What changed in this filing

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Item 1. Financial Statements

2022-05-23 compared with 2021-11-19 · 527 added, 1412 removed, 405 unchanged (83% of the section changed)

Financial Statements.

AULT GLOBAL HOLDINGS, INC.

BITNILE HOLDINGS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

CURRENT ASSETS

Cash and cash equivalents

Restricted cash

Marketable equity securities

Digital currencies

Accounts receivable

Accounts and other receivable, related party

Accrued revenue

1 unchanged sentence

TOTAL CURRENT ASSETS

Cash and marketable securities held in Trust Account

Intangible assets, net

1 unchanged sentence

Right-of-use assets

Investment in promissory notes, related parties

Investments in common stock and warrants, related parties

Investments in debt and equity securities

Investment in limited partnership

Investment in promissory notes and other, related parties

Investments in common stock, related parties

Investments in equity securities

Investment in unconsolidated entity

Loans receivable

Other investments, related parties

$ 518,924,000

$ 490,286,000

LIABILITIES AND STOCKHOLDERS' EQUITY

1 unchanged sentence

Accounts payable and accrued expenses

Accounts payable and accrued expenses, related party

Investment margin accounts payable

Operating lease liability, current

Revolving credit facility

Notes payable, net

Notes payable, related parties

Convertible notes payable, related party

Warrant liability

Other current liabilities

TOTAL CURRENT LIABILITIES

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

AULT GLOBAL HOLDINGS, INC.

BITNILE HOLDINGS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

September 30,

LONG TERM LIABILITIES

1 unchanged sentence

Notes payable

Notes payable, related parties

Convertible notes payable

Deferred underwriting commissions of Ault Disruptive subsidiary

TOTAL LIABILITIES

COMMITMENTS AND CONTINGENCIES

Redeemable noncontrolling interests in equity of subsidiaries

STOCKHOLDERS’ EQUITY

1 unchanged sentence

$ 0.001 par value – 1,000,000 shares authorized;

issued and outstanding at September 30, 2021 and December 31, 2020

issued and outstanding at March 31, 2022 and December 31, 2021

(redemption amount and liquidation preference of $ 176,000 as of

September 30, 2021 and December 31, 2020)

March 31, 2022 and December 31, 2021)

Series B Convertible Preferred Stock, $ 10 stated value per share,

1 unchanged sentence

125,000 shares issued

and outstanding at September 30, 2021 and December 31, 2020 (liquidation

preference of $ 1,250,000 at September 30, 2021 and December 31, 2020)

and outstanding at March 31, 2022 and December 31, 2021 (liquidation

preference of $ 1,250,000 at March 31, 2022 and December 31, 2021)

Class A Common Stock, $ 0.001 par value – 500,000,000 shares authorized;

63,346,921 and 27,753,562 shares issued and outstanding at September 30, 2021

225,015,203 and 84,344,607 shares issued and outstanding at March 31,

2022 and December 31, 2021, respectively

Class B Common Stock, $ 0.001 par value – 25,000,000 shares authorized;

nil shares issued and outstanding at September 30, 2021 and December 31, 2020

nil shares issued and outstanding at March 31, 2022 and December 31, 2021

Additional paid-in capital

3 unchanged sentences

Accumulated other comprehensive loss

( 9,631,000 )

( 1,718,000 )

Treasury stock, at cost

( 14,172,000 )

TOTAL AULT GLOBAL HOLDINGS STOCKHOLDERS’ EQUITY

( 13,180,000 )

TOTAL BITNILE HOLDINGS STOCKHOLDERS’ EQUITY

Non-controlling interest

2 unchanged sentences

$ 518,924,000

$ 490,286,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

AULT GLOBAL HOLDINGS, INC.

BITNLE HOLDINGS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS (Unaudited)

AND COMPREHENSIVE LOSS

For the Three Months Ended

For the Nine Months Ended

September 30,

Revenue, cryptocurrency mining

Revenue, cryptocurrency mining, net

Revenue, hotel operations

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

Impairment of mined cryptocurrency

Total operating expenses

Loss from continuing operations

( 49,874,000 )

( 1,625,000 )

( 2,850,000 )

( 5,324,000 )

Income from operations

Other income (expenses)

Interest income

Accretion of discount on note receivable, related party

Interest and other income

Interest expense

( 29,824,000 )

( 4,414,000 )

Change in fair value of marketable equity securities

Realized gain on marketable securities

Gain (loss) on extinguishment of debt

( 12,823,000 )

( 13,298,000 )

Loss from investment in unconsolidated entity

Gain on extinguishment of debt

Change in fair value of warrant liability

Total other income (expenses), net

( 15,116,000 )

( 17,637,000 )

Income (loss) from continuing operations before income taxes

( 46,140,000 )

Total other (expenses) income, net

( 29,817,000 )

(Loss) income before income taxes

( 28,787,000 )

Income tax (provision) benefit

Net income (loss) from continuing operations

( 42,774,000 )

( 16,735,000 )

( 22,943,000 )

Net loss from discontinued operations, net of taxes

( 1,698,000 )

Net income (loss)

( 42,774,000 )

( 16,735,000 )

( 24,641,000 )

Net loss attributable to non-controlling interest

Net income (loss) attributable to Ault Global Holdings

Net (loss) income

( 28,787,000 )

Net loss (income) attributable to non-controlling interest

( 1,081,000 )

Net (loss) income attributable to BitNile Holdings, Inc.

( 28,772,000 )

Preferred dividends

Net income (loss) available to common stockholders

$ ( 42,874,000 )

$ ( 16,738,000 )

Net (loss) income available to common stockholders

$ ( 28,777,000 )

Basic net income (loss) per common share:

Continuing operations

Discontinued operations

Net income (loss) per common share

Diluted net income (loss) per common share:

Continuing operations

Discontinued operations

Net income (loss) per common share

Basic net (loss) income per common share

Diluted net (loss) income per common share

Weighted average basic common shares outstanding

Weighted average diluted common shares outstanding

Comprehensive loss

Net income (loss) available to common stockholders

$ ( 42,874,000 )

$ ( 16,738,000 )

Comprehensive (loss) income

Net (loss) income available to common stockholders

$ ( 28,777,000 )

1 unchanged sentence

Foreign currency translation adjustment

Net unrealized gain (loss) on derivative securities of related party

( 4,849,000 )

( 7,773,000 )

Other comprehensive income (loss)

( 5,031,000 )

( 7,914,000 )

Total comprehensive loss

$ ( 47,905,000 )

$ ( 15,133,000 )

$ ( 6,581,000 )

Net unrealized gain on derivative securities of related party

Other comprehensive (loss) income

Total comprehensive (loss) income

$ ( 29,064,000 )

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

AULT GLOBAL HOLDINGS, INC.

BITNILE HOLDINGS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY (Unaudited)

Three Months Ended September 30, 2021

IN STOCKHOLDERS’ EQUITY

Three Months Ended March 31, 2022

Comprehensive

Non-Controlling

Stockholders’

BALANCES, July 1, 2021

BALANCES, January 1, 2022

$ 385,644,000

2 unchanged sentences

$ ( 13,180,000 )

$ 228,455,000

Issuance of common stock for restricted stock awards

1 unchanged sentence

Restricted stock awards

Issuance of stock options at Gresham Worldwide

Issuance of common stock for cash

Financing cost in connection with sales of common stock

Adjustment to treasury stock

for holdings in investment

Financing cost in connection with sales of common

( 2,758,000 )

Comprehensive loss:

Purchase of treasury stock – Ault Alpha

( 28,772,000 )

1 unchanged sentence

Preferred dividends

Net unrealized gain on derivatives in related party

( 4,849,000 )

Foreign currency translation adjustments

Net income attributable to non-controlling interest

BALANCES, September 30, 2021

$ 331,886,000

$ ( 120,066,000 )

$ ( 9,631,000 )

$ ( 2,773,000 )

$ 200,981,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

AULT GLOBAL HOLDINGS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY (Unaudited)

Three Months Ended September 30, 2020

Comprehensive

Non-Controlling

Stockholders’

BALANCES, July 1, 2020

$ 105,626,000

$ ( 96,565,000 )

$ ( 6,044,000 )

Stock-based compensation:

Issuance of common stock for conversion

Beneficial conversion feature in connection

with convertible notes

Fair value of warrants issued in connection

with convertible notes

Cash for exchange fees and other financing costs

Comprehensive loss:

Net loss attributable to non-controlling interest

BALANCES, March 31, 2022

$ 495,536,000

$ ( 174,378,000 )

Preferred dividends

Net unrealized gain on derivatives

in related party

Foreign currency translation adjustments

BALANCES, September 30, 2020

$ ( 393,000 )

2 unchanged sentences

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

AULT GLOBAL HOLDINGS, INC.

BITNILE HOLDINGS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY (Unaudited)

Nine Months Ended September 30, 2021

IN STOCKHOLDERS’ EQUITY

Three Months Ended March 31, 2021

Preferred Stock

Comprehensive

1 unchanged sentence

Stockholders’

Income (Loss)

BALANCES, January 1, 2021

2 unchanged sentences

$ ( 1,718,000 )

Issuance of common stock for restricted stock awards

Stock based compensation:

Restricted stock awards

Issuance of stock options at Gresham Worldwide

Issuance of common stock for cash

Financing cost in connection with sales of common

( 4,952,000 )

Adjustment to treasury stock

for holdings in

investment partnerships

( 2,773,000 )

Issuance of common stock for conversion

of convertible notes payable

Issuance of common stock for conversion

of convertible notes payable, related party

Comprehensive loss:

Preferred dividends

Net unrealized loss on derivatives in related party

( 7,773,000 )

Foreign currency translation adjustments

Net income attributable to non-controlling interest

BALANCES, September 30, 2021

$ 331,886,000

$ ( 120,066,000 )

$ ( 9,631,000 )

$ ( 2,773,000 )

$ 200,981,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

AULT GLOBAL HOLDINGS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY (Unaudited)

Nine Months Ended September 30, 2020

Comprehensive

Non-Controlling

Stockholders’

BALANCES, January 1, 2020

$ 101,099,000

Financing cost in connection with sales of common stock

( 4,065,000 )

Stock based compensation:

Issuance of common stock in payment of

short term advances, related party

Issuance of common stock in payment of

accrued liabilities

Issuance of common stock for conversion

Beneficial conversion feature in connection

with convertible notes

Fair value of warrants issued in connection

with convertible notes

Cash for exchange fees and other financing costs

Comprehensive loss:

( 24,641,000 )

Preferred dividends

Net unrealized loss on derivatives

in related party

Net unrealized gain on derivatives in related party

Foreign currency translation adjustments

BALANCES, September 30, 2020

Net income attributable to non-controlling interest

BALANCES, March 31, 2021

$ 292,763,000

2 unchanged sentences

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

AULT GLOBAL HOLDINGS, INC.

