What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-11-21 compared with 2022-08-22 · 492 added, 316 removed, 328 unchanged (71% of the section changed)

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program (the “2022 Common ATM Offering”).

As of June 30, 2022, we had sold an aggregate of 239.7 million shares of common

As of September 30, 2022, we had sold an aggregate of 256.7 million shares of common

stock pursuant to the 2022 Common ATM Offering for gross proceeds of $168.0 million.

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(“TurnOnGreen”), 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 TurnOnGreen that we own, and (ii) forgive and eliminate the intracompany accounts

between us and TurnOnGreen evidencing historical equity investments made by us in TurnOnGreen, in the approximate amount of $25 million,

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 TurnOnGreen and other customary closing conditions.

following the completion of the Transaction, TurnOnGreen 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 TurnOnGreen shall cease to exist, IMHC shall own TurnOnGreen’s two operating subsidiaries, TOG Technologies Inc.

Digital Power Corporation.

Following the closing of the Transaction, IMHC will dissolve its dormant subsidiary.

According to the Agreement, which closed on September

we (i) delivered to IMHC all of the outstanding shares of common stock of TurnOnGreen that we own, and (ii) eliminated the intracompany

accounts between us and TurnOnGreen evidencing historical equity investments made by us in TurnOnGreen, in the approximate amount of $36

million, 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 IMHC Preferred

Stock has an aggregate liquidation preference of $25 million, is convertible into shares of IMHC’s common stock, par value $0.001

per share (the “IMHC Common Stock”) at our option, is redeemable by us, and entitles us to vote with the IMHC Common Stock

on an as-converted basis.

On September 5, 2022, we, IMHC and TurnOnGreen entered into an amendment to the Agreement (the “Amendment”),

pursuant to which IMHC agreed to (i) use commercially reasonable efforts to effectuate a distribution by us of approximately 140 million

shares of IMHC Common Stock beneficially owned by us (the “Distribution”), including the filing of a registration statement

(the “Distribution Registration Statement”) with the Securities and Exchange Commission (the “SEC”), (ii) to issue

our warrants to purchase an equivalent number of shares of IMHC Common Stock to be issued in the Distribution (the “Warrants”),

and (iii) to register the Warrants and the shares of IMHC Common Stock issuable upon exercise of the Warrants on the Distribution Registration

IMHC and us will mutually agree to the terms and conditions of the Warrants and the Distribution Registration Statement after

the Closing Date.

On March 30, 2022, we fully

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amount of the loans, interest, penalties and break-up fees, were fully repaid on June 30, 2022.

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

On April 26, 2022, Ault Lending,

LLC (“Ault 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, Ault 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.

Ault 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.

On April 26, 2022, Ault

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.

DP Lending retains the option to acquire an additional 6,666,667 shares of Alzamend common stock and

Ault Lending retains the option to acquire an additional 6,666,667 shares of Alzamend common stock and

warrants to purchase another 3,333,334 such shares for an aggregate of $10 million.

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ATM Offering”).

As of June 30, 2022, we had sold an aggregate of 2,618 shares of Series D Preferred Stock pursuant to the 2022 Preferred

ATM Offering for gross proceeds of $57,000.

As of September 30, 2022, we had sold an aggregate of 2,618 shares of Series D Preferred Stock pursuant to the 2022

Preferred ATM Offering for gross proceeds of $57,000.

On June 1, 2022, we converted

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Beginning in June 2022, we,

through DP Lending, began making open market purchases of The Singing Machine Company, Inc.

(“SMC”) common stock and on June

15, 2022, we owned more than 50% of the issued and outstanding common stock of SMC.

As of June 15, 2022, the purchase price of the common

stock acquired totaled $7.4 million and on June 15, 2022 a $3.1 million gain was recognized in interest and other income for the remeasurement

of our previously held ownership interest to $10.5 million, based on the trading price of SMC common stock.

through Ault Lending, began making open market purchases of The Singing Machine Company, Inc.

(“SMC”) common stock and on

June 15, 2022, we owned more than 50% of the issued and outstanding common stock of SMC.

As of June 15, 2022, the purchase price of the

common stock acquired totaled $7.4 million and on June 15, 2022 a $3.1 million gain was recognized in interest and other income for the

remeasurement of our previously held ownership interest to $10.5 million, based on the trading price of SMC common stock.

On August 10, 2022, BNI and

DP Lending entered into a Note Purchase Agreement (the “NPA”) with two accredited investors (the “Investors”)

providing for the issuance of Secured Promissory Notes (individually, a “Note” and collectively, the “Notes”)

with an aggregate principal face amount of $11,000,000.

The Notes have a principal face amount of $11,000,000 and bear interest at 10%

per annum, payable monthly in arrears, pursuant to the terms of the Notes.

The maturity date of the Notes is August 10, 2023.

BNI is required

to make an aggregate monthly payment (a “Monthly Payment”) of $1,000,000 on the tenth calendar day of each month, starting

in September 2022.

The Monthly Payment includes principal and interest pursuant to the amortization table set forth in the Notes.

BNI makes the first six Monthly Payments, BNI may elect to pay a forbearance fee of $125,000 to an Investor, or an aggregate of $250,000

to the two Investors (each, a “Monthly Forbearance”) in lieu of a Monthly Payment, which Monthly Forbearance would extend

the maturity date of such Notes by one month, provided that BNI may not elect to make a Monthly Forbearance in consecutive months.

may prepay the full outstanding principal and accrued but unpaid interest at any time, provided that if BNI prepays the Notes, BNI is

required to pay the Investors the amount of interest that would have accrued from the date of prepayment until the first anniversary of

the issuance date of the Notes.

Ault Lending entered into a Note Purchase Agreement (the “NPA”) with two accredited investors (the “Investors”)

providing for the issuance of secured promissory notes (the “Notes”).

The Notes have a principal face amount of $11,000,000

and bear interest at 10% per annum, payable monthly in arrears, pursuant to the terms of the Notes.

The maturity date of the Notes is

August 10, 2023.

BNI is required to make an aggregate monthly payment (a “Monthly Payment”) of $1,000,000 on the tenth calendar

day of each month, starting in September 2022.

The Monthly Payment includes principal and interest pursuant to the amortization table

set forth in the Notes.

After BNI makes the first six Monthly Payments, BNI may elect to pay a forbearance fee of $125,000 to an Investor,

or an aggregate of $250,000 to the two Investors (each, a “Monthly Forbearance”) in lieu of a Monthly Payment, which Monthly

Forbearance would extend the maturity date of such Notes by one month, provided that BNI may not elect to make a Monthly Forbearance in

consecutive months.

BNI may prepay the full outstanding principal and accrued but unpaid interest at any time, provided that if BNI prepays

the Notes, BNI is required to pay the Investors the amount of interest that would have accrued from the date of prepayment until the first

anniversary of the issuance date of the Notes.

