FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) ~~OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For~~OF ~~the~~THE ~~quarterly~~SECURITIES ~~period~~EXCHANGE ~~ended~~ACT ~~November 28,~~OF ~~2004~~1934

For the quarterly period ended November 27, 2005

Commission file number 0-12611

AULT INCORPORATED

MINNESOTA		41-0842932
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
7105 Northland Terrace
Minneapolis, Minnesota 55428-1028
(Address of principal executive offices)
Registrant’s telephone number: (763) 592-1900

Registrant’s telephone number: (763) 592-1900

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

YES ý NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

YES o NO ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class of Common Stock		Outstanding at January 3, 2005
		Outstanding at
No par value		4,778,955 shares
Class of Common Stock		December 19, 2005
No par value		4,861,192 shares

Total pages 23

Exhibits Index on Page 19

PART 1. FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

AULT INCORPORATED & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Share and Per Share Amounts)

	(Unaudited)
	Three Months Ended						Six Months Ended
	Nov. 28 2004			Nov. 30 2003			Nov. 28 2004			Nov. 30 2003
	Nov. 27			Nov. 28			Nov. 27			Nov. 28
Net Sales	$	11,047		$	11,134		$	24,186		$	21,950
	2005			2004			2005			2004
Cost of Goods Sold	8,078			8,327			17,654			16,603
Net Sales	$	9,254		$	8,225		$	18,452		$	18,561
Gross Profit	2,969			2,807			6,532			5,347
Cost of Goods Sold	6,652			5,916			13,590			13,577
Gross Profit	2,602			2,309			4,862			4,984
Operating Expenses:
Marketing	~~1,109~~899			~~985~~912			21,~~081~~697			1,~~939~~696
Design Engineering	~~914~~807			~~863~~758			1,~~780~~504			1,~~742~~479
General and Administrative	1,~~269~~279			1,~~236~~157			2,~~702~~850			2,~~640~~456
Plant Closing Costs				223						321
	2,985			2,827			6,051			5,631
	3,292			3,307			6,563			6,642
Operating Loss	(383		)	(518		)	(1,189		)	(647		)
Operating Loss	(323		)	(500		)	(31		)	(1,295		)
Other Income (Expense):
Interest Expense	(~~144~~40		)	(~~139~~101		)	(~~282~~89		)	(~~298~~189		)
Other	~~(31~~5		)	(4529		)	~~(24~~95		)	(1516		)
	(175		)	(184		)	(306		)	(313		)
	(35		)	(130		)	6			(205		)
Loss Before Income Taxes	(~~498~~418		)	(~~684~~648		)	(~~337~~1,183		)	(~~1,608~~852		)
Income Tax Expense	—			1			82			2
Net Loss	(498		)	(684		)	(345		)	(1,608		)
Loss From Continuing Operations	(418		)	(649		)	(1,185		)	(854		)
Discontinued Operations	—			(5		)	—			31
Net Loss	(418		)	(654		)	(1,185		)	(823		)
Redeemable Convertible Preferred Stock Dividends	(36		)	(36		)	(72		)	(72		)
Net Loss Applicable to Common Stockholders	$	(~~534~~454	)	$	(~~720~~690	)	$	(~~417~~1,257	)	$	(~~1,680~~895	)
Net Loss Per Share Applicable to Common Stockholders:
Net Basic and Diluted Loss Per Common Share:
Basic	$	(0.11	)	$	(0.15	)	$	(0.09	)	$	(0.36	)
Continuing Operations	$	(0.09	)	$	(0.14	)	$	(0.26	)	$	(0.19	)
Diluted	$	(0.11	)	$	(0.15	)	$	(0.09	)	$	(0.36	)
Discontinued Operations	—			—			—			—
Loss Per Common Share	$	(0.09	)	$	(0.14	)	$	(0.26	)	$	(0.19	)
Common and Equivalent Shares Outstanding:
Basic	4,~~803~~861,~~318~~192			4,~~673~~803,~~706~~318			4,~~795~~821,~~870~~918			4,~~665~~795,~~659~~870
Diluted	4,~~803~~861,~~318~~192			4,~~673~~803,~~706~~318			4,~~795~~821,~~870~~918			4,~~665~~795,~~659~~870

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AULT INCORPORATED & SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

	(Unaudited)
	November 28, 2004		May 30, 2004
	November 27, 2005		May 29, 2005
Assets:
Current Assets
Cash and Cash Equivalents	$	1,506	$	1,058
Cash and Equivalents	$	3,996	$	2,191
Trade Receivables, Less Allowance for Doubtful Accounts of $673 at November 28, 2004; $476 at May 30, 2004	7,288		8,399
Trade Receivables, Less Allowance for Doubtful Accounts of $825 at November 27, 2005; $781 at May 29, 2005	5,136		5,766
Inventories	83,~~828~~996		83,~~737~~377
Prepaid Expenses and Other	1,990		1,384
Note Receivable JEC – Current Portion	1,125		563
Total Current Assets	19,612		19,578
Prepaid Expenses and Other	848		741
Other Assets	127		177
Total Current Assets	15,101		12,638
Property, Equipment and Leasehold Improvements:
Land	1,735		1,735
Building and Leasehold Improvements	764		764
Building and Leasehold Improvements	6,720		6,711
Machinery and Equipment	5,333		5,314
Machinery and Equipment	6,880		7,050
Office Furniture	391		344
Office Furniture	1,991		1,911
Data Processing Equipment	1,682		1,630
E.D.P. Equipment	2,189		2,009
	8,170		8,052
	19,515		19,416
Less Accumulated Depreciation	5,837		5,677
Less Accumulated Depreciation	9,193		8,743
Net Property Equipment and Leasehold Improvements	2,333		2,375
	10,322		10,673
Other Assets	79		106
Total Assets	$	30,061	$	30,428
Note Receivable JEC – Non-current Portion	1,125		1,687
Total Assets	$	18,638	$	16,806

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	(Unaudited)
	November 28, 2004			May 30, 2004
Liabilities and Stockholders’ Equity:
Current Liabilities
Note Payable to Bank	$	4,369		$	4,650
Current Maturities of Long-Term Debt	445			460
Accounts Payable	6,288			6,265
Accrued Compensation	1,553			1,165
Accrued Commissions	211			281
Other	318			487
Total Current Liabilities	13,184			13,308
Long-Term Debt, Less Current Maturities	2,219			2,313
Retirement and Severance Benefits, Less Current Portion	288			203
Redeemable Convertible Preferred Stock, No Par Value, 2,074 Shares Issued and Outstanding	2,074			2,074
Stockholders’ Equity:
Preferred Stock, No Par Value, Authorized, 1,000,000 Shares; None Issued.
Common Shares, No Par Value, Authorized 10,000,000 Shares; Issued and Outstanding 4,778,955 on November 28, 2004; and 4,705,083 on May 30, 2004;	21,317			21,173
Notes Receivable arising from the sale of common stock	(45		)	(45		)
Accumulated Other Comprehensive Loss	(831		)	(870		)
Accumulated Deficit	(8,145		)	(7,728		)
	12,296			12,530
	$	30,061		$	30,428

AULT INCORPORATED & SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

	(Unaudited)
	November 27, 2005			May 29, 2005
Liabilities and Stockholders’ Equity:
Current Liabilities
Note Payable to Bank	$	2,176		$	—
Current Maturities of Long-Term Debt	296			290
Accounts Payable	6,312			5,482
Accrued Compensation	923			978
Accrued Commissions	283			272
Other	477			350
Total Current Liabilities	10,467			7,372

Redeemable Convertible Preferred Stock, No Par Value, 2,074 Shares Issued and Outstanding; Liquidation Preference of $1,000 Per Share	2,074			2,074

Stockholders’ Equity:
Preferred Stock, No Par Value, Authorized, 1,000,000 Shares; None Issued.	—			—
Common Shares, No Par Value, Authorized 10,000,000 Shares; Issued and Outstanding 4,861,192 on November 27, 2005; and 4,806,116 on May 29, 2005;	21,520			21,390
Notes Receivable arising from the sale of common stock	(42		)	(44		)
Accumulated Other Comprehensive Loss	(83		)	55
Accumulated Deficit	(15,298		)	(14,041		)
	6,097			7,360

	$	18,638		$	16,806

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AULT INCORPORATED & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

