impact our operating results and financial condition.

Certain components produced by our suppliers may be discontinued or no longer available to us to produce our products. Such discontinuations or lack of supply would require us to seek replacement components that may take longer and cost more than initially expected to procure and lead to delays in product sales.

If we fail to maintain satisfactory compliance with quality certifications and classified processing and control standards, product deliveries may be delayed or cancelled which would adversely impact our business, operating result and financial condition.

Certain of our customer contracts require that we maintain quality certifications and classified processing and control standards. If we were unable to maintain such certifications and standards, our product shipments may be delayed or cancelled which would cause us to lose business or brand reputation, resulting in a material adverse effect on our business operating results and financial condition.

If we are deemed to infringe on the proprietary rights of third parties, we could incur unanticipated expense and be prevented from providing our products and services to customers.

We could be subject to intellectual property infringement claims as the number of our competitors grows and if our products or the functionality of our products overlap with patents of our competitors. While we do not currently believe that we have infringed or are infringing on any proprietary rights of third parties, we cannot assure you that infringement claims will not be asserted against us or that those claims will be unsuccessful. We could incur substantial costs and diversion of management resources defending any infringement claims whether or not such claims are ultimately successful, even if such claims are meritless. Furthermore, a party making a claim against us could secure a judgment awarding substantial damages, as well as injunctive or other equitable relief that could effectively block our ability to provide products or services. We may not prevail in litigation given the complex technical issues and inherent uncertainties in intellectual property litigation. If litigation results in an adverse ruling, we could be required to:

We face risks related to production delays, delays of customer orders and higherthe relatively high selling price of a new product platform.

Ourour RADAR/EW testing platform.

Our EW test and training platform has been ourthe primary product development focus duringfor the past seven years, however,Original Business for the last several years. However, delays in completing its initial development, together with early design and manufacturing issues and longer than anticipated sales cycles have contributed to our losses and increased our accumulated deficit as of June 29, 2019.inability to generate material sales. Additionally, the average selling price of our RADAR/EW systemstest and training system is considerably higher than our prior general-purpose test and measurement products, which in turn requires additional internal approvals on the part of the customer and generally leads to longer sales cycles. Our financial condition may also cause potential customers to delay, postpone or decide against placing orders for our products. Continued longer than anticipated sales cycles in future fiscal years, or delays in production and shipping volume quantities, could significantly contribute to additional losses.

Our business dependshave a material adverse impact on our intellectual property rights,operating results and if we are unable to protect them, our competitive position may suffer.liquidity.

Our business plan is predicated on our proprietary technology. Accordingly, protecting our intellectual property rights is critical to our continued success and our ability to maintain our competitive position. Our goal is to protect our proprietary rights through a combination of patent, trademark, trade secret and copyright law, confidentiality agreements and technical measures. We generally enter into non-disclosure agreements with our employees, consultants and suppliers and limit access to our trade secrets and technology. We cannot assure you that the steps we have taken will prevent misappropriation of our technology. Misappropriation of our intellectual property would have an adverse effect on our competitive position, financial condition, and results of operations.

We are dependent on our management team and development and operations personnel, and the loss of one or more key employees or groups could harm our business and prevent us from implementing our business plan in a timely manner.

Our success depends substantially upon the continued services of our executive officersEarthquakes and other key members of management. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives. Such changes in our executive management team may be disruptive to our business. We are also substantially dependent on the continued service of our existing development and operations personnel because of the complexity of our service and technologies. Staffing due to the loss of one or more of our key employees or groups can be expensive, divert management’s attention from executing our business plan and could seriously harm our business. Furthermore, possible shortages of key personnel, including engineers, in the area surrounding our facilities could require us to pay more to hire and retain key personnel, thereby increasing our costs.

Our directors and executive officers and parties with whom they are affiliated beneficially own a significant number of shares of our common stock.  Their interests may conflict with our outside shareholders, who may be unable to influence management and exercise control over our business.

As of the date of this prospectus, our executive officers, directors and entities with whom they are affiliated beneficially own approximately 38% of our issued and outstanding shares of common stock.  As a result, our executive officers, directors and the entities with whom they are affiliated may be able to: affect the election or defeat the election of our directors, amend or prevent amendment to our certificates of incorporation or bylaws, effect or prevent a merger, sale of assets or other corporate transaction which other shareholders may deem to be attractive, and control the outcome of any other matter submitted to the shareholders for vote. Accordingly, our outside shareholders may be unable to influence management and exercise control over our business.

We require additional capital to support our current operations and this capital may not been readily available.