The purchase price for the Notes was $10 million.

Pursuant to the NPA, BNI,

DP Lending and Helios Funds LLC, as the collateral agent on behalf of the Investors (the “Agent”) entered into a security

agreement (the “Security Agreement”), pursuant to which (i) DP Lending granted to the Investors a security interest in marketable

securities, investments and other property having a value of $10 million in a DP Lending brokerage account and (ii) BNI granted to the

Investors a security interest in 4,000 S19 Pro Antminers (the “Miners”), provided that the number of Miners would be reduced

Ault Lending and Helios Funds LLC, as the collateral agent on behalf of the Investors (the “Agent”) entered into a security

agreement (the “Security Agreement”), pursuant to which (i) Ault Lending granted to the Investors a security interest in marketable

securities, investments and other property having a value of $10 million in an Ault Lending brokerage account and (ii) BNI granted to

the Investors a security interest in 4,000 S19 Pro Antminers (the “Miners”), provided that the number of Miners would be reduced

to 2,000 after BNI makes the third Monthly Payment (as defined below), as set forth in the Security Agreement.

In addition, pursuant to

a subsidiary guaranty, DP Lending jointly and severally agreed to guarantee and act as surety for BNI’s obligation to repay the

a subsidiary guaranty, Ault Lending jointly and severally agreed to guarantee and act as surety for BNI’s obligation to repay the

The Notes are further secured by a guaranty we provided.

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for the hosting by Compute North of Bitcoin miners owned by BNI.

Pursuant to the Hosting Documents, Compute North will host 6,500 S19j

Pro Antminers (the “Hosted Miners”) owned by BNI for a period of five (5) years (the “Term”).

BNI agreed to pay

a fee for the Hosted Miners (the “Monthly Service Fee”), together with a monthly package fee per Hosted Miner.

Service Fee is payable based on the actual hashrate performance of the Hosted Miners, of which 70% of the anticipated Monthly Service

Fee is payable in advance, and the remaining Monthly Service Fee, if any, will be invoiced in arrears.

Pursuant to the Hosting Documents, Compute North will host approximately

6,500 S19j Pro Antminers (the “Hosted Miners”) owned by BNI for a period of five (5) years (the “Term”).

to pay a fee for the Hosted Miners (the “Monthly Service Fee”), together with a monthly package fee per Hosted Miner.

Monthly Service Fee is payable based on the actual hashrate performance of the Hosted Miners, of which 70% of the anticipated Monthly

Service Fee is payable in advance, and the remaining Monthly Service Fee, if any, will be invoiced in arrears.

We paid Compute North a

deposit of approximately $2.0 million (the “Deposit”) to be used towards the Monthly Service Fee.

As of the date of this filing,

none of the Hosted Miners are in operation as we are awaiting the energization of the Hosted Miners at the facility.

Under the Master Agreement,

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Upon an event of default (as defined in the Master Agreement) by BNI, Compute North has the right to terminate

the Hosting Documents and BNI is obligated to pay to Compute North all amounts then due under the Hosting Documents, together with a

fee as liquidated damages, equal to the amount of fees that BNI would have been required to pay through the end of the Term.

the Hosting Documents and BNI is obligated to pay to Compute North all amounts then due under the Hosting Documents, together with a fee

as liquidated damages, equal to the amount of fees that BNI would have been required to pay through the end of the Term.

On September 22, 2022, Compute

North (along with its affiliated debtors), filed for chapter 11 bankruptcy protection in the U.S.

Bankruptcy Court for the Southern District

of Texas under Chapter 11 of the U.S.

Bankruptcy Code (11 U.S.

Code section 101 et seq.).

The ultimate outcome of the bankruptcy process,

and its impact on the Deposit, remains to be determined.

We assessed this financial exposure and recorded an impairment of the Deposit

totaling $2 million during the three months ended September 30, 2022.

We have retained counsel to assist in this matter.

November 7, 2022, we and certain of our subsidiaries borrowed $18.9 million of principal amount of term loans (the “Loans”)

from a group of institutional investors (the “Financing”).

The Loans mature in 18 months, which may be extended to 24 months,

accrue interest at the rate of 8.5% per annum and are secured by certain of our assets and our various subsidiaries.

Starting in January

2023, the lenders have the right to require us to make monthly payments of $0.6 million, which will increase to $1.1 million in November

The Loans were issued with an original issue discount of $1.89 million.

The lenders received warrants

to purchase approximately 4.5 million shares of our common stock, exercisable for four years at $0.45 per share and warrants to purchase

another approximately 4.5 million shares of our common stock, exercisable for four years at $0.75 per share, subject to adjustment.

On November 7, 2022, Ault

Aviation used proceeds from the Loans to purchase a private aircraft for a total purchase price of $15.8 million.

In addition, we and certain

of our subsidiaries entered into various agreements as collateral for the repayment of the Loans, including (i) a security interest in

certain Bitcoin mining equipment, (ii) a pledge of the membership interests of Third Avenue Apartments, LLC, our wholly owned subsidiary

(“Third Apartments”), (iii) a pledge of the membership interests of Alliance Cloud Services, LLC, our wholly owned subsidiary

(“Alliance Cloud”), (iv) a pledge of the membership interests of Ault Aviation, LLC, our wholly owned subsidiary (“Ault

Aviation”), (v) a pledge in a segregated deposit account of $1.5 million of cash, (vi) a mortgage and security agreement by Third

Avenue on the real estate property owned by Third Avenue in St.

Petersburg, Florida, (vii) a future advance mortgage by Alliance Cloud

on the real estate property owned by Alliance Cloud in Dowagiac, Michigan, and (viii) an aircraft mortgage and security agreement by Ault

Aviation on the private aircraft purchased by Ault Aviation on November 7, 2022.

The Loans are further secured by a guaranty provided

by Ault Lending and Milton C.

Ault, our Executive Chairman.

On November 18, 2022, BNI

entered into another Note Purchase Agreement (the “November NPA”) with the Investors providing for the issuance of secured

promissory notes (the “November Notes”).

The November Notes have a principal face amount of $8,181,819 and bear interest at

3% per annum pursuant to the terms of the November Notes.

The maturity date of the November Notes is May 18, 2023.

When BNI sells the

Collateral (as defined below), BNI is required to make a payment towards the November Notes equal to 45% of the realized gains.

the November Notes have been repaid in full and until all of the Collateral is sold, when BNI sells any remaining Collateral, BNI is required

to give the investors a profits participation interest equal to 45% of the realized gains.

Pursuant to the November NPA,

BNI, Ault Lending and the Agent entered into a security agreement (the “November Security Agreement”), pursuant to which BNI

and Ault Lending granted to the Investors a security interest in marketable securities to be acquired by BNI (the “Collateral”).

