What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-19 compared with 2021-08-16 · 378 added, 272 removed, 266 unchanged (71% of the section changed)

2 unchanged sentences

the “Company,” “Ault Global,” “we,” “us” and “our” refer to Ault Global Holdings,

Inc., a Delaware corporation, our wholly-owned subsidiaries, Gresham Worldwide, Inc., Coolisys Technologies, Corp, Ault Alliance, Inc.,

Digital Power Lending, LLC, Digital Farms, Inc., Gresham Power Electronics, Enertec Systems 2001 Ltd.

and our majority owned subsidiary,

Microphase Corporation.

Inc., a Delaware corporation.

Ault Global is a diversified holding company pursuing growth by acquiring undervalued businesses and disruptive

technologies with a global impact.

Through its wholly and majority-owned subsidiaries and strategic investments, the Company owns and

operates a data center at which it mines Bitcoin, and provides mission-critical products that support a diverse range of industries, including

defense/aerospace, industrial, automotive, telecommunications, medical/biopharma, and textiles.

In addition, the Company extends credit

to select entrepreneurial businesses through a licensed lending subsidiary.

Recent Developments

1 unchanged sentence

On January 22, 2021, we entered

into an At-The-Market Issuance Sales Agreement, as amended on February 17, 2021 and thereafter on March 5, 2021 (the “2021

Sales Agreement”) with Ascendiant Capital Markets, LLC, or the sales agent, relating to the sale of shares of common stock offered

by a prospectus supplement and the accompanying prospectus, as amended by the amendments to the sales agreement dated February 16, 2021

into an At-The-Market Issuance Sales Agreement, as amended on February 17, 2021 and thereafter on March 5, 2021 (the “2021 Sales

Agreement”) with Ascendiant Capital Markets, LLC, or the sales agent, relating to the sale of shares of common stock offered by

a prospectus supplement and the accompanying prospectus, as amended by the amendments to the 2021 Sales Agreement dated February 16, 2021

and March 5, 2021.

In accordance with the terms of the 2021 Sales Agreement, we may offer and sell shares of common stock having

an aggregate offering price of up to $200 million from time to time through the sales agent.

As of June 30, 2021, we had sold an

aggregate of 27.9 million shares of common stock pursuant to the sales agreement for gross proceeds of $144.0 million.

In accordance with the terms of the 2021 Sales Agreement, we may offer and sell shares of common stock having an aggregate

offering price of up to $200.0 million from time to time through the sales agent.

As of September 30, 2021, we had sold an aggregate of

34.7 million shares of common stock pursuant to the 2021 Sales Agreement for gross proceeds of $160.5 million.

Acquisition of Michigan

4 unchanged sentences

The purchase price was paid in cash.

Purchase Agreements for Bitcoin Mining Equipment

the quarter ended September 30, 2021, we executed contracts to purchase 4,000 Antminer S-19 Pro Bitcoin miners.

As of September 30, 2021,

we had received 1,000 of the Bitcoin miners.

The remaining 3,000 units are expected to be delivered at a rate of 300 units per month between

October 2021 and July 2021.

The gross purchase price is $27.3 million, of which $18.1 million was paid as of September 30, 2021 with the

balance scheduled to be paid between October 2021 and June 2022.

During the quarter ended September 30, 2021, we capitalized $433,000

of shipping costs and $1.2 million of third-party commissions related to cryptocurrency machines and related equipment.

November 2021, we executed contracts to purchase an aggregate of 16,000 Bitcoin miners for $121 million.

The purchase includes both the

environmentally friendly S19 XP Antminers that feature a processing power of 140 terahashes per second (TH/s) with an energy consumption

of 3.01 kilowatt-hours (kWh) and the S19j Pro Antminers that feature a processing power of 100 TH/s with an energy consumption of 2.95

Based on current delivery schedules, we expect that the 16,000 newly purchased miners will be shipped by Bitmain between March 2022

and September 2022.

Investment in Alzamend

March 9, 2021, our wholly owned subsidiary, DP Lending, entered into a securities purchase agreement with Alzamend, a related party, to

invest $10 million in Alzamend common stock and warrants, subject to the achievement of certain milestones.

We agreed to fund $4 million

upon execution of the securities purchase agreement and to fund the balance upon Alzamend achieving certain milestones related to the

Food and Drug Administration approval of Alzamend’s Investigational New Drug application and Phase 1a human clinical trials

for Alzamend’s lithium based ionic cocrystal therapy, known as AL001.

Under the securities purchase agreement, Alzamend has agreed

to sell up to 6,666,667 shares of its common stock to DPL for $10 million, or $1.50 per share, and issue to DPL warrants to acquire up

to 3,333,334 shares of Alzamend common stock with an exercise price of $3.00 per share.

The transaction was approved by our independent

directors after receiving a third-party valuation report of Alzamend.

On June 15, 2021, Alzamend

closed an initial public offering at a price to the public of $5.00 per share.

DP Lending purchased 2,000,000 shares of Alzamend’s

common stock in the initial public offering for an aggregate of $10,000,000.

Alzamend’s common stock is listed on The Nasdaq Capital

Market under the ticker symbol “ALZN”.

On July 28, 2021, Alzamend received from the U.S.

Food and Drug Administration

a “Study May Proceed” letter for a Phase 1 study under the Alzamend’s Investigational New Drug application for AL001,

a lithium-based ionic cocrystal oral therapy for patients with dementia related to mild, moderate, and severe cognitive impairment associated

with Alzheimer’s disease.

Based on the achievement of

this milestone, under the March 9, 2021 securities purchase agreement, Alzamend sold an additional 1,333,333 shares of its common stock

to DPL for $2 million, or $1.50 per share, and issued to DPL warrants to acquire 666,667 shares of Alzamend common stock with an exercise

price of $3.00 per share.

March 9, 2021, DP Lending entered into a securities purchase agreement with Alzamend to invest $10.0 million in Alzamend common stock

and warrants, subject to the achievement of certain milestones.

DP Lending funded $4.0 million upon execution of the securities purchase

agreement, which included the conversion of the short-term advance and convertible promissory note in the aggregate amount of $800,000,

and funded an additional $2.0 million upon the achievement of a milestone related to Alzamend’s Phase 1 study of its Investigational

New Drug application for AL001.

