What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-05-23 compared with 2021-11-19 · 329 added, 559 removed, 85 unchanged (91% of the section changed)

1 unchanged sentence

In this quarterly report,

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

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

Inc., a Delaware corporation.

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

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, and textiles.

In addition, the Company extends credit

to select entrepreneurial businesses through a licensed lending subsidiary.

Recent Developments

2021 ATM Offering

On January 22, 2021, we entered

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

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

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

and March 5, 2021.

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

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

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

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

Acquisition of Michigan

Cloud Data Center

January 29, 2021, Alliance Cloud Services, LLC, a majority-owned subsidiary of its wholly-owned subsidiary, 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 purchase price was paid in cash.

Purchase Agreements for Bitcoin Mining Equipment

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

As of September 30, 2021,

we had received 1,000 of the Bitcoin miners.

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

October 2021 and July 2021.

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

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

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

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

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

The purchase includes both the

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

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

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

and September 2022.

Investment in Alzamend

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

and warrants, subject to the achievement of certain milestones.

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

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

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

New Drug application for AL001.

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

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

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

Under the securities purchase agreement, in aggregate, Alzamend

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

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

The transaction was approved

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

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

DP Lending purchased 2 million shares

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

Alzamend’s common stock is listed

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

At September 30, 2021, the

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

Based upon the fair

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

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

In conjunction with the March

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

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

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

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

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

Significant Fluctuation

in the Fair Value of Investment in Alzamend

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

unrealized gains and losses from market price changes.

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

in our periodic earnings.

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

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

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

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

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

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

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

Investment in Ault

& Company, Inc.

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 us.

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.

Forgiveness of Debt

On January 11, 2021, we received

forgiveness of a loan under the Paycheck Protection Program (“PPP”) in the principal amount of $715,000.

On May 20, 2021,

Microphase received forgiveness of a loan under the PPP in the principal amount of $467,000.

Impact of Coronavirus on Our Operations

The COVID-19 pandemic continues

to present significant business challenges in 2021.

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

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

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

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

We also continued to work with our customers and suppliers

to minimize disruptions.

Although the COVID-19 pandemic

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

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

and will depend on future pandemic related developments, including the duration of the pandemic, any potential subsequent waves of COVID-19

infection, the effectiveness, distribution and acceptance of COVID-19 vaccines, and related government actions to prevent and manage disease

spread, all of which are uncertain and cannot be predicted.

The long-term impacts of COVID-19 on demand for our products and services

are also difficult to predict but could negatively affect our future results and business operations.

For additional risks to the corporation

related to the COVID-19 pandemic, see Item 1A, Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2020.

Through its wholly 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 owns and operates hotels and extends

credit to select entrepreneurial businesses through a licensed lending subsidiary.

Recent Events and Developments

On February 4, 2022, we and

our wholly owned subsidiary Ault Alliance, Inc.

(“Ault Alliance”) entered into a securities purchase agreement providing for

our purchase of BitNile, Inc.

(“BNI”) from Ault Alliance.

As a result of this transaction, both BNI and Ault Alliance are

each stand-alone wholly owned subsidiaries of ours.

On February 10, 2022, consistent

with our objective to have BNI operate the entirety of our business that relates to cryptocurrencies, Ault Alliance assigned the entirety

of its interest in Alliance Cloud Services, LLC (“ACS”) to BNI.

On February 25, 2022, we entered

into an At-The-Market issuance sales agreement with Ascendiant Capital Markets, LLC 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, we 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.

On March 20, 2022, we and

our majority owned subsidiary Imperalis Holding Corp.

(“IMHC”) entered into a securities purchase agreement (the “Agreement”)

with TurnOnGreen, Inc.

(“TOGI”), a wholly owned subsidiary of ours.

According to the Agreement, we will (i) deliver to IMHC

all of the outstanding shares of common stock of TOGI that we own, and (ii) forgive and eliminate the intracompany accounts between us

and TOGI evidencing historical equity investments made by us in TOGI, in the approximate amount of $25,000,000, in consideration for the

issuance by IMHC to us (the “Transaction”) of an aggregate of 25,000 newly designated shares of Series A Preferred Stock (the

“IMHC Preferred Stock”), with each such share having a stated value of $1,000.

The closing of the Transaction is subject to

our delivery to IMHC of audited financial statements of TOGI and other customary closing conditions.