On November 18, 2022, BNI

and the Investors also entered into an amendment to the Notes issued in August 2022, whereby the Investors permitted BNI to (i) elect

to utilize one of the six monthly forbearances under the Notes for the November 2022 monthly payment and (ii) make the forbearance payment

with the December 2022 monthly payment.

As a holding company, our

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In recent years, we have provided

capital and relevant expertise to fuel the growth of businesses in defense/aerospace, industrial, automotive, medical/biopharma, karaoke

audio equipment, hotel operations and textiles.

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.

capital and relevant expertise to fuel the growth of businesses in oil exploration, defense/aerospace, industrial, automotive, medical/biopharma,

karaoke audio equipment, hotel operations and textiles.

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

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Results of Operations

Results of Operations for the Three Months Ended June 30, 2022

Results of Operations for the Three Months Ended September 30,

2022 and 2021

The following table summarizes

the results of our operations for the three months ended June 30, 2022 and 2021.

For the Three Months Ended June 30,

the results of our operations for the three months ended September 30, 2022 and 2021.

For the Three Months Ended September 30,

Revenue, cryptocurrency mining

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Revenue, lending and trading activities

(38,869,000 )

Total revenue

Cost of revenue

(30,794,000 )

Cost of revenue, products

Cost of revenue, cryptocurrency mining

Cost of revenue, hotel operations

Total cost of revenue

Gross profit (loss)

(36,065,000 )

Total operating expenses

(Loss) income from operations

Loss from operations

(49,874,000 )

Interest and other income

Accretion of discount on note receivable, related party

Interest expense

Change in fair value of marketable equity securities

Realized loss on marketable securities

Loss from investment in unconsolidated entity

Gain on extinguishment of debt

Realized gain on digital currencies and marketable securities

Loss from investment in unconsolidated entity

Change in fair value of warrant liability

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Income tax (provision) benefit

Net (loss) income

(42,774,000 )

Net loss attributable to non-controlling interest

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

Net loss (income) attributable to non-controlling interest

Net loss attributable to BitNile Holdings, Inc.

(42,870,000 )

Preferred dividends

Net (loss) income available to common stockholders

Net loss available to common stockholders

$ (7,461,000 )

Comprehensive (loss) income

Net (loss) income available to common stockholders

$ (42,874,000 )

Comprehensive loss

Net loss available

to common stockholders

$ (7,461,000 )

$ (42,874,000 )

Other comprehensive income (loss)

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Net unrealized loss on derivative securities of related party

Other comprehensive loss

Total comprehensive (loss) income

Other comprehensive income (loss)

Total comprehensive loss

$ (7,155,000 )

$ (47,905,000 )

Revenues by segment for the

three months ended June 30, 2022 and 2021 are as follows:

For the Three Months Ended June 30,

three months ended September 30, 2022 and 2021 are as follows:

For the Three Months Ended Sept 30,

Revenue, cryptocurrency mining

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$ (30,794,000 )

Our revenues decreased by

$44.8 million, or 72%, to $17.4 million for the three months ended June 30, 2022, from $62.1 million for the three months ended June

GWW revenues were flat at

$6.5 million for both the three months ended June 30, 2022 and 2021.

Our revenues increased by

$80.6 million to $49.8 million for the three months ended September 30, 2022, from negative $30.8 million for the three months ended

September 30, 2021.

GWW revenues increased by

$1.4 million, or 22%, to $7.8 million for the three months ended September 30, 2022, from $6.4 million for the three months ended

September 30, 2021.

The increase in revenue from our GWW segment for customized solutions for the military markets reflects $0.9 million

from GIGA, which was acquired on September 8, 2022 and $0.5 million higher revenues from Gresham UK, a GWW subsidiary, related to naval

power projects that had previously been delayed.

TurnOnGreen revenues for the

three months ended June 30, 2022 of $1.1 million declined $0.8 million, or 42%, from $1.8 million for the three months ended

June 30, 2021, due to supply chain challenges.

The current supply chain crisis

in the global economy has led to delivery delays and shortages of certain electronic components and associated raw materials that TurnOnGreen

uses in its products.

Should this supply chain crisis continue throughout 2022, it will likely extend TurnOnGreen’s production time

periods and delay the timing of revenue recognition.

TurnOnGreen cannot predict if or when circumstances may change, nor can it predict

the amount by which bookings or shipments may change.

three months ended September 30, 2022 of $1.7 million increased $0.6 million, or 52%, from $1.1 million for the three months

ended September 30, 2021, due to increased sales to defense customers.

SMC revenues increased by

$17.1 million for the three months ended September 30, 2022, compared to $0 for the three months ended September 30, 2021, due to the

acquisition of SMC in June 2022.

Revenues from BNI’s

cryptocurrency mining operations were $4.0 million for the three months ended June 30, 2022, compared to $0.3 million for three months

ended June 30, 2021.

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

to increase our cryptocurrency mining operations 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.

cryptocurrency mining operations were $3.9 million for the three months ended September 30, 2022, compared to $0.3 million for three months

ended September 30, 2021.

During 2021, we began to purchase Bitcoin mining equipment, which were primarily delivered in 2022, and increased

our cryptocurrency mining activities.

Our decision to increase our cryptocurrency mining operations 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.

AGREE revenues were $5.5 million

for the three months ended June 30, 2022 compared to $0 for the three months ended June 30, 2021.

for the three months ended September 30, 2022 compared to $0 for the three months ended September 30, 2021.

December 22, 2021, AGREE acquired four hotel properties for $71.3 million, consisting of a 136-room Courtyard by Marriott, a 133-room

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Revenues from our lending

and trading activities decreased to $0.9 million for the three months ended June 30, 2022, from $53.3 million for the three months ended

June 30, 2021, which is attributable to significant unrealized gains in the prior year period and unrealized losses in the current year

period from our investment portfolio.

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

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

in certain financing transactions.

Revenue from lending and trading activities during the three months ended June 30, 2021 included an

approximate $40 million unrealized gain from our investment in Alzamend.

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 three months ended June 30, 2022 included net gains on equity securities, including unrealized

and trading activities increased to $13.4 million for the three months ended September 30, 2022, from negative revenues of $38.9 million

for the three months ended September 30, 2021, which is attributable to significant realized and unrealized gains in the current year

period and unrealized losses in the prior year period from our investment portfolio.

During the three months ended September 30, 2022,

Ault 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 Ault Lending in certain financing transactions.

Revenue from lending and trading activities

during the three months ended September 30, 2022 included an approximate $2.5 million unrealized gain from our investment in Alzamend.

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

from our trading activities during the three months ended September 30, 2021 included significant unrealized losses from market price

changes related to Alzamend.

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.

from our trading activities during the three months ended September 30, 2022 included net gains on equity securities, including unrealized

gains and losses from market price changes.

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Gross Margins

Gross margins decreased to

28.8% for the three months ended June 30, 2022, compared to 89.9% for the three months ended June 30, 2021.