	(Unaudited)
	(Unaudited) Six Months Ended
	Six Months Ended
	November 27, 2005			November 28, 2004
	November 28, 2004			November 30, 2003
Cash Flows From Operating Activities:
Net Loss	$	(~~345~~1,185	)	$	(~~1,608~~823	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Adjustments to Reconcile Net Loss to Net Cash
Depreciation	491			655
Used in Operating Activities:
Depreciation	234			322
Gain on Disposal of Assets	(62		)
Changes in Assets and Liabilities:
(Increase) Decrease In:
Trade Receivables	~~1,015~~649			~~(906~~778		)
Inventories	27(698		)	~~248~~676
Prepaid and Other Expenses	(~~344~~68		)	~~195~~(130		)
Increase (Decrease) in:
Accounts Payable	~~(55~~742		)	~~310~~387
Accrued Expenses	~~199~~76			~~350~~(149		)
Net Cash Provided by (Used in) Operating Activities	988			(756		)
Discontinued Operations	—			(102		)
Net Cash Provided by (Used in) Operating Activities	(312		)	959
Cash Flows From Investing Activities:
Purchase of Equipment and Leasehold Improvements	(~~140~~132		)	(~~236~~122		)
Net Cash Used in Investment Activities	(140		)	(236		)
Discontinued Operations	—			(18		)
Net Cash Used in Investment Activities	(132		)	(140		)
Cash Flows From Financing Activities:
Net Borrowings (Payments) on Revolving Credit Agreements	~~(373~~2,176		)	~~973~~(116		)
Proceeds from Issuance of Common Stock	7294			272
Principal Payments on Long-Term Borrowings	(109		)	(143		)
Proceeds from Common Stock Receivable	2			—
Net Cash Provided by (Used in) Financing Activities	(410		)	832
Dividend Payments	(36		)	—
Effect of Foreign Currency Exchange Rate Changes on Cash	10			1
Principal Payments on Long-Term Borrowings	—			(109		)
Increase (Decrease) in Cash and Cash Equivalents	448			(159		)
Discontinued Operations	—			(256		)
Cash and Cash Equivalents at Beginning of Period	1,058			1,100
Net Cash Provided by (Used in) Financing Activities	2,236			(409		)
Cash and Cash Equivalents at End of Period	$	1,506		$	941
Effect of Foreign Currency Exchange Rate Changes on Cash	13			—
Increase in Cash and Cash Equivalents	1,805			410
Cash and Cash Equivalents at Beginning of Period	2,191			837
Cash and Cash Equivalents at End of Period	$	3,996		$	1,247
Non-Cash Transaction:
Issuance of Common Stock to Pay Preferred Stock Dividends	7236			72
Trade Receivable Converted to a Note Receivable	~~185~~—			—185

AULT INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SECOND QUARTER ENDED NOVEMBER 2827, 20042005

1. Summary of Consolidation Principles

The accompanying consolidated financial statements include the accounts of Ault Incorporated, its wholly owned subsidiaries, Ault Electronics Shanghai Ltd., Ault International Trade Shanghai Co., Ltd., and Ault Xianghe Co. ~~Ltd, and~~ ~~Ault Korea Corporation~~Ltd. All intercompany transactions and balances have been eliminated. The foreign currency translation adjustment represents the translation into United States dollars of the Company’s investment in the net assets of its foreign subsidiaries in accordance with the provisions of FASB Statement No. 52.

The balance sheet of the Company as of November 28 27, ~~2004~~2005, and the related statements of operations and cash flows for the three and six months ended November 28 27, ~~2004~~ 2005 and November 30 28, ~~2003~~2004 have been prepared without being audited. In the opinion of the management, these statements reflect all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the position of Ault Incorporated and subsidiaries as of November 28 27, ~~2004~~2005 and November 30 28, ~~2003~~ 2004, and the results of operations and cash flows for all periods presented.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. Therefore, these statements should be read in conjunction with the financial statements and notes thereto included in the Company’s May 30 29, ~~2004~~2005 Form 10-K/A.

~~The~~Prior results ofhave ~~operations for~~been ~~the~~restated ~~interim~~as ~~periods~~disclosed ~~are~~in ~~not~~the ~~necessarily~~Company’s ~~indicative of results that will be~~May 29, ~~realized~~2005 ~~for~~form ~~the full fiscal year~~10-K/A.

~~Management plans –~~ The ~~financial~~results ~~statements have been prepared on a going-concern basis, which contemplates the realization~~ of ~~assets and satisfaction of liabilities in the~~ ~~normal~~operations course of business. The Company sustained net losses applicable to common stockholders of $4,952,667 in fiscal year 2004 and $7,692,073 in fiscal year 2003 and at May 30, 2004 had an accumulated deficit of $7,728,065. The Company utilized $913,911 of cash for ~~operating activities in fiscal year 2004. In~~ the ~~first~~interim ~~six~~periods ~~months~~are ofnot ~~fiscal~~necessarily ~~2005,~~indicative ~~the Company has recorded a net loss applicable to common stockholders~~ of ~~$417,000. The~~ ~~Company has provided~~results ~~$988,000~~that ~~of cash from operating activities in the first six months of fiscal year 2005. Future operations~~ will ~~require~~ ~~the~~be ~~Company~~realized tofor borrow additional funds. The Company has a financing agreement, which includes a $7,000,000 line-of-credit agreement through December 6, 2006. There was an outstanding balance on this line-of-credit at November 28, 2004 of $1,849,000. The Company believes it can remain in compliance with covenants in the ~~financing agreement,~~full ~~as amended, through~~ fiscal ~~2005~~year.

~~Based~~Management onplans ~~available~~– The ~~funds~~financial statements have been prepared on a going-concern basis, ~~current~~which contemplates ~~plans~~the ~~and~~realization ~~business~~of ~~conditions~~assets ~~management~~and ~~believes~~satisfaction ~~that~~of liabilities in the normal course of business. The Company’s sustained ~~available~~net ~~cash~~losses applicable to common stockholders of $5,472,302 ~~borrowings~~in 2005 and ~~amounts~~$5,793,646 ~~generated~~in ~~from~~2004 ~~operations~~and at May 29, ~~will~~ be2005 ~~sufficient~~had toan ~~meet~~accumulated ~~the~~deficit of $14,041,346. The Company’s ~~cash~~provided $1,479,695 ~~requirements~~of cash for operating activities in 2005. In the ~~next~~first 12 six months~~. The~~ ~~assumptions~~of ~~underlying~~fiscal ~~this~~2006, the ~~belief~~Company ~~include~~has recorded a net loss applicable to common stockholders of $1,257,000 and ~~among~~had ~~other~~an ~~things~~accumulated deficit of $15,298,000 ~~that~~as ~~there~~of ~~will~~November 27, 2005. The beCompany nohas ~~material~~used ~~adverse~~$312,000 of ~~developments~~cash infor operating activities for the ~~business~~first orsix ~~market~~months inof ~~general~~fiscal year 2006. ~~There~~Future ~~can~~operations bemay norequire ~~assurances~~the Company ~~however~~to ~~that~~borrow ~~those~~additional funds. The ~~assumed~~Company ~~events~~has ~~will~~a ~~occur. If~~financing ~~management’s plans~~agreement, ~~are~~which ~~not~~includes ~~achieved~~a $7,000,000 ~~there~~line-of-credit agreement ~~may~~through beDecember 4, ~~further~~2006. There ~~negative~~was ~~effects~~an outstanding balance on this line-of-credit at November 27, 2005 in the ~~results~~amount of ~~operations~~ ~~and~~$2,176,000 ~~cash~~with ~~flows~~current availability of $3,509,000 ~~which~~as determined ~~could~~by ~~have~~the aCompany’s ~~material~~borrowing ~~adverse~~base. The ~~effect~~Company onis out of compliance with the covenants in the financing agreement. The Company is currently in discussions with the lending facility to determine if an amendment or waiver will be necessary.

6Based on available funds, current plans and business conditions management believes that the Company’s available cash, borrowings and amounts generated from operations, will be sufficient to meet the Company’s cash requirements for the next 12 months and the foreseeable future. The assumptions underlying this belief include, among other things, that there will be no material adverse developments in the business or market in general. There can be no assurances however that those assumed events will occur. If management’s plans are not achieved, there may be further negative effects on the results of operations and cash flows, which could have a material adverse effect on the Company.

2Subsequent events – On December 16, 2005, SL Industries, Inc., ~~Stock~~a ~~Compensation~~New Jersey corporation (“SL Industries”), Lakers Acquisition Corp., a Minnesota corporation and a wholly owned subsidiary of SL Industries (“Purchaser”), and Ault Incorporated, a Minnesota corporation (“Ault” or the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”).