The remaining $4.0 million will be funded upon Alzamend achieving certain milestones related to the U.S.

Food and Drug Administration approval of Alzamend’s Investigational New Drug application and Phase 1a human clinical trials for

Alzamend’s lithium based ionic cocrystal therapy, known as AL001.

Under the securities purchase agreement, in aggregate, Alzamend

has agreed to sell up to 6,666,667 shares of its common stock to DP Lending for $10.0 million, or $1.50 per share, and issue to DP Lending

warrants to acquire 3,333,334 shares of Alzamend common stock with an exercise price of $3.00 per share.

The transaction was approved

by our independent directors after receiving a third-party valuation report of Alzamend.

June 15, 2021, Alzamend closed an initial public offering at a price to the public of $5.00 per share.

DP Lending purchased 2 million shares

of Alzamend’s Common stock in the initial public offering for an aggregate of $10 million.

Alzamend’s common stock is listed

on The Nasdaq Capital Market under the ticker symbol “ALZN”.

At September 30, 2021, the

fair value of Alzamend’s common stock was $3.08 based on the closing price of Alzamend’s common stock.

Based upon the fair

value of Alzamend common stock at September 30, 2021, during the nine months ended September 30, 2021, we recorded an unrealized gain

of $3.8 million related to our investment in Alzamend common stock.

In conjunction with the March

2021 securities purchase agreement, Alzamend issued us warrants to purchase 1,333,334 shares of Alzamend common stock at an exercise price

of $3.00 per share for a period of five years.

We computed the fair value of Alzamend warrants using the Black-Scholes option pricing

During the nine months ended September 30, 2021, we recorded an unrealized gain on its investment in warrants of Alzamend of $2.6

Our investment in Alzamend will be revalued on each balance sheet date.

Significant Fluctuation

in the Fair Value of Investment in Alzamend

from our trading activities during the nine months ended September 30, 2021 included significant net gains on equity securities, including

unrealized gains and losses from market price changes.

These gains and losses have caused, and will continue to cause, significant volatility

in our periodic earnings.

September 30, 2021, the fair value of Alzamend’s common stock was $3.08 based on the closing price of Alzamend’s common stock.

Based upon the fair value of Alzamend common stock at September 30, 2021, during the three months ended September 30, 2021, we recorded

an unrealized loss of $27.4 million related to our investment in Alzamend common stock and during the nine months ended September 30,

2021, we recorded an unrealized gain of $3.8 million related to our investment in Alzamend common stock.

the three months ended September 30, 2021, we recorded an unrealized loss on our investment in warrants of Alzamend of $6.0 million and

during the nine months ended September 30, 2021, we recorded an unrealized gain on our investment in warrants of Alzamend of $2.6 million.

Our investment in Alzamend will be revalued on each balance sheet date.

Investment in Ault

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to present significant business challenges in 2021.

During the second quarter of 2021, we continued to experience impacts in each of our

business areas related to COVID-19, primarily in continued increased coronavirus-related costs, delays in supplier deliveries, impacts

of travel restrictions, site access and quarantine restrictions, and the impacts of remote work and adjusted work schedules.

second quarter, we continued to take measures to protect the health and safety of our employees, including measures to facilitate the

provision of vaccines to our employees in line with state and local guidelines.

During the third quarter of 2021, we continued to experience impacts in each of our

business areas related to COVID-19, primarily in delays in supplier deliveries and the impacts of remote work and adjusted work schedules.

During the third quarter, we continued to take measures to protect the health and safety of our employees, including measures to facilitate

the provision of vaccines to our employees in line with state and local guidelines.

We also continued to work with our customers and suppliers

1 unchanged sentence

Although the COVID-19 pandemic

did not have a significant impact on our financial results in the second quarter of 2021, the ultimate impact of COVID-19 on our operations

did not have a significant impact on our financial results in the third quarter of 2021, the ultimate impact of COVID-19 on our operations

and financial performance in future periods, including our ability to execute our programs in the expected timeframe, remains uncertain

33 unchanged sentences

and textile industries.

We have provided capital to subsidiaries as well as partner companies in which we have an equity interest or may be actively

involved, influencing development through board representation and management support.

We have provided capital to subsidiaries as well as partner companies in which we have an equity interest or may

be actively involved, influencing development through board representation and management support.

We are a Delaware corporation with

3 unchanged sentences

Results of Operations

Results of Operations for the Three Months Ended June 30, 2021 and

Results of Operations for the Three Months Ended September 30, 2021

The following table summarizes

the results of our operations for the three months ended June 30, 2021 and 2020.

the results of our operations for the three months ended September 30, 2021 and 2020.

For the Three Months Ended

September 30,

Revenue, cryptocurrency mining

Revenue, lending and trading activities

(38,869,000 )

Total revenue

(30,794,000 )

Cost of revenue

Gross profit (loss)

(36,065,000 )

Operating expenses

2 unchanged sentences

General and administrative

Provision for credit losses

Total operating expenses

Income (loss) from continuing operations

Loss from continuing operations

(49,874,000 )

Interest income

Accretion of discount on note receivable, related party

Interest expense

1 unchanged sentence

Realized gain on marketable securities

Gain (loss) on extinguishment of debt

Loss on extinguishment of debt

(12,823,000 )

Change in fair value of warrant liability

Income (loss) from continuing operations before income taxes

Income tax (expense) benefit

Net income (loss)

Loss before income taxes

(46,140,000 )

(16,741,000 )

Income tax benefit

(42,774,000 )

(16,735,000 )

Net gain attributable to non-controlling interest

Net income (loss) attributable to Ault Global Holdings

Net loss attributable to Ault Global Holdings

(42,870,000 )

(16,735,000 )

Preferred dividends

Net income (loss) available to common stockholders

Net loss available to common stockholders

$ (42,874,000 )

Comprehensive income (loss)

Income (loss) available to common stockholders

$ (16,738,000 )

Comprehensive loss

Net loss available to common stockholders

$ (42,874,000 )