Gross margins were 42.4% for

the three months ended September 30, 2022, compared to 117.1% for the three months ended September 30, 2021.

Our gross margins have typically

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Our gross margins of 42.4%

recognized during the three months ended June 30, 2022 were impacted by the favorable margins from our lending and trading activities

recognized during the three months ended September 30, 2022 were impacted by the favorable margins from our lending and trading activities

and modest margins on cryptocurrency mining operations due to the decline in the price of Bitcoin.

Excluding the effects of margin from

our lending and trading activities and cryptocurrency mining operations, our adjusted gross margins for the three months ended June 30,

2022 and 2021, would have been 33.1% and 30.0%, respectively, consistent with our historical range.

our lending and trading activities and cryptocurrency mining operations, our adjusted gross margins for the three months ended September

30, 2022 and 2021, would have been 27.6% and 35.8%, respectively, with gross margins for the three months ended September 30, 2022 slightly

lower than our historical averages due to gross margins from SMC, which were 23.8%.

Research and Development

Research and development expenses

increased by $0.2 million to $0.7 million for the three months ended June 30, 2022, from $0.5 million for the three months ended June

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

were flat at $0.5 million for the three months ended September 30, 2022 and 2021.

Selling and Marketing

Selling and marketing expenses

were $7.0 million for the three months ended June 30, 2022, compared to $1.5 million for the three months ended June 30, 2021, an increase

of $5.5 million, or 364%.

The increase was the result of $3.7 million higher marketing costs at Ault Alliance, including $2.4 million

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

were $7.4 million for the three months ended September 30, 2022, compared to $2.0 million for the three months ended September 30, 2021,

an increase of $5.4 million, or 273%.

The increase was the result of $4.2 million higher marketing costs at Ault Alliance, including $3.2

million related to an advertising sponsorship agreement as well as a $0.9 million increases in sales and marketing costs from SMC, which

was acquired in June 2022.

General and Administrative

General and administrative

expenses were $19.0 million for the three months ended June 30, 2022, compared to $8.0 million for the three months ended June 30,

expenses were $15.9 million for the three months ended September 30, 2022, compared to $11.3 million for the three months ended September

30, 2021, an increase of $4.7 million, or 41%.

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

· increased costs of $2.6 million related to the Michigan data center, operated by ACS;

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

· general and administrative costs of $2.6 million from SMC, which was acquired in June 2022;

· general and administrative costs of $0.6 million from AVLP, which was acquired in June 2022;

· general and administrative costs of $0.6 million from our hotel operations, which were acquired in December

· $2.2 million increase in the accrual of a performance bonus related to realized gains on trading activities

during the period;

· general and administrative costs of $1.9 million from our hotel operations, which were acquired in December

· higher salaries of $1.3 million and audit fees of $1.0 million;

· non-cash stock compensation costs of $1.0 million;

· increased legal fees of $0.9 million, in part related to the efforts to acquire EYP.

Loss From Operations

recorded a loss from operations of $23.7 million for the three months ended June 30, 2022, compared to a gain of $45.8 million for

the three months ended June 30, 2021.

The decrease in operating income is attributable primarily to the decrease in unrealized gains

from trading activities from the prior year period, combined with an increase in operating expenses.

· increased costs of $0.6 million, in part related to the efforts to spin off TurnOnGreen and GWW;

· partially offset by lower non-cash stock compensation costs of $2.5 million.

Interest and Other Income

Interest and other income was

$81,000 for the three months ended June 30, 2022 compared to $14,000 for the three months ended June 30, 2021.

Other income for the three

months ended June 30, 2022 included a $2.8 million gain related to remeasurement of our previously held ownership interest of SMC prior

to the June 15, 2022 acquisition, based on the trading price of SMC common stock.

In addition, other income for the three months ended

June 30, 2022 included a $2.7 million loss related to remeasurement of our previously held ownership interest of AVLP prior to the June

1, 2022 acquisition.

$0.7 million for the three months ended September 30, 2022 compared to $0.1 million for the three months ended September 30, 2021.

increase in interest and other income is primarily due to income from Ault Disruptive from cash and marketable securities held in the

trust account.

Accretion of discount on note receivable, related

Accretion of discount on note

receivable, related party was $0 for the three months ended September 30, 2022 and $4.2 million for the three months ended September 30,

The prior year amount was due to the significant decline in the value of warrants in AVLP, accretion of the warrant discount was

accelerated, resulting in a discount of $0 related to warrants issued in conjunction with the convertible promissory note of AVLP as of

September 30, 2021.

Interest Expense

Interest expense was $4.0 million

for the three months ended June 30, 2022, compared to $22,000 for the three months ended June 30, 2021.

The increase in interest expense

is due primarily to interest on the $55.1 million construction loans related to the December 2021 acquisition of hotel properties.

for the three months ended September 30, 2022, compared to $0.1 million for the three months ended September 30, 2021.

The increase in

interest expense is due primarily to interest on the $58.4 million construction loans related to the hotel properties purchased in December

2021 and interest on the $11 million secured promissory notes issued in August 2022.

Change in Fair Value of Warrant Liability

Change in fair value of warrant

liability was a loss of $6,000 for the three months ended June 30, 2022, compared to a gain of $0.3 million for the three months ended

June 30, 2021.

During the three months ended June 30, 2021, the fair value of the warrants that were issued during 2021 in a series of

debt financings decreased by $0.3 million.

The fair value of warrant liabilities 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) income.

liability was a loss of $3,000 for the three months ended September 30, 2022, compared to a gain of $0.3 million for the three months

ended September 30, 2021.

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 $0.3 million.

The fair value of warrant liabilities 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) income.

Change in Fair Value of Marketable Equity Securities

Change in fair value of marketable

equity securities was a gain of $0.2 million for the three months ended June 30, 2022, compared to a loss of $1.9 million for the three

months ended June 30, 2021.

The loss generated in the prior year period related 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 Loss on Marketable Securities

Realized loss on marketable

securities was $43,000 for the three months ended June 30, 2022, compared to $0 for the three months ended June 30, 2021.

Realized loss

for the three months ended June 30, 2022 included losses from Alpha Fund, which began operations in October 2021.

Loss From Investment in Unconsolidated Entity

Loss from investment in unconsolidated

entity was $0.4 million for the three months ended June 30, 2022, compared to $0 for the three months ended June 30, 2021, representing

our share of losses from our equity method investment in AVLP prior to the June 1, 2022 acquisition.

Gain on Extinguishment of Debt

Gain on extinguishment of

debt was $0 for the three months ended June 30, 2022, compared to a gain of $0.4 million for the three months ended June 30, 2021.

May 20, 2021, Microphase received forgiveness of its Paycheck Protection Program loan in the principal amount of $0.4 million.