The Company’s 1986 and 1996 stock option plan has reserved 600,000 and 1,500,000 common shares, respectively, for issuance under qualified and nonqualified stock options for its key employees and directors. Option prices are the market value of the stock at the time the option was granted. Options become exercisable as determined at the date of grant by a committee of the Board of Directors. Options expire ten years after the date of grant unless an earlier expiration date is set at the time of grant.6

~~The~~Pursuant to the terms of the Merger Agreement, Purchaser will commence ~~Company~~a ~~has~~tender ~~adopted~~offer (the ~~disclosure-only~~“Offer”) ~~provisions~~for all of ~~SFAS~~the ~~No.~~issued ~~123,~~and ~~Accounting~~outstanding ~~for~~shares ~~Stock-Based~~of common ~~Compensation. Accordingly~~stock, no ~~compensation~~par ~~cost~~value ~~has~~per ~~been recognized~~share ~~for~~ (the ~~stock~~“Company ~~option~~Common ~~plan~~Stock”), asof ~~all~~Ault, including ~~options~~associated ~~were~~preferred ~~issued~~stock rights (the “Rights” and together with ~~exercised~~the ~~prices~~Company Common Stock, the “Shares” and each share thereof, a “Share”), at ora price ~~above~~equal ~~fair~~to ~~value~~$2. ~~Had~~90 per Share net to the seller in cash (or any higher price ~~compensation~~per ~~cost~~Share ~~for~~paid in the ~~Company’s~~Offer) ~~stock~~(the ~~option~~“Offer ~~plans~~Price”), ~~been~~without ~~determined~~interest ~~based~~(and subject to applicable withholding taxes). The Offer commenced on December 23, 2005. Upon the ~~fair~~terms ~~value~~and atsubject to the ~~grant~~conditions ~~date~~set ~~for~~forth ~~awards~~ in ~~2004~~the Merger Agreement, following a successful completion of the Offer, Purchaser will be merged with and ~~2003~~into ~~consistent~~Ault with Ault surviving the ~~provisions~~merger as a wholly owned subsidiary of ~~SFAS~~SL NoIndustries (the “Merger”). ~~123,~~In the ~~Company’s~~Merger, ~~net~~each ~~loss~~Share (other ~~and~~than ~~net~~Shares ~~loss~~owned ~~per~~by ~~share~~SL Industries, Purchaser, or shareholders, if any, ~~would~~who have ~~changed~~perfected statutory dissenters’ rights under Minnesota law) will be converted into the right to receive the ~~pro~~Offer ~~forma~~Price, ~~amounts~~without ~~indicated~~interest ~~below:~~(and subject to applicable withholding taxes).

~~Amounts~~Discontinued operations - On May 20, 2005, the Company completed the sale of its wholly owned subsidiary, Ault Korea Corporation (“Ault Korea”), to JEC Korea Co., Ltd (“JEC”) for $3.7 million. The agreement includes the receipt of $1,472,000 in ~~thousands~~cash and a secured note in the amount of $2,250,000. The transaction ~~except~~resulted ~~per~~in ~~share~~a loss of approximately $2,442,000 and the ~~amounts~~reclassification of the Korean subsidiary activity as “discontinued operations” for all periods presented.

	Three Months Ended						Six Months Ended
	Nov. 28 2004			Nov. 30 2003			Nov. 28 2004			Nov. 30, 2003
Net loss applicable to common stockholders:
as reported	$	(534	)	$	(720	)	$	(417	)	$	(1,680	)
pro forma	(596		)	(802		)	(530		)	(1,838		)
per share, basic, as reported	(0.11		)	(0.15		)	(0.09		)	(0.36		)
per share, diluted, as reported	(0.11		)	(0.15		)	(0.09		)	(0.36		)
per share, basic, pro forma	(0.12		)	(0.17		)	(0.11		)	(0.39		)
per share, diluted, pro forma	(0.12		)	(0.17		)	(0.11		)	(0.39		)

The sale includes all assets and liabilities of Ault Korea Corporation and the use of the “Ault Korea” name in Korea for a period of three years. Ault Korea includes the property in Seoul, South Korea and approximately 110 employees. As part of the terms of the agreement, JEC has the rights to sell power conversion products in Korea while Ault will have rights to sell the same power conversion products throughout the rest of the world. Prior to this transaction, JEC was a supplier of Ault, but otherwise no material relationship existed between Ault and JEC, or their respective affiliates, directors or officers, or any associates of their directors and officers.

3.The ~~Inventories~~secured note receivable is scheduled to be paid in four equal installments of $562,500 in December 2005, June 2006, December 2006 and the final installment in June 2007.

~~The~~Revenues ~~components~~and results of ~~inventory~~operations ~~(in~~for ~~thousands)~~the atKorean ~~November~~subsidiary ~~28,~~for ~~2004~~the ~~and~~six-month ~~May~~period presented ~~30,~~include ~~2004~~the ~~are as follows~~following:

	November 28, 2004		May 30, 2004
Raw Materials	$	4,704	$	4,601
Work-in-process	2,270		2,000
Finished Goods	1,854		2,136
	$	8,828	$	8,737

(in thousands)

4. Warranty

	Quarter Ended
	November 28, 2004
Net Sales	$	5,740

Income from Discontinued Operations	31

The Company offers its customers up to a three-year warranty on products. Warranty expense is determined by calculating the historical relationship between sales and warranty costs and applying the calculation to the current period’s sales. Based on warranty repair costs and the rate of return, the Company periodically reviews and adjusts its warranty accrual. Actual repair costs are offset against the reserve. The following table shows the fiscal 2005 year-to-date activity for the Company’s warranty accrual (in thousands):7

	FY 2005		FY 2004
Beginning Balance	$	125	$	134
Charges and Costs Accrued	34		11
Less Repair Costs Incurred	15		—
Ending Balance	$	144	$	145

2. Stock Compensation

7The Company’s 1986 and 1996 stock option plan has reserved 600,000 and 1,500,000 common shares, respectively, for issuance under qualified and nonqualified stock options for its key employees and directors. Option prices are the market value of the stock at the time the option was granted. Options become exercisable as determined at the date of grant by a committee of the Board of Directors. Options expire ten years after the date of grant unless an earlier expiration date is set at the time of grant.

5The Company has adopted the disclosure-only provisions of SFAS No. 123, ~~Plant~~Accounting ~~Closing~~for Stock-Based Compensation. Accordingly, no compensation cost has been recognized for the stock option plan, as all options were issued with exercised prices at or above fair value. Had compensation cost for the Company’s stock option plans been determined based on the fair value at the grant date for awards in 2004 and 2003 consistent with the provisions of SFAS No. 123, the Company’s net loss and net loss per share would have changed to the pro forma amounts indicated below:

OnAmounts July 17, 2003, the Company announced the consolidation of its manufacturing operations. The consolidation includes the closing of its Minneapolis production operations, eliminating approximately 40 jobs in ~~assembly~~thousands, ~~equipment maintenance,~~except ~~procurement~~per ~~and~~share administrative support and the integration of production into Ault’s other manufacturing plants. Ault’s engineering, documentation, safety certification/reliability, sales, marketing and administrative services will remain at the Minneapolis headquarters facility. The consolidation was complete in February 2004 with the last payment for related liabilities made in August 2004.amounts

A summary of the restructuring activity during the six-month period ending November 28, 2004 is as follows:

	Three Months Ended						Six Months Ended
	Nov. 27, 2005			Nov. 28, 2004			Nov. 27, 2005			Nov. 28, 2004
Net loss applicable to common stockholders:
as reported	$	(454	)	$	(690	)	$	(1,257	)	$	(895	)
pro forma	(470		)	(752		)	(1,304		)	(1,008		)
per share, basic, as reported	(0.09		)	(0.14		)	(0.26		)	(0.19		)
per share, diluted, as reported	(0.09		)	(0.14		)	(0.26		)	(0.19		)
per share, basic, pro forma	(0.10		)	(0.16		)	(0.27		)	(0.21		)
per share, diluted, pro forma	(0.10		)	(0.16		)	(0.27		)	(0.21		)

		Balance at May 30, 2004			Current Period Plant Closing Charges			Cash Payments			Restructuring Liabilities at November 28, 2004
Employee termination costs		$	15,000		$	0		$	15,000		$	0

3. Inventories

6.The ~~Debt~~components of inventory (in thousands) at November 27, 2005 and May 29, 2005 are as follows:

The Company has a financing agreement, which includes a $7,000,000 revolving line-of-credit agreement through December 6, 2006. Interest on advances is at the prime rate plus 2% (prime plus 5% default rate) for fiscal year 2005. The rate at November 28, 2004 was 7.00% and on November 30, 2003 was 11.00%. All advances are due on demand and are secured by all assets of the Company. The Company’s financing agreement contains financial covenants, which require the Company, among other things, to maintain a minimum capital base, and also impose certain limitations on additional capital expenditures and the payment of dividends. At the end of fiscal 2004, the Company’s net worth and income before taxes did not meet the minimum of the credit agreement. The Company received a waiver and amendment for these covenants. During the second quarter of fiscal 2005, the Company violated the financing agreement covenants and subsequent to quarter-end received a waiver and an amended agreement with less restrictive covenants. Following the January 2005 waiver, the Company believes the provisions imposed by this credit agreement are achievable based on the Company’s expected operating results for the next year. The availability of the line is based on the outstanding receivables of the Company; the amount available at November 30, 2004 was $2,995,000. There were advances outstanding on the revolving line of credit of $1,849,000 and $1,965,000 at November 28, 2004 and May 30, 2004. Also, the Company’s Korean subsidiary maintains an unsecured $3,370,000 credit facility agreement to cover bank overdrafts, short-term financing, and export financing at a rate of 6.11%. Advances outstanding relating to the Korean facility were $2,519,000 and $2,685,000 at November 28, 2004 and May 30, 2004, respectively.