$ (16,738,000 )

Other comprehensive income (loss)

2 unchanged sentences

Other comprehensive income (loss)

Total comprehensive income (loss)

Total comprehensive loss

$ (47,905,000 )

$ (15,133,000 )

Revenues by segment for the

three months ended June 30, 2021 and 2020 are as follows:

three months ended September 30, 2021 and 2020 are as follows:

For the Three Months Ended

September 30,

Gresham Worldwide (“GWW”)

Ault Alliance:

1 unchanged sentence

Revenue, lending and trading activities

(38,868,000 )

(38,839,000 )

Total revenue

Our revenues increased by

$56.7 million, or 1050%, to $62.1 million for the three months ended June 30, 2021, from $5.4 million for the three months ended June

$ (30,794,000 )

$ (36,470,000 )

Our revenues decreased by

$36.5 million, or 643%, to negative $30.8 million for the three months ended September 30, 2021, from $5.7 million for the three months

ended September 30, 2020.

GWW revenues increased by

$2.3 million, or 55%, to $6.5 million for the three months ended June 30, 2021, from $4.2 million for the three months ended June 30,

$2.0 million, or 47%, to $6.4 million for the three months ended September 30, 2021, from $4.3 million for the three months ended September

GWW revenue in 2021 includes $1.8 million from Relec, which was acquired on November 30, 2020.

In addition, the increase in revenue

from our GWW segment for customized solutions for the military markets reflected the benefit of capital that was allocated to our defense

business based on the overall improved capital structure of the Company.

Revenue from Enertec, which largely consists of revenue recognized

over time, was $2.5 million for the three months ended June 30, 2021, an increase of $158,000 or 7%, from $2.3 million in the prior-year

Coolisys revenues increased

by $586,000 or 47%, to $1.8 million for the three months ended June 30, 2021, from $1.2 million for three months ended June 30, 2020.

The increase is due, in part, to disruptions to Coolisys’ business operations experienced in the prior year period related to the

temporary suspension of operations related to the outbreak of COVID-19.

In the prior year period, revenue

was constrained by working capital issues.

The increase in revenue from our GWW segment for customized solutions for the military markets

reflects the benefit of our improved liquidity in 2021, as we were able to allocate additional funds to our defense business to improve

their ability to fulfill backlog.

Revenue from Enertec, which largely consists of revenue recognized over time, was $2.9 million for the

three months ended September 30, 2021, a decrease of $687,000 or 31%, from $2.2 million in the prior-year period.

TurnOnGreen revenues decreased

by $282,000 or 20%, to $1.1 million for the three months ended September 30, 2021, from $1.4 million for three months ended September

The decrease is primarily due to supply chain disruptions during the quarter.

Ault Alliance

Revenues from our cryptocurrency

mining operations were $291,000 for the three months ended June 30, 2021, compared to nil for the three months ended June 30, 2020, as

we resumed our cryptocurrency mining operations during the first quarter of 2021.

Our decision to resume cryptocurrency mining operations

in 2021 was based on several factors, which had positively affected the number of active miners we operated, including the market prices

of digital currencies, and favorable power costs available at our Michigan data center.

mining operations were $238,000 for the three months ended September 30, 2021, compared to nil for the three months ended September

30, 2020, as we resumed our cryptocurrency mining operations during the first quarter of 2021.

Our decision to resume cryptocurrency mining

operations in 2021 was based on several factors, which had positively affected the number of active miners we operated, including the

market prices of digital currencies, and favorable power costs available at our Michigan data center.

Revenues from our lending

and trading activities increased to $53.3 million for the three months ended June 30, 2021, from negative revenues of $34,000 for the

three months ended June 30, 2020, attributed to a significant allocation of capital from our recent equity financing transactions to our

loan and investment portfolio.

During the three months ended June 30, 2021, DP Lending generated significant income from appreciation

of investments in marketable securities as well as shares of common stock underlying convertible notes and warrants issued to DP Lending

in certain financing transactions.

Under its business model, DP Lending also generates revenue through origination fees charged to borrowers

and interest generated from each loan.

Revenues from our trading

activities in 2021 included significant net gains on equity securities, including unrealized gains and losses from market price changes.

These gains and losses have caused, and will continue to cause, significant volatility in our periodic earnings.

and trading activities decreased to negative $38.9 million for the three months ended September 30, 2021, from negative revenues of $29,000

for the three months ended September 30, 2020.

Revenues from our trading activities during the three months ended September 30, 2021 included

significant unrealized losses from market price changes related to Alzamend.

Unrealized gain and losses have caused, and will continue

to cause, significant volatility in our periodic earnings.

September 30, 2021, the fair value of Alzamend’s common stock was $3.08 based on the closing price of Alzamend’s common stock.

Based upon the fair value of Alzamend common stock at September 30, 2021, during the three months ended September 30, 2021, we recorded

an unrealized loss of $27.4 million related to our investment in Alzamend common stock.

During the three months ended September 30, 2021,

we recorded an unrealized loss on our investment in warrants of Alzamend of $6.0 million.

Our investment in Alzamend will be revalued

on each balance sheet date.

Gross margins

Gross margins increased to

89.9% for the three months ended June 30, 2021 compared to 37.1% for the three months ended June 30, 2020.

Our gross margins have typically

ranged between 33% and 37%, with slight variations depending on the overall composition of our revenue.

Our gross margins of 89.9%

recognized during the three months ended June 30, 2021, were impacted by the favorable margins from our lending and trading activities.

Excluding the effects of margin from our lending and trading activities, our adjusted gross margins for the three months ended June 30,

2021, would have been 29%, slightly lower than our historical range.

Gross margins were negative

$36.0 million or 117.1% for the three months ended September 30, 2021 compared to 35.3% for the three months ended September 30, 2020.

Our gross margins have typically ranged between 33% and 37%, with slight variations depending on the overall composition of our revenue.

Our gross margins during the

three months ended September 30, 2021, were impacted by the unfavorable margins from our lending and trading activities.

Excluding the

effects of margin from our lending and trading activities, our adjusted gross margins for the three months ended September 30, 2021, would

have been 34.7%, consistent our historical range.