Immediately following the completion

of the Transaction, TOGI will be a wholly-owned subsidiary of IMHC.

The parties to the Agreement have agreed that, upon completion of

the Transaction, IMHC will change its name to TurnOnGreen, Inc., and, through an upstream merger whereby the current TOGI shall cease

to exist, IMHC shall have TOGI’s two operating subsidiaries, TOG Technologies Inc.

and Digital Power Corporation.

Promptly following

the closing of the Transaction, IMHC will dissolve its three dormant subsidiaries.

On March 30, 2022, we fully

paid our $66 million senior secured notes (the “Senior Notes”) and accrued interest.

The 10% original issuance discount promissory

notes were sold in December 2021 and were due and payable on March 31, 2022.

On April 22, 2022, Ault Alliance

entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with EYP Group Holdings, Inc.

and each of its subsidiaries

and affiliates listed on the signature page to the Asset Purchase Agreement (collectively, “EYP”), pursuant to which Ault

Alliance agreed to purchase substantially all of the assets of EYP (such assets, the “Assets,” and such transaction, the “Asset

On April 24, 2022, EYP filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code (the

“Bankruptcy Code”) with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”).

The Bankruptcy Court has permitted joint administration of the Chapter 11 cases under the caption “In re EYP Group Holdings, Inc.,

et al.”, Case No.

22-10367 (MFW) (the “Chapter 11 Cases”).

Under the Asset Purchase Agreement,

Ault Alliance or its designee(s), upon the closing of the transactions contemplated thereby, will purchase the Assets and assume certain

of EYP’s obligations associated with the purchased Assets through a supervised sale under Section 363 of the Bankruptcy Code.

Alliance’s stalking horse bid is based on an enterprise value of approximately Sixty-Seven Million Seven Hundred Thousand Dollars

($67,700,000), which includes the purchase price for the Assets under the Asset Purchase Agreement of Sixty-Two Million Five Hundred Thousand

Dollars ($62,500,000), as adjusted by a closing working capital adjustment (the “Purchase Price”), plus Ault Alliance’s

assumption of certain liabilities.

The Purchase Price would be paid in cash, less the outstanding amount of the DIP Loans and the senior

secured loans previously issued by Ault Alliance to EYP, in an approximate aggregate amount of Eleven Million Seven Hundred Fifty Thousand

Dollars ($11,750,000), and less the amount of certain liabilities assumed by Ault Alliance.

The Asset Purchase Agreement requires the

Asset Purchase to close by June 30, 2022.

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.

In connection with the Chapter

11 Cases, EYP filed a motion seeking Bankruptcy Court approval of debtor-in-possession financing on the terms set forth in that certain

Senior Secured Superpriority Debtor-in-Possession Financing Term Sheet, dated April 22, 2022 (the “DIP Financing Agreement”),

by and among Ault Alliance and EYP.

The DIP Financing Agreement provides for senior secured superpriority debtor-in-possession financing

facilities (the “DIP Financing”) in a $5 million commitment, with up to $2.5 million of such commitment available upon entry

of an interim order (the “Interim DIP Order”) approving the DIP Financing (the “Initial Draw”).

The DIP Financing

will become available upon the satisfaction of customary conditions precedent thereto, including the entry of the Interim DIP Order.

remaining portion of the commitment, minus the Initial Draw, shall become available upon entry of the final order of the Bankruptcy Court

approving the DIP Financing (collectively, any borrowings under the DIP Financing the “DIP Loans”).

On April 26, 2022, the

Bankruptcy Court entered the Interim DIP Order.

On or about April 29, 2022, EYP made an Initial Draw in the amount of $1.5 million pursuant

to the Interim DIP Order.

A hearing on approval of the DIP Financing on a final basis is scheduled for May 25, 2022.

The DIP Financing matures

on the earlier of (i) June 30, 2022, (ii) the closing date following entry of one or more final orders approving the sale of the Assets

in the Chapter 11 Cases, (iii) the acceleration of any outstanding DIP Loans following the occurrence of an uncured event of default (as

defined in the DIP Financing Agreement), or (iv) entry of an order by the Bankruptcy Court in the Chapter 11 Cases either (a) dismissing

such case or converting such Chapter 11 Case to a case under Chapter 7 of the Bankruptcy Code, or (b) appointing a Chapter 11 trustee

or an examiner with enlarged powers relating to the operation of the business of EYP (i.e., powers beyond those set forth in sections

1106(a)(3) and (4) of the Bankruptcy Code), in each case without the consent of Ault Alliance.