	November 27, 2005		May 29, 2005
Raw Materials	$	2,816	$	1,701
Work-in-process	124		514
Finished Goods	1,056		1,162
	$	3,996	$	3,377

~~Long-term~~4. ~~debt (in thousands) including current maturities contain the following:~~Warranty

	November 28, 2004		May 30, 2004
8.05% term loan, due in monthly installments of $28,756, including interest to February 2015, collateralized by the Company’s headquarters building in Minneapolis	$	2,374	$	2,465
5.3% uncollateralized term loan, due in January 2005	290		290
7.94% term loan, paid during 2004	—		18
Total	$	2,664	$	2,773
Less current maturities	445		460
	$	2,219	$	2,313

The Company offers its customers up to a three-year warranty on products. Warranty expense is determined by calculating the historical relationship between sales and warranty costs and applying the calculation to the current period’s sales. Based on warranty repair costs and the rate of return, the Company periodically reviews and adjusts its warranty accrual. Actual repair costs are offset against the reserve. The following table shows the fiscal 2006 and fiscal 2005 year-to-date activity for the Company’s warranty accrual (in thousands):

	FY 2006		FY 2005
Beginning Balance	$	134	$	125

Charges and Costs Accrued	36		34

Less Repair Costs Incurred	18		15

Ending Balance	$	152	$	144

~~7. Stockholders’ Equity~~ 8

				Six Months Ended November 28, 2004
				($000)
Total Stockholders’ Equity – May 30, 2004				$	12,530
Net Loss	$	(345	)
Net change in Foreign currency translation adjustment	39
Comprehensive Income (Loss)				(306		)
Issue 48,875 shares of common stock in accordance with stock purchase plan				72
Preferred Stock Dividends Declared				(72		)
Preferred Stock Dividends Paid with Common Stock				72
Total Stockholders’ Equity				$	12,296

5. Debt

The Company has a financing agreement, which includes a $7,000,000 revolving line-of-credit agreement through December 4, 2006. Interest on advances is at the prime rate plus 2% (prime plus 5% default rate) for fiscal year 2006. The rate at November 27, 2005 was 9.00% and on May 29, 2005 was 8.00%. All advances ~~Net~~are ~~Loss~~due ~~Per~~on ~~Common~~demand ~~Share~~and are secured by all assets of the Company. The Company’s financing agreement contains financial covenants, which require the Company, among other things, to maintain a minimum capital base, and also impose certain limitations on additional capital expenditures and the payment of dividends. At the end of the second quarter of fiscal 2006, the Company’s net worth and income before taxes did not meet the minimum of the credit agreement. The Company is currently in discussions with the lending facility to determine if an amendment or waiver will be necessary. The availability of the line is based on the outstanding receivables of the Company; the amount available at November 27, 2005 was $3,509,000. There were advances outstanding on the revolving line of credit of $2,176,000 at November 27, 2005 with none outstanding at May 29, 2005.

~~Basic~~Long-term ~~and~~debt ~~diluted earnings per share are presented~~ (in ~~accordance with Statement of Financial Accounting Standards (SFAS~~thousands) ~~No. 128, Earnings per Share. The~~ ~~Redeemable~~including ~~Convertible~~current ~~Preferred~~maturities ~~Stock~~contain ~~and~~the ~~stock options had no effect on diluted weighted average shares outstanding, as they were anti-dilutive.~~following:

	Three Months Ended						Six Months Ended
	November 27,		May 29,
	November 28, 2004			November 30, 2003			November 28, 2004			November 30, 2003
	2005		2005
Loss Applicable to Common Shareholders (in thousands)	$	(534	)	$	(720	)	$	(417	)	$	(1,680	)
5.3% uncollateralized term loan, due in January 2006	296		290
Basic – Weighted Average Shares Outstanding	4,803,318			4,673,706			4,795,870			4,665,659
Diluted – Weighted Average Shares Outstanding	4,803,318			4,673,706			4,795,870			4,665,659
Basic Loss per Share	$	(0.11	)	$	(0.15	)	$	(0.09	)	$	(0.36	)
Diluted Loss per Share	$	(0.11	)	$	(0.15	)	$	(0.09	)	$	(0.36	)

96. ~~Accounting~~Stockholders’ ~~Pronouncements~~Equity

In December 2004, the Financial Accounting Standards Board issued a revision to Statement of Financial Accounting Standards 123 (SFAS 123(R)), Share-Based Payment. The revision requires all entities to recognize compensation expense in an amount equal to the fair value of share-based payments granted to employees. The statement eliminates the alternative method of accounting for employee share-based payments previously available under Accounting Principles Board Opinion No. 25. The Statement is effective for the Company beginning in the second quarter of fiscal 2006. The Company has not completed the process of evaluating the impact that will result from adopting SFAS 123(R).

				Six Months Ended November 27, 2005
				($000)
Total Stockholders’ Equity – May 29, 2005				$	7,360
Net Loss	$	(1,185	)
Net change in Foreign currency translation adjustment	(138		)
Comprehensive Loss				(1,323		)
Issue 41,003 shares of common stock in accordance with stock purchase plan				94
Preferred Stock Dividends Declared				(72		)
Preferred Stock Dividends Paid with Common Stock				36
Payment of receivable from sale of common stock				2
Total Stockholders’ Equity – November 27, 2005				$	6,097

~~ITEM~~7. 2Net ~~- MANAGEMENT~~Loss ~~DISCUSSION~~Per ~~AND~~Common ~~ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS~~Share

Basic and diluted earnings per share are presented in accordance with Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per Share. The Redeemable Convertible Preferred Stock and stock options had no effect on diluted weighted average shares outstanding, as they were anti-dilutive.

	Three Months Ended						Six Months Ended
	November 27, 2005			November 28, 2004			November 27, 2005			November 28, 2004
Loss Applicable to Common Shareholders (in thousands)	$	(454	)	$	(690	)	$	(1,257	)	$	(895	)
Basic – Weighted Average Shares Outstanding	4,861,192			4,803,318			4,821,918			4,795,870
Diluted – Weighted Average Shares Outstanding	4,861,192			4,803,318			4,821,918			4,795,870
Basic Loss per Share	$	(0.09	)	$	(0.14	)	$	(0.26	)	$	(0.19	)
Diluted Loss per Share	$	(0.09	)	$	(0.14	)	$	(0.26	)	$	(0.19	)

8. Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board issued a revision to Statement of Financial Accounting Standards 123 (SFAS 123(R)), Share-Based Payment. The revision requires all entities to recognize compensation expense in an amount equal to the fair value of share-based payments granted to employees. The statement eliminates the alternative method of accounting for employee share-based payments previously available under Accounting Principles Board Opinion No. 25. The Statement is effective for the Company beginning in the first quarter of fiscal 2007. The Company has not completed the process of evaluating the impact that will result from adopting SFAS 123(R).

ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

BUSINESS OVERVIEW

Ault’s power conversion products are used to adapt alternating current (AC) to provide a source of power at various levels up to more than one kilowatt of continuous power for a wide variety of electronic equipment. A significant amount of the Company’s products are located outside the equipment they power as a wall plug-in or as in-line components. Both of these styles are generally referred to as external power conversion products. A smaller percentage of the Company’s products are located inside the equipment they power and are generally known as internal power conversion devices. Each product configuration, external and internal, offers distinct advantages to the OEM buyer. Internal power products are more generally accepted among design engineers across all segments of the electronic original equipment market (EOEM). Internal power has traditionally been the norm in product design and, in terms of range, it provides greater latitude especially in applications beyond 100 watts. External power still ranks as a high growth area in the power supply industry due to the increasing emphasis on smaller and portable products that perform increasingly sophisticated functions. Ault’s business strategy is to offer OEMs in these markets an expanding line of high-quality power conversion products, diverse design engineering expertise and customized customer services.

Prior results have been restated as disclosed in the Company’s May 29, 2005 form 10-K/A.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of the financial condition and results of operations are based on the consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those involving significant judgments and uncertainties which could potentially result in materially different results under different assumptions and conditions. Application of these policies is particularly important to the portrayal of the financial condition and results of operations. The Company believes the accounting policies described below meet these characteristics. All significant accounting policies are more fully described in the notes to the consolidated financial statements included in the Company’s annual report on Form 10-K/A.

Revenue Recognition – The Company’s policy is to recognize revenue for product sales when title transfers and risk of loss has passed to the customer, which is generally upon acceptance of the product by the overseas freight carrier. Judgments are required in evaluating the credit worthiness of our customers. Credit is not extended to customers and revenue is not recognized until the Company has determined that the risk of uncollectibility is minimal.

Inventory Valuation – Inventory is written down for estimated surplus and discontinued inventory items. The amount of the write-down is determined by analyzing historical and projected sales information, plans for discontinued products and other factors. Changes in sales volumes due to unexpected economic or competitive conditions are among the factors that would result in materially different amounts for this item.

Allowance for Doubtful Accounts – An allowance is established for estimated uncollectible accounts receivable. The required allowance is determined by reviewing customer accounts and making estimates of amounts that may be uncollectible. Factors considered in determining the amount of the reserve include the age of the receivable, the financial condition of the customer, general business, economic and political conditions, and other relevant facts and circumstances. Unexpected changes in the aforementioned factors would result in materially different amounts for this item.

Product Warranties – The Company’s products are sold with warranty provisions that require it to remedy deficiencies in quality or performance over a specified period of time, 36 months, at no cost to the Company’s customers. The Company’s policy is to establish warranty reserves at levels that represent its estimate of the costs that will be incurred to fulfill those warranty requirements at the time that revenue is recognized. The Company believes that its recorded liabilities are adequate to cover its future cost of materials, and overhead for the servicing of its products sold through that date. If there is an actual product failure, or material or service delivery costs differ from the Company’s estimates, its warranty liability would need to be revised accordingly.