Research and development

Research and development expenses

increased by $69,000 to $531,000 for the three months ended June 30, 2021, from $462,000 for the three months ended June 30, 2020.

increase in research and development expenses is due to cost incurred at Coolisys related to the development of our electric vehicle charger

increased by $55,000 to $524,000 for the three months ended September 30, 2021, from $469,000 for the three months ended September 30,

The increase in research and development expenses is due to costs incurred at GWW related to the development of products for defense

applications.

Selling and marketing

Selling and marketing expenses were $1.5 million for the three months

ended June 30, 2021, compared to $295,000 for the three months ended June 30, 2020, an increase of $1.2 million, or 410%.

was the result of increases in personnel costs directly attributed to an increase in sales and marketing personnel and consultants primarily

at Ault Alliance related to digital marketing and digital learning.

The increase is also attributable to costs incurred at Coolisys to

grow our selling and marketing infrastructure related to our electric vehicle charger products.

Selling and marketing expenses

were $2.0 million for the three months ended September 30, 2021, compared to $260,000 for the three months ended September 30, 2020, an

increase of $1.7 million, or 667%.

The increase was the result of increases in personnel costs directly attributed to an increase in sales

and marketing personnel and consultants primarily at Ault Alliance related to digital marketing and digital learning.

The increase is

also attributable to costs incurred at TurnOnGreen to grow our selling and marketing infrastructure related to our electric vehicle charger

General and administrative

expenses were $8.0 million for the three months ended June 30, 2021, compared to $2.9 million for the three months ended June 30, 2020,

an increase of $5.1 million.

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

· the accrual of a $2.9 million performance bonus related to trading activities during the period;

· non-cash stock compensation costs of $545,000 related to GWW options and shares issued to GWW’s

Chief Executive Officer and Chief Operating Officer;

expenses were $11.3 million for the three months ended September 30, 2021, compared to $2.8 million for the three months ended September

30, 2020, an increase of $8.5 million or 298%.

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

· non-cash stock compensation costs of $4.1 million;

· the accrual of an $859,000 performance bonus related to realized gains on trading activities during the

· general and administrative costs of $385,000 from Relec, which was acquired on November 30, 2020;

1 unchanged sentence

· higher consulting, audit, legal and insurance costs.

Income (loss) from continuing operations

We recorded income from continuing

operations of $45.8 million for the three months ended June 30, 2021, compared to an operating loss of $770,000 for the three months ended

June 30, 2020.

The prior-year period included a $1.0 million provision for credit losses.

The improvement in operating results is attributable

to the increase in revenue and gross margins partially offset by the increase in operating expenses, primarily general and administrative

Provision for credit losses

are generally carried at the amount of unpaid principal, adjusted for unearned loan fees and original issue discount, which are amortized

over the term of the loan using the effective interest rate method.

Interest on loans is accrued based on the principal amounts outstanding.

During the three months ended June 30, 2021 and 2020, we evaluated the collectability of

both interest and principal for the convertible promissory notes in AVLP to determine whether there was an impairment.

30, 2020 , based on information and events available at that time, primarily the value of the underlying

conversion feature and recent economic events, we concluded that an impairment existed and, accordingly, we recorded a $1.0 million provision

for credit losses.

Loss from continuing operations

We recorded loss from continuing

operations of $49.9 million for the three months ended September 30, 2021, compared to an operating loss of $1.6 million for the three

months ended September 30, 2020.

The significant operating loss for the three months ended September 30, 2021 is attributable to the significant

unrealized losses on our investment in Alzamend, coupled with the increase in operating expenses, primarily general and administrative

Interest income

Interest income was $125,000

for the three months ended June 30, 2021 compared to $36,000 for the three months ended June 30, 2020.

for the three months ended September 30, 2021 compared to $102,000 for the three months ended September 30, 2020.

Accretion of discount on note receivable, related

Accretion of discount on note

receivable, related party was $4.2 million for the three months ended September 30, 2021 compared to nil for the three months ended

September 30, 2020, due to the significant decline in the value of warrants in AVLP, accretion of the warrant discount was accelerated,

resulting in a discount of nil related to warrants issued in conjunction with the convertible promissory note of AVLP as of September

Interest expense

Interest expense was $140,000

for the three months ended June 30, 2021 compared to $963,000 for the three months ended June 30, 2020.

The decrease in interest expense

for the three months ended June 30, 2021 was primarily related to the decrease in our level of borrowings.

for the three months ended September 30, 2021 compared to $2.4 million for the three months ended September 30, 2020.

The decrease in

interest expense for the three months ended September 30, 2021 was primarily related to the decrease in our level of borrowings.

Change in fair value of warrant liability

During the three months ended

June 30, 2020, the fair value of the warrants that were issued during 2020 in a series of debt financings decreased by $290,000.

value of these warrants is re-measured at each financial reporting period and immediately before exercise, with any changes in fair value

recorded as change in fair value of warrant liability in the Consolidated Statements of Operations and Comprehensive Income (Loss).

September 30, 2021, the fair value of the warrants that were issued during 2021 in a series of debt financings decreased by $259,000.

The fair value of these warrants is re-measured at each financial reporting period and immediately before exercise, with any changes in

fair value recorded as change in fair value of warrant liability in the Consolidated Statements of Operations and Comprehensive Loss.

Change in fair value of marketable equity securities

Change in fair value of marketable

equity securities was a loss of $1.9 million for the three months ended June 30, 2021 compared to a gain of $337,000 for the three months

ended June 30, 2020.

Gain on extinguishment of debt

equity securities was a loss of $750,000 for the three months ended September 30, 2021 compared to a gain of $29,000 for the three months

ended September 30, 2020.

Loss on extinguishment of debt

Gain on extinguishment of

debt was $447,000 for the three months ended June 30, 2021 compared to a loss of $12,000 for the three months ended June 30, 2020.

May 20, 2021, Microphase received forgiveness its Paycheck Protection Program loan in the principal amount of $467,000.

Net income (loss)

debt was nil for the three months ended September 30, 2021 compared to a loss of $12.8 million for the three months ended September 30,

During the three months ended September 30, 2020, principal and accrued interest of $2.4 million and $699,000, respectively, on our

debt securities was satisfied through the issuance of 4.9 million shares of our common stock.