On April 26, 2022, Digital

Power Lending, LLC (“DP Lending”) made an additional $4 million investment in Alzamend Neuro, Inc.

(“Alzamend”),

a related party and early clinical-stage biopharmaceutical company focused on developing novel products for the treatment of neurodegenerative

diseases and psychiatric disorders.

During 2021, DP Lending entered into a securities purchase agreement (the “SPA”) with

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

DP Lending had

previously funded $6 million pursuant to the terms of the SPA and the achievement of 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 AL001.

26, 2022, DP Lending funded the remaining amount due to achievement of the final milestone, the receipt of the full data set from Alzamend’s

Phase 1 clinical trial for AL001.

On May 12, 2022, BNI closed

a $1.8 million membership interest purchase agreement whereby BNI acquired the 30% minority interest of ACS which BNI did not previously

own, resulting in ACS becoming a wholly-owned subsidiary of BNI.

ACS owns and operates our Michigan data center, where BNI conducts our

Bitcoin mining operations.

As a holding company, our

business strategy is designed to increase shareholder value.

Under this strategy, we are focused on acquiring, managing and financially

supporting our subsidiaries and partner companies, with the goal of pursuing monetization opportunities and maximizing the value returned

to shareholders.

business strategy is designed to increase stockholder value.

Under this strategy, we are focused on managing and financially supporting

our existing subsidiaries and partner companies, with the goal of pursuing monetization opportunities and maximizing the value returned

to stockholders.

We have, are and will consider initiatives including, among others:

public offerings, the acquisition of new subsidiaries

and/or partner companies, the sale of individual partner companies, the sale of certain or all partner company interests in secondary

market transactions, or a combination thereof, as well as other opportunities to maximize shareholder value.

We anticipate returning value

to shareholders after satisfying our debt obligations and working capital needs.

public offerings, the sale of individual partner

companies, the sale of certain or all partner company interests in secondary market transactions, or a combination thereof, as well as

other opportunities to maximize stockholder value.

We anticipate returning value to stockholders after satisfying our debt obligations

and working capital needs.

From time to time, we engage

2 unchanged sentences

To the extent we believe that a subsidiary partner company’s further growth and development can best be supported

by a different ownership structure or if we otherwise believe it is in our shareholders’ best interests, we will seek to sell some

by a different ownership structure or if we otherwise believe it is in our stockholders’ best interests, we will seek to sell some

or all of our position in the subsidiary or partner company.

5 unchanged sentences

We will continue to consider these (or similar) programs and the sale

of certain subsidiary or partner company interests in secondary market transactions to maximize value for our shareholders.

of certain subsidiary or partner company interests in secondary market transactions to maximize value for our stockholders.

Over the recent past we have

provided capital and relevant expertise to fuel the growth of businesses in defense/aerospace, industrial, telecommunications, medical,

and textile industries.

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

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

We are a Delaware corporation with

our corporate office located at 11411 Southern Highlands Pkwy #240, Las Vegas, Nevada 89141.

Our phone number is 949-444-5464 and our

website address is www.aultglobal.com.

crypto-mining, textiles and a select portfolio of commercial hospitality properties.

We have provided capital to subsidiaries as well

as partner companies in which we have an equity interest or may be actively involved, influencing development through board representation

and management support.

We are a Delaware corporation

with our corporate office located at 11411 Southern Highlands Pkwy, Suite 240, Las Vegas, NV 89141.

Our phone number is 949-444-5464 and

our website address is www.bitnile.com.

Results of Operations

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

Results of Operations for the Three Months Ended March 31, 2022

The following table summarizes

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

the results of our operations for the three months ended March 31, 2022 and 2021.