Income Taxes – The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes,” which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between book and tax basis of recorded assets and liabilities. SFAS 109 also requires that deferred tax assets be reduced by a valuation allowance if it is likely that some portion or the entire deferred tax asset will not be realized. Based upon prior taxable income and estimates of future taxable income, the Company has determined that it is likely that its net deferred tax asset will not be fully realized in the future. Thus a full valuation allowance has been established. If actual taxable income varies from these estimates, the Company may be required to change the valuation allowance against the deferred tax assets resulting in a change in income tax expense (benefit), which will be recorded in the consolidated statement of operations.

MANAGEMENT PLANS

In July 2003, Ault announced the decision to consolidate ~~manufacturing~~ manufacturing operations. Ault was one of the last power supply companies to maintain manufacturing in the United States. The decision to consolidate was driven by a goal to return to profitability ~~by the end of the fourth quarter of fiscal 2004~~ as well as the desire to continue a high level of service to global OEM customers.

Last fiscal year was spent on the execution of the consolidation plan. The first phase of the consolidation went smoothly which included the closing of our US-based production in Minneapolis. This phase was completed in February 2004. The Company is benefiting in the following ways:

World Class Manufacturing – Ault Xianghe (China) is developing into a world-class facility. China’s annual volume output has more than tripled due to the transition of many product families from North America over the past year and the transfer of the Power General internal power supplies resulting from the acquisition in fiscal 2003. Ault has also worked diligently to build a strong infrastructure by enhancing global IT capabilities for purchasing, design engineering and manufacturing. Ault Xianghe has also achieved ISO certification and had several successful audit visits from top OEM (original equipment manufacturer) customers.

Reduced Lead Times – Ault customers across all segments of the electronics industry appear to have one common need — orders with JIT (just-in-time) delivery dates. This trend prompted the Company to look for ways in all product categories to reduce lead times on top-selling power supplies. In October, the Company announced a five-week lead-time on its most popular standard products in the switch-mode power supply category. Most competitors are still averaging 8eight weeks. The Company believes meeting customers’ needs for quick-turn orders will earn Ault more business from current accounts as well as providing a competitive edge in earning new business.

Improved Margins - Gross margin has increased several percent over the prior period. Current year margin increased because of the cost reductions resulting from the transition of US manufacturing as well as increased sales volume from North America and Korea.12

Sales Review

Ault has traditionally been a major power supplier to the OEMs in the telecommunications market. This market hit bottom in calendar 2002, itand is now recovering with several niches performing well. One of these niches is the Power over Ethernet market. Dubbed PoE, Power over Ethernet is designed to supply power to any device on a local area network.

This technology has a broad range of applications including IP phones, security cameras, RFID tag readers, PDAs, access control systems and smart signs.

Ault has developed two single port, midspan power products to meet the needs of PoE users. The Company has launched initiatives to cost-reduce and re-design its midspan offering in anticipation of the continued growth of Power over Ethernet technology.

Ault has also transitioned the China sales team. There were two significant shifts in strategy: 1) Hire more seasoned salespeople that have contacts and experience in the local electronics market; and 2) focus efforts on Ault’s traditional segments of the communications and medical equipment markets. Ault is pursuing and closing business for applications in the data communications/telecommunications market that include high-end set-top boxes, routers and video phones. The future plan includes expanding business with current OEM customers as well as targeting other leaders in the growing communications and medical equipment market segments throughout China. The intent is to leverage Ault’s global reputation, long history of power supply design success and local presence to win additional business.

11The financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company sustained net losses applicable to common stockholders of $5,472,302 in 2005 and $5,793,646 in 2004 and at May 29, 2005 had an accumulated deficit of $14,041,346. The Company provided $1,479,695 of cash for operating activities in 2005. In the first six months of fiscal 2006, the Company has recorded a net loss applicable to common stockholders of $1,257,000 and had an accumulated deficit of $15,298,000 at November 27, 2005. The Company has used $312,000 of cash for operating activities for the first six months of fiscal year 2006. Future operations may require the Company to borrow additional funds. The Company has a financing agreement, which includes a $7,000,000 line-of-credit agreement through December 4, 2006. There was an outstanding balance on this line-of-credit at November 27, 2005 in the amount of $2,176,000 with current availability of $3,509,000 based on the Company’s borrowing base. The Company is out of compliance with the covenants in the financing agreement. The Company is currently in discussions with the lending facility to determine if an amendment or waiver will be necessary.

~~The~~Based ~~financial statements have been prepared~~ on aavailable ~~going-concern basis~~funds, ~~which~~ ~~contemplates~~current ~~the~~plans ~~realization of assets~~ and ~~satisfaction~~business ~~of liabilities in~~conditions ~~the~~management ~~normal~~believes ~~course~~that ofthe ~~business. The~~ Company’s ~~sustained~~available ~~net losses applicable to common stockholders of $4~~cash,~~952,667~~ ~~in fiscal~~borrowings ~~year 2004~~ and ~~$7,692,073~~amounts generated infrom ~~fiscal year 2003 and at May 30~~operations, ~~2004~~will ~~had~~be ~~an accumulated~~sufficient ~~deficit~~to ofmeet ~~$7,728,065. The~~ the Company’s ~~utilized $913,911 of~~ cash requirements for ~~operating activities in fiscal year 2004. In~~ the ~~first~~next ~~six~~12 months ofand ~~fiscal 2005,~~ the ~~Company~~foreseeable ~~has recorded a net loss applicable to common stockholders of $417,000~~future. The ~~Company~~assumptions ~~has~~underlying ~~provided~~this belief ~~$988~~include,~~000~~ ofamong ~~cash~~other ~~from~~things, ~~operating~~that ~~activities~~there inwill ~~the~~be ~~first~~no ~~six~~material ~~months of fiscal~~adverse ~~year~~developments ~~2005. Future~~in ~~operations will require~~ the ~~Company~~business toor ~~borrow~~market ~~additional~~in ~~funds~~general. ~~The~~ There ~~Company~~can ~~has~~be ano ~~financing~~assurances ~~agreement,~~however ~~which~~that ~~includes~~those assumed aevents ~~$7,000,000~~will ~~line-of-credit~~occur. If management’s ~~agreement~~plans ~~through~~are ~~December~~not 6achieved, ~~2006. There~~there ~~was~~may anbe ~~outstanding~~further ~~balance~~negative effects on ~~this~~the ~~line-~~results of~~-credit~~ operations atand ~~November~~cash 28flows, ~~2004~~ ofwhich ~~$1,849,000. The~~could ~~Company~~have ~~believes it~~a ~~can~~material ~~remain~~adverse ineffect ~~compliance~~on ~~with covenants in~~ the ~~financing agreement, as~~ ~~amended, through fiscal 2005~~Company.

Based on available funds, current plans and business conditions management believes that the Company’s available cash, borrowings and amounts generated from operations, will be sufficient to meet the Company’s cash requirements for the next 12 months. The assumptions underlying this belief include, among other things, that there will be no material adverse developments in the business or market in general. There can be no assurances however that those assumed events will occur. If management’s plans are not achieved, there may be further negative effects on the results of operations and cash flows, which could have a material adverse effect on the Company.

RESULTS OF OPERATIONS

Second Quarter Ended November 2827, 20042005

	Fiscal			Fiscal			Favorable / (Unfavorable)
($000)	~~2005~~2006			~~2004~~2005			Amount			Percent
Net Sales	$	119,~~047~~254		$	118,~~134~~225		$	~~(87~~1,029	)	(113	)%
Operating Loss	(~~323~~383		)	(~~500~~518		)	~~177~~135			3526	%

Net sales were $119,~~047~~254,000 for the second quarter of fiscal ~~2005~~2006 ~~down~~up 113% from $118,~~134~~225,000 for ~~the~~ the second quarter of fiscal ~~2004~~2005. The ~~decrease~~increase is due to ~~lower~~higher sales from North America and Europe of $~~422~~1,374,000 ~~offset~~and offset by ana ~~increase~~decrease in sales from Asia Pacific of $~~336~~345,000. The North American ~~decrease~~increase is primarily from aan ~~reduction~~increase in orders from two customers. The asCompany ~~they~~is ~~use~~expecting upsales ~~inventory.~~to increase to North America and Europe

Gross margin for the second quarter was 26.9 percent as a percent of sales, compared with 25.2 percent for the same period last year. Margins increased primarily due to the closure of manufacturing in the United States. Transferring the manufacturing to China, reduced production costs by $318,000 offset by higher than normal rework costs of $84,000. The rework was related to one customer and was completed in the second quarter of 2005.13

~~Operating~~through ~~expenses decreased in~~ the ~~second~~end ~~quarter~~ of ~~fiscal 2005 to $3,292,000 from $3,307,000 in~~ ~~the second quarter of~~ fiscal ~~2004~~2006. The ~~reduction~~ ofincrease ~~$223,000 in the second quarter of fiscal 2005~~ is ~~related~~due to ~~the~~an ~~cost~~expected oforder ~~closing~~increase ~~the United States manufacturing~~ in ~~fiscal~~sales ~~2004. This decrease was offset by additional expenses~~ to ~~increase~~two ~~sales~~existing incustomers ~~future~~as ~~periods. These~~their ~~expenses include additional sales people in China of $45,000,~~products ~~additional~~are ~~travel~~introduced ~~expense~~into in the ~~United States and Europe of $45,000, and additional freight expense of $34,000~~market.