We will require additional debt or equity financing to fund our operations. Our recent history of losses, changes to our product focus and the development of new products makes it difficult to evaluate our current business model and future prospects. Accordingly, investors should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies developing new products as we have, in fact, encountered. Potential investors should carefully consider the risks and uncertainties that a company with limited funds (such as the Company) and recently developed products will face. In particular, potential investors should consider that there is a significant risk that we will not be able to:

If we raise additional funds through further issuances of equity or convertible debt securities, our existing shareholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our existing capital stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our current operations and to respond to business challenges would be significantly limited. If we cannot access the capital necessary to support our business, we would be forced to curtail our business activities or even shut down operations. If we cannot execute any one of the foregoing or similar matters relating to our business, the business may fail, in which case you would lose the entire amount of your investment in the Company.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.  Any inability to accurately and timely report and file our financial results could harm our reputation and adversely impact the trading price of our common stock.

Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud.  If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed.  With each prospective acquisition, we will conduct whatever due diligence is necessary or prudent to assure us that the acquisition target can comply with the internal controls requirements of The Sarbanes-Oxley Act of 2002.  Notwithstanding our diligence, certain internal control deficiencies may not be detected.  As a result, any internal control deficiencies may adversely affect our financial condition, results of operations and access to capital.  We have not performed an in-depth analysis to determine if historical undiscovered failures of internal controls exist, and may in the future discover areas of our internal controls that need improvement.

Our competition has greater resources.

Several of our competitors, including, among others, Agilent/Keysight, Rohde & Schwarz and National Instruments have substantially greater research and development, manufacturing, marketing, financial, and technological personnel and managerial resources than us. These resources also make these competitors better able to withstand difficult market conditions than us. There can be no assurance that any products developed by these competitors will not gain greater market acceptance than any developed by us.

Business interruptions could delay or prevent our business activities, whichevents could have a material adverse effect on our business, financial condition and results of operations.

operations.

Our primaryMicroSource facility and headquarters is located in the San Francisco Bay Area near known earthquake fault zones and is vulnerable to significant damage from earthquakes. We are also vulnerable to other natural disasters, epidemics,

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such as COVID-19,and other events that could disrupt our operations that may be beyond our control. We do not carry insurance for earthquakes and we may not carry sufficient business interruption insurance to compensate us for losses that may occur. Any losses or damages we incur could have a material adverse effect on our operating results, cash flows and success as an overall business.

If we experience a significant cybersecurity attack or disruption in our IT systems, our business, reputation,Risks Related to the Distribution and operating results could be adversely affected.

Ownership of Our Common Stock

We rely on an internal IT system monitored by certain internal employeesmay not achieve the benefits expected from the Distribution and third-party service providers to maintain our IT systems; maintain financial records; retain sensitive data, such as intellectual property, proprietary business information, and data related to customers, and suppliers; process orders; manage inventory; process shipments to customers; and operate other critical functions. The ongoing maintenance and security of this information is critical to the classified processing and control standards that our suppliers require us to maintain and the success of our business operations and our strategic goals.

Despite our implementation of network security measures, our network may be vulnerablemore susceptible to cybersecurity attacks, computer viruses, break-insadverse events.

We expect that, as a company independent from Ault, we will be able to grow organically and similar disruptions. Our network security measures include, but are not limited to, the implementation of firewalls, antivirus protection, patches, log monitors, routine backups, offsite storage, network audits, and routine updates and modifications. Despite our efforts to create these security barriers,through acquisitions. Nonetheless, we may not be able to keep pace as new threats emerge and itachieve any of these benefits. Further, by separating from Ault, there is virtually impossible for us to entirely eliminate this risk. Cybersecurity attacks are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, and other electronic security breachesa risk that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and corruption of data. Any such event could have a material adverse effect on our business, reputation, operating results and financial condition, and no assurance can be given that our efforts to reduce the risk of such attacks will be successful.

In addition, our IT systemswe may be more susceptible to damage, disruptions or shutdowns due to power outages, hardware failures, telecommunication failures, user errors, catastrophes or other unforeseen events. Suchadverse events could resultthan we would have otherwise experienced as a subsidiary of Ault. As a subsidiary of Ault, we enjoyed certain benefits, including economies of scope and scale in the disruption of business processes, network degradation and system downtime, along with the potential that a third party will exploit our critical assets such as intellectual property, proprietary business information and data related to our customers, supplierscosts, employees and business partners. To the extent that such disruptions occur, our customers and suppliers may lose confidence in our solutions and we may lose business or brand reputation, resulting in a material and adverse effect on our business operating results and financial condition.