For the Three 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 )

Interest income

Accretion of discount on note receivable, related party

Income from operations

Interest and other income

Interest expense

Change in fair value of marketable equity securities

Realized gain on marketable securities

Loss on extinguishment of debt

(29,824,000 )

Change in fair value of warrant liability

Loss before income taxes

(46,140,000 )

(16,741,000 )

Income tax benefit

(42,774,000 )

(16,735,000 )

Net gain attributable to non-controlling interest

Net loss attributable to Ault Global Holdings

(42,870,000 )

(16,735,000 )

Preferred dividends

Net loss available to common stockholders

$ (42,874,000 )

$ (16,738,000 )

Comprehensive loss

Net loss available to common stockholders

$ (42,874,000 )

$ (16,738,000 )

Other comprehensive income (loss)

Foreign currency translation adjustment

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

Other comprehensive income (loss)

Total comprehensive loss

$ (47,905,000 )

$ (15,133,000 )

Revenues by segment for the

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

For the Three Months Ended

September 30,

Gresham Worldwide (“GWW”)

Ault Alliance:

Revenue, cryptocurrency mining

Revenue, lending and trading activities

(38,868,000 )

(38,839,000 )

Total revenue

$ (30,794,000 )

$ (36,470,000 )

Our revenues decreased by

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

ended September 30, 2020.

GWW revenues increased by

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

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

In the prior year period, revenue

was constrained by working capital issues.

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

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

their ability to fulfill backlog.

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

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

TurnOnGreen revenues decreased

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

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

Ault Alliance

Revenues from our cryptocurrency

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

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

Our decision to resume cryptocurrency mining

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

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

Revenues from our lending

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

for the three months ended September 30, 2020.

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

significant unrealized losses from market price changes related to Alzamend.

Unrealized gain and losses have caused, and will continue

to cause, significant volatility in our periodic earnings.

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

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

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

During the three months ended September 30, 2021,

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

Our investment in Alzamend will be revalued

on each balance sheet date.

Gross margins

Gross margins were negative

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

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

Our gross margins during the

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

Excluding the

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

have been 34.7%, consistent our historical range.

Research and development

Research and development expenses

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

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

applications.

Selling and marketing

Selling and marketing expenses

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

increase of $1.7 million, or 667%.

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

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

The increase is

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

General and administrative

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

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

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

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

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

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

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

· higher consulting, audit, legal and insurance costs.

Loss from continuing operations

We recorded loss from continuing

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

months ended September 30, 2020.

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

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

Interest income

Interest income was $125,000

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

Accretion of discount on note receivable, related

Accretion of discount on note

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

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

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

Interest expense

Interest expense was $140,000

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

The decrease in

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

Change in fair value of warrant liability

During the three months ended

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

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

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

Change in fair value of marketable equity securities

Change in fair value of marketable

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

ended September 30, 2020.

Loss on extinguishment of debt

Gain on extinguishment of

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

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

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

We recognized a loss on extinguishment of

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

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

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

For the foregoing reasons,

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

months ended September 30, 2020.

Other comprehensive income (loss)

Other comprehensive loss was

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

ended September 30, 2020.

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

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

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

of other comprehensive loss.

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

The following table summarizes

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

For the Nine Months Ended

September 30,

Revenue, cryptocurrency mining

Revenue, lending and trading activities

Total revenue

Cost of revenue

Operating expenses

Research and development

Selling and marketing

General and administrative

Total operating expenses

Loss from continuing operations

Interest income

Accretion of discount on note receivable, related party

Interest expense

Change in fair value of marketable equity securities

Realized gain on marketable securities

Gain (loss) on extinguishment of debt

(13,298,000 )

Loss from investment in unconsolidated entity

Gain on extinguishment of debt

Change in fair value of warrant liability

Income (loss) from continuing operations before income taxes

(22,961,000 )

Income tax benefit

Income (loss) from continuing operations

(Loss) income before income taxes

(28,787,000 )

Net loss from discontinued operations, net of taxes

Net income (loss)

Income tax (provision) benefit

Net (loss) income

(28,787,000 )

Net gain attributable to non-controlling interest

Net income (loss) attributable to Ault Global Holdings

Net loss (income) attributable to non-controlling interest

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

(28,772,000 )

Preferred dividends

Net income (loss) available to common stockholders

Net (loss) income available to common stockholders

$ (28,777,000 )

Comprehensive loss

Net income (loss) available to common stockholders

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

Other comprehensive income (loss)

Total comprehensive loss

$ (6,581,000 )

Net unrealized gain on derivative securities of related party

Other comprehensive (loss) income

Total comprehensive (loss) income

$ (29,064,000 )

Revenues by segment for the

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

For the Nine Months Ended

September 30,

three months ended March 31, 2022 and 2021 are as follows:

For the Three Months Ended March 31,

Gresham Worldwide, Inc.