~~Six~~Gross ~~Months~~margin ~~Ended~~for ~~November~~the second quarter was 28.1 percent as a percent of sales, ~~2004~~compared with 28.1 percent for the same period last year. Future margins may be adversely affected by the higher energy costs and the implementation of lead free initiatives required for our products.

	Fiscal			Fiscal			Favorable / (Unfavorable)
($000)	2005			2004			Amount		Percent
Net Sales	$	24,186		$	21,950		$	2,236	10	%
Operating Loss	(31		)	(1,295		)	1,264		98	%

Operating expenses increased in the second quarter of fiscal 2006 to $2,985,000 from $2,827,000 in the second quarter of fiscal 2005. The increase is primarily due to higher professional services costs of $149,000 and these costs are expected to continue at a similar rate through the rest of 2006.

NetSix salesMonths wereEnded $24,186,000November for the first six months of fiscal 2005 up 10% from $2127,950,000 for the first six months of fiscal 2004. The increase is due to the continued activity in North America and Korea, with an increase in sales to existing customers and new customers.2005

	Fiscal			Fiscal			Favorable / (Unfavorable)
($000)	2006			2005			Amount			Percent
Net Sales	$	18,452		$	18,561		$	(109	)	(1	)%
Operating Loss	(1,189		)	(647		)	(542		)	(84	)%

~~Gross~~Net ~~margin~~sales were $18,452,000 for the first six months of fiscal ~~2005~~2006 ~~was~~down ~~27.0~~1% ~~percent~~from as$18,561,000 afor ~~percent~~the first six months of ~~sales,~~fiscal ~~compared~~2005. Sales ~~with~~have 24decreased in the China market by $895,000.4 This ~~percent~~decrease ~~for~~is from the Company’s ~~same~~strategy ~~period~~to ~~last~~target ~~year~~data communications customers in China. ~~Margins~~At ~~increased~~this ~~primarily~~time, ~~due~~the sales are to ~~the~~a limited ~~closure~~number of ~~manufacturing~~customers, inso ~~the~~there ~~United~~is ~~States~~a high risk of variability from quarter to quarter. The Company is attempting to ~~Transferring~~reduce that risk by increasing the ~~manufacturing~~customer tobase in China, ~~reduced~~but ~~production~~may ~~costs~~not bybe able ~~$636,000~~to ~~offset~~avoid bythe ~~higher~~variability ~~than~~in ~~normal~~the ~~rework~~sales ~~costs~~from China in the next several quarters. The North American sales increase of $84786,000 is primarily from an increase in orders from two customers. The ~~rework~~Company ~~was~~is ~~related~~expecting sales to ~~one~~increase ~~customer~~to North America and Europe through the end of fiscal ~~was~~2006. The ~~completed~~increase is due to an expected order increase in ~~the~~sales ~~second~~to ~~quarter~~these oftwo ~~2005~~existing customers as their products are introduced into the market.

~~Operating~~Gross ~~expenses decreased~~margin infor the first six months of fiscal ~~2005~~2006 towas ~~$6,563,000~~26.3 ~~from $6,642,000~~percent inas ~~the~~a ~~first~~percent ~~six months~~ of ~~fiscal 2004. The reduction of $321~~sales,~~000~~ incompared ~~fiscal~~with ~~2005~~26.9 ispercent ~~related~~for to the ~~cost~~same ~~of closing~~period ~~the United States manufacturing in fiscal 2004. This decrease was offset by additional~~last ~~expenses in fiscal 2005 to increase sales in future periods~~year. ~~These~~Future ~~expenses~~margins ~~include~~may ~~additional~~be ~~sales~~adversely ~~people~~affected inby ~~China of $45,000, additional travel expense in~~ the ~~United~~higher ~~States~~energy ~~and Europe~~costs ~~of $58,000,~~ and ~~additional~~the ~~freight~~implementation ~~expense~~ of ~~$40,000. Also~~lead anfree initiatives ~~increase~~required ~~in allowance~~ for ~~doubtful accounts~~our ~~increased operating expenses in fiscal 2005 by $75,000~~products.

~~Order~~Operating ~~Backlog:~~expenses increased ~~The~~in ~~Company’s~~the ~~order~~first ~~backlog~~six ~~at November~~months ~~28,~~of ~~2004~~fiscal ~~totaled~~2006 to $96,~~777~~051,000 ~~compared~~from $5,631,000 in the first six months of fiscal 2005. The increase is primarily due to professional services of $10398,~~027,~~000 higher atwhen ~~May~~comparing 30the first six-months of fiscal year 2006 to the first six-months of fiscal year 2005, and the first quarter of fiscal year 2006 ~~2004. The~~includes ~~order~~a ~~backlog~~severance ~~represents~~payment ~~sales~~of $78,000 to the former Chief Financial Officer. ~~for~~All ~~approximately~~of ~~eleven~~these ~~weeks~~expenses are part of the General & Administrative classification.

~~Non-Operating~~Order ~~Income and Expenses~~Backlog: ~~Nonoperating~~The ~~expense~~Company’s isorder ~~$306,000~~backlog ~~for~~at ~~the~~November 27, ~~first six months of fiscal~~ 2005 ~~compared~~totaled to $~~313~~11,~~000 for the same period in fiscal 2004. The Company incurred interest expenses of $282~~294,000 ~~in the first six~~compared ~~months~~to ~~of fiscal 2005 and~~ $~~298~~9,678,000 inat ~~the same period of fiscal 2004~~May 29, ~~paid on~~2005. The ~~bank~~order ~~credit~~backlog ~~facilities~~represents ~~and~~sales ~~long-term~~for ~~borrowings~~approximately sixteen weeks.

Non-Operating Income ~~Tax~~and Expenses: ~~The~~Nonoperating income ~~Company~~is ~~had a pre-tax loss of~~ $~~337~~6,000 for the first six~~-month~~ ~~period~~months inof fiscal ~~2005~~2006 oncompared ~~which~~to ita ~~accrued~~loss of $8205,000 ~~consolidated~~ ~~income tax expense relating to amounts due~~ for ~~state and foreign taxes. For~~ the ~~six-month~~same period in fiscal ~~2004~~2005. The ~~the~~ Company ~~had~~recorded aan ~~pre-tax~~exchange ~~loss~~gain of $195,~~608,~~000 onin ~~which~~the nofirst ~~income tax~~two ~~benefit~~quarters ~~was~~of ~~accrued. The~~fiscal ~~effective~~2006 ~~tax rate~~compared isto 2%a ~~for~~loss ~~the first two quarters~~ of ~~2005~~$16,000 ~~and 0%~~ for the same period in fiscal ~~2004~~2005. InThe ~~the~~Company ~~first~~incurred interest ~~two~~expenses ~~quarters~~ of ~~fiscal~~$89,000 ~~2005~~in ~~and 2004~~ the ~~Company~~first ~~did~~six ~~not~~months ~~take~~of afiscal ~~benefit~~2006 ~~from the losses~~and ~~generated. A~~$189,000 ~~full~~in ~~valuation~~the ~~allowance against~~same ~~deferred~~period ~~tax~~of ~~assets~~fiscal ~~has~~2005, ~~been~~paid ~~recorded~~on ~~because~~bank itcredit isfacilities ~~likely the Company~~and ~~will~~long-term ~~be unable to use such losses~~borrowings.

~~Net~~Income ~~Loss~~Taxes: The Company ~~reported~~had a ~~basic~~pre-tax ~~and~~loss of $1,183,000 for the six-month period in fiscal ~~diluted~~2006 ~~per~~on ~~share~~which ~~loss~~it ofaccrued $~~0.09~~2,000 consolidated income tax expense relating to amounts due for ~~the~~state ~~first~~taxes. For the six-month ~~months~~period ofin fiscal 2005 the Company had a pre-tax loss of $852,000 ~~based~~ on which 4it accrued $2,~~796,~~000 ~~outstanding~~consolidated ~~weighted~~income ~~average~~tax ~~shares,~~expense ~~compared~~relating to ~~basic~~amounts ~~and diluted~~due ~~per~~for ~~share~~state ~~loss~~taxes. The ofeffective $tax rate is 0~~.36~~% for all periods presented. A full valuation allowance against deferred tax assets has been recorded due to the uncertainties ~~same~~regarding ~~period~~the realization of ~~fiscal~~these ~~2004,~~assets based on ~~4,666,000~~the Company’s ~~outstanding~~lack ~~weighted~~of ~~average shares~~earnings.

Net Loss: The Company reported a basic and diluted per share loss of $0.26 for the first six months of fiscal 2006, based on 4,822,000 outstanding weighted average shares, compared to basic and diluted per share loss of $0.19 for the same period of fiscal 2005, based on 4,796,000 outstanding weighted average shares.