We recognized a loss on extinguishment of

$10.3 million as a result of these issuances of common stock based on the fair value of our common stock at the date of the exchanges.

The remaining loss on extinguishment is primarily due to the estimated fair value of warrants to purchase an aggregate of 1.4 million

shares of common stock that were issued to Esousa pursuant to the Master Exchange Agreement.

For the foregoing reasons,

our net income for the three months ended June 30, 2021, was $42.2 million compared to a net loss of $1.4 million for the three months

ended June 30, 2020.

our net loss for the three months ended September 30, 2021, was $42.8 million compared to a net loss of $16.7 million for the three

months ended September 30, 2020.

Other comprehensive income (loss)

Other comprehensive loss was

$5.8 million for the three months ended June 30, 2021, compared to other comprehensive income of $858,000 for the three months ended June

Other comprehensive loss for the three months ended June 30, 2021, which decreased our equity, was primarily due to unrealized

losses in the warrant derivative securities that we received as a result of our investment in AVLP, a related party.

During the three

months ended June 30, 2020, unrealized gains in the warrant derivative securities of AVLP was the primary component of other comprehensive

Results of Operations for the Six Months Ended June 30, 2021 and

$5.0 million for the three months ended September 30, 2021, compared to other comprehensive income of $1.6 million for the three months

ended September 30, 2020.

Other comprehensive loss for the three months ended September 30, 2021, which decreased our equity, was primarily

due to unrealized losses in the warrant derivative securities that we received as a result of our investment in AVLP, a related party.

During the three months ended September 30, 2020, unrealized losses in the warrant derivative securities of AVLP was the primary component

of other comprehensive loss.

Results of Operations for the Nine Months Ended September 30, 2021

The following table summarizes

the results of our operations for the six months ended June 30, 2021 and 2020.

For the Six Months Ended

the results of our operations for the nine months ended September 30, 2021 and 2020.

For the Nine Months Ended

September 30,

Revenue, cryptocurrency mining

6 unchanged sentences

General and administrative

Provision for credit losses

Total operating expenses

Income (loss) from continuing operations

Loss from continuing operations

Interest income

Accretion of discount on note receivable, related party

Interest expense

2 unchanged sentences

Gain (loss) on extinguishment of debt

(13,298,000 )

Change in fair value of warrant liability

Income (loss) from continuing operations before income taxes

Income tax (expense) benefit

Net income (loss) from continuing operations

(22,961,000 )

Income tax benefit

Income (loss) from continuing operations

(22,943,000 )

Net loss from discontinued operations, net of taxes

Net income (loss)

(24,641,000 )

Net gain attributable to non-controlling interest

Net income (loss) attributable to Ault Global Holdings

(24,641,000 )

Preferred dividends

1 unchanged sentence

$ (24,651,000 )

Comprehensive income (loss)

Income (loss) available to common stockholders

Comprehensive loss

Net income (loss) available to common stockholders

$ (24,651,000 )

3 unchanged sentences

Other comprehensive income (loss)

Total comprehensive income (loss)

Total comprehensive loss

$ (6,581,000 )

$ (23,579,000 )

Revenues by segment for the

six months ended June 30, 2021 and 2020 are as follows:

For the Six Months Ended

nine months ended September 30, 2021 and 2020 are as follows:

For the Nine Months Ended

September 30,

Ault Alliance:

3 unchanged sentences

Our revenues increased by

$64.4 million, or 585%, to $75.4 million for the six months ended June 30, 2021, from $11.0 million for the six months ended June 30,

GWW revenues increased by $4.2 million, or 50%, to $12.8 million for

the six months ended June 30, 2021, from $8.6 million for the six months ended June 30, 2020.

GWW revenue in 2021 includes $3.6 million

from Relec, which was acquired on November 30, 2020.

In addition, the increase in revenue from our GWW segment for customized solutions

for the military markets reflected the benefit of capital that was allocated to our defense business based on the overall improved capital

structure of the Company.

Revenue from Enertec, which largely consists of revenue recognized over time, was $4.9 million for the six months

ended June 30, 2021, an increase of $290,000 or 6%, from $4.6 million in the prior-year period.

Coolisys revenues increased

by $786,000 or 32%, to $3.2 million for the six months ended June 30, 2021, from $2.4 million for six months ended June 30, 2020.

increase is due, in part, to disruptions to Coolisys’ business operations experienced in the prior year period related to the temporary

suspension of operations related to the outbreak of COVID-19.

$27.9 million, or 194%, to $44.6 million for the nine months ended September 30, 2021, from $16.7 million for the nine months ended

September 30, 2020.

GWW revenues increased by

$6.3 million, or 49%, to $19.2 million for the nine months ended September 30, 2021, from $12.9 million for the nine months ended

September 30, 2020.

GWW revenue in 2021 includes $5.3 million from Relec, which was acquired on November 30, 2020.

In the prior year period,

revenue was constrained by working capital issues.

The increase in revenue from our GWW segment for customized solutions for the military

markets reflects the benefit of our improved liquidity in 2021, as we were able to allocate additional funds to our defense business to

improve their ability to fulfill backlog.

Revenue from Enertec, which largely consists of revenue recognized over time, was $7.8 million

for the nine months ended September 30, 2021, an increase of $1.0 million, or 14.3%, from $6.8 million in the prior-year period.

TurnOnGreen revenues increased

by $505,000, or 13%, to $4.3 million for the nine months ended September 30, 2021, from $3.8 million for nine months ended September

The increase is due, in part, to disruptions to TurnOnGreen’s business operations experienced in the prior year period

related to the temporary suspension of operations related to the outbreak of COVID-19.

Ault Alliance

Revenues from our cryptocurrency

mining operations were $421,000 for the six months ended June 30, 2021, compared to nil for six months ended June 30, 2020, as we resumed

our cryptocurrency mining operations during the first quarter of 2021.

Our decision to resume cryptocurrency mining operations in 2021

was based on several factors, which positively affected the number of active miners we operated, including the market prices of digital

currencies, and favorable power costs available at our Michigan data center.