BITNILE HOLDINGS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Cash flows from operating activities:

Net income (loss)

$ ( 24,641,000 )

Net loss from discontinued operations

( 1,698,000 )

Net income (loss) from continuing operations

Net (loss) income

$ ( 28,787,000 )

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

Amortization of right-of-use assets

1 unchanged sentence

Interest expense – debt discount

(Gain) loss on extinguishment of debt

Gain on extinguishment of debt

Change in fair value of warrant liability

Accretion of original issue discount on notes receivable – related party

( 4,213,000 )

Accretion of original issue discount on notes receivable

1 unchanged sentence

Stock-based compensation

Realized losses on other investments

Impairment of cryptocurrencies

Realized gains on sale of marketable securities

( 4,892,000 )

Unrealized losses on marketable equity securities

Unrealized gains on equity securities – related party

Unrealized gains on marketable securities

( 13,515,000 )

Unrealized (gains) losses on equity securities

( 2,260,000 )

Unrealized (gains) losses on investments in common stock, related parties

Unrealized gains on equity securities

( 13,461,000 )

Loss from investment in unconsolidated entity

Changes in operating assets and liabilities:

2 unchanged sentences

Accounts receivable

( 1,270,000 )

Accrued revenue

( 1,723,000 )

Prepaid expenses and other current assets

Digital currencies

( 3,809,000 )

1 unchanged sentence

( 1,713,000 )

Accounts payable, related parties

Other current liabilities

Lease liabilities

Net cash used in continuing operating activities

( 56,911,000 )

( 5,357,000 )

Net cash provided by discontinued operating activities

Net cash used in operating activities

( 56,911,000 )

Net cash provided by (used in) operating activities

( 14,241,000 )

2 unchanged sentences

( 35,359,000 )

Investment in promissory notes, related parties

( 4,349,000 )

Investment in promissory notes and other, related parties

( 3,595,000 )

Investments in common stock and warrants, related parties

2 unchanged sentences

( 2,670,000 )

Proceeds from sale of investment in real property, related party

Sales of marketable equity securities

Purchase of marketable equity securities

Sales of marketable equity securities

Investments in loans receivable

Principal payments on loans receivable

Sale of digital currencies

Investments in equity securities

( 3,820,000 )

Proceeds from loans receivable

Investments in debt and equity securities

( 1,787,000 )

3 unchanged sentences

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

AULT GLOBAL HOLDINGS, INC.

BITNILE HOLDINGS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (continued)

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Cash flows from financing activities:

1 unchanged sentence

$ 110,147,000

$ 124,983,000

Financing cost in connection with sales of equity securities

( 2,758,000 )

Proceeds from convertible notes payable

( 4,065,000 )

Proceeds from notes payable

Proceeds from short-term advances

Payments on short-term advances

Proceeds from short-term advances – related party

Payments on short-term advances – related party

Repayment of margin accounts

( 18,488,000 )

Payments on notes payable

( 65,986,000 )

Payments on advances on future receipts

Payments of preferred dividends

Purchase of treasury stock

( 2,773,000 )

Payments on revolving credit facilities, net

1 unchanged sentence

Effect of exchange rate changes on cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Net increase in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of period

Cash and cash equivalents and restricted cash at end of period

$ 107,798,000

Supplemental disclosures of cash flow information:

1 unchanged sentence

Non-cash investing and financing activities:

Cancellation of convertible notes payable into shares of common stock

Cancellation of notes payable into shares of common stock

Conversion of convertible notes payable into shares of common stock

Payment of accounts payable with digital currency

Issuance of common stock in payment of liability

Cancellation of short-term advances, related party, into shares

of common stock

Issuance of notes payable and convertible notes payable in

payment of accrued expenses

Conversion of debt and equity securities to marketable securities

Conversion of loans to debt and equity securities

Conversion of convertible notes payable, related party, in shares

of common stock

Conversion of convertible notes payable, related party into shares of common stock

Recognition of new operating lease right-of-use assets and lease liabilities

Purchase of marketable equity securities for future payment

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

DESCRIPTION OF BUSINESS

Ault Global Holdings, Inc.,

a Delaware corporation (“Ault Global” or the “Company”), formerly known as DPW Holdings, Inc., was incorporated

in September 2017.

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.

Ault Global was founded by Milton “Todd” Ault III, its Executive Chairman

and is led by Mr.

Ault, William B.

BitNile Holdings, Inc., a

Delaware corporation (“BitNile” or the “Company”) was incorporated in September 2017.

BitNile 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, hotel operations and textiles.

In addition, the Company extends credit to select entrepreneurial businesses through

a licensed lending subsidiary.

BitNile was founded by Milton “Todd” Ault, III, its Executive Chairman and is led by Mr.

Horne, its Chief Executive Officer and Vice Chairman and Henry Nisser, its President and General Counsel.

Together, they constitute the Executive Committee, which manages the day-to-day operations of the holding company.

The Company’s

long-term objective is to maximize per share intrinsic value.

All major investment and capital allocation decisions are made for the Company

Together, they constitute

the Executive Committee, which manages the day-to-day operations of the Company.

All major investment and capital allocation decisions

are made for the Company by Mr.

Ault and the Executive Committee.

The Company has three reportable segments:

· Gresham Worldwide (“GWW”) –

defense solutions,

The Company has six reportable segments:

· BitNile, Inc.

(“BNI”) – cryptocurrency mining operations,

· Ault Alliance, Inc.

(“Ault Alliance”) – commercial lending, activist investing, media,

and digital learning,

· Gresham Worldwide, Inc.

(“GWW”) – defense solutions,

· TurnOnGreen, Inc.

(“TurnOnGreen”) – commercial electronics solutions,

· Ault Alliance – Bitcoin mining, data

center operations, commercial lending and media.

On January 19, 2021, the Company

changed its corporate name from DPW Holdings, Inc., to Ault Global Holdings, Inc.

The name change was effected through a parent/subsidiary

short form merger pursuant to an agreement and plan of merger dated January 7, 2021.

The merger and resulting name change did not affect

the rights of security holders of the Company.

The Company’s common stock continues to be listed on the NYSE American under the

symbol “DPW”.

LIQUIDITY AND FINANCIAL CONDITION

As of September 30, 2021,

the Company had cash and cash equivalents of $ 44.0 million , working capital of $ 93.9 million and total stockholders’ equity

of $ 201.0 million .

In the past, the Company financed its operations principally through issuances of convertible debt, promissory notes

and equity securities.

During the nine months ended September 30, 2021, the Company continued to strengthen its liquidity and financial

condition through additional equity financing from its 2021 At-The-Market Offering (the “2021 ATM Offering”);

see Note 24 for a discussion of the

Company’s 2021 ATM Offering.

The Company believes its current

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

statements are issued.

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING

The accompanying

unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and

Regulation S-X and do not include all the information and disclosures required by generally accepted accounting principles in the

· Real Estate – hotel operations and other commercial real estate holdings, and

· Ault Disruptive Technologies Corporation (“Ault Disruptive”) – a special purpose acquisition

company (“SPAC”).

LIQUIDITY AND FINANCIAL

of March 31, 2022, the Company had cash and cash equivalents of $ 39.4 million and working capital of $ 55.6 million .

The Company has primarily

financed its operations principally through issuances of convertible debt, promissory notes and equity securities.

The Company believes

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

these financial statements are issued.

OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q

and Regulation S-X and do not include all the information and disclosures required by generally accepted accounting principles in the

United States of America (“GAAP”).

The Company has made estimates and judgments affecting the amounts reported in the

Company’s condensed consolidated financial statements and the accompanying notes.

The actual results experienced by the

Company may differ materially from the Company’s estimates.

The condensed consolidated financial information is unaudited but

reflects all normal adjustments that are, in the opinion of management, necessary to provide a fair statement of results for the

interim periods presented.

These condensed consolidated financial statements should be read in conjunction with the consolidated

financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the

Securities and Exchange Commission (the “SEC”) on April 15, 2021.

The condensed consolidated balance sheet as of December

31, 2020 was derived from the Company’s audited 2020 financial statements contained in the above referenced Form 10-K.

of the three and nine months ended September 30, 2021, are not necessarily indicative of the results to be expected for the full

year ending December 31, 2021.

Significant Accounting Policies

There have been no material

changes in the Company’s significant accounting policies to those previously disclosed in the 2020 Annual Report other than disclosed

Variable Interest Entities

For Variable Interest Entities

(“VIEs”), the Company assesses whether it is the primary beneficiary as prescribed by the accounting guidance on the consolidation

The primary beneficiary of a VIE is the party that has the power to direct the activities that most significantly impact the

performance of the entity and the obligation to absorb the losses or the right to receive the benefits that could potentially be significant

to the entity.

The Company evaluates its

business relationships with related parties to identify potential VIEs under ASC 810 “Consolidation”.

The Company consolidates

VIEs in which it is considered to be the primary beneficiary.

Entities are considered to be the primary beneficiary if they have both

of the following characteristics:

(i) the power to direct the activities that, when taken together, most significantly impact the VIE’s

performance, and (ii) the obligation to absorb losses and right to receive the returns from the VIE that would be significant to the VIE.

The Company’s judgment with respect to its level of influence or control of an entity involves the consideration of various factors

including the form of its ownership interest, its representation in the entity’s governance, the size of its investment, estimates

of future cash flows, its ability to participate in policy making decisions and the rights of the other investors to participate in the

decision making process and to replace the Company as manager and/or liquidate the joint venture, if applicable.

Treasury Stock

The shares of Company stock

attributable to the Company’s limited partner interest in Ault Alpha LP (the “Alpha Fund”) are considered treasury stock

on the consolidated balance sheet and thereby deemed not to be included in the calculation of weighted average common shares outstanding.

However, these shares are legally outstanding.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial

Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2019-12, Income Taxes (Topic

Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects

related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies

and amends existing guidance to improve consistent application.

This guidance is effective for fiscal years, and interim periods within

those fiscal years, beginning after December 15, 2020.

The Company has completed its evaluation process and the January 1, 2021 adoption

did not have a material impact to the Company’s consolidated financial statements.

The Company has made estimates and judgments affecting the amounts reported in the Company’s

condensed consolidated financial statements and the accompanying notes.

The actual results experienced by the Company may differ materially

from the Company’s estimates.

The condensed consolidated financial information is unaudited but reflects all normal adjustments

that are, in the opinion of management, necessary to provide a fair statement of results for the interim periods presented.

These condensed

consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company’s Annual

Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on

April 15, 2022.

The condensed consolidated balance sheet as of December 31, 2021 was derived from the Company’s audited 2021 financial

statements contained in the above referenced Form 10-K.

Results of the three months ended March 31, 2022, are not necessarily indicative

of the results to be expected for the full year ending December 31, 2022.

Significant Accounting

have been no material changes in the Company’s significant accounting policies to those previously disclosed in the 2021 Annual

Reclassifications

prior period amounts have been reclassified for comparative purposes to conform to the current-period financial statement presentation.

These reclassifications had no effect on previously reported results of operations.

Accounting Standards

In May 2021, the Financial

Accountings Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-04, “Earnings Per Share

(Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and

Hedging-Contracts in Entity’s Own Equity (Subtopic 815- 40):

Issuer’s Accounting for Certain Modifications or Exchanges of

Freestanding Equity-Classified Written Call Options.” The guidance became effective for the Company on January 1, 2022.

adopted the guidance on January 1, 2022, and has concluded the adoption did not have a material impact on its unaudited condensed consolidated

financial statements.