Cryptocurrency

Revenue, cryptocurrency mining, net

Revenue, commercial real estate leases

Ault Alliance:

Revenue, cryptocurrency mining

Revenue, lending and trading activities

1 unchanged sentence

Our revenues increased by

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

September 30, 2020.

$19.6 million, or 148%, to $32.8 million for the three months ended March 31, 2022, from $13.2 million for the three months ended

March 31, 2021.

GWW revenues increased by

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

September 30, 2020.

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

In the prior year period,

revenue was constrained by working capital issues.

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

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

improve their ability to fulfill backlog.

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

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

TurnOnGreen revenues increased

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

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

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

Ault Alliance

$0.9 million, or 14%, to $7.2 million for the three months ended March 31, 2022, from $6.4 million for the three months ended March

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

Enertec, which largely consists of revenue recognized over time, grew to $3.3 million for the three months ended March 31, 2022, an increase

of $0.8 million, or 33.4%, from $2.4 million in the prior-year period.

TOGI revenues for the three

months ended March 31, 2022 of $1.1 million declined $0.3 million, or 18%, from $1.4 million for the three months ended March

31, 2021, due to supply chain challenges.

Cryptocurrency

Revenues from our cryptocurrency

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

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

Our decision to resume cryptocurrency mining

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

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

mining operations were $3.5 million for the three months ended March 31, 2022, compared to $0.1 million for three months ended March 31,

During 2021, we purchased Bitcoin mining equipment and increased our cryptocurrency mining activities.

Our decision to increase

our cryptocurrency mining operations in 2021 was based on several factors, which positively affected the number of active miners we operated,

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

Real estate segment revenues

were $2.7 million for the three months ended March 31, 2022 compared to nil for the three months ended March 31, 2021.

December 22, 2021, the real estate segment acquired four hotel properties for $71.3 million, consisting of a 136-room Courtyard by Marriott,

a 133-room Hilton Garden Inn and a 122-room Residence Inn by Marriott in Middleton, WI, as well as a 135-room Hilton Garden Inn in Rockford,

Other than the cryptocurrency segment Michigan data center, we did not have any income-producing real estate prior to the hotel acquisitions.

Ault Alliance

Revenues from our lending

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

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

transactions to our loan and investment portfolio.

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

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

issued to DP Lending in certain financing transactions.

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

fees charged to borrowers and interest generated from each loan.

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

and trading activities increased to $17.9 million for the three months ended March 31, 2022, from $5.2 million for the three months ended

March 31, 2021, which is attributable to a significant allocation of capital from our equity financing transactions to our loan and investment

During the three months ended March 31, 2022, DP Lending generated significant income from appreciation of investments in marketable

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

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

from our trading activities during the three months ended March 31, 2022 included significant net gains on equity securities, including

unrealized gains and losses from market price changes.

1 unchanged sentence

in our periodic earnings.

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

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

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

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

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

Revenues from our trading

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

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

Gross Margins

Gross margins increased to

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

Our gross margins have

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

68.0% for the three months ended March 31, 2022, compared to 61.4% for the three months ended March 31, 2021.

Our gross margins have typically

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

Our gross margins of 68.0%

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

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

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

recognized during the three months ended March 31, 2022 were impacted by the favorable margins from our lending and trading activities.

Excluding the effects of margin from our lending and trading activities, our adjusted gross margins for the three months ended March 31,

2022, would have been 30%, slightly lower than our historical range, due in part to lower margins at TOGI related to higher freight costs

for the three months ended March 31, 2022.

Research and Development

Research and development expenses

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

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

electric vehicle charger products.

increased by $0.1 million for the three months ended March 31, 2022, from $0.6 million for the three months ended March 31, 2021.

increase in research and development expenses is due to product development efforts at GWW.

Selling and Marketing

Selling and marketing expenses

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

increase of $3.8 million, or 431%.

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

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

were $6.5 million for the three months ended March 31, 2022, compared to $1.2 million for the three months ended March 31, 2021, an increase

of $5.2 million, or 422%.

The increase was the result of $5.0 million higher marketing costs at Ault Alliance, including $3.5 million

related to an advertising sponsorship agreement as well as increases in sales and marketing personnel and consultants.