Revenues from our lending and trading activities increased to $58.5

million for the six months ended June 30, 2021, from revenues of $2,000 for the six months ended June 30, 2020, which is attributable

to a significant allocation of capital from our recent equity financing transactions to our loan and investment portfolio.

six months ended June 30, 2021, DP Lending generated significant income from appreciation of investments in marketable securities as well

as shares of common stock underlying convertible notes and warrants issued to DP Lending in certain financing transactions.

business model, DP Lending also generates revenue through origination fees charged to borrowers and interest generated from each loan.

mining operations were $619,000 for the nine months ended September 30, 2021, compared to nil for nine months ended September 30,

2020, as we resumed our cryptocurrency mining operations during the first quarter of 2021.

Our decision to resume cryptocurrency mining

operations in 2021 was based on several factors, which positively affected the number of active miners we operated, including the market

prices of digital currencies, and favorable power costs available at our Michigan data center.

Revenues from our lending

and trading activities increased to $19.6 million for the nine months ended September 30, 2021, from a loss of revenues of $27,000

for the nine months ended September 30, 2020, which is attributable to a significant allocation of capital from our recent equity financing

transactions to our loan and investment portfolio.

During the nine months ended September 30, 2021, DP Lending generated significant income

from appreciation of investments in marketable securities as well as shares of common stock underlying convertible notes and warrants

issued to DP Lending in certain financing transactions.

Under its business model, DP Lending also generates revenue through origination

fees charged to borrowers and interest generated from each loan.

from our trading activities during the nine months ended September 30, 2021 included significant net gains on equity securities, including

unrealized gains and losses from market price changes.

These gains and losses have caused, and will continue to cause, significant volatility

in our periodic earnings.

September 30, 2021, the fair value of Alzamend’s common stock was $3.08 based on the closing price of Alzamend’s common stock.

Based upon the fair value of Alzamend common stock at September 30, 2021, during the nine months ended September 30, 2021, we recorded

an unrealized gain of $3.8 million related to our investment in Alzamend common stock.

the nine months ended September 30, 2021, we recorded an unrealized gain on our investment in warrants of Alzamend of $2.6 million.

investment in Alzamend will be revalued on each balance sheet date.

Revenues from our trading

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Gross margins increased to

84.9% for the six months ended June 30, 2021 compared to 33.2% for the six months ended June 30, 2020.

Our gross margins have typically

ranged between 33% and 37%, with slight variations depending on the overall composition of our revenue.

62.6% for the nine months ended September 30, 2021 compared to 33.6% for the nine months ended September 30, 2020.

Our gross margins have

typically ranged between 33% and 37%, with slight variations depending on the overall composition of our revenue.

Our gross margins of 62.6%

recognized during the six months ended June 30, 2021, were impacted by the favorable margins from our lending and trading activities.

Excluding the effects of margin from our lending and trading activities, our adjusted gross margins for the six months ended June 30,

recognized during the nine months ended September 30, 2021, were impacted by the favorable margins from our lending and trading activities.

Excluding the effects of margin from our lending and trading activities, our adjusted gross margins for the nine months ended September

30, 2021, would have been 33.3%, consistent with our historical range.

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Research and development expenses

increased by $230,000 to $1.1 million for the six months ended June 30, 2021, from $903,000 for the six months ended June 30, 2020.

increase in research and development expenses is due to cost incurred at Coolisys related to the development of our electric vehicle charger

increased by $285,000 to $1.7 million for the nine months ended September 30, 2021, from $1.4 million for the nine months ended September

The increase in research and development expenses is due to costs incurred at TurnOnGreen related to the development of our

electric vehicle charger products.

Selling and marketing

Selling and marketing expenses

were $2.7 million for the six months ended June 30, 2021, compared to $633,000 for the six months ended June 30, 2020, an increase of

$2.1 million, or 334%.

The increase was the result of increases in personnel costs directly attributed to an increase in sales and marketing

personnel and consultants primarily at Ault Alliance related to digital marketing and digital learning.

The increase is also attributable

to costs incurred at Coolisys to grow our selling and marketing infrastructure related to our electric vehicle charger products.

were $4.7 million for the nine months ended September 30, 2021, compared to $893,000 for the nine months ended September 30, 2020, an

increase of $3.8 million, or 431%.

The increase was the result of increases in personnel costs directly attributed to an increase in sales

and marketing personnel and consultants primarily at Ault Alliance related to digital marketing and digital learning.

The increase is

also attributable to costs incurred at TurnOnGreen to grow our selling and marketing infrastructure related to our electric vehicle charger

General and administrative

expenses were $13.1 million for the six months ended June 30, 2021, compared to $5.8 million for the six months ended June 30, 2020, an

increase of $7.3 million.

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

· the accrual of a $2.9 million performance bonus related to trading activities during the period;

· non-cash stock compensation costs of $545,000 related to GWW options and shares issued to GWW’s

Chief Executive Officer and Chief Operating Officer;

· general and administrative costs of $704,000 from Relec, which was acquired on November 30, 2020;

expenses were $24.4 million for the nine months ended September 30, 2021, compared to $8.7 million for the nine months ended September

30, 2020, an increase of $15.7 million, or 182%.

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

· non-cash stock compensation costs of $4.7 million;

· the accrual of a $3.7 million performance bonus related to realized gains on trading activities during

· general and administrative costs of $1.1 million from Relec, which was acquired on November 30, 2020;

· increased costs related to our Michigan Data Center, operated by Alliance Cloud Services;

· higher consulting, audit, legal and insurance costs.

Income (loss) from continuing operations

We recorded income from continuing

operations of $47.0 million for the six months ended June 30, 2021, compared to an operating loss of $3.7 million for the six months ended

June 30, 2020.

The prior-year period included a $1.0 million provision for credit losses.

The improvement in operating results is attributable

to the increase in revenue and gross margins partially offset by the increase in operating expenses, primarily general and administrative

Loss from continuing operations

We recorded a loss from continuing

operations of $2.9 million for the nine months ended September 30, 2021, compared to an operating loss of $5.3 million for the nine months

ended September 30, 2020.