In June 2016, the FASB issued

2016-13, “Financial Instruments - Credit Losses,” (“ASU No.

2016-13”) to improve information on credit

losses for financial assets and net investment in leases that are not accounted for at fair value through net income.

ASU 2016-13 replaces

the current incurred loss impairment methodology with a methodology that reflects expected credit losses.

This guidance is effective for

the Company beginning on January 1, 2023, with early adoption permitted.

The Company does not expect that the adoption of this standard

will have a significant impact on its condensed consolidated financial statements and related disclosures.

In August 2020, the FASB issued

ASU 2020-06, “Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own

Equity (Subtopic 815-40)-Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”).

The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP.

Consequently,

more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion

ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope

exception, which will permit more equity contracts to qualify for it.

ASU 2020-06 also simplifies the diluted net income per share calculation

in certain areas.

The amendments in ASU 2020-06 are effective for smaller reporting companies as defined by the SEC for fiscal years beginning

after December 15, 2023, including interim periods within those fiscal years.

Effective January 1, 2022, the Company early adopted ASU

2020-06 using the modified retrospective approach, which resulted in no impact on its consolidated financial statements.

In October 2021, the FASB

issued ASU 2021-08, “Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with

Customers,” which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured

by the acquirer on the acquisition date in accordance with ASC 606, “Revenue from Contracts with Customers.” The guidance

will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree.

should be applied prospectively to acquisitions occurring on or after the effective date.

The guidance is effective for fiscal years beginning

after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted, including in interim periods,

for any financial statements that have not yet been issued.

The Company is currently evaluating this guidance to determine the impact

it may have on its consolidated financial statements.

In November 2021, the FASB

issued ASU 2021-10, “Government Assistance (Topic 832),” which requires annual disclosures that increase the transparency

of transactions involving government grants, including (1) the types of transactions, (2) the accounting for those transactions, and (3)

the effect of those transactions on an entity’s financial statements.

The amendments in this update are effective for financial

statements issued for annual periods beginning after December 15, 2021.

The Company expects that this guidance will not have a significant

impact on its consolidated financial statements.

REVENUE DISAGGREGATION

The following tables summarize disaggregated customer

contract revenues and the source of the revenue for the three and nine months ended September 30, 2021 and 2020.

Revenues from lending and trading

activities included in consolidated revenues were primarily interest, dividend and other investment income, which are not considered to

be revenues from contracts with customers under GAAP.

The Company’s disaggregated revenues consist

of the following for the three months ended September 30, 2021:

Three Months ended September 30, 2021

Ault Alliance

The following tables summarize

disaggregated customer contract revenues and the source of the revenue for the three months ended March 31, 2022 and 2021.

Revenues from

lending and trading activities included in consolidated revenues were primarily interest, dividend and other investment income, which

are not considered to be revenues from contracts with customers under GAAP.

The Company’s disaggregated

revenues consist of the following for the three months ended March 31, 2022:

Three months ended March 31, 2022

Cryptocurrency

Primary Geographical Markets

2 unchanged sentences

Revenue, lending and trading activities

( 38,869,000 )

Total revenue

$ ( 38,261,000 )

$ ( 30,794,000 )

RF/microwave filters

Detector logarithmic video amplifiers

Power supply units

Power supply systems

Healthcare diagnostic systems

Defense systems

Digital currency mining

Revenue from contracts with customers

Revenue, lending and trading activities

(38,869,000 )

Total revenue

$ (38,261,000 )

$ (30,794,000 )

Timing of Revenue Recognition

Goods transferred at a point in time

Services transferred over time

Revenue from contracts with customers

The Company’s disaggregated revenues consist

of the following for the three months ended September 30, 2020:

Three Months ended September 30, 2020

Ault Alliance

Primary Geographical Markets

(North America)

Revenue from contracts with customers

Revenue, lending and trading activities

Total revenue

Major Goods or Services

RF/microwave filters

4 unchanged sentences

Defense systems

Digital currency mining, net

Hotel operations

Revenue from contracts with customers

5 unchanged sentences

Revenue from contracts with customers

The Company’s disaggregated revenues consisted

of the following for the nine months ended September 30, 2021:

Nine Months Ended September 30, 2021

The Company’s disaggregated

revenues consist of the following for the three months ended March 31, 2021:

Three months ended March 31, 2021

Ault Alliance

2 unchanged sentences

Revenue from contracts with customers

Revenue, lending and trading activities

Revenue, lending and trading activities (North

Total revenue

13 unchanged sentences

Revenue from contracts with customers

The Company’s disaggregated revenues consisted

of the following for the nine months ended September 30, 2020:

Nine Months ended September 30, 2020

Ault Alliance

Primary Geographical Markets

North America

Revenue from contracts with customers

Revenue, lending and trading activities

Total revenue

RF/microwave filters

Detector logarithmic video amplifiers

Power supply units

Power supply systems

Healthcare diagnostic systems

Defense systems

Revenue from contracts with customers

Revenue, lending and trading activities

Total revenue

Timing of Revenue Recognition

Goods transferred at a point in time

Services transferred over time

Revenue from contracts with customers

Sales of Products

The Company generates revenues

from the sale of its products through a direct and indirect sales force.

The Company’s performance obligations to deliver products

are satisfied at the point in time when title transfers to the customer.

Generally products are shipped FOB shipping point and title transfers

to the customer at the time the products are placed on a common carrier.

The Company provides standard assurance warranties, which are

not separately priced, that the products function as intended.

The Company primarily receives fixed consideration for sales of product.

Some of the Company’s contracts with distributors include stock rotation rights after six months for slow moving inventory, which

represents variable consideration.

The Company uses an expected value method to estimate variable consideration and constrains revenue

for estimated stock rotations until it is probable that a significant reversal in the amount of cumulative revenue recognized will not

To date, returns have been insignificant.

The Company’s customers generally pay within 30 days from the receipt of an invoice.

Because the Company’s

product sales agreements have an expected duration of one year or less, the Company has elected to adopt the practical expedient in Accounting

Standards Codification (“ASC”) 606-10-50-14(a) of not disclosing information about its remaining performance obligations.

Manufacturing Services

For manufacturing services,

which include revenues generated by the Company’s subsidiary, Enertec Systems 2001 Ltd (“Enertec”), and in certain instances,

revenues generated by the Company’s subsidiary, Gresham Power Electronics Ltd., the Company’s performance obligation for manufacturing

services is satisfied over time as the Company creates or enhances an asset based on criteria that are unique to the customer and that

the customer controls as the asset is created or enhanced.

Generally, the Company recognizes revenue based upon proportional performance

over time using a cost-to-cost method which measures progress based on the costs incurred to total expected costs in satisfying its performance

This method provides a depiction of the progress in providing the manufacturing service because there is a direct relationship

between the costs incurred by the Company and the transfer of the manufacturing service to the customer.

Manufacturing services that are

recognized based upon the proportional performance method are included in the above table as services transferred over time and to the

extent the customer has not been invoiced for these revenues, as accrued revenue in the accompanying consolidated balance sheets.

to the Company’s estimates may result in increases or decreases to revenues and income and are reflected in the consolidated financial

statements in the periods in which they are first identified.

The Company has elected the

practical expedient to not adjust the promised amount of consideration for the effects of a significant financing component to the extent

that the period between when the Company transfers its promised good or service to the customer and when the customer pays in one year

Lending and Trading Activities

Lending Activities

Ault Alliance, Inc.

(“Ault Alliance”),

through its wholly owned subsidiary Digital Power Lending, LLC (“DP Lending”), generates revenue from lending activities primarily

through interest, origination fees and late/other fees.

Interest income on these products is calculated based on the contractual interest

rate and recorded as interest income as earned.

The origination fees or original issue discounts are recognized over the life of the loan

using the effective interest method.

Trading Activities

Ault Alliance, through DP Lending, generates

revenue from trading activities primarily through sales of securities that have appreciated since their acquisition.

Financial instruments

utilized in trading activities are carried at fair value.

Fair value is generally based on quoted market prices for the same or similar

assets and liabilities.

If these market prices are not available, fair values are estimated based on dealer quotes, pricing models, discounted

cash flow methodologies, or similar techniques where the determination of fair value may require significant management judgment or estimation.

Realized gains and losses are recorded on a trade-date basis.

Realized and unrealized gains and losses are recognized in revenue from

lending and trading activities.

Blockchain Mining

The Company has executed contracts

with digital asset mining pools to provide computing power to the mining pool.

The contracts are terminable at any time by either party

and the Company’s enforceable right to compensation only begins when the Company provides computing power to the mining pool operator.

In exchange for providing computing power, the Company is entitled to a fractional share of the fixed digital currency award the mining

pool operator receives (less digital asset transaction fees to the mining pool operator which are recorded as a component of cost of revenues),

for successfully adding a block to the blockchain.

The Company’s fractional share is based on the proportion of computing power

the Company contributed to the mining pool operator to the total computing power contributed by all mining pool participants in solving

the current algorithm to add a block to the blockchain.

Providing computing power

in digital asset transaction verification services is an output of the Company’s ordinary activities.

The provision of providing

such computing power is the only performance obligation in the Company’s contracts with mining pool operators.

The transaction consideration

the Company receives, if any, is noncash consideration, which the Company measures at fair value on the date received, which is not materially

different than the fair value at contract inception or the time the Company has earned the award from the pools.

All consideration is

The Company cannot determine, during the course of solving for a block, that a reversal of revenue is not probable and therefore

revenue is recognized when the mining pool operator successfully places a block (by being the first to solve an algorithm) and the Company

receives confirmation of the consideration it will receive.

Because it is not probable

that a significant reversal of cumulative revenue will not occur, the consideration is constrained until the mining pool operator successfully

places a block (by being the first to solve an algorithm) and the Company receives confirmation of the consideration it will receive,

at which time revenue is recognized.

There is no significant financing component in these transactions.

Fair value of the digital

currency award received is determined using the market rate of the related digital currency at the time of receipt.

There is currently no specific

definitive guidance under GAAP or alternative accounting framework for the accounting for digital currencies recognized as revenue or

held, and management has exercised significant judgment in determining the appropriate accounting treatment.

In the event authoritative

guidance is promulgated by the FASB, the Company may be required to change its policies, which could have an effect on the Company’s

consolidated financial position and results from operations.

Expenses associated with running

the cryptocurrency mining business, such as equipment depreciation and electricity costs are recorded as a component of cost of revenues.

fair value of financial instruments

The categorization of a financial

instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

FAIR VALUE OF FINANCIAL

following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within

the fair value hierarchy:

Fair Value Measurement at September 30, 2021

Investments in convertible promissory notes

of Avalanche International, Corp.

– a related party

Fair Value Measurement at March 31, 2022

Investment in term promissory note of Ault &

Company, Inc.

(“Ault & Company”) – a

related party

Investments in common stock of AVLP – a

related party

Investment in common stock and warrants of

Alzamend Neuro, Inc.