Net (Loss) Income

For the foregoing reasons,

our net loss for the three months ended June 30, 2022 was $25.8 million, compared to net income of $42.2 million for the three months

ended June 30, 2021.

equity securities was a gain of $0.1 million for the three months ended September 30, 2022, compared to a loss of $0.8 million for the

three months ended September 30, 2021.

The loss generated in the prior year period relates to an investment in marketable securities held

by Microphase that was fully sold in the fourth quarter of 2021 as well as the loss on an investment in AVLP common stock.

Realized Gain on Digital Currencies and Marketable

Realized gain on digital

currencies and marketable securities was $0.6 million for the three months ended September 30, 2022, compared to $30,000 for the three

months ended September 30, 2021.

Realized gain for the three months ended September 30, 2022 related primarily to gains on the sale of

Bitcoin by BNI.

Other Comprehensive Loss

Other comprehensive loss was

$1.5 million for the three months ended June 30, 2022, compared to other comprehensive income of $5.8 million for the three months ended

June 30, 2021.

Other comprehensive loss of $1.5 million for the three months ended June 30, 2022 was attributable to changes in currency

exchange rates.

Other comprehensive loss for the three months ended June 30, 2021 was primarily due to unrealized losses in the warrant

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

Results of Operations for the Six Months Ended June 30, 2022

$0.3 million for the three months ended September 30, 2022, compared to other comprehensive loss of $5.0 million for the three months

ended September 30, 2021.

Other comprehensive loss of $0.3 million for the three months ended September 30, 2022 was attributable to changes

in currency exchange rates.

Other comprehensive loss for the three months ended September 30, 2021, 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.

Results of Operations for the Nine Months Ended September 30,

2022 and 2021

The following table summarizes

the results of our operations for the six months ended June 30, 2022 and 2021.

For the Six Months Ended June 30,

the results of our operations for the nine months ended September 30, 2022 and 2021.

For the Nine Months Ended September 30,

Revenue, cryptocurrency mining

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Total revenue

Cost of revenue

Cost of revenue, products

Cost of revenue, cryptocurrency mining

Cost of revenue, hotel operations

Total cost of revenue

Total operating expenses

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Interest and other income

Accretion of discount on note receivable, related party

Interest expense

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Change in fair value of marketable equity securities

Realized gain on marketable securities

Loss from investment in unconsolidated entity

Gain on extinguishment of debt

Realized gain on digital currencies and marketable securities

Loss from investment in unconsolidated entity

Change in fair value of warrant liability

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(62,868,000 )

Net loss attributable to non-controlling interest

Net loss (gain) attributable to non-controlling interest

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

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Other comprehensive loss

Total comprehensive (loss) income

Total comprehensive loss

$ (63,498,000 )

$ (6,581,000 )

Revenues by segment for the

six months ended June 30, 2022 and 2021 are as follows:

For the Six Months Ended June 30,

nine months ended September 30, 2022 and 2021 are as follows:

For the Nine Months Ended September 30,

Revenue, cryptocurrency mining

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Revenue, lending and trading activities

(39,621,000 )

Total revenue

$ (25,183,000 )

Our revenues decreased by

$25.2 million, or 33%, to $50.2 million for the six months ended June 30, 2022, from $75.4 million for the six months ended June

Our revenues increased by

$55.4 million, or 124%, to $100.0 million for the nine months ended September 30, 2022, from $44.6 million for the nine months ended

September 30, 2021.

GWW revenues increased by

$0.9 million, or 7%, to $13.7 million for the six months ended June 30, 2022, from $12.8 million for the six months ended June 30,

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

Systems 2001 Ltd., a GWW subsidiary, which primarily consisted of revenue recognized over time, grew to $6.2 million for the six months

ended June 30, 2022, an increase of $1.3 million, or 27%, from $4.9 million in the prior-year period.

$2.3 million, or 12%, to $21.5 million for the nine months ended September 30, 2022, from $19.2 million for the nine months ended

September 30, 2021.

The increase in revenue from our GWW segment for customized solutions for the military markets reflects $0.9 million

from GIGA, which was acquired on September 8, 2022 and $0.7 million higher revenues from Gresham UK, a GWW subsidiary, related to naval

power projects that had previously been delayed, and $0.5 million higher revenues from Relec.

TurnOnGreen revenues for the

six months ended June 30, 2022 of $2.2 million declined $1.0 million, or 32%, from $3.2 million for the six months ended June

30, 2021, due to supply chain challenges.

nine months ended September 30, 2022 of $3.9 million declined $0.5 million, or 11%, from $4.2 million for the nine months ended

September 30, 2021, due to supply chain challenges in the first half of the year partially offset by increased sales to defense customers

in the third fiscal quarter of 2022.

SMC revenues increased by

$17.1 million for the nine months ended September 30, 2022, compared to $0 for the nine months ended September 30, 2021, due to the acquisition

of SMC in June 2022.

Revenues from BNI’s

cryptocurrency mining operations were $7.5 million for the six months ended June 30, 2022, compared to $0.4 million for six months ended

June 30, 2021.

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

Our decision to

increase our cryptocurrency mining operations in 2022 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.

AGREE revenues were $7.3 million

for the six months ended June 30, 2022 compared to $0 for the six months ended June 30, 2021.

cryptocurrency mining operations were $11.4 million for the nine months ended September 30, 2022, compared to $0.7 million for nine months

ended September 30, 2021.

During 2021, we began to purchase Bitcoin mining equipment, which were primarily delivered in 2022, and increased

our cryptocurrency mining activities.

Our decision to increase our cryptocurrency mining operations in 2022 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.

AGREE revenues were $12.8

million for the nine months ended September 30, 2022 compared to $0 for the nine months ended September 30, 2021.

December 22, 2021, AGREE acquired four hotel properties for $71.3 million, consisting of a 136-room Courtyard by Marriott, a 133-room

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Revenues from our lending

and trading activities decreased to $18.9 million for the six months ended June 30, 2022, from $58.5 million for the six months ended

June 30, 2021, which is attributable to significant unrealized gains in the prior year period and unrealized losses in the current year

period from our investment portfolio.

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

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

in certain financing transactions.

Revenue from lending and trading activities during the six months ended June 30, 2021 included an approximate

$40 million unrealized gain from our investment in Alzamend.

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 six months ended June 30, 2022 included significant net gains on equity securities, including unrealized

gains and losses from market price changes.

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

our periodic earnings.

and trading activities increased to $32.2 million for the nine months ended September 30, 2022, from $19.6 million for the nine months

ended September 30, 2021, which is primarily attributable to significant realized and unrealized gains in the current year period and

unrealized gains in the prior year period from our investment portfolio.

During the nine months ended September 30, 2022, Ault 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 Ault Lending in certain financing transactions.

Revenue from lending and trading activities during the nine

months ended September 30, 2022 included a $4.8 million unrealized loss from our investment in Alzamend.

Revenue from lending and trading

activities during the nine months ended September 30, 2021 included a $3.8 million unrealized gain from our investment in Alzamend.