The increase is

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

also attributable to a $0.2 million increase in costs incurred at TOGI to grow our selling and marketing infrastructure related to our

EV charger products.

General and Administrative

General and administrative

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

expenses were $13.7 million for the three months ended March 31, 2022, compared to $5.1 million for the three months ended March

31, 2021, an increase of $8.6 million, or 169%.

1 unchanged sentence

· non-cash stock compensation costs of $2.6 million;

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

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

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

· higher consulting, audit, legal and insurance costs.

Loss from continuing operations

We recorded a loss from continuing

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

ended September 30, 2020.

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

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

Interest income

Interest income was $176,000

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

Accretion of discount on note receivable, related

Accretion of discount on note

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

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

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

· general and administrative costs of $1.8 million from our hotel operations, which were acquired in December

· increased costs of $0.9 million related to the Michigan data center, operated by ACS;

· higher legal expense of $1.3 million, salaries of $0.5 million and

audit fees of $0.3 million.

Income From Operations

We recorded income from operations

of $1.0 million for the three months ended March 31, 2022, compared to $1.2 million for the three months ended March 31, 2021.

in operating income is attributable to the increase in operating expenses partially offset by the increase in revenue and gross margins.

Interest and Other Income

Interest and other income was

$0.4 million for the three months ended March 31, 2022 compared to $37,000 for the three months ended March 31, 2021.

Other income for

the three months ended March 31, 2022 included $0.3 million other income from Alpha Fund, which was formed in July 2021.

Interest Expense

Interest expense was $29.8

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

The decrease in interest

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

million for the three months ended March 31, 2022, compared to $0.3 million for the three months ended March 31, 2021.

The increase in

interest expense relates to the $66.0 million of Senior Notes issued in December 2021, which were fully paid in March 2022.

Interest expense

from these Senior Notes included the amortization of debt discount of $26.3 million from the issuance of warrants, a non-cash charge,

and original issue discount, in connection with these Senior Notes.

Change in Fair Value of Warrant Liability

During the nine months ended

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

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

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

During the three months ended

March 31, 2022, the fair value of the warrants that were issued during 2021 in a series of debt financings increased by $18,000.

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

recorded as change in fair value of warrant liability in the condensed consolidated statements of operations and comprehensive loss.

Change in Fair Value of Marketable Equity Securities

Change in fair value of marketable

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

ended September 30, 2020.

equity securities was nil for the three months ended March 31, 2022, compared to a gain of $2.0 million for the three months ended March

The change relates to an investment in marketable securities held by Microphase Corporation (“Microphase”), a majority

owned subsidiary of GWW, that was fully sold in the fourth quarter of 2021.

Realized Gain on Marketable Securities

Realized gain on marketable

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

Gain (loss) on extinguishment of debt

securities was $0.1 million for the three months ended March 31, 2022, compared to $0.4 million for the three months ended March 31, 2021.

The change relates to realized gains from an investment in marketable securities held by Microphase, a portion of which was sold during

the three months ended March 31, 2021.

Loss From Investment in Unconsolidated Entity

Loss from investment in unconsolidated

entity was $0.5 million for the three months ended March 31, 2022, compared to nil for the three months ended March 31, 2021, representing

our share of losses from our equity method investment in Avalanche International Corp.

Gain on Extinguishment of Debt

Gain on extinguishment of

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

During April 2020, we received loans under the PPP

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

principal amount of $467,000.

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

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

During the nine months ended September

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

the issuance of 6.8 million shares of our common stock.

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

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

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

Net loss from discontinued operations

As a result of temporary closures

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

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

Management determined that the permanent

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

Accordingly, the results of the restaurant

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

from continuing operations for all periods presented.

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

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

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

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

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

Net income (loss)

debt was nil for the three months ended March 31, 2022, compared to a gain of $0.4 million for the three months ended March 31, 2021.

During the three months ended March 31, 2021, principal and accrued interest of $200,000 and $16,000, respectively, on our debt was satisfied

through the issuance of 183,214 shares of our common stock.

We recognized a loss on extinguishment of $0.2 million as a result of this

issuance of common stock based on the fair value of our common stock at the date of the exchange.