(“Alzamend”) – a

(“Ault & Company”) and other – a

related party

Investment in common stock of Alzamend Neuro,

(“Alzamend”) – a related party

Investments in marketable equity securities

Investments in debt and equity securities

Total Investments

Cash and marketable securities held in trust

Investments in equity securities

Total assets measured at fair value

$ 181,368,000

$ 141,624,000

Fair Value Measurement at December 31, 2021

Investments in convertible promissory notes

and advances of AVLP and Alzamend –

related parties

Investments in common stock and warrants of

AVLP – a related party

Investment in common stock and warrants of

Alzamend – a related party

Investment in term promissory note of Ault &

Company and other – a related party

Investment in common stock of Alzamend – a related

Investments in marketable equity securities

Investments in debt and equity securities

Total Investments

Cash and marketable securities held in trust account

Investments in equity securities

Total assets measured at fair value

$ 203,659,000

$ 170,335,000

The Company assesses the inputs

1 unchanged sentence

in the market.

The Company considers all

highly liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents.

fair values of these investments approximate their carrying values.

In general, investments with original maturities of greater than three

months and remaining maturities of less than one year are classified as short-term investments.

Investments with maturities beyond one

year may be classified as short-term based on their highly liquid nature and because such marketable securities represent the investment

of cash that is available for current operations.

Debt investments are classified

as available-for-sale and realized gains and losses are recorded using the specific identification method.

The Company made an irrevocable

election to record available-for-sale debt investments at fair value utilizing the fair value option available under GAAP.

believed that carrying these investments at fair value better portrayed the economic substance of the investments.

Under the fair value

option, gains and losses on the debt investments are included in unrealized gains/(losses) on investments within net earnings each reporting

Fair value is calculated based on publicly available market information or other estimates determined by management.

of an investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, credit quality of debt

instrument issuers, and the extent to which the fair value is less than cost.

To determine credit losses, the Company employs a systematic

methodology that considers available quantitative and qualitative evidence.

In addition, the Company considers specific adverse conditions

related to the financial health of, and business outlook for, the investee.

If the Company has plans to sell the security or it is more

likely than not that the Company will be required to sell the security before recovery, then a decline in fair value below cost is recorded

as an impairment charge in other income (expense), net and a new cost basis in the investment is established.

If market, industry, and/or

investee conditions deteriorate, the Company may incur future impairments.

Equity Investments

The following discusses the

Company’s marketable equity securities, non-marketable equity securities, gains and losses on marketable and non-marketable equity

The Company’s marketable

equity securities are publicly traded stocks or funds measured at fair value and classified within Level 1 and 2 in the fair value hierarchy

because the Company uses quoted prices for identical assets in active markets or inputs that are based upon quoted prices for similar

instruments in active markets.

The Company’s non-marketable

equity securities are investments in privately held companies without readily determinable market values.

The carrying value of the Company’s

non-marketable equity securities is adjusted to fair value upon observable transactions for identical or similar investments of the same

issuer or impairment (referred to as the measurement alternative).

Non-marketable equity securities that have been remeasured during the

period based on observable transactions are classified within Level 2 or Level 3 in the fair value hierarchy because the Company estimates

the value based on valuation methods which may include a combination of the observable transaction price at the transaction date and other

unobservable inputs including volatility, rights, and obligations of the securities the Company holds.

The fair value of non-marketable

equity securities that have been remeasured due to impairment are classified within Level 3.

The Company performs a qualitative

assessment on a periodic basis and recognizes an impairment if there are sufficient indicators that the fair value of the investment is

less than carrying value.

Changes in value are recorded in other income (expense), net.

Derivative instruments are

recognized as either assets or liabilities and measured at fair value.

The accounting for changes in the fair value of a derivative depends

on the intended use of the derivative and the resulting designation.

For derivative instruments

that are not designated as hedges, gains and losses from changes in fair values are primarily recognized in other income (expense), net.

The following table summarizes

the changes in investments in debt and equity securities measured and carried at fair value on a recurring basis with the use of significant

unobservable inputs (Level 3) for the nine months ended September 30, 2021:

following table summarizes the changes in investments in equity securities measured and carried at fair value on a recurring basis with

the use of significant unobservable inputs (Level 3) for the three months ended March 31, 2022:

Investments in

debt and equity

equity securities

Balance at January 1, 2022

Investment in convertible promissory notes

Investment in convertible preferred stock

Initial valuation of acquired warrants

Investment in equity securities

Change in fair value of warrants

Conversion of loans to debt and equity securities

Unrealized gains on debt and equity securities

Unrealized gains on equity securities

Conversion to marketable securities

( 10,672,000 )

Balance at September 30, 2021

See Note 13 for the changes

in investments in AVLP, Alzamend and Ault & Company measured and carried at fair value on a recurring basis with the use of significant

unobservable inputs (Level 3) during the nine months ended September 30, 2021.

Net incomE (Loss) per Share

Basic and diluted net income

per common share for the nine months ended September 30, 2021 are calculated as follows:

For the Nine Months Ended September 30, 2021

(Denominator)

Net income attributable to Ault Global Holdings

Preferred stock dividends

Basic earnings per share

Net income available to common stockholders

Effect of dilutive securities

Restricted stock grants

Diluted earnings per share

Income available to common stockholders plus assumed conversions

loss per share is computed by dividing the net loss to common stockholders by the weighted

average number of common shares outstanding.

The calculation of the basic and diluted earnings

per share is the same for all periods presented, excluding the nine months ended September

30, 2021, as the effect of the potential common stock equivalents is anti-dilutive due to

the Company’s net loss position for all periods presented.

Anti-dilutive securities,

which are convertible into or exercisable for the Company’s common stock, consist of

the following at September 30, 2021 and 2020:

September 30,

Stock options

Convertible notes

Conversion of preferred stock

Discontinued Operations

On March 16, 2020, to try

and mitigate the spread of COVID-19, San Diego County health officials issued orders mandating that all restaurants must end dine-in services.

As a result of these temporary closures and the deteriorating business conditions at the Company’s restaurant businesses, the Company

concluded that discontinuing the operations of I.AM, Inc.

(“I.AM”) was ultimately in its best interest.

In the first quarter of 2020,

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 the Company’s condensed consolidated

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

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, the Company concluded that Ault Global

had lost control of I.AM, and no longer had significant influence over I.AM.

Therefore, the Company deconsolidated I.AM effective with

the filing of the Chapter 11 bankruptcy in November 2020.

The restaurant operations

are included in the Company’s results as discontinued operations through March 16, 2020, the date of closing of the restaurants.

The following tables summarize the major classes of line items included in loss from discontinued operations:

September 30, 2020

Cost of revenue

Selling and marketing

General and administrative

Impairment of property and equipment and right-of-use assets

( 1,525,000 )

Loss from discontinued operations

$ ( 1,698,000 )

Marketable Equity Securities

Balance at March 31, 2022

Note 8 for the changes in investments in Ault & Company measured and carried at fair value on a recurring basis with the use of significant

unobservable inputs (Level 3) during the three months ended March 31, 2022.

Marketable Securities

Marketable securities in equity

securities with readily determinable market prices consisted of the following as of September 30, 2021 and December 31, 2020:

Marketable equity securities at September 30, 2021

securities with readily determinable market prices consisted of the following as of March 31, 2022 and December 31, 2021:

Marketable equity securities at March 31, 2022

Gross unrealized

6 unchanged sentences

Common shares

Equity Securities

The following table presents additional information

about marketable equity securities:

Equity Securities

Balance at January 1, 2021

Purchases of marketable equity securities in operations

Purchases of marketable equity securities

Conversion of debt securities to marketable securities

Sales of marketable equity securities in operations

$ ( 13,127,000 )

Sales of marketable equity securities

Realized gains on marketable equity securities

Realized losses on marketable equity securities

( 4,386,000 )

Unrealized gains on marketable equity securities

( 6,353,000 )

Balance at September 30, 2021

At September 30, 2021 and

December 31, 2020, the Company had invested in the marketable equity securities of certain publicly traded companies.

The Company’s

investment in marketable equity securities will be revalued on each balance sheet date.

At September 30, 2021 and

December 31, 2020, the Company also held an investment in a limited partnership.

This investment does not have a readily determinable

fair value and has been measured at cost less impairment, if any, and adjusted for observable price changes for identical or similar investments.

Naked Brand Group Stock Purchase Agreement

On March 29, 2021, DP Lending

entered into a stock purchase agreement with an institutional investor (the “Seller”) to purchase 47,058,824 shares of Naked

Brand Group Limited (the “NAKD shares”).

Under the agreement, DP Lending agreed to sell the NAKD shares and pay the Seller

99 % of the net proceeds from the sale.

In April 2021, DP Lending sold 47,058,824 shares of Naked Brand Group Limited for gross proceeds

of $29.3 million.

DP Lending remitted 99% of the proceeds to the institutional investor and retained 1%, or $293,000, which was recorded

as revenue in April 2021.

Loans receivable are summarized as follows :

September 30, 2021

December 31, 2020

Loans receivable before allowances and discounts

Allowances for uncollectible loans

( 1,281,000 )

Unamortized discounts

( 1,956,000 )

DP Lending provides commercial

loans to companies throughout the United States to provide them with operating capital to finance the growth of their businesses.

related to loans receivable for the nine months ended September 30, 2021 is summarized as follows:

Loans Receivable

Balance at January 1, 2021

Investment in convertible promissory notes

Accretion of discount

Foreign currency loss

Conversion to marketable securities

Balance at September 30, 2021

At March 31, 2022 and December

31, 2021, the Company invested in the marketable equity securities of publicly traded companies.

The Company’s investment in marketable

equity securities are revalued on each balance sheet date.

PROPERTY AND EQUIPMENT, NET

During the quarter ended

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

As of September

30, 2021, the Company 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 2022 .

The gross purchase price is $2 7.3 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, the Company capitalized $ 433,000 of shipping costs and $ 1.2 million of third-party commissions related to cryptocurrency machines

and related equipment.

At September 30, 2021 and December 31,

At March 31, 2022 and December

31, 2021, property and equipment consisted of:

September 30, 2021

March 31, 2022

December 31, 2021

2 unchanged sentences

Office furniture and equipment

Leasehold improvements

Building and improvements

Accumulated depreciation and amortization

1 unchanged sentence

( 5,096,000 )

Property and equipment placed in service, net

Deposits on cryptocurrency machines

Property and equipment, net

For the nine months ended

September 30, 2021 and 2020, depreciation expense amounted to $ 711,000 and $ 357,000 , respectively.

Acquisition of Michigan

Cloud Data Center

January 29, 2021, Alliance Cloud Services, LLC, a majority-owned subsidiary of Ault Alliance, closed on the acquisition of a 617,000 square

foot energy-efficient facility located on a 34.5 acre site in southern Michigan for a purchase price of $ 3.9 million .

The facility is

subject to a final corrective measures plan with the Environment Protection Agency.

The seller performed remedial activities at the Michigan

facility relating to historical soil and groundwater contamination and the Company is responsible for ongoing monitoring and final remediation

The Company’s estimated cost of the environmental remediation obligation is approximately $ 369,000 and reflects its best

estimate of probable future costs for remediation based on the current assessment data and regulatory obligations.

Future costs will depend

on many factors, including the extent of work necessary to implement monitoring and final remediation plans and the Company’s time

frame for remediation.

The Company may incur actual costs in the future that are materially different than this estimate and such costs

could have a material impact on results of operations, financial condition, and cash flows during the period in which they are recorded.