LIQUIDITY AND CAPITAL RESOURCES

The following table describes the Company’s liquidity and financial position on November 27, 282005, ~~2004,~~ and on May 30 29, ~~2004~~2005:

	November 28, 2004		May 30, 2004
	November 27,		May 29,
	2005		2005
	($000)		($000)
Working capital	$	64,~~428~~634	$	65,~~270~~266
Cash and cash equivalents	13,~~506~~996		12,~~058~~191
Unutilized bank credit facilities	~~6,001~~979		53,~~720~~357

Current Working Capital Position

As of November 27, 282005, ~~2004,~~ the Company had current assets of $1915,~~612~~101,000 and current liabilities of $1310,~~184~~467,000, which amounted to working capital of $64,~~428~~634,000 and a current ratio of 1.54. This represents ~~an increase~~a decrease from its working capital of $65,~~270~~266,000 as of May 30 29, ~~2004~~2005. The Company relies on its credit facilities as sources of working capital to support normal growth in revenue, capital expenditures and attainment of profit goals. The Company has not committed any funds for future capital expenditures as of November 28 27, ~~2004~~ 2005.

13Cash and Investments: As of November 27, 2005, the Company had cash totaling $3,996,000, compared to $2,191,000 as of May 29, 2005. This increase in cash was due to additional borrowings against the bank line. This was done to offset the minimum interest payment necessary on the bank line.

~~Cash~~Credit ~~and Investments~~Facilities: The Ascredit arrangement with Wells Fargo Bank is an asset-based credit facility of ~~November~~$7 28million, ~~2004,~~secured by all company assets. ~~the~~At ~~Company~~November 27, ~~had~~2005, ~~cash~~there ~~totaling~~were borrowings against this facility of $12,~~506~~176,000. The financing agreement contains financial covenants, ~~compared~~which torequire $1the Company,~~058~~ among other things,~~000~~ asto maintain a minimum capital base, and also impose certain limitations on additional capital expenditures and the payment of ~~May~~dividends. 30At November 27, ~~2004~~2005, the Company’s net worth and income before taxes did not meet the minimum of the credit agreement. ~~This~~The ~~increase~~Company is currently in ~~cash~~discussions ~~was~~with ~~due~~the lending facility to ~~normal~~ ~~fluctuations~~determine inif ~~the~~an ~~timing~~amendment or ofwaiver ~~payments~~will ~~and~~be ~~receipts~~necessary.

Credit Facilities: The credit arrangement with Wells Fargo Bank is an asset-based credit facility of $7 million, secured by company assets. At November 28, 2004, there were borrowings against this facility of $1,849,000. The financing agreement contains financial covenants, which require the Company, among other things, to maintain a minimum capital base, and also impose certain limitations on additional capital expenditures and the payment of dividends. At the end of fiscal 2004, the Company’s net worth and income before taxes did not meet the minimum of the credit agreement. The Company received a waiver and amendment for this covenant. At the end of November 2004, the Company’s income before taxes did not meet the minimum of the credit agreement. Following the January 2005 amendment, the Company believes the provisions imposed by this credit agreement are achievable based on the Company’s expected operating results for the next year.

The South Korean credit facility is approximately $3,370,000 of which borrowings at November 28, 2004 totaled $2,519,000.

CASH FLOWS FOR FISCAL 2005

Operations: ~~Operations~~ ~~provided~~Operations used $~~988~~312,000 of cash during the first six months of fiscal ~~2005~~2006 due principally to the following activities:

(a) The loss, net of depreciation ~~provided~~ used $~~146~~951,000.

(b) Decreases in trade receivables provided $1649,~~200,~~000, primarily related to increased collections efforts ~~from~~by the ~~Asia~~accounting ~~Pacific~~ area.

(c) Increases in ~~prepaid expenses~~ inventories used $~~529~~698,000., primarily related to purchasing inventory in anticipation of orders for a major customer order

~~Investing~~(d) Increases ~~Activities:~~in ~~Investing activities~~accounts ~~used~~payable ~~net~~provided ~~cash of~~ $~~140~~742,000, ~~principally~~primarily ~~relating~~related to the ~~purchase~~timing of ~~tooling~~payments into Ault Korea. After the ~~Asia~~sale ~~facilities~~of Ault Korea, the payment terms were changed from net 20 to net 60, which resulted in a higher accounts payable balance.

~~Financing~~Investing Activities: ~~Financing activities~~Investing activities used net cash of $~~409~~132,000, ~~comprised~~principally ~~of $481,000~~relating ~~payment~~to ~~on debt, and $72,000 of proceeds from~~ the ~~issuance~~purchase of ~~common~~tooling ~~stock~~in ~~for~~ the ~~stock~~Asia ~~purchase plan~~facilities.

~~Summary~~Financing Activities: Financing ~~The~~activities ~~Company’s~~provided net cash ~~and~~of ~~working capital positions are sound and~~$2, ~~together with its credit facilities~~236,000, ~~adequate~~primarily tocomprised ~~support~~of borrowings from the Company’s ~~strategies~~bank ~~for the remainder of fiscal 2005~~line.

~~Information about~~Effect ~~Products~~of ~~and~~Foreign ~~Services:~~Currency ~~The~~Exchange ~~Company’s business~~Rate ~~operations~~Fluctuations: ~~are~~The ~~comprised~~effect of ~~one~~translating ~~activity~~ the ~~design, manufacture and sale of~~Chinese ~~equipment~~financial ~~for~~statements, ~~converting~~which ~~electric~~were ~~power~~prepared ~~to a level used by OEMs~~ in ~~data~~Yuan ~~communications/telecommunications and medical markets~~ to ~~charge~~US ~~batteries~~dollars, ~~and/or~~had ~~power equipment. The Company supports these power requirements~~minimal byeffect ~~making~~on ~~available~~cash tofor the ~~OEMs~~first ~~products~~six ~~that~~months have various technical features. These products are managed as one product segment under the Company’s internal organizational structure and the Company does not consider any financial distinctive measures, including net profitability and segmentation of ~~assets~~fiscal ~~to be meaningful to performance assessment~~2006.

14Summary: The Company’s cash and working capital positions are sound and, together with its credit facilities, adequate to support the Company’s strategies for the remainder of fiscal 2006 and the foreseeable future.

Information about Products and Services: The Company’s business operations are comprised of one activity—the design, manufacture and sale of equipment for converting electric power to a level used by OEMs in data communications/telecommunications and medical markets to charge batteries, and/or power equipment. The Company supports these power requirements by making available to the OEMs products that have various technical features. These products are managed as one product segment under the Company’s internal organizational structure and the Company does not consider any financial distinctive measures, including net profitability and segmentation of assets to be meaningful to performance assessment.

Information about Revenue by Geography

Geographic distribution of revenue is as follows:

	Six Months Ended
	November 28, 2004		November 30, 2003
	November 27, 2005		November 28, 2004
	($000)		($000)
US	$	1314,~~976~~895	$	1213,~~400~~978
Korea	5,740		4,751
China	1,073		2,136
China	2,023		2,375
UK	1,109		939
UK	939		1,478
Canada	822		527
Canada	527		397
Other Foreign	553		981
Other Foreign	981		549
Total	$	18,452	$	18,561
Total	$	24,186	$	21,950

The Company considers a country to be the geographic source of revenue if it has contractual obligations, including ~~obligation~~obligations to pay for trade ~~receivable~~ receivable invoices.

Impact of Foreign Operations and Currency Changes:

The Company will experience normal valuation changes as the ~~Korean and~~ Chinese currency fluctuates. The effect of of translating the ~~Korean and~~ Chinese financial statements resulted in a net asset ~~increase~~ decrease of $39138,000 for the six months ended November 28 27, ~~2004~~2005.

Forward Looking Statements

From time to time, in reports filed with the Securities and Exchange Commission, in press releases, and in other communications to shareholders or the investing public, the Company may make forward-looking statements concerning possible or anticipated future results of operations or business developments which are typically preceded by the words “believes”, “expects”, “anticipates”, “intends” or similar expressions. For such forward-looking statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Shareholders and the investing public should understand that such forward-looking statements are subject to risks and uncertainties that could cause results or developments to differ significantly from those indicated in the forward-looking statements. Such risks and uncertainties include, but are not limited to, the overall level of sales by original equipment manufacturers (OEMs) in the telecommunications, data communications, computer peripherals and the medical markets; buying patterns of the Company’s existing and prospective customers; the impact of new products introduced by competitors; delays in new product introductions; higher than expected expense related to sales and new marketing initiatives; availability of adequate supplies of raw materials and components; fuel prices; and other risks affecting the Company’s target markets.

Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board issued a a revision to Statement of Financial Accounting Standards 123 (SFAS 123(R)), Share-Based Payment. The revision requires all entities to recognize compensation expense in an amount equal to the fair value of share-based payments granted to employees. The statement eliminates the alternative method of accounting for employee share-based payments previously available under Accounting Principles Board Opinion No. 25. The Statement is effective for the Company beginning in the ~~second~~first quarter of ~~fiscal~~ ~~2006~~fiscal 2007. The Company has not completed the process of evaluating the impact that will result from adopting SFAS 123(R).