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

from our trading activities during the nine months ended September 30, 2022 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 decreased to

54.4% for the six months ended June 30, 2022, compared to 84.9% for the six months ended June 30, 2021.

Our gross margins have typically

ranged between 30% and 35%, with slight variations depending on the overall composition of our revenue.

48.4% for the nine months ended September 30, 2022, compared to 62.6% for the nine months ended September 30, 2021.

Our gross margins

have typically ranged between 30% and 35%, with slight variations depending on the overall composition of our revenue.

Our gross margins of 48.4%

recognized during the six months ended June 30, 2022 were impacted by the favorable margins from our lending and trading activities and

modest margins on cryptocurrency mining operations due to the decline in the price of Bitcoin.

Excluding the effects of margin from our

lending and trading activities and cryptocurrency mining operations, our adjusted gross margins for the six months ended June 30, 2022

and 2021 would have been 31.4% and 33.2%, respectively, consistent with our historical range.

recognized during the nine months ended September 30, 2022 were impacted by the favorable margins from our lending and trading activities

and modest margins on cryptocurrency mining operations due to the decline in the price of Bitcoin.

Excluding the effects of margin from

our lending and trading activities and cryptocurrency mining operations, our adjusted gross margins for the nine months ended September

30, 2022 and 2021 would have been 29.2% and 34.0%, respectively, with gross margins for the three months ended September 30, 2022, slightly

lower than our historical averages due to gross margins from SMC, which were 23.8%.

Research and Development

Research and development expenses

increased by $0.3 million to $1.4 million for the six months ended June 30, 2022, from $1.1 million for the six months ended June 30,

increased by $0.3 million to 1.9 million for the nine months ended September 30, 2022, from $1.7 million for the nine months ended September

The increase in research and development expenses was due to product development efforts at TurnOnGreen and GWW.

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Selling and marketing expenses

were $13.5 million for the six months ended June 30, 2022, compared to $2.7 million for the six months ended June 30, 2021, an increase

of $10.7 million, or 390%.

The increase was the result of $8.2 million higher advertising and promotion costs at Ault Alliance, including

$6.4 million related to an advertising sponsorship agreement as well as a $1.4 million increase in sales and marketing personnel and a

$0.4 million increase in consulting expense.

were $20.9 million for the nine months ended September 30, 2022, compared to $4.7 million for the nine months ended September 30, 2021,

an increase of $16.1 million, or 341%.

The increase was the result of $14.7 million higher advertising and promotion costs at Ault Alliance,

including $9.4 million related to an advertising sponsorship agreement as well as a $1.8 million increase in sales and marketing personnel

and a $0.9 million increase in travel expense.

The increase is also attributable to a $0.7 million increase in costs incurred at TurnOnGreen

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

to grow our selling and marketing infrastructure related to our electric vehicle charger products as well as a $0.9 million increases

in sales and marketing costs from SMC, which was acquired in June 2022.

General and Administrative

General and administrative

expenses were $32.7 million for the six months ended June 30, 2022, compared to $13.1 million for the six months ended June 30, 2021,

expenses were $48.7 million for the nine months ended September 30, 2022, compared to $24.4 million for the nine months ended September

30, 2021, an increase of $24.3 million, or 100%.

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

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

· general and administrative costs of $4.3 million from our hotel operations, which were acquired in December

· general and administrative costs of $2.6 million from SMC, which was acquired in June 2022;

· general and administrative costs of $0.6 million from AVLP, which was acquired in June 2022;

· increased general and administrative costs of $0.8 million from Ault Disruptive, a SPAC which completed

its IPO in December 2021;

· non-cash stock compensation costs of $1.0 million;

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during the period;

· higher salaries of $1.8 million and audit fees of $1.3 million;

· increased costs of $1.5 million related to the Michigan data center, operated by ACS;

· increased legal fees of $1.5 million, in part related to the efforts to acquire EYP.

(Loss) Income From Operations

We recorded a loss from operations

of $22.7 million for the six months ended June 30, 2022, compared to a gain of $47.0 million for the six months ended June 30, 2021.

The decrease in operating income is attributable primarily to the decrease in unrealized gains from trading activities from the prior

year period, combined with an increase in operating expenses.

· higher salaries of $1.6 million;

· higher audit fees of $1.6 million;

· increased costs of $1.9 million related to the Michigan data center and Bitcoin mining operations;

· increased legal fees of $2.2 million, including $0.7 million related to the efforts to acquire EYP, Inc.

Interest and Other Income

Interest and other income was

$0.5 million for the six months ended June 30, 2022 compared to $51,000 for the six months ended June 30, 2021.

Other income for the six

months ended June 30, 2022 included a $2.8 million gain related to remeasurement of our previously held ownership interest of SMC prior

to the June 15, 2022 acquisition, based on the trading price of SMC common stock.

In addition, other income for the six months ended June

30, 2022 included a $2.7 million loss related to remeasurement of our previously held ownership interest of AVLP prior to the June 1,

2022 acquisition.

$1.3 million for the nine months ended September 30, 2022, compared to $0.2 million for the nine months ended September 30, 2021.

increase in interest and other income is primarily due to income from Ault Disruptive from cash and marketable securities held in the

trust account.

Other income for the nine months ended September 30, 2022 included a $2.8 million gain related to remeasurement of our

previously held ownership interest of SMC prior to the June 15, 2022 acquisition, based on the trading price of SMC common stock.

other income for the nine months ended September 30, 2022 included a $2.7 million loss related to remeasurement of our previously held

ownership interest of AVLP prior to the June 1, 2022 acquisition.

Accretion of discount on note receivable, related

Accretion of discount on note

receivable, related party was $0 for the nine months ended September 30, 2022, compared to $4.2 million for the nine months ended September

The prior year amount was due to the significant decline in the value of warrants in AVLP, accretion of the warrant discount

was accelerated, resulting in a discount of $0 related to warrants issued in conjunction with the convertible promissory note of AVLP

as of September 30, 2021.

Interest Expense

Interest expense was $35.8

million for the six months ended June 30, 2022 compared to $0.3 million for the six months ended June 30, 2021.

The increase in interest

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

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.

In addition, the increase in interest expense is due, in part,

to interest on the $55.1 million construction loans related to the December 2021 acquisition of hotel properties.

million for the nine months ended September 30, 2022 compared to $0.5 million for the nine months ended September 30, 2021.

in interest expense relates primarily 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.

In addition, the increase in interest expense includes

interest on the $58.4 million construction loans related to the hotel properties purchased in December 2021 and interest on the $11 million

secured promissory notes issued in August 2022.

Change in Fair Value of Warrant Liability

Change in fair value of warrant

liability was a loss of $24,000 for the six months ended June 30, 2022, compared to a loss of $0.4 million for the six months ended

June 30, 2021.