INTANGIBLE ASSETS, NET

At September 30, 2021 and December 31,

2020 intangible assets consisted of:

September 30, 2021

December 31, 2020

Trade name and trademark

Indefinite life

Customer list

10 - 14 years

Domain name and other intangible assets

Accumulated depreciation and amortization

$ 206,797,000

$ 174,025,000

Intangible assets, net

The Company’s

trade names and trademarks were determined to have an indefinite life.

The remaining definite lived intangible assets are primarily

being amortized on a straight-line basis over their estimated useful lives.

Amortization expense was $ 296,000 and $ 252,000 ,

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

The following table summarizes

the changes in the Company’s goodwill during the nine months ended September 30, 2021:

Balance as of January 1, 2021

Effect of exchange rate changes

Balance as of September 30, 2021

For the three months ended

March 31, 2022 and 2021, depreciation expense amounted to $ 2.6 million and $ 0.2 million , respectively.

INVESTMENTS – RELATED PARTIES

Investments in AVLP, Alzamend

and Ault & Company at September 30, 2021 and December 31, 2020, are comprised of the following:

Investment in Promissory

Notes, Related Parties

September 30,

Investment in convertible promissory note of AVLP

December 31, 2023

Short-term advance in Alzamend

Investment in convertible promissory note of Alzamend

Investments in Alzamend and

Ault & Company at March 31, 2022 and December 31, 2021, were comprised of the following:

Investment in Promissory Notes, Related

Investment in promissory note of Ault & Company

February 25, 2022

Accrued interest receivable, AVLP

Accrued interest receivable, Ault & Company and Alzamend

Total investment in promissory notes, related parties – gross

original issue discount

provision for loan losses, AVLP

( 2,000,000 )

( 3,424,000 )

Total investment in promissory notes, related parties

Investment in Common

Stock and Warrants, Related Parties

Weighted Avg.

September 30,

Contractual Term

Investment in warrants of AVLP

Investment in common stock of AVLP

Investment in warrants of Alzamend

Investment in common stock of Alzamend

Total investment in common stock and warrants, related parties

December 31, 2022

Accrued interest receivable, Ault & Company

Total investment in promissory note, related party

Investment in Common Stock and Options,

Related Parties

Investment in common stock and options of Alzamend

The following table summarizes

the changes in the Company’s investments in AVLP, Alzamend and Ault & Company during the nine months ended September 30, 2021:

Investment in

the changes in the Company’s investments in Alzamend and Ault & Company during the three months ended March 31, 2022:

Investment in

promissory notes

common stock of

Investment in

AVLP, Alzamend

Ault & Company

promissory notes and

advances of Alzamend

and Ault & Company

Balance at January 1, 2022

Investment in convertible promissory notes of AVLP

Investment in convertible promissory note of Alzamend

Investment in promissory note of Ault & Company

Investment in common stock of AVLP and Alzamend

Investment in warrants of Alzamend

Short-term advance in Alzamend

Fair value of warrants issued by AVLP

Unrealized loss in warrants of AVLP

( 7,772,000 )

Investment in common stock and options of Alzamend

Unrealized loss in common stock of Alzamend

( 4,695,000 )

Unrealized gain in warrants of Alzamend

Unrealized gain in common stock of AVLP and Alzamend

Accretion of discount

Amortization of related party investment

Accrued interest

Balance at September 30, 2021

Investments in AVLP

The Company’s investments

in AVLP, a related party controlled by Philou Ventures, LLC (“Philou”), an affiliate of the Company, consist of convertible

promissory notes, warrants and shares of AVLP common stock.

As of September 30, 2021, loans to AVLP totaled $ 16.5 million and, in addition

to the 12 % convertible promissory notes, AVLP has issued to the Company warrants to purchase 33.1 million shares of AVLP common stock

at an exercise price of $ 0.50 per share and an initial contractual term of five years.

During the nine months

ended September 30, 2021, the Company recorded an unrealized loss of $ 7.7

million due to the decline in value of the warrant derivative securities that the Company received as a result of its

investment in AVLP.

The unrealized loss was recorded in accumulated other comprehensive loss in the stockholder’s equity

section of the Company’s consolidated balance sheet.

The Company’s investment in AVLP will be revalued on each balance

Fair Value Assessment of Convertible Notes

During the nine months ended

September 30, 2021 and 2020, no interest income was recognized from the Company’s investment in convertible promissory notes in

The Company evaluated the collectability of both interest and principal for the convertible promissory notes in AVLP to determine

whether there was an impairment.

At September 30, 2021, the Company determined that the fair value of the convertible promissory notes

in AVLP was $ 16.6 million .

The Company’s determination of fair value requires significant judgments

and are based on significant assumptions related to the borrower’s credit risk, financial performance, expected sales, and estimated

fair value of the collateral.

Fair Value Assessment of Common Stock –

In aggregate, the Company

has 999,175 shares of AVLP common stock which represents 18.0 % of AVLP’s outstanding shares of common stock.

As a result of new rules implemented

by the SEC, which became effective September 28, 2021, shares of AVLP were

no longer eligible for quotation on the “Pink – No Information” tier operated by the OTC Markets Group, Inc.

new rules, companies like AVLP are required to have current financial information publicly available for brokers to publish competing

quotes and provide continuous market making.

As AVLP does not have financial information publicly available, AVLP was removed from the

Pink Market, which resulted in almost a complete loss of liquidity for shares of AVLP common stock.

Shares of AVLP are available

only through the “Expert Market” tier operated by the OTC Markets Group, in which quotes are “unsolicited only.”

That means broker-dealers can publish unsolicited quotes representing limit orders from customers who are not affiliates or insiders of

However, many broker-dealers will not effectuate trades in securities that are not eligible for competing quotes, such as

those on the Expert Market tier.

Quotations in Expert Market tier securities are only made available to broker-dealers, institutions and

other sophisticated investors.

Securities that are on Expert Market tier do not have trading bid and ask prices and share trading volumes

publicly quoted.

As a result, any transactions would be unknown to the public marketplace and would not provide stockholders with a reliable

market value for their shares.

At September 30, 2021, the

Company estimated the fair value of AVLP’s common stock was $0.06 per share, a decrease from $0.50 at December 31, 2020.

upon the estimated fair value of AVLP common stock at September 30, 2021, the Company’s investment in AVLP common stock had an unrealized

loss of $688,000.

Variable Interest Entity Considerations - AVLP

The Company has determined

that AVLP is a VIE as it does not have sufficient equity at risk.

The Company does not consolidate AVLP because the Company is not the

primary beneficiary and does not have a controlling financial interest.

To be a primary beneficiary, an entity must have the power to

direct the activities of a VIE that most significantly impact the VIE’s economic performance, among other factors.

Company has made a significant investment in AVLP, the Company has determined that Philou, which controls AVLP through the voting power

conferred by its equity investment and which is deemed to be more closely associated with AVLP, is the primary beneficiary.

AVLP’s financial position and results of operations are not consolidated in the Company’s financial position and results of

Extension of AVLP Loan Agreement

On April 13, 2021, the AVLP

Loan Agreement was increased to up to $ 15 million and extended to December 31, 2023.

On June 4, 2021, the AVLP Loan Agreement was

increased to up to $ 20 million.

Investments in Alzamend Common Stock and Warrants

The following table summarizes

the changes in the Company’s investments in Alzamend common stock during the nine months ended September 30, 2021:

Balance at March 31, 2022

Investments in

Alzamend Common Stock

following table summarizes the changes in the Company’s investments in Alzamend common stock during the three months ended March

Investment in

Balance at January 1, 2022

Purchase of shares from an Alzamend shareholder

March 9, 2021 securities purchase agreement

Investment in Alzamend initial public offering

Open market purchases after initial public offering

Unrealized gain in common stock of Alzamend

Unrealized loss in common stock of Alzamend

( 4,691,000 )

Investment in Alzamend common stock

Investment in Alzamend options

Balance at September 30, 2021

At December 31, 2020, the

Company had provided Alzamend a short-term advance of $ 750,000 and invested $ 50,000 in an 8 % convertible promissory note.

In conjunction

with the issuance of the 8% convertible promissory note, Alzamend issued to the Company warrants to purchase 16,667 shares of Alzamend

common stock at an exercise price of $3.00 per share for a period of five years.

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 .

The remaining $6.0 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 the Company’s independent

directors after receiving a third-party valuation report on 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”.

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.

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.

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, the Company recorded an unrealized

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

In conjunction with the March

2021 securities purchase agreement, Alzamend issued to the Company 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.

The Company computed the fair value of Alzamend warrants using the Black-Scholes

option pricing model.

During the nine months ended September 30, 2021, the Company recorded an unrealized gain on its investment in warrants

of Alzamend of $2.6 million.

The Company’s investment in Alzamend will be revalued on each balance sheet date.

Fair Value Assessment of Alzamend Warrants

The fair value of the Company’s

holdings in the 2,016,667 Alzamend warrants was estimated using the Black-Scholes option-pricing method and the following assumptions:

Exercise price

Remaining contractual term (in years)

Weighted average risk free interest rate

0.76 % — 0.98 %

Expected dividend yield

Significant Fluctuation

in the Fair Value of Investment in Alzamend

from the Company’s 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 the Company’s 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, the Company

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

30, 2021, the Company recorded an unrealized gain of $3.8 million related to its investment in Alzamend common stock.

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

and during the nine months ended September 30, 2021, the Company recorded an unrealized gain on its investment in warrants of Alzamend

of $2.6 million.

The Company’s investment in Alzamend will be revalued on each balance sheet date.

Investment in Ault

February 25, 2021, Ault & Company, a related party, sold and issued an 8 % Secured Promissory Note in the principal

amount of $ 2.5 million to the Company.

The principal amount of the Secured Promissory Note, plus any accrued and unpaid

interest at a rate of 8% per annum, is due and payable on February 25, 2022.

The carrying value of the 8% Secured Promissory

Note is considered to be a reasonable estimate of its fair value.

INVESTMENT PARTNERSHIP

Investments in the Alpha Fund

During fiscal year 2021, the

Company has invested in the Alpha Fund.

The Alpha Fund operates as a private investment fund.

The general partner of the Alpha Fund, Ault

Alpha GP LLC (“Alpha GP”) is owned by Ault Capital Management LLC (the “Investment Manager”), which also acts

as the investment manager to the Alpha Fund.

The Investment Manager is owned by Ault & Company, Inc.

(“Ault & Co.”).

Ault, Horne and Nisser as well as Kenneth Cragun, who serve as executive officers and/or directors of the Company, are executive

officers of the Investment Manager, and Messrs.

Ault, Horne and Nisser are executive officers and directors of Ault & Company.

As of September 30, 2021,

the Company subscribed for $ 10 million of limited partnership interests in the Alpha Fund, of which $ 7.5 million was funded, and was the

only limited partner in the Alpha Fund at such date.

These investments are subject to a rolling five-year lock-up period, provided that

after three years, Alpha GP will waive the last twenty-four (24) months of the lock-up period upon receipt of written notice from an executive

officer of the Company that a withdrawal of capital is required to prevent a going concern opinion from the Company’s auditors,

under the terms of the Alpha Fund’s partnership agreement and side letter entered into between the Company and the Alpha Fund.