There is risk related to acquisitions.

We plan to continue to grow our business organically. However, from time to time, we may consider opportunistic strategic acquisitions that we believe support our long-term business strategy. We face significant competition from numerous other companies, many of which will have greater financial resources than we do, when considering acquisition opportunities. Accordingly, attractive acquisition opportunitiesrelationships. These benefits may not be available to us. There canas readily achievable as a smaller, stand-alone company.

Because the Distribution will significantly increase the number of free trading shares it is likely many Ault stockholders will sell their common stock which may depress our stock price.

Immediately after the Distribution, it is possible that there may be no assurance that we will be successful in identifying or completing any future acquisitions. Acquisitionsa larger number of technology companies involve operational risks and uncertainties and acquired companies may have unforeseen liabilities, key employee and customer retention problems and other problems that could negatively affectsellers than purchasers of the Company’s common stock, as our organization. Wenew stockholders may not be able to complete future acquisitionsinterested in owning our common stock and if we do completemay sell their shares of our common stock. If such acquisitions, we may nota situation occurs, the price of our common stock would likely be able to successfully integrate the operations, management, productsmaterially reduced. See “Trading and services of the entities that we acquire and eliminate redundancies. The integration processDividend Information.” Any such decline could result in the loss of key employees or disruption of the combined entity’s ongoing business or inconsistencies in standards, controls, procedures, and policies that adversely affecthamper our ability to maintain relationships with customersraise capital.

The price of our common stock may have little or no relationship to the historical bid prices of our common stock on the OTCQB.

There has been a relatively illiquid public market for our common stock on the OTCQB. The average daily trading volume of our shares of common stock during 2022 was 1,411 shares as of December 27, 2022. It is difficult to predict the broader market demand for our common stock and employees or achievethus the anticipated benefitsprice of our common stock after giving effect to the Distribution. As a result, you should not rely on these historical sales prices as they may differ materially from subsequent prices and the trading volume of our common stock following the Distribution.

The rights of the transaction. The integration processholders of common stock may also require significant time and attention frombe impaired by the potential issuance of preferred stock.

Our charter documents give our management that they would otherwise direct at servicing existing business and developingBoard of the right to create new business. Weseries of preferred stock. As a result, our Board may, not be able to realize any projected cost savings, synergieswithout stockholder approval, issue preferred stock with voting, dividend, conversion, liquidation or other benefits associatedrights which could adversely affect the voting power and equity interest of the holders of common stock. Preferred stock, which could be issued with the right to more than one vote per share, could be utilized as a method of discouraging, delaying or preventing a change of control. The possible impact on takeover attempts could adversely affect the price of our common stock. Although we have no present intention to issue any shares of preferred stock, we may issue such acquisition we complete. We cannot determine all potential events, facts and circumstances that could resultshares in loss or give assurances that our investigation or mitigation efforts will be sufficient to protect against any such loss.the future.

Risks Related to Our Securities and This Offering

Our stock price may be volatile, which could result in substantial losses to investors and you may not be ablelitigation.

In addition to resell your shares at or abovechanges to market prices based on our results of operations and the purchase price.

Thefactors discussed elsewhere in this “Risk Factors” section, the market price of and trading volume for our common stock is likelymay change for a variety of other reasons, not necessarily related to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:

In addition, the securities markets have from time to time experienced significant price and volume fluctuationsextreme volatility that arehas often been unrelated to the operating performance of particular companies. Our stock at any time has historically traded on low volume on the OTCQB Market and, previously, on the NASDAQ Capital Market. Market and volumeThese broad market fluctuations may also materially and adversely affect the markettrading price of our common stock.

Our common stock is quoted on the Over-the-Counter Market and trading volumes have been limited.

As compared to a larger stock market with greater liquidity, our common stock is quoted on the OTCQB™, which is the middle tier of the Over-the Counter Market, or the OTC, reserved for companies that are registered and reporting with the SEC or a U.S. banking regulator. The volume of trading of our common stock on the OTCQB has been very thin. Therefore, an investor might find it more difficult than it would be on a larger stock exchange to dispose of, or to obtain accurate quotations as to the market value of, our securities.