During the six months ended June 30, 2021, the fair value of the warrants that were issued during 2021 in a series of debt

financings increased by $0.4 million.

The fair value of warrant liabilities 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

liability was a loss of $27,000 for the nine months ended September 30, 2022, compared to a loss of $0.1 million for the nine months

ended September 30, 2021.

The fair value of warrant liabilities 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) income.

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Change in fair value of marketable

equity securities was a gain of $0.2 million for the six months ended June 30, 2022, compared to a gain of $45,000 for the six months

ended June 30, 2021.

The loss generated in the prior year period relates to an investment in marketable securities held by Microphase

that was fully sold in the fourth quarter of 2021.

Realized Gain on Marketable Securities

equity securities was a gain of $0.4 million for the nine months ended September 30, 2022, compared to a loss of $0.7 million for the

nine months ended September 30, 2021.

The loss generated in the prior year period relates to an investment in marketable securities held

by Microphase that was fully sold in the fourth quarter of 2021 as well as the loss on an investment in AVLP common stock.

Realized Gain on Digital Currencies and Marketable

Realized gain on marketable

securities was $0.1 million for the six months ended June 30, 2022, compared to $0.4 million for the six months ended June 30, 2021.

gains in the prior year period relates to realized gains from an investment in marketable securities held by Microphase, a portion of

which was sold during the six months ended June 30, 2021.

securities was $0.7 million for the nine months ended September 30, 2022, compared to $0.4 million for the nine months ended September

Realized gain for the nine months ended September 30, 2022 related primarily to gains on the sale of Bitcoin by BNI.

gains in the prior year period related to realized gains from an investment in marketable securities held by Microphase, a portion of

which was sold during the nine months ended September 30, 2021.

Loss From Investment in Unconsolidated Entity

Loss from investment in unconsolidated

entity was $0.9 million for the six months ended June 30, 2022, compared to $3,000 for the six months ended June 30, 2021, representing

entity was $0.9 million for the nine months ended September 30, 2022, compared to $0 for the nine months ended September 30, 2021, representing

our share of losses from our equity method investment in AVLP prior to the June 1, 2022 acquisition.

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Gain on extinguishment of

debt was $0 for the six months ended June 30, 2022, compared to a gain of $0.9 million for the six months ended June 30, 2021.

year gain on extinguishment of debt represents forgiveness of Paycheck Protection Program loans.

Net (Loss) Income

For the foregoing reasons,

our net loss for the six months ended June 30, 2022 was $54.6 million, compared to net income of $44.2 million for the six months ended

June 30, 2021.

Other Comprehensive (Loss) Income

debt was $0 for the nine months ended September 30, 2022, compared to a gain of $0.9 million for the nine months ended September 30,

The prior year gain on extinguishment of debt represents forgiveness of Paycheck Protection Program loans.

Other Comprehensive Loss

Other comprehensive loss was

$1.8 million for the six months ended June 30, 2022, compared to other comprehensive loss of $2.9 million for the six months ended June

Other comprehensive loss of $1.8 million for the six months ended June 30, 2022 was attributable to changes in currency exchange

Other comprehensive loss for the six months ended June 30, 2021 was primarily due to unrealized losses in the warrant derivative

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

$1.5 million for the nine months ended September 30, 2022, compared to other comprehensive loss of $7.9 million for the nine months ended

September 30, 2021.

Other comprehensive loss of $1.5 million for the nine months ended September 30, 2022 was attributable to changes

in currency exchange rates.

Other comprehensive loss for the nine months ended September 30, 2021 was primarily due to unrealized losses

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

Liquidity and Capital Resources

On June 30, 2022, we had cash

and cash equivalents of $24.1 million (excluding restricted cash of $4.7 million).

This compares to 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 was primarily due to cash

provided by financing activities related to the sale of common and preferred stock, as well as proceeds from notes payable and cash provided

by operating activities, partially offset by the payment of debt and purchases of property and equipment.

On September 30, 2022, we

had cash and cash equivalents of $10.1 million (excluding restricted cash of $4.6 million).

This compares to cash and cash equivalents

of $15.9 million (excluding restricted cash of $5.3 million) at December 31, 2021.

The decrease in cash and cash equivalents was

primarily due the payment of debt and purchases of property and equipment partially offset by cash provided by financing activities related

to the sale of common and preferred stock, as well as proceeds from notes payable and cash provided by operating activities.

Net cash provided by operating

activities totaled $15.0 million for the six months ended June 30, 2022 compared to net cash used in operating activities of $21.7 million

for the six months ended June 30, 2021.

Cash provided by operating activities for the six months ended June 30, 2022 included $50.7 million

net cash provided by marketable securities from trading activities related to the operations of DP Lending, partially offset by operating

losses and changes in working capital.

activities totaled $12.9 million for the nine months ended September 30, 2022, compared to net cash used in operating activities of $56.9

million for the nine months ended September 30, 2021.

Cash provided by operating activities for the nine months ended September 30, 2022

included $68.5 million net cash provided by marketable securities from trading activities related to the operations of Ault Lending,

partially offset by operating losses and changes in working capital.

Net cash used in investing

activities was $82.8 million for the six months ended June 30, 2022, compared to $29.7 million for the six months ended June 30, 2021.

Net cash used in investing activities for the six months ended June 30, 2022 included $72.8 million of capital expenditures primarily

related to Bitcoin mining equipment, $15.8 million for investments in equity securities and $8.2 million for the purchase of SMC, net

of cash received, partially offset by $11.7 million proceeds from the sale of marketable equity securities, $10.5 million principal payments

received on loans receivable and $4.4 million proceeds from the sale of digital currencies.

activities was $106.4 million for the nine months ended September 30, 2022, compared to $68.7 million for the nine months ended September

Net cash used in investing activities for the nine months ended September 30, 2022 included $84.5 million of capital expenditures

primarily related to Bitcoin mining equipment, $22.4 million for investments in equity securities, $8.2 million for the purchase of SMC

and $3.7 million for the purchase of GIGA, net of cash received, partially offset by $11.7 million proceeds from the sale of marketable

equity securities, $10.5 million principal payments received on loans receivable and $9.0 million proceeds from the sale of digital currencies.

Net cash provided by financing

activities was $75.5 million for the six months ended June 30, 2022, compared to $138.1 million for the six months ended June 30,

activities was $86.1 million for the nine months ended September 30, 2022, compared to $151.1 million for the nine months ended September

30, 2021, and reflects the following transactions:

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to time, through the 2022 Common ATM Offering.

As of June 30, 2022, we had sold an aggregate of 239.7 million shares of common stock pursuant

to the 2022 Common ATM Offering for gross proceeds of $163.4 million.

Net proceeds to us, after payment of commissions, were $159.4 million.

As of September 30, 2022, we had sold an aggregate of 256.7 million shares of common stock

pursuant to the 2022 Common ATM Offering for gross proceeds of $168 million.