The Company consolidates Alpha

Fund as a VIE due to its significant level of influence and control of Alpha Fund, the size of its investment, and its ability to participate

in policy making decisions, the Company is considered the primary beneficiary of the VIE.

Investments by Alpha Fund

The Alpha Fund has purchased

shares of the Company’s common stock in open market transactions.

As of September 30, 2021, the Alpha Fund owned 1,000,000 shares

of the Company’s common stock, accounted for as treasury stock as of September 30, 2021.

EXECUTIVE CHAIRMAN RELOCATION BENEFIT

On February 23, 2021, as

part of a relocation benefit for the Company’s Executive Chairman, Milton C.

Ault, III, related to the Company moving its

corporate headquarters from Newport Beach, CA to Las Vegas, NV, the Company agreed to purchase Mr.

Ault’s California residence

The transaction was structured such that upon the closing of the subsequent sale of the residence, the Company shall have

not recognized a gain or a loss on the transaction.

The Company and Mr.

Ault agreed to escrow $ 254,000

of the purchase price in the event of a loss on the subsequent sale of the residence.

During April 2021, the Company entered into an

agreement for the subsequent sale of the residence, which closed on April 19, 2021.

STOCK-BASED COMPENSATION

The options outstanding as of September 30, 2021,

have been classified by exercise price, as follows :

$ 480 - $ 560

$ 1,208 - $ 1,352

$ 480 - $ 1,352

Issuances Outside of Plans

$ 2.46 - $ 2.55

$ 1.79 - $ 2.55

Total Options

$ 1.79 - $ 1,856

total stock-based compensation expense related to stock options and stock awards issued to the Company’s employees,

consultants and directors, included in reported net loss for the three and nine months ended September 30, 2021 and 2020, was

comprised as follows :

Three Months Ended

September 30,

Nine Months Ended

September 30,

General and administrative

Total stock-based compensation

A summary of option activity

under the Company’s stock option plans as of September 30, 2021, and changes during the nine months ended are as follows :

Outstanding Options

January 1, 2020

Restricted stock awards

January 1, 2021

Stock options granted

( 1,760,000 )

Restricted stock awards

( 1,070,000 )

September 30, 2021

As of September 30, 2021,

there was $ 3.3 million of unrecognized compensation cost related to non-vested stock-based compensation arrangements granted under the

Company’s stock incentive plans.

That expense is expected to be recognized over a weighted average period of 3.54 years.

GWW Stock-Based Compensation

On May 25, 2021, GWW issued

to Jonathan Read, its Chief Executive Officer, and Timothy Long, its Chief Operating Officer, options to purchase an aggregate total of

100,000 shares of GWW Class A common stock, at an exercise price per share of $ 14.64 .

The options vest over a four -year period.

Additionally,

Read and Long were also granted a restricted stock award to acquire an aggregate of 50,000 shares of GWW Class A common stock,

vesting annually over a three-year term.

As of the date of grant, the authorized share capital of GWW is 1,000,000 shares of Class A common

stock, of which 700,000 shares were issued and outstanding, 500,000 shares of Class B common stock of which 500,000 shares were issued

and outstanding and 100,000 shares of preferred stock of which no shares of which were outstanding.

The stock-based compensation expense

related to the options included in reported net loss for the three and nine months ended September 30, 2021 was $ 42,000 and $ 587,000 ,

respectively, based on the estimated fair value of the options on the date of issuance.

The estimated fair value of the options was based

on observable market prices of the Company’s common stock and extrapolated to GWW based upon its relative fair value within the

Company as determined by equal weighting of revenues, operating income, and net tangible assets between the Company’s subsidiaries.

As of September 30, 2021, there was $ 472,000 of unrecognized compensation cost related to non-vested stock-based compensation arrangements

Read and Long.

That cost is expected to be recognized over a weighted average period of 2.7 years.

During the nine months ended

September 30, 2021, the Company did not issue any warrants.

The following table summarizes information about common stock warrants outstanding

at September 30, 2021:

$ 0.88 - $ 3.01

$ 8.00 - $ 19.80

$ 440 - $ 920

$ 1,040 - $ 2,000

Balance at March 31, 2022

INVESTMENT IN UNCONSOLIDATED ENTITY –

Avalanche International Corp.

Equity Investments in Unconsolidated Entity

Equity investments in an unconsolidated

entity, AVLP, at March 31, 2022 and December 31, 2021, were comprised of the following:

Investment in Promissory Notes

Investment in convertible promissory note

Investment in promissory note – Alpha Fund

June 30, 2022

Accrued interest receivable

Total investment in promissory notes, gross

provision for loan losses

( 2,000,000 )

The Company utilized the Black-Scholes

option pricing model and the assumptions used during the nine months ended September 30, 2021 :

Exercise price

( 2,000,000 )

Remaining contractual term (in years)

Total investment in promissory note

* During the three months ended March 31, 2022

and 2021, no interest income was recognized from the Company’s investment in AVLP.

AVLP Convertible Promissory Note Maturities

The contractual maturities

of AVLP’s convertible promissory notes as of March 31, 2022 were:

The following table summarizes

the changes in the Company’s equity investments in an unconsolidated entity, AVLP, during the year ended December 31, 2021 and the

three months ended March 31, 2022:

Investment in

promissory notes

Balance at January 1, 2021

Investment in convertible promissory notes

Fair value of warrants

Unrealized loss in warrants

( 7,772,000 )

Risk free interest rate

( 7,772,000 )

Expected dividend yield

OTHER CURRENT LIABILITIES

Other current liabilities at September

Unrealized gain in common stock

Loss from equity investment

Accretion of discount

Accrued interest

Balance at January 1, 2022

Investment in convertible promissory notes

Loss from equity investment

Balance at March 31, 2022

CONSOLIDATED VARIABLE INTEREST ENTITY -

Alpha Fund – Consolidated Variable

Interest Entity

During the three months ended

March 31, 2022 and the year ended December 31, 2021, the Company invested in Ault Alpha LP (the “Alpha Fund”).

The Alpha Fund

operates as a private investment fund.

The general partner of the Alpha Fund, Ault Alpha GP LLC (“Alpha GP”) is owned by Ault

Capital Management LLC (the “Investment Manager”), which also acts as the investment manager to the Alpha Fund.

The Investment

Manager is owned by Ault & Company.

Ault, Horne, Nisser and Cragun, who serve as executive officers and/or directors of the

Company, are executive officers of the Investment Manager, and Messrs.

Ault, Horne and Nisser are executive officers and directors of

Ault & Company.

As of March 31, 2022, the

Company subscribed for $ 18 million or 100 % of the limited partnership interests in the Alpha Fund, the full amount of which was funded,

an increase of $1 million from the $ 17 million subscribed and funded as of December 31, 2021.

These investments are subject to a rolling

five-year lock-up period, provided that after three years, Alpha GP will waive the last twenty-four (24) months of the lock-up period

upon receipt of written notice from an executive officer of the Company that a withdrawal of capital is required to prevent a going concern

opinion from the Company’s auditors, under the terms of the Alpha Fund’s partnership agreement and side letter entered into

between the Company and the Alpha Fund.

The Company consolidates Alpha

Fund as a variable interest entity (a “VIE”) due to its significant level of influence and control of Alpha Fund, the size

of its investment, and its ability to participate in policy making decisions, the Company is considered the primary beneficiary of the

Investments by Alpha Fund

– Treasury Stock

As of March 31, 2022, the

Alpha Fund owned 7,100,000 shares of the Company’s common stock, accounted for as treasury stock as of March 31, 2022.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Other current liabilities at March 31,

2022 and December 31, 2021 consisted of:

September 30, 2021

December 31, 2020

Accounts payable

Accrued payroll and payroll taxes

Warranty liability

Deferred tax liability

Financial instrument liabilities

Accrued legal

Other accrued expenses

The Company has operating

leases for office space.

The Company’s leases have remaining lease terms of 1.5 years to ten years, some of

which may include options to extend the leases perpetually, and some of which may include options to terminate the leases within one year.

The following table provides

a summary of leases by balance sheet category as of September 30, 2021 :

September 30, 2021

Operating right-of-use assets

Operating lease liability - current

Operating lease liability - non-current

The components of lease expenses

for the nine months ended September 30, 2021, were as follows :

Nine Months Ended

September 30, 2021

Operating lease cost

Short-term lease cost

Variable lease cost

T he following tables provides

a summary of other information related to leases for the nine months ended September 30, 2021:

September 30, 2021

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

Right-of-use assets obtained in exchange for new operating lease liabilities

Weighted-average remaining lease term - operating leases

Weighted-average discount rate - operating leases

The Company determined that

using a weighted average discount rate of 8% is reasonable, as this is consistent with the mortgage rates for commercial properties for

the time period commensurate with the terms of the leases.

Maturity of lease liabilities

under the Company’s non-cancellable operating leases as of September 30, 2021, were as follows:

Payments due by period

2021 (remainder)

Total lease payments

Less interest

( 1,608,000 )

Present value of lease liabilities

NOTES PAYABLE

Notes payable at September

30, 2021 and December 31, 2020, were comprised of the following :

September 30,

Esousa purchased notes

Short-term notes payable

Notes payable to Wells Fargo

Note payable to Dept.

of Economic and Community Development

Paycheck Protection Program Loans

SBA Economic Injury Disaster Loan

Short-term bank credit

Total notes payable

current portion

( 1,697,000 )

( 4,048,000 )

Notes payable – long-term portion

Master Exchange Agreement

February 10, 2020, the Company entered into a master exchange agreement (the “Master Exchange Agreement”) with Esousa Holdings,

LLC (“Esousa”) which acquired certain promissory notes that had been previously issued by the Company.

During January 2021,

the Company issued to Esousa an aggregate of 183,214

shares of the Company’s common stock upon the exchange of principal and interest in the aggregate amount of $ 216,000 .

A loss on extinguishment of $ 234,000

was recognized on the issuance of common stock based on the fair value of the Company’s common stock at the date of the

Protection Program

April 2020, the Company received loans under the Paycheck Protection Program (“PPP”)

in the principal amount of $ 715,000 and the Company’s majority owned subsidiary, Microphase, received

loans in the principal amount of $467,000.

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

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

NOTES PAYABLE – RELATED PARTIES

Notes payable – related

parties at September 30, 2021 and December 31, 2020, were comprised of the followin g:

September 30, 2021

December 31, 2020

Notes payable, related parties

current portion

Notes payable, related parties – long-term portion

Microphase was party to several

notes payable agreements with six of its past officers, employees and their family members.

As of September 30, 2021, the related party

notes payable were paid in full.

CONVERTIBLE NOTES

Convertible notes payable

at September 30, 2021 and December 31, 2020, were comprised of the following :

September 30,

Convertible promissory note

Unamortized debt discounts

Total convertible notes payable, net of financing cost

4% Convertible Promissory Note

On May 20, 2019, the Company

entered into a securities purchase agreement with an investor to sell, for a purchase price of $ 500,000 , a 4 % original issue discount

(“OID”) convertible promissory note with an aggregate principal face amount of $ 660,000 and a five -year warrant to purchase

an aggregate of 12,500 shares of the Company’s common stock.