We cannot be certain that a more active trading market will develop or, if developed, be sustained. We also cannot be certain that purchasers of our common stock will be able to resell their common stock at prices equal to or greater than their purchase price. The development of a public market having the desirable characteristics of depth, liquidity and orderliness depends upon the presence in the marketplace of a sufficient number of willing buyers and sellers at any given time. We do not have any control over whether there will be sufficient numbers of buyers and sellers. Accordingly, we cannot be certain that an established and liquid market for our common stock will develop or be maintained. The market price of our common stock could experience significant fluctuations in response to our operating results and other factors. In addition, the stock market in recent years has experienced extreme price andaverage daily trading volume fluctuationsof the securities of small companies can be very low, which may contribute to future volatility. Factors that often have been unrelated or disproportionate to the operating performance of individual companies. These fluctuations, and general economic and market conditions, maycould cause the market price of our common stock to decline substantially.fluctuate significantly include:

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Any of these factors, as well as broader market and industry factors, may result in large and sudden changes in the meaning of the rule, additional burdens imposed upon broker-dealers may discourage broker-dealers from effecting transactions in penny stocks, which could reduce the liquiditytrading volume of our common stock and have a material adverse effect on the trading market for our securities.

Our common stock ranks junior to all of our preferred stock and indebtedness.

Immediately following the completion of this offering, our outstanding preferred shares will have an aggregate liquidation preference of $[●] million. Included in this amount are shares of our Series B, Series C and Series D preferred stock, which have a liquidation preferences aggregating $3.5 million and [●] shares of our Series E Preferred Stock that will remain outstanding upon completion of the offering having an aggregate liquidation preference of $[●]. In addition, as of June 29, 2019, we had an aggregate of $6.0 million in debt and other liabilities.

In the event of our bankruptcy, liquidation or winding-up, our assets will be available to make payments to holders of our common stock only after all of our indebtedness and other liabilities and all of the liquidation preferences on any then outstanding Series B, Series C, Series D and Series E preferred stock have been paid. Consequently, if we are forced to liquidate our assets to pay our creditors, we may not have sufficient assets remaining to pay amounts to the holders of shares of our common stock then issued and outstanding.

We have a significant number of outstanding warrants, options and shares of convertible preferred stock, which may cause significant dilution to our shareholders, adversely impactingcould seriously harm the market price of our common stock, and making it more difficultregardless of our operating performance. This may prevent you from being able to sell your shares at or above the price you paid for us to raise funds through future equity offerings.

As of June 29, 2019, we had 11,343,011your shares, of common stock outstanding.if at all. In addition, asfollowing periods of volatility in the market price of a company’s shares, stockholders often institute securities class action litigation against that date we had outstanding warrants to acquire 3,451,594 sharescompany. Our involvement in any class action suit or other legal proceeding could divert our senior management’s attention and could adversely affect our business, financial condition, results of operations and prospects.

If equity research analysts do not publish research or reports about our business, or if they issue unfavorable commentary or downgrade our common stock, options to acquire 3,650,000 shares of our common stock and shares of convertible preferred stock convertible into an aggregate of 18,533,510 shares of our common stock. The issuance of shares of common stock upon the exercise of warrants or options or conversion of preferred stock would dilute the percentage ownership interest of all holders of our common stock, might dilute the book value per share of our common stock and would increase the number of our publicly traded shares, which could depress the market price of our common stock.

The fact that our shareholders, warrant holders and option holders can sell substantial amounts of our common stock in the public market, whether or not sales have occurred or are occurring, could make it more difficult for us to raise additional funds through the sale of equity or equity-related securities in the future at a time and price that we and our shareholders deem reasonable or appropriate, or at all.

We may issue additional shares of common or preferred stock in the future, which could dilute a shareholder’s ownership of common stock.

Our articles of incorporation authorize our board of directors, generally without shareholder approval, to, among other things, issue additional shares of common or preferred stock. The issuance of any additional shares of common or preferred stock would be dilutive to an existing shareholder’s ownership of our common stock. The issuance of preferred stock could impair the voting, dividend and liquidation rights of common shareholders without their approval. To the extent that we issue options or warrants to purchase common stock in the future and the options or warrants are exercised, our shareholders may experience further dilution. Holders of shares of our common stock have no preemptive rights that entitle holders to purchase their pro rata share of any offering of shares of any class or series and, therefore, shareholders may not be permitted to invest in future issuances of our common or preferred stock. 

Shares eligible for future sale may adversely affect the market.

From time to time, certain of our shareholders may decide to sell some or all of their shares of common stock that they currently hold or could acquire upon the conversion of our preferred stock or exercise of warrants or other derivative securities by means of ordinary brokerage transactions in the open market. Any substantial sale of our common stock may have a material adverse effect on the market price of our common stock.

Our management has broad discretion as to the use of the net proceeds from this offering.