Net proceeds to us, after payment of commissions, were $164

· Public Offering of Series D Preferred Stock – On June 3, 2022, we announced the closing of

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fees and offering expenses were $3.1 million.

· 2022 Preferred ATM Offering – On June 14, 2022, we entered into an At-The-Market equity offering

program with Ascendiant Capital under which we may sell, from time to time, shares of our Series D Preferred Stock for aggregate gross

proceeds of up to $46,400,000.

As of September 30, 2022, we had sold an aggregate of 10,928 shares of Series D Preferred Stock pursuant

to the 2022 Preferred ATM Offering for gross proceeds of $0.2 million.

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

purchase agreement with certain accredited 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.

purchase agreement with certain accredited 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.

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months ended March 31, 2022.

· Purchase of Treasury Stock – During the six months ended June 30, 2022, Alpha Fund purchased

16.1 million shares of our common stock for $6.2 million and 53,033 shares of our Series D Preferred Stock for $1.3 million, accounted

for as treasury stock as of June 30, 2022.

During the quarter ended September 30, 2022, we borrowed $2.4 million on our margin account.

· 10% Secured Promissory Notes – On August 10, 2022, we, through our BNI subsidiary, entered

into a note purchase agreement providing for the issuance of secured promissory notes with an aggregate principal face amount of $11,000,000

and an interest rate of 10%.

The purchase price (proceeds to us) for the secured promissory notes was $10.0 million.

The secured promissory

notes have a security interest in marketable securities, investments and certain Bitcoin mining equipment.

The secured promissory notes

are further secured by a guaranty provided by us, Ault Lending and Milton C.

Ault, our Executive Chairman.

The maturity date of the secured

promissory notes is August 10, 2023.

We are required to make monthly payment (principal and interest) of $1,000,000 on the tenth calendar

day of each month, starting in September 2022.

Provided that we make the first six monthly payments in full and on a timely basis, after

six months, we may elect to pay a forbearance fee of $250,000 in lieu of a monthly payment, which would extend the maturity date of the

related secured promissory notes by one month for each forbearance.

We may not elect forbearance in consecutive months.

· Purchase of Treasury Stock – During the nine months ended September 30, 2022, Alpha Fund

purchased 38.9 million shares of our common stock for $13.4 million and 91,033 shares of our Series D Preferred Stock for $2.2 million,

accounted for as treasury stock as of September 30, 2022.

Financing Transactions Subsequent to September

Financing transactions subsequent to September 30, 2022 include

the following:

2022 Common ATM Offering

During the period between

October 1, 2022 through November 18, 2022, we sold an aggregate of 14.8 million shares of common stock pursuant to the 2022 Common ATM

Offering for gross proceeds of $2.6 million.

2022 Preferred ATM

the period between October 1, 2022 through November 18, 2022, we sold an aggregate of 8,933 shares of Series D Preferred Stock pursuant

to the 2022 Preferred ATM Offering for gross proceeds of $124,000.

SMC Credit and Security Agreement with Fifth

On October 14, 2022, SMC entered

into a credit agreement with Fifth Third Bank.

The credit agreement provides for a three-year secured revolving credit facility in an

aggregate principal amount of up to $15 million decreased to $7.5 million during the non-peak period of January 1 through July 31 of each

The credit agreement matures on October 14, 2025.

The revolving credit facility

bears interest of the Prime Rate plus 0.50% or the 30-day term secured overnight financing rate plus 3.00%.

Under the credit agreement:

· Accounts receivable advance rate up to an 85% against SMC’s eligible accounts receivable;

· Inventory advance of up to 85% of SMC’s eligible inventory;

· SMC must maintain a minimum fixed charge coverage of 1.05 to 1.

Availability under the credit

agreement was approximately $4.0 million as of November 18, 2022.

Secured Debt Financing

On November 7, 2022, we and

certain of our subsidiaries borrowed $18.9 million of principal amount of term loans (the “Loans”) from a group of institutional

investors (the “Financing”).

The Loans mature in 18 months, which may be extended to 24 months, accrue interest at the rate

of 8.5% per annum and are secured by certain of our assets and the assets of our various subsidiaries.

Starting in January 2023, the lenders

have the right to require us to make monthly payments of $0.6 million, which will increase to $1.1 million in November 2023.

were issued with an original issue discount of $1.89 million.

The lenders received warrants

to purchase approximately 4.5 million shares of our common stock, exercisable for four years at $0.45 per share and warrants to purchase

another approximately 4.5 million shares of our common stock, exercisable for four years at $0.75 per share, subject to adjustment.

On November 7, 2022, Ault

Aviation used proceeds from the Loans to purchase a private aircraft for a total purchase price of $15.8 million.

In addition, we and

certain of our subsidiaries entered into various agreements as collateral for the repayment of the Loans, including (i) a security interest

in certain Bitcoin mining equipment, (ii) a pledge of the membership interests of Third Avenue Apartments, LLC, our wholly owned subsidiary

(“Third Apartments”), (iii) a pledge of the membership interests of Alliance Cloud Services, LLC, our wholly owned subsidiary

(“Alliance Cloud”), (iv) a pledge of the membership interests of Ault Aviation, LLC, our wholly owned subsidiary (“Ault

Aviation”), (v) a pledge in a segregated deposit account of $1.5 million of cash, (vi) a mortgage and security agreement by Third

Avenue on the real estate property owned by Third Avenue in St.

Petersburg, Florida, (vii) a future advance mortgage by Alliance Cloud

on the real estate property owned by Alliance Cloud in Dowagiac, Michigan, and (viii) an aircraft mortgage and security agreement by Ault

Aviation on the private aircraft purchased by Ault Aviation on November 7, 2022.

The Loans are further secured by a guaranty provided

by Ault Lending and Milton C.

Ault, our Executive Chairman.

3% Secured Promissory Notes

On November 18, 2022, BNI

entered into the November NPA with the Investors providing for the issuance of the November Notes.

The November Notes have a principal

face amount of $8,181,819 and bear interest at 3% per annum pursuant to the terms of the November Notes.

The maturity date of the November

Notes is May 18, 2023.

When BNI sells the Collateral, BNI is required to make a payment towards the November Notes equal to 45% of the

realized gains.

After the November Notes have been repaid in full and until all of the Collateral is sold, when BNI sells any remaining

Collateral, BNI is required to give the investors a profits participation interest equal to 45% of the realized gains.

Pursuant to the November NPA,

BNI, Ault Lending and the Agent entered into the November Security Agreement pursuant to which BNI and Ault Lending granted to the Investors

a security interest in the Collateral.

We believe our current cash

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 six months ended June 30, 2022 are issued.

the next twelve months from the date the financial statements for the nine months ended September 30, 2022 are issued.

Critical Accounting Policies

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What changed 10-Q

Item 2. Management’s Discussion and Analysis