The loss on extinguishment from the

issuance of the 183,214 shares of our common stock was offset by the forgiveness of our Paycheck Protection Program loan in the principal

amount of $0.7 million.

Net (Loss) Income

For the foregoing reasons,

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

ended September 30, 2020.

Other comprehensive income (loss)

our net loss for the three months ended March 31, 2022 was $28.8 million, compared to net income of $2.0 million for the three months

ended March 31, 2021.

Other Comprehensive (Loss) Income

Other comprehensive loss was

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

ended September 30, 2020.

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

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

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

of other comprehensive loss.

$0.3 million for the three months ended March 31, 2022 compared to other comprehensive income of $2.9 million for the three months ended

March 31, 2021.

Other comprehensive income for the three months ended March 31, 2021 was primarily due to unrealized gains in the warrant

derivative securities that we received as a result of our investment in AVLP.

Liquidity and Capital Resources

On September 30, 2021, we

had cash and cash equivalents of $44.0 million.

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

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

Net cash used in continuing

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

ended September 30, 2020.

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

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

On March 31, 2022, we had cash and cash equivalents of $39.4 million

(excluding restricted cash of $4.7 million).

This compares with cash and cash equivalents of $15.9 million (excluding restricted

cash of $5.3 million) at December 31, 2021.

The increase in cash and cash equivalents cash was primarily due to cash provided by financing

activities related to our 2022 ATM Offering and cash provided by operating activities, partially offset by the payment of debt and purchases

of property and equipment.

Net cash provided by operating

activities totaled $25.0 million for the three months ended March 31, 2022 compared to net cash used in operating activities of $14.2

million for the three months ended March 31, 2021.

Cash provided by operating activities for the three months ended March 31, 2022 included

$32.6 million net cash provided by marketable securities from trading activities related to the operations of DP Lending.

Net cash used in investing

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

activities was $24.4 million for the three months ended March 31, 2022, compared to $16.7 million for the three months ended March 31,

Net cash used in investing activities for the three months ended March 31, 2022 included $35.4 million of capital expenditures related

to Bitcoin mining equipment, partially offset by $10.2 million proceeds from the sale of marketable equity securities.

Net cash provided by financing

activities was $22.2 million for the three months ended March 31, 2022, compared to $119.9 million for the three months ended March

31, 2021, and reflects the following transactions:

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

at Ault Alliance.

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

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

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

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

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

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

During the quarter ended September

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

related equipment.

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

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.

· Investment in Alzamend Neuro, Inc.

- On March 9, 2021, our wholly owned subsidiary, DP Lending,

entered into a securities purchase agreement with Alzamend, a related party, to invest $10 million in Alzamend common stock and warrants,

subject to the achievement of certain milestones.

We agreed to fund $4 million upon execution of the securities purchase agreement and

to fund the balance upon Alzamend achieving certain milestones related to the 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

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

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

of $3.00 per share.

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

· Investment in Ault & Company, Inc.

- On 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 us.

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.

· Executive Chairman relocation benefit - On February 23, 2021, as part of a relocation benefit for

our Executive Chairman, Milton C.

Ault, III, related to the moving of our corporate headquarters from Newport Beach, CA to Las Vegas,

NV, we agreed to purchase Mr.

Ault’s California residence for the appraised market value of the property of $2.7 million.

was subsequently sold during April 2021 and no gain or loss was recognized from sale of the property.

Historically, we have financed

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

During 2021, we continued to

successfully obtain additional equity financing.

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

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

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

related to proceeds from the 2021 ATM offering.

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

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

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

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

In accordance with the terms of the 2021

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

time through the sales agent.

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

2021 Sales Agreement for gross proceeds of $160.5 million.

· 2022 ATM Offering – On February 25, 2022, we entered into an At-The-Market issuance sales

agreement with Ascendiant Capital Markets, LLC to sell shares of common stock having an aggregate offering price of up to $200 million

from time to time, through the 2022 ATM Offering.

As of March 31, 2022, we 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.

· December 2021 Secured Promissory Notes – On December 30, 2021, we entered into a securities

purchase agreement with certain sophisticated investors providing for the issuance of Senior Notes that bore interest at 8% per annum

with an aggregate principal face amount of $66.0 million.

The Senior Notes were repaid in March 2022.

· Margin Accounts Payable – During the year ended December 31, 2021, we entered into leverage

agreements on certain brokerage accounts, whereby we borrowed $18.5 million.