Our management will have broad discretion in the application of the net proceeds of this offering. Accordingly, you will have to rely upon the judgment of our management with respect to the use of these proceeds. Our management may spend a portion or all of the net proceeds from this offering in ways that holders of our common stock may not desire or that may not yield a significant return or any return at all. Our management not applying these funds effectively could harm our business. Pending their use, we may also invest the net proceeds from this offering in a manner that does not produce income or that loses value. Please see “Use of Proceeds” below for more information.

You will experience immediate and substantial dilution as a result of this offering.

As of June 29, 2019, our net tangible book value was approximately$1.925 million, or $0.17 per share. Since the effective price per share of our common stock being offered in this offering is substantially higher than the net tangible book value per share of our common stock, you will suffer substantial dilution with respect to the net tangible book value of the common stock you purchase in this offering. Based on the assumed public offering price of $[●] per share of common stock being sold in this offering, which is the midpoint of the estimated offering range set forth on the cover page of this prospectus, and our net tangible book value per share as of June 29, 2019, if you purchase shares of common stock in this offering, you will suffer immediate and substantial dilution of $[●] per share (or $[●] per share if the underwriter exercises the over-allotment option in full) with respect to the net tangible book value of the common stock. See the section titled “Dilution” for a more detailed discussion of the dilution you will incur if you purchase securities in this offering.

We do not intend to pay cash dividends to our shareholders, so you will not receive any return on your investment in our common stock prior to selling your interest in the Company.

We have never paid any dividends to our common shareholders and do not foresee doing so. We currently intend to retain any future earnings for funding growth and, therefore, do not expect to pay any cash dividends in the foreseeable future. If we determine that we will pay cash dividends to the holders of our common stock, we cannot assure that such cash dividends will be paid on a regular basis. The success of your investment in our common stock will likely depend entirely upon any future appreciation.  As a result, you will not receive any return on your investment prior to selling your common stock and, for the other reasons discussed in this “Risk Factors” section and in the “Risk Factors” section of the documents incorporated herein by reference, you may not receive any return on your investment even when you sell your shares.decline.

If securities industry analysts do not publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our common stock could be negatively affected.

AnyThe trading market for our common stock may be influencedwill rely in part by anyon the research and reports that securities industryequity research analysts, over whom we have no control, publish about our business and us. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of us,our company, the market price andfor our common stock could decline. In the event we obtain securities or industry analyst coverage, the market trading volumeprice of our common stock could be negatively affected. In the event we are covered by analysts, anddecline if one or more of suchequity analysts downgrade our common stock or if those analysts issue unfavorable commentary, even if it is inaccurate, or cease publishing reports about us or our business.

If our shares of common stock are subject to the penny stock rules, it would become more difficult to trade our shares.

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or otherwise reportsauthorized for quotation on us unfavorably, or discontinues coverage of us, the marketcertain automated quotation systems, provided that current price and market trading volume information with respect to transactions in such securities is provided by

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the exchange or system. Unless we are listed on the NYSE American, or the Nasdaq Stock Market or if the price of our common stock could be negatively affected.

We have limited the circumstances in whichis less than $5.00 (as it is now), our directorscommon stock will be liablea penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for monetary damages.the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.

We do not anticipate paying any dividends on our common stock for the foreseeable future.

We have includednot paid any dividends on our common stock to date, and we do not anticipate paying any such dividends in our articles of incorporation a provision to eliminate the liability of directors for monetary damages to the maximum extent permittedforeseeable future. We anticipate that any earnings experienced by California law. The effect of this provisionus will be retained to reducefinance the situations in which we or our shareholders will be able to seek monetary damages from our directors. Our bylaws also have a provision providing for indemnificationimplementation of our directorsoperational business plan and executive officers and advancement of litigation expenses to the fullest extent permitted or required by California law, including circumstances in which indemnification is otherwise discretionary. Also, we have entered into agreements with our officers and directors in which we similarly agreed to provide indemnification that is otherwise discretionary. Such indemnification may be available for liabilities arising in connection with this offering.expected future growth.

Furthermore, we may choose to raise additional capital through the sale of equity or convertible debt securities due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. We may also choose to engage in strategic acquisitions through the issuance of shares of our stock. New investors will experience further dilution if any of our outstanding options or warrants are exercised, new options are issued and exercised under our equity incentive plans or we issue additional shares of common stock, other equity securities, convertible debt securities or other derivative securities in the future.

The pro forma information discussed above is illustrative only and will change based on the actual public offering price, number of shares and other terms of this offering determined at pricing.