The Company is required to make quarterly interest payments and the

principal amount of the note is due on May 20, 2024.

The note is convertible into shares of common stock at $ 4.00 per share.

price of the warrant is $ 12.00 per share.

In addition, the Executive Chairman of the Company agreed to guarantee and act as surety for

the Company’s obligation to repay the note pursuant to a personal guarantee.

The Company computed the fair

value of the warrants using the Black-Scholes option pricing model and, as a result of this calculation, recorded debt discount in the

amount of $ 58,000 based on the estimated fair value of the warrants.

At the time of issuance of the note, the closing price of the common

stock was in excess of the effective conversion price, resulting in a beneficial conversion feature

(“BCF”) of $ 188,000 , based on the difference between the effective conversion price and the fair value of the Company’s

common stock at the commitment date of the transaction.

In aggregate, the Company

recorded a debt discount in the amount of $ 407,000 based on the relative fair values of the warrants, BCF and OID.

During each of the

nine months ended September 30, 2021 and 2020, non-cash interest expense of $ 40,000 was recorded from the amortization of debt discounts.

The fair value of the warrants was estimated using the Black-Scholes option-pricing method.

The risk-free rate of 2.18 % was derived from

Treasury yield curve, matching the term of the warrant, in effect at the measurement date.

The volatility factor of 87.51 % was

determined based on historical stock prices of similar technology companies.

Financial Instruments

Under authoritative guidance

used by the FASB on determining whether an instrument (or embedded feature) is indexed to an entity’s own stock, instruments that

do not have fixed settlement provisions are deemed to be derivative instruments.

In prior years, the Company granted certain warrants

that resulted in these warrants accounted for as a financial instrument and being re-measured every reporting period with the change in

value reported in the statement of operations.

The financial

instruments were valued using a variety of pricing models with the following valuation assumptions:

Contractually stipulated stock price

Exercise price

Contractually defined remaining term

Contractually defined volatility

Dividend yield

Risk-free interest rate

Per the terms of

the warrant agreements underlying the financial instruments, the value to the warrant holders is defined within the agreement based on

a stock price, contractual term, volatility factor and dividend rate as defined in the warrant agreement, and not indexed to the company’s

stock, resulting in the financial instrument accounting.

The risk-free interest rate was based on rates established by the Federal Reserve

The following table sets forth

a summary of the changes in the estimated fair value of the financial instruments during the three months ended March 31, 2022 and 2021:

March 31, 2022

March 31, 2021

Beginning balance

Change in fair value

Ending balance

AMORTIZATION OF DEBT DISCOUNT OF SECURED PROMISSORY NOTES

On December 30, 2021, the

Company entered into a securities purchase agreement with certain sophisticated investors providing for the issuance of:

· secured promissory notes (the “Secured Promissory Notes”) that bear interest at 8 % per annum

with an aggregate principal face amount of approximately $ 66 million including a 10 % original issue discount;

· five-year warrants to purchase an aggregate of 14,095,350 shares of the Company’s common stock at

an exercise price of $ 2.50 , subject to adjustment;

· five-year warrants to purchase an aggregate of 1,942,508 shares of Common Stock (the “Class B Warrant

Shares”) at an exercise price of $ 2.50 per share, subject to adjustment.

The Class B Warrant Shares are deemed to be a derivative

As of December 31, 2021, unamortized

debt discount on the Secured Promissory Notes related to the original issue discount and estimated fair value of the warrants totaled

$ 26.3 million .

During the three months ended

March 31, 2022, the Secured Promissory Notes were repaid and the Company fully amortized the related debt discount of $ 26.3 million , which

is included within interest expense on the condensed consolidated statements of operations.

COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

Mining Supply and Services, Ltd.

(“Blockchain Mining”) a vendor who sold computers to the Company’s subsidiary, filed

a Complaint (the “Complaint”) in the United States District Court for the Southern District of New York against the Company

and the Company’s subsidiary, Digital Farms, Inc.

(f/k/a Super Crypto Mining, Inc.), in an action captioned Blockchain Mining

Supply and Services, Ltd.

(“Blockchain Mining”) a vendor who sold computers to one of the Company’s subsidiaries,

filed a Complaint (the “Complaint”) in the United States District Court for the Southern District of New York against the

Company and the Company’s subsidiary, Digital Farms, Inc.

(f/k/a Super Crypto Mining, Inc.), in an action captioned Blockchain

Mining Supply and Services, Ltd.

Super Crypto Mining, Inc.

8 unchanged sentences

On April 13, 2020, the Company

and its subsidiary, jointly filed a motion to dismiss the Complaint in its entirety as against us, and the promissory estoppel claim as

against its subsidiary.

On the same day, the Company’s subsidiary also filed a partial Answer to the Complaint in connection with

the breach of contract claim.

and its subsidiary, jointly filed a motion to dismiss the Complaint in its entirety as against the Company, and the promissory estoppel

claim as against its subsidiary.

On the same day, the Company’s subsidiary also filed a partial Answer to the Complaint in connection

with the breach of contract claim.

On April 29, 2020, Blockchain

24 unchanged sentences

unfavorable outcome may have a material adverse effect on the Company’s business, financial condition and results of operations.

Ding Gu (a/k/a Frank Gu) and Xiaodan Wang Litigation

Ding Gu (a/k/a Frank Gu) and Xiaodan Wang

On January 17, 2020, Ding

10 unchanged sentences

(i) a series of transactions entered into

between Gu and us, as well as Gu and Ault, in or about May 2019;

and (ii) a term sheet entered into between Plaintiffs and the Company,

in or about July 2019.

The Complaint seeks, among other things, monetary damages in excess of $1.1 million, plus a decree of specific

performance directing the Company to deliver unrestricted shares of common stock to Gu, plus attorneys’ fees and costs.

between Gu and the Company, as well as Gu and Ault, in or about May 2019;

and (ii) a term sheet entered into between Plaintiffs and the

Company, in or about July 2019.

The Complaint seeks, among other things, monetary damages in excess of $1.1 million, plus a decree of

specific performance directing the Company to deliver unrestricted shares of common stock to Gu, plus attorneys’ fees and costs.

The Company intends to vigorously

8 unchanged sentences

The Court reserved decision on the other causes of action.

On December 14, 2021, the

Court entered a decision and order in connection with the motion to dismiss whereby the Court dismissed Plaintiff’s causes of action

for specific performance, conversion, permanent injunction, and reiterated its prior determination that the fraud claim was also dismissed.

The Court denied the motion to dismiss in connection with the other causes of action asserted in the complaint.

On January 26, 2022, the Company

Ault filed an answer to the complaint and asserted numerous affirmative defenses.

Based on the Company’s

3 unchanged sentences

adverse effect on the Company’s business, financial condition and results of operations.

The Company received a subpoena

from the SEC for the voluntary production of documents.

The Company is fully cooperating with this non-public, fact-finding inquiry and

Management believes that the Company has operated its business in compliance with all applicable laws.

The subpoena expressly provides

that the inquiry is not to be construed as an indication by the SEC or its staff that any violations of the federal securities laws have

occurred, nor should it be considered a reflection upon any person, entity or security.

However, there can be no assurance as to the outcome

of this matter.

The Company and certain affiliates

and related parties have received several subpoenas from the SEC for the production of documents and testimony.

The Company is fully cooperating

with this non-public, fact-finding inquiry and management believes that the Company has operated its business in compliance with all applicable

The subpoenas expressly provide that the inquiry is not to be construed as an indication by the SEC or its staff that any violations

of the federal securities laws have occurred, nor should they be considered a reflection upon any person, entity or security.

there can be no assurance as to the outcome of this matter.

Other Litigation Matters

22 unchanged sentences

STOCKHOLDERS’ EQUITY

Preferred Stock

Company is authorized to issue 25.0

million shares of Preferred Stock $ 0.001

The Company’s board of directors (the “Board”) has designated 1.0

million shares as Series A Convertible Preferred Stock (the “Series A Preferred Stock”), 500,000

shares as Series B Convertible Preferred Stock (the “Series B Preferred Stock”) and 2,500

shares as Series C Convertible Redeemable Preferred Stock (the “Series C Preferred Stock”).

The rights, preferences,

privileges and restrictions on the remaining authorized 23.5 million shares of Preferred Stock have not been determined.

is authorized to designate a new series of preferred shares and determine the number of shares, as well as the rights, preferences,

privileges and restrictions granted to or imposed upon any series of preferred shares.

As of September

30, 2021 , there were 7,040

shares of Series A Preferred Stock, 125,000

shares of Series B Preferred Stock and no other shares of Preferred Stock issued or outstanding.

Common stock confers upon

the holders the rights to receive notice to participate and vote at any meeting of stockholders of the Company, to receive dividends,

if and when declared, and to participate in a distribution of surplus of assets upon liquidation of the Company.

The Class B common stock

carries the voting power of 10 shares of Class A common stock.

2022 Issuances

2022 ATM Offering

On January 22, 2021, the Company

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

and March 5, 2021.

In accordance with the terms of the 2021 Sales Agreement, the Company 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, the Company

had sold an aggregate of 34.7 million shares of common stock pursuant to the sales agreement for gross proceeds of $ 160.5 million .

Issuance of Common Stock for Conversion

During January 2021, the Company

issued to Esousa an aggregate of 183,214 shares of the Company’s common stock upon the exchange of principal and interest in the

amount of $ 200,000 and $ 16,000 , respectively.

A loss on extinguishment of $ 234,000 was recognized on the issuance of common stock based

on the fair value of the Company’s common stock at the date of the exchanges.

Issuance of Common Stock for Convertible Promissory

Note, Related Party

May 12, 2021, the Company issued 275,862 shares of common stock to Ault & Company, Inc.

upon the conversion of $ 400,000 of principal

on an 8% Convertible Promissory Note dated February 5, 2020.

Securities Purchase

Agreement, Related Party

June 11, 2021, the Company entered into a securities purchase agreement with Ault & Company.

Under the terms of the agreement,

Ault & Company agreed to purchase an aggregate of 1,000,000

shares of the Company’s common stock for a total purchase price of $ 2.99

million , at a purchase price per share of $ 2.99 ,

which was $0.05 per share above the closing stock price on June 10, 2021, subject to the approval of the NYSE American.

SEGMENT, CUSTOMERS AND GEOGRAPHICAL INFORMATION

The Company has three reportable

On February 25, 2022, the

Company entered into an At-The-Market issuance sales agreement with Ascendiant Capital Markets to sell shares of common stock having an

aggregate offering price of up to $ 200 million from time to time, through an “at the market offering” program (the “2022

ATM Offering”).

As of March 31, 2022, the Company had sold an aggregate of 140.0 million shares of common stock pursuant to the

2022 ATM Offering for gross proceeds of $ 110.1 million .

Company calculates its interim income tax provision in accordance with ASC 270 and ASC 740.

The Company’s effective tax rate (“ETR”)

from continuing operations was 0.0 % and 0.2 % for the three months ended March 31, 2022 and 2021, respectively.

The Company had no provision for income taxes for the three months

ended March 31, 2022 and recorded an income tax provision of $ 6,000 for the three months ended March 31, 2021.