The margin accounts payable were repaid during the three

months ended March 31, 2022.

We believe our current cash

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

for the quarter ended September 30, 2021 are issued.

on hand combined with the proceeds from the 2022 ATM Offering are sufficient to meet our operating and capital requirements for at least

the next twelve months from the date the financial statements for the three months ended March 31, 2022 are issued.

Critical Accounting Policies

Fair value of financial instruments

In accordance with ASC No.

820, Fair Value Measurements and Disclosures , fair value is defined as the exit price, or the amount that would be received for

the sale of an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.

The guidance also establishes

a three-tier hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable

inputs by requiring that the most observable inputs be used when available.

Observable inputs include those that market participants would

use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company.

inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset

or liability.

We assess the inputs used

to measure fair value using the three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in

The Company’s investments

in AVLP, a related party controlled by Philou, an affiliate of the Company, consist of convertible promissory notes, warrants and shares

of AVLP common stock.

As of December 31, 2020, the Company has provided loans to AVLP in the principal amount $13,924,136 and, in addition

to the 12% convertible promissory notes, AVLP has issued to the Company warrants to purchase 27,858,272 shares of AVLP common stock at

an exercise price of $0.50 per share for a period of five years.

Management used both a market and income approach to quantify the carrying

amount of the convertible notes, including credit risk.

The market approach considered the fair value of AVLP’s common stock adjusted

for a lack of marketability discount and the time value of money based on expectation as to the timing of a potential liquidity event

which could affect the timing of a settlement of the convertible notes.

The income approach was primarily based on a discounted cash flow

analysis with assumptions regarding forecasted revenues, operating margins and a risk-adjusted discount rate to compute the net present

value of such cash flows.

In determining the revenue

and expense assumptions that were used in the discounted cash flow analysis, the Company considered the disruptive nature of AVLP’s

Multiplex Laser Surface Enhancement (“MLSE”) plasma-laser system, the size of the market for the treatment of textiles, customer

demand, existing treatment methods, the performance capabilities of the MLSE system and the risk of business execution and the adoption

of AVLP’s disruptive technology.

Variable Interest Entities

For a variable interest entity

(“VIE”), we assess whether we are the primary beneficiary as prescribed by the accounting guidance on the consolidation of

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

We evaluate our business relationships

with related parties to identify potential VIEs under Accounting Standards Codification (“ASC”) 810, Consolidation .

We consolidate VIEs in which we are 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.

Our judgment with respect to our level of influence or control of an entity involves the consideration of various

factors including the form of our ownership interest, our representation in the entity’s governance, the size of our investment,

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

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

Variable Interest Entity Considerations –

We have determined that AVLP

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

We do not consolidate AVLP because we are not the primary beneficiary and do 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.

Although we have made a significant investment in

AVLP, we have 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.

As a result, AVLP’s financial position and results of operations

are not consolidated in our financial position and results of operations.

Investment in Unconsolidated Entity

of March 31, 2022, our ownership percentage of AVLP was less than 20%.

During the fourth quarter of 2021, we made additional advances

to AVLP under the existing loan agreement and our consolidated VIE, Ault Alpha, entered into a loan agreement with AVLP totaling $3.6

Due to our cumulative lending position to AVLP and the facts and circumstances surrounding the terms of loan agreements, we reevaluated

our level of influence over AVLP and determined that the equity ownership in AVLP should be accounted for under the equity method of accounting.

basis of our previously held interest in AVLP was remeasured to fair value immediately before adopting the equity method of accounting.

Our interest in AVLP as of March 31, 2022 and December 31, 2021 has been presented as an equity investment in an unconsolidated entity.

have invested in AVLP based on the potential global impact of the novel technology of AVLP.

AVLP has developed a novel cost effective

and environmentally friendly material synthesis technology for textile applications.

AVLP’s Multiplex Laser Surface Enhancement

is a unique technology that has the ability to treat both natural and synthetic textiles for a wide variety of functionalities, including

dyeability and printing enhancements, hydrophilicity, hydrophobicity, fire retardancy and anti-microbial properties.

The use of water,

harmful chemicals and energy is significantly reduced in comparison to conventional textile treatment methods.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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What changed 10-Q

Item 2. Management’s Discussion and Analysis