The improvement in operating results is attributable to the increase in revenue and gross margins partially

offset by the increase in operating expenses, primarily general and administrative expenses.

Interest income

Interest income was $176,000

for the six months ended June 30, 2021 compared to $36,000 for the six months ended June 30, 2020.

for the nine months ended September 30, 2021 compared to $139,000 for the nine months ended September 30, 2020.

Accretion of discount on note receivable, related

Accretion of discount on note

receivable, related party was $4.2 million for the three months ended September 30, 2021 compared to nil for the nine months ended

September 30, 2020, due to the significant decline in the value of warrants in AVLP, accretion of the warrant discount was accelerated,

resulting in a discount of nil related to warrants issued in conjunction with the convertible promissory note of AVLP as of September

Interest expense

Interest expense was $337,000 for the six months ended June 30, 2021

compared to $2.0 million for the six months ended June 30, 2020.

The decrease in interest expense for the six months ended June 30, 2021

was primarily related to the decrease in our level of borrowings.

Interest expense was $475,000

for the nine months ended September 30, 2021 compared to $4.4 million for the nine months ended September 30, 2020.

The decrease in interest

expense for the nine months ended September 30, 2021 was primarily related to the decrease in our level of borrowings.

Change in fair value of warrant liability

During the six months ended

June 30, 2020, the fair value of the warrants that were issued during 2020 in a series of debt financings increased by $388,000.

value of these warrants is re-measured at each financial reporting period and immediately before exercise, with any changes in fair value

recorded as change in fair value of warrant liability in the Consolidated Statements of Operations and Comprehensive Income (Loss).

During the nine months ended

September 30, 2021, the fair value of the warrants that were issued during 2021 in a series of debt financings increased by $130,000.

The fair value of these warrants is re-measured at each financial reporting period and immediately before exercise, with any changes in

fair value recorded as change in fair value of warrant liability in the Consolidated Statements of Operations and Comprehensive Loss.

Change in fair value of marketable equity securities

Change in fair value of marketable

equity securities was a gain of $45,000 for the six months ended June 30, 2021 compared to a loss of $29,000 for the six months ended

June 30, 2020.

equity securities was a loss of $705,000 for the nine months ended September 30, 2021 compared to a loss of $58,000 for the nine months

ended September 30, 2020.

Realized gain on marketable securities

Realized gain on marketable

securities was $397,000 for the six months ended June 30, 2021.

securities was $428,000 for the nine months ended September 30, 2021 compared to nil for the nine months ended September 30, 2020.

Gain (loss) on extinguishment of debt

Gain on extinguishment of

debt was $929,000 for the six months ended June 30, 2021 compared to a loss of $475,000 for the six months ended June 30, 2020.

April 2020, we received loans under the PPP in the principal

amount of $715,000 and our majority owned subsidiary, Microphase, received loans in the principal amount of $467,000.

On January 11, 2021,

we received forgiveness in the principal amount of $715,000 .

On May 20, 2021, Microphase received

forgiveness in the principal amount of $467,000 .

debt was $929,000 for the nine months ended September 30, 2021 compared to a loss of $13.3 million for the nine months ended September

During April 2020, we received loans under the PPP

in the principal amount of $715,000 and our majority owned subsidiary, Microphase, received loans in the

principal amount of $467,000.

On January 11, 2021, we received forgiveness in the principal amount of $715,000 .

May 20, 2021, Microphase received forgiveness in the principal amount of $467,000 .

During the nine months ended September

30, 2020, principal and accrued interest of $4.0 million and $1.6 million, respectively, on our debt securities was satisfied through

the issuance of 6.8 million shares of our common stock.

We recognized a loss on extinguishment of $10.5 million as a result of these issuances.

The remaining loss on extinguishment is primarily due to the estimated fair value of warrants to purchase an aggregate of 1.7 million

shares of common stock that were issued to Esousa pursuant to the Master Exchange Agreement.

Net loss from discontinued operations

As a result of temporary closures

of restaurants in San Diego County and the deteriorating business conditions at the Company’s restaurant businesses, during the

first quarter of 2020, the Company concluded that discontinuing the operations of I.AM was ultimately in its best interest.

determined that the permanent closing of the restaurant operations met the criteria for presentation as discontinued operations.

the results of the restaurant operations are presented as discontinued operations in our consolidated statements of operations and comprehensive

loss and are excluded from continuing operations for all periods presented.

Additionally, on November 2, 2020, I.AM filed a voluntary

petition for bankruptcy under Chapter 7 in the United States Bankruptcy Court in the Central District of California, Santa Ana Division,

case number 8:20-bk-13076.

As a result of I.AM’s bankruptcy filing on November 2, 2020, Ault Global ceded authority for managing

the business to the Bankruptcy Court.

For this reason, we concluded that Ault Global had lost control of I.AM, and no longer had significant

influence over I.AM.

Therefore, we deconsolidated I.AM effective with the filing of the Chapter 11 bankruptcy in November 2020.

of restaurants in San Diego County and the deteriorating business conditions at our restaurant businesses, during the first quarter of

2020, we concluded that discontinuing the operations of I.AM was ultimately in our best interest.

Management determined that the permanent

closing of the restaurant operations met the criteria for presentation as discontinued operations.

Accordingly, the results of the restaurant

operations are presented as discontinued operations in our consolidated statements of operations and comprehensive loss and are excluded

from continuing operations for all periods presented.

Additionally, on November 2, 2020, I.AM filed a voluntary petition for bankruptcy

under Chapter 7 in the United States Bankruptcy Court in the Central District of California, Santa Ana Division, case number 8:20-bk-13076.

As a result of I.AM’s bankruptcy filing on November 2, 2020, Ault Global ceded authority for managing the business to the Bankruptcy

For this reason, we concluded that Ault Global had lost control of I.AM, and no longer had significant influence over I.AM.

we deconsolidated I.AM effective with the filing of the Chapter 11 bankruptcy in November 2020.

Net income (loss)

For the foregoing reasons,

our net income for the six months ended June 30, 2021, was $44.2 million compared to a net loss of $7.9 million for the six months ended

June 30, 2020.

our net income for the nine months ended September 30, 2021, was $1.4 million compared to a net loss of $24.6 million for the nine months

ended September 30, 2020.