1516

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company experiences foreign currency gains and losses, which are reflected in the financial statements, due to the strengthening and weakening of the U.S. dollar against currencies of the Company’s foreign subsidiaries. The Company anticipates that it will continue to have exchange gains or losses in the future.

The Company is exposed to certain market risks on the line of credit agreement because of the variable interest rate charged. Market risk is the potential loss arising from the adverse changes in market rates and prices, such as interest rates. Market risk is estimated as the potential increase in fair value resulting from a hypothetical one percent increase in interest rates, which assuming an average outstanding debt balance of $5.0 million would result in an annual interest expense increase of approximately $50,000.

ITEM 4 – CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures.

~~The~~Management, ~~Company’s~~with ~~Chief~~the ~~Executive Officer,~~participation ~~Frederick~~of M.the ~~Green,~~principal executive officer and ~~Chief~~principal ~~Financial~~financial ~~Officer~~officer, ~~Donald~~has L.evaluated ~~Henry,~~the effectiveness ~~have~~of ~~reviewed~~ the ~~Company’s~~design and operation of the disclosure controls and procedures ~~within~~(as defined in rules 13a-15(e) and 15d – 15(e) under 90the ~~days~~Securities ~~prior~~Exchange toAct of 1934, as amended) as of the ~~filing~~end of the period covered by this quarterly report. ~~Based~~Subject ~~upon~~to ~~this~~the ~~review~~matters discussed below, ~~these~~management ~~officers~~has ~~believe~~concluded that the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed in ~~ensuring~~the reports that ~~material~~the Company files ~~information~~under ~~related~~the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that the disclosure controls are also not effective to ensure that information required to be disclosed in the Company’s Exchange Act reports is ~~made~~accumulated ~~known~~and communicated to ~~them~~management, byincluding ~~others~~the ~~within~~chief ~~the~~executive officer and chief ~~Company~~financial officer to allow timely decisions regarding required disclosure.

China Subsidiary

As of May 29, 2005, the Company did not maintain effective controls relating to transactions at its China subsidiary related to inventory build-up and relief and reconciliation of intercompany accounts. Additionally in November 2005, the Company discovered the controls relating to the recording of accounts payable were not effective. The Company had unrecorded liabilities at May 30, 2004 of $248,000, at May 29, 2005 of $342,000 and at August 28, 2005 of $345,000. The Company has concluded that these control deficiencies constitute material weaknesses.

Remediation of Material Weaknesses Related to China Subsidiary

Management has taken, or is in the process of taking the following steps with respect to the control deficiencies at its China subsidiary:

• The transfer of a seasoned accountant with experience in Asian operations who will be headquartered in Minneapolis, and will be the primary liaison with our China accounting staff and operations.

• Commencement of a training program to upgrade the skill sets of our China accounting staff.

• The hiring of an experienced China-based controller to coordinate all financial reporting, monthly physical inventory counts and verification and also be a part of the weekly conference calls with all of our operations to improve communications.

• Implementation of an ERP system in China.

Management believes that implementation of these actions will remediate the material weaknesses described above.

Warehouse Control Deficiencies

In a cost-cutting effort in the third quarter of fiscal 2004, the Company closed down a manufacturing facility in Minneapolis and terminated a third party warehouse facility in Ireland. As part of the shutdown of the manufacturing in December 2003, certain personnel were terminated prior to the disposition of inventory at the location. The Company’s haste in cost elimination resulted in having insufficient staffing to control the disposition of the inventory. This was found to be a weakness of $25,569 in the counting of inventory that was discovered during the course of the audit by the Company’s external auditors. This should have been recorded in the third quarter.

In addition to the manufacturing shut-down, the Company also closed a third party warehouse facility to cut costs in January 2004. This too resulted in the terminations of personnel whose responsibilities included monitoring third party warehousing of customer stock inventory. Approximately $57,581 of inventory was not adequately tracked. This error was also discovered in the course of the audit, and should have been recorded in the third quarter. Taken together the manufacturing and third party warehouse control deficiencies resulted in an adjustment of $83,150, which should have been recorded in the third quarter. This $83,150 adjustment was extrapolated over the Company’s entire inventory, which resulted in a total adjustment of $279,987. The Company believes that this adjustment is not material.

In connection with its audit of the Company’s consolidated financial statements for the year ended May 30, 2004, Grant Thornton LLP (“Grant Thornton”), the Company’s independent registered public accounting firm, advised the Company’s audit committee and management that the adjustments described with respect to inventory constituted a material weakness as that term is defined under standards established by the Public Company Accounting Oversight Board (PCAOB). In response to the observations made by Grant Thornton, the Company has implemented certain enhancements to its internal controls and procedures that the Company believes will address the matters raised by Grant Thornton.

Specifically, if the Company determines to enter into any future third party warehouse agreement, the Company will make sure that is has devoted adequate resources for necessary preventative and detective controls. The third party warehouse will have a weekly reconciliation between the inventory in the warehouse and the Company’s inventory system. The head of sales and the head of finance will review this reconciliation. On a quarterly basis, the Company will physically count the inventory.

Similarly, before the Company closes another manufacturing location, the Company will make sure there are adequate resources in place for necessary preventative and detective controls. If the Company closes a manufacturing location, it will have the necessary resources to maintain a cycle count system until the disposition of the inventory is complete. Also there will be a physical inventory of the inventory before the end of each quarter until the disposition of the inventory is complete.

(b) Changes in Internal Controls.

There ~~were~~have nobeen no significant changes in ~~the Company’s~~ internal ~~controls~~control orover infinancial ~~other~~reporting ~~factors~~ that ~~could significantly affect these~~occurred ~~controls~~ during the ~~quarter~~period covered by this report orthat ~~from~~have ~~the~~materially ~~date~~affected, ofor ~~the~~are ~~review~~reasonable likely to materially affect, the ~~date~~registrant’s ofinternal ~~this~~control ~~Form~~over financial ~~10-Q~~reporting.

1618

PART II

ITEM 1 LEGAL PROCEEDINGS:

ITEM 1		LEGAL PROCEEDINGS:

Not Applicable

ITEM 2		CHANGES IN SECURITIES AND USE OF PROCEEDS

Not Applicable

ITEM 3		DEFAULTS UPON SENIOR SECURITIES:

Not Applicable

ITEM 4		Submission of Matters to a Vote of Security Holders;

Not Applicable

ITEM 5		OTHER INFORMATION

Not Applicable.

ITEM 6		EXHIBITS AND REPORTS ON FORM 8-K

(a) The following exhibits are included herein:

		31.1 Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
		31.2 Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
		32.1 Certification of CEO and CFO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on form 8-K

		A. Form 8-K filed September 20, 2005 referencing a press release dated September 20, 2005 announcing the delisting notification due to late filing of the May 29, 2005 form 10-K and hearing request with Nasdaq.
		B. Form 8-K filed September 30, 2005 referencing a press release dated September 29, 2005 announcing the delisting notification due to failure to satisfy the minimum stockholders’ equity of the Nasdaq market.
		C. Form 8-K filed October 13, 2005 referencing a press release dated October 13, 2005 of financial results for the quarter ended August 28, 2005.
		D. Form 8-K filed October 13, 2005 announcing the election of Lyron Bentovim as a new board member.

~~Not Applicable~~19

ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS

Not Applicable

ITEM 3 DEFAULTS UPON SENIOR SECURITIES:

Not Applicable

ITEM 4 Submission of Matters to a Vote of Security Holders;

The following matter was voted upon at the Annual Meeting of Stockholders held on September 28, 2004, and received the votes set forth below:

All of the following persons nominated were elected to serve as directors and received the number of votes set opposite their respective names:

	For	Withheld
F. Green	4,079,048	365,605
J. Colwell	4,079,048	365,605
C. Barnett	4,079,244	365,409
J. Kassakian	4,079,248	365,405
B. Chang	4,079,244	365,409
M. Walker	4,079,248	365,405
D. Larkin	4,079,244	365,409

The proposal to ratify and approve an amendment to the Company’s 1996 Stock Plan to increase the number of Shares authorized to be issued under such Plan by 300,000 shares to 1,500,000 passed by a vote of 1,722,634 for and 876,710 against.

ITEM 5 OTHER INFORMATION

Not Applicable.

ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K

(a) The following exhibits are included herein:

31.1 Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certification of CEO and CFO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on form 8-K

A. Form 8-K filed September 27, 2004 announcing the first quarter fiscal 2005 financial results.

B. Form 8-K filed October 1, 2004 announcing the update to the code of ethics.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AULT INCORPORATED

(REGISTRANT)

DATED:	January 10, 2005	/ s /Frederick M. Green
DATED: January 10 2006	/s/ Frederick M. Green
	Frederick M. Green, President	~~Frederick M. Green, President~~
	Chief Executive Officer and	~~Chief Executive Officer and~~
	Chairman	~~Chairman~~
DATED:	January 10, 2005	/ s /Donald L. Henry
DATED: January 10 2006	/s/ William J. Birmingham
		Donald L. Henry
	William J. Birmingham
		Chief Financial Officer
	Interim Chief Financial Officer

1820

Filing Compare · AULT INC