The difference between the ETR and federal statutory rate of 21 % is primarily attributable to items recorded for GAAP but permanently

disallowed for U.S.

federal income tax purposes and changes in valuation allowance.

NET INCOME (LOSS) PER SHARE

For the three months ended

March 31, 2022, net loss per share is computed by dividing the net loss to common stockholders by the weighted average number of common

shares outstanding.

The calculation of the basic and diluted earnings per share is the same for the three months ended March 31, 2022,

as the effect of the potential common stock equivalents is anti-dilutive due to the Company’s net loss position for the period.

Anti-dilutive securities, which are convertible into or exercisable for the Company’s common stock, consist of the following at

March 31, 2022:

Net Loss Per Share

March 31, 2022

Stock options

Restricted stock grants

Convertible notes

Convertible preferred stock

Basic and diluted net income

per common share for the three months ended March 31, 2021 were calculated as follows:

For the Three Months Ended March 31, 2021

(Denominator)

Net income attributable to BitNile Holdings

Preferred stock dividends

Basic earnings per share

Net income available to common stockholders

Effect of dilutive securities

Stock options

8% convertible notes, related party

4% convertible notes

Diluted earnings per share

Income available to common stockholders plus assumed conversions

SEGMENT AND CUSTOMERS INFORMATION

The Company had six reportable

segments as of March 31, 2022 and three as of March 31, 2021;

see Note 1 for a brief description of the Company’s business.

The following data presents

the revenues, expenditures and other operating data of the Company’s operating segments and presented in accordance with ASC No.

The total income (loss) from operations of the Company’s reportable segments is different than the Company’s consolidated

loss from operations due to the Company’s corporate expenses.

Three Months Ended September 30, 2021

Ault Alliance

Revenue, lending and trading activities

( 38,869,000 )

Revenue, cryptocurrency mining

the revenues, expenditures and other operating data of the Company’s operating segments for the three months ended March 31, 2022:

Cryptocurrency

Revenue, cryptocurrency

Revenue, commercial real

estate leases

Revenue, lending and trading

Revenue, hotel operations

Total revenues

$ ( 38,261,000 )

$ ( 30,794,000 )

Depreciation and

amortization expense

Depreciation and amortization expense

Income (loss) from operations

2 unchanged sentences

$ ( 363,000 )

Capital expenditures for

segment assets, as of

September 30, 2021

Identifiable assets as of

September 30, 2021

$ ( 1,382,000 )

$ ( 297,000 )

Three Months Ended September 30, 2020

Ault Alliance

Revenue, lending and trading activities

Total revenues

Depreciation and

amortization expense

Income (loss) from operations

$ ( 7,521,000 )

Capital expenditures for

segment assets, as of

September 30, 2020

Identifiable assets as of

September 30, 2020

Nine Months Ended September 30, 2021

Ault Alliance

Capital expenditures for the

three months ended March 31,

Segment information for the

three months ended March 31, 2021:

Revenue, cryptocurrency mining, net

Revenue, lending and trading activities

Revenue, cryptocurrency mining

Total revenues

Depreciation and

amortization expense

Depreciation and amortization expense

Income (loss) from operations

1 unchanged sentence

$ ( 2,844,000 )

Capital expenditures for

segment assets, as of

September 30, 2021

Identifiable assets as of

September 30, 2021

$ 191,326,000

$ 225,721,000

Nine Months Ended September 30, 2020

Ault Alliance

Revenue, lending and trading activities

Total revenues

Depreciation and

amortization expense

Income (loss) from operations

$ ( 122,000 )

Capital expenditures for

segment assets, as of

September 30, 2020

Identifiable assets as of

September 30, 2020

Concentration Risk

The following tables provide

the percentage of total revenues for the three and nine months ended September 30, 2021 and 2020 to a single customer from which

10% or more of total revenues are derived .

For the Three Months Ended

For the Nine Months Ended

September 30, 2021

Total Revenues

Percentage of

Total Revenues

Percentage of

Total Company

For the Nine Months Ended

September 30, 2020

Total Revenues

Percentage of

Total Revenues

Percentage of

Total Company

Revenue from Customer A is

attributable to Enertec.

Revenue from Customer B is attributable to Microphase.

represented all the Company’s accounts

and other receivable, related party.

The Company calculates its

interim income tax provision in accordance with ASC 270 and ASC 740.

The Company’s effective tax rate (“ETR”) from continuing

operations was ( 7.3 %) and 0 % for the three months ended September 30, 2021 and September 30, 2020, respectively, and ( 9.1 %) and ( 0.1 %)

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

The Company recorded income tax (provision) benefit of $3.4 million

and $ 6,000 for the three months ended September 30, 2021 and 2020, respectively and ($ 144,000 ) and $ 18,000 for the nine months ended September

30, 2021 and 2020, respectively.

The difference between the ETR and federal statutory rate of 21 % is primarily attributable to items recorded

for GAAP but permanently disallowed for U.S.

federal income tax purposes and changes in valuation allowance.

A valuation allowance is recorded

when it is more-likely-than-not some of the Company’s deferred tax assets may not be realized.

Significant judgment is applied when

assessing the need for a valuation allowance and the Company considers future taxable income, reversals of existing deferred tax assets

and liabilities and ongoing prudent and feasible tax planning strategies, in making such assessment.

As of September 30, 2021, the Company

maintains a full US federal, state and UK valuation allowance.

The Company records uncertain

tax positions in accordance with ASC 740, Income Taxes, on the basis of a two-step process in which (i) the Company determines whether

it is more likely than not a tax position will be sustained on the basis of the technical merits of such position and (ii) for those tax

positions meeting the more-likely-than-not recognition threshold, the Company would recognize the largest amount of tax benefit that is

more than 50% likely to be realized upon ultimate settlement with the related tax authority.

The Company has determined it has no uncertain

tax positions as of September 30, 2021 and 2020.

The Company classifies interest and penalties recognized on uncertain tax positions as

a component of income tax expense.

Capital expenditures for the three months

ended March 31, 2021

SUBSEQUENT EVENTS

Activity Under 2021 ATM Offering

From October 1, 2021 through

November 18, 2021, the Company sold an aggregate of 17.9 million shares of common stock pursuant to the 2021 Sales Agreement for gross

proceeds of $ 39.5 million .

2022 ATM Offering

During the period between

April 1, 2022 through May 20, 2022, the Company sold an aggregate of 88.2 million shares of common stock pursuant to the 2022 ATM Offering

for gross proceeds of $ 49.4 million .

Investments in Alpha Fund

In October and November 2021,

the Company purchased an additional $8.5 million of limited partnership interests in the Alpha Fund.

Investments by Alpha Fund

In October 2021, Alpha Fund

purchased 1,650,000 shares of the Company’s common stock in open market transactions at an average purchase price of $ 2.42 per share.

As of November 15, 2021, the Alpha Fund owned 2,650,000 shares of the Company’s common stock.

Stock Option and Restricted Stock Grants

November 9, 2021, the Board approved the following grants:

· Grants to each independent director of non-qualified stock options to purchase

100,000 shares of the Company’s common stock with an exercise price of $ 2.19 per share, vesting monthly beginning on January 1,

2023 and ending December 31, 2024 and will be exercisable upon approval by the NYSE American and the Company’s stockholders ;

· Grants to each of Milton C.

Ault, III, William Horne, Henry Nisser and

Kenneth Cragun of non-qualified stock options to purchase 1,000,000 , 800,000 , 600,000

shares of the Company’s common stock, respectively, with an exercise price of $ 2.19

per share, vesting

monthly beginning on January 1, 2023 and ending December 31, 2024 and exercisable upon approval by the NYSE American and the

Corporation’s stockholders ;

· Grant to certain employees of non-qualified stock options to purchase

an aggregate of 1,635,000

shares of the Company’s common stock with an exercise price of $ 2.19

per share, vesting

over 36 months beginning on January 1, 2022 and exercisable pursuant to the Company’s 2021 Stock Incentive Plan,

although one employee’s stock option grant of 100,000

options is exercisable at $ 2.66

per share vesting

ratably over 48 months beginning October 1, 2021 ;

· Restricted stock grant to certain employees of an aggregate of 200,000 shares

pursuant to the Company’s 2021 Stock Incentive Plan.

Such shares will vest 25% on November 15, 2021, 25% on May 15, 2022, 25% on

November 15, 2022 and 25% on May 15, 2023 .

TurnOnGreen Lease Agreement

On November 5, 2021, the

Company’s subsidiary, TurnOnGreen, entered into a lease agreement to lease a 31,165

square foot building in Milpitas, California.

lease term is approximately 50 months ending January 31, 2026 .

The total commitment under the lease is $ 2.3

Purchase Agreement for Bitcoin Mining Equipment

In November 2021, Ault

Alliance entered into contracts with Bitmain Technologies Limited to purchase an aggregate of 16,000 Bitcoin miners for $ 121

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 kWh.

Based on current delivery schedules, Ault Alliance expects that

the 16,000 newly purchased miners will be shipped by Bitmain between March 2022 and September 2022.

During the period between

April 1, 2022 through May 16, 2022, the Company purchased an additional $ 3.0 million of limited partnership interests in the Alpha Fund.

As of May 16, 2022, the Company had subscribed for $ 21.0 million of limited partnership interests.

Investments in Alzamend

On April 26, 2022, DP Lending

funded the remaining $ 4 million due to Alzamend upon its achievement of the final milestone.

EYP Acquisition

On April 25, 2022, the Company

announced that its subsidiary, Ault Alliance has agreed to lend approximately $12 million (inclusive of existing loans) through a

super-priority debtor-in-possession (“DIP”) loan to, and entered into an asset purchase agreement with, EYP, Inc.

affiliates (“EYP”) providing for the acquisition of all of EYP’s assets for an aggregate consideration of approximately

$68 million (the “Asset Purchase”).

Ault Alliance will also make an offer of employment to all current employees of EYP.

is an integrated architecture, engineering, and design services company specializing in higher education, healthcare, government and science

& technology with offices in 11 cities across the United States.

The asset purchase agreement

constitutes a “stalking horse” bid in a sale process being conducted under Section 363 of the U.S.

Bankruptcy Code.

Ault Alliance’s acquisition of EYP’s assets remains subject to approval by the United States Bankruptcy Court for the District

of Delaware, following court-approved bidding procedures, including the potential receipt of competing offers for EYP’s assets at

It is expected that the sale process will be completed by June 2022, and that throughout the sale process, the business will

continue to operate in the ordinary course providing services to its customers.

As part of the purchase, Ault Alliance will be able to

include the value of its DIP loan as part of its bid at closing.

Consummation of the Asset Purchase

is subject to Bankruptcy Court approved bidding procedures, higher and better offers made in the auction by other potential bidders, approval

of the highest bidder by the Bankruptcy Court and customary closing conditions.

Increase in Ownership of Alliance Cloud

Services, LLC

On May 12, 2022, BNI closed

a $ 1.8 million membership interest purchase agreement whereby BNI acquired the 30 % minority interest of Alliance Cloud Services, LLC (“ACS”)

which BNI did not previously own, resulting in ACS becoming a wholly-owned subsidiary of BNI.

ACS owns and operates the Company’s

Michigan data center, where BNI conducts the Company’s Bitcoin mining operations.

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 1. Financial Statements