Other comprehensive income (loss)

Other comprehensive loss was

$2.9 million for the six months ended June 30, 2021, compared to other comprehensive loss of $532,000 million for the six months ended

June 30, 2020.

Other comprehensive loss for the six months ended June 30, 2021, which decreased our equity, was primarily due to unrealized

losses in the warrant derivative securities that we received as a result of our investment in AVLP, a related party.

During the six months

ended June 30, 2020, unrealized losses in the warrant derivative securities of AVLP was the primary component of other comprehensive loss.

$7.9 million for the nine months ended September 30, 2021, compared to other comprehensive income of $1.1 million for the nine months

ended September 30, 2020.

Other comprehensive loss for the nine months ended September 30, 2021, which decreased our equity, was primarily

due to unrealized losses in the warrant derivative securities that we received as a result of our investment in AVLP, a related party.

During the nine months ended September 30, 2020, unrealized losses in the warrant derivative securities of AVLP was the primary component

of other comprehensive loss.

Liquidity and Capital Resources

On June 30, 2021, we had cash

and cash equivalents of $105.4 million.

On September 30, 2021, we

had cash and cash equivalents of $44.0 million.

This compares with cash and cash equivalents of $18.7 million at December 31, 2020.

in cash and cash equivalents was primarily due to cash provided by financing activities related to our 2021 ATM offering.

increase in cash and cash equivalents was primarily due to cash provided by financing activities related to our 2021 ATM offering.

Net cash used in continuing

operating activities totaled $21.7 million for the six months ended June 30, 2021, compared to $2.3 million for the six months ended June

Cash used for operating activities included $9.6 million net cash used for marketable securities related to trading activities

related to the operations of DP Lending and $2.6 million cash used to reduce accounts payable and accrued liabilities.

operating activities totaled $56.9 million for the nine months ended September 30, 2021, compared to $5.4 million for the nine months

ended September 30, 2020.

Cash used for operating activities included $34.7 million net cash used for marketable securities related

to trading activities related to the operations of DP Lending and $1.1 million cash used to reduce accounts payable and accrued liabilities.

Net cash used in investing

activities was $29.7 million for the six months ended June 30, 2021, compared to $152,000 for the six months ended June 30, 2020 and reflects

the following transactions:

activities was $68.7 million for the nine months ended September 30, 2021, compared to $894,000 for the nine months ended September 30,

2020 and reflects the following transactions:

· Capital expenditures - $19.8 million of capital expenditures related to Bitcoin mining equipment

at Ault Alliance.

During the quarter ended September 30, 2021, we executed contracts to purchase 4,000 Antminer S-19 Pro Bitcoin miners.

As of September 30, 2021, we had received 1,000 of the Bitcoin miners.

The remaining 3,000 units are expected to be delivered at a

rate of 300 units per month between October 2021 and July 2021.

The gross purchase price is $27.3 million, of which $18.1 million was

paid as of September 30, 2021 with the balance scheduled to be paid between October 2021 and June 2022.

During the quarter ended September

30, 2021, we capitalized $433,000 of shipping costs and $1.2 million of third-party commissions related to cryptocurrency machines and

related equipment.

· Acquisition of Michigan Cloud Data Center - On January 29, 2021, Alliance Cloud Services, LLC,

10 unchanged sentences

Under the securities purchase agreement, Alzamend has agreed to sell up to 6,666,667 shares of its common stock to DPL for $10

or $1.50 per share, and issue to DPL warrants to acquire up to 3,333,334 shares of Alzamend common stock with an exercise price of $3.00

million, or $1.50 per share, and issue to DPL warrants to acquire up to 3,333,334 shares of Alzamend common stock with an exercise price

of $3.00 per share.

The transaction was approved by our independent directors after receiving a third-party valuation report of Alzamend.

15 unchanged sentences

Net cash provided by financing activities was $151.1 million and $7.1 million for the

six months ended June 30, 2021 and 2020, respectively.

Financing activities during the six months ended June 30, 2021, primarily related

to proceeds from the 2021 ATM offering.

On January 22, 2021, we entered into an At-The-Market Issuance Sales Agreement, as amended on

February 17, 2021 and thereafter on March 5, 2021 (collectively, the “2021 Sales Agreement”) with Ascendiant Capital Markets,

LLC, or the sales agent, relating to the sale of shares of common stock offered by a prospectus supplement and the accompanying prospectus,

as amended by the amendments to the sales agreement dated February 16, 2021 and March 5, 2021.

nine months ended September 30, 2021 and 2020, respectively.

Financing activities during the nine months ended September 30, 2021, primarily

related to proceeds from the 2021 ATM offering.

On January 22, 2021, we entered into an At-The-Market Issuance Sales Agreement, as amended

on February 17, 2021 and thereafter on March 5, 2021 (the “2021 Sales Agreement”) with Ascendiant Capital Markets, LLC, or

the sales agent, relating to the sale of shares of common stock offered by a prospectus supplement and the accompanying prospectus, as

amended by the amendments to the 2021 Sales Agreement dated February 16, 2021 and March 5, 2021.

In accordance with the terms of the 2021

Sales Agreement, we may offer and sell shares of common stock having an aggregate offering price of up to $200 million from time to time

through the sales agent.

As of June 30, 2021, we sold an aggregate of 27.9 million shares of common stock pursuant to the sales agreement

for gross proceeds of $144.0 million.

Sales Agreement, we may offer and sell shares of common stock having an aggregate offering price of up to $200.0 million from time to

time through the sales agent.

As of September 30, 2021, we had sold an aggregate of 34.7 million shares of common stock pursuant to the

2021 Sales Agreement for gross proceeds of $160.5 million.

We believe our current cash

on hand is sufficient to meet its operating and capital requirements for at least the next twelve months from the date the financial statements

for the quarter ended June 30, 2021 are issued.

for the quarter ended September 30, 2021 are issued.

Critical Accounting Policies

32 unchanged sentences

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable for a smaller

reporting company.

applicable for a smaller reporting company.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis