What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-04-14 compared with 2023-04-14 · 272 added, 509 removed, 146 unchanged (84% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

this quarterly report, the “Company,” “BitNile,” “we,”

“us” and “our” refer to Ault Alliance, Inc., a Delaware corporation

which was then known as BitNile Holdings, Inc.

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, we own and

operate a data center at which we mine Bitcoin, and provide mission-critical products that

support a diverse range of industries, including defense/aerospace, industrial, automotive,

medical/biopharma, karaoke audio equipment, hotel operations and textiles.

In addition, we

own and operate hotels and extends credit to select entrepreneurial businesses through a

licensed lending subsidiary.

In this quarterly report, the “Company,” “BitNile,”

“we,” “us” and “our” refer to Ault Alliance, Inc., a Delaware corporation which was then known as

BitNile Holdings, Inc.

BitNile is a diversified holding company pursuing growth by acquiring undervalued businesses and disruptive technologies

with a global impact.

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

10 unchanged sentences

On February 25, 2022, we entered

into an At-The-Market issuance sales agreement with Ascendiant Capital Markets, LLC (“Ascendiant Capital”) 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 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.

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

2 unchanged sentences

with TurnOnGreen, Inc.

(“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.

(“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

2 unchanged sentences

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

April 22, 2022, Ault Alliance entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with EYP Group Holdings,

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 Purchase”).

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.

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, were to purchase the Assets and assume certain

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 $67.7 million, which includes the purchase price

for the Assets under the Asset Purchase Agreement of $62.5 million, 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

$11.8 million, and less the amount of certain liabilities assumed by Ault Alliance.

The Asset Purchase Agreement required the Asset Purchase

to close by June 30, 2022.

Consummation of the Asset Purchase was 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

On July 7, 2022, we announced that Ault Alliance did not acquire the assets of EYP as a result of a higher bidder.

Ault Alliance

lent $8.0 million to EYP and earned $4.7 million in interest, penalties and break-up fees from October 2021 through June 2022.

The principal

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

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

11 unchanged sentences

Phase 1 clinical trial for AL001.

DP 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.

On May 12, 2022, BNI closed

3 unchanged sentences

Bitcoin mining operations.

May 26, 2022, we entered into an underwriting agreement (the “Underwriting Agreement”) with Alexander Capital, L.P., as representative

of the several underwriters named therein (collectively, the “Underwriters”), relating to a firm commitment public offering

of 123,423 newly issued shares of our 13.00% Series D Cumulative Redeemable Perpetual Preferred Stock (the “Series D Preferred Stock”)

at a public offering price of $25.00 per share.

June 1, 2022, we and the Underwriters mutually agreed to increase the size of the offering of our Series D Preferred Stock from 123,423

shares to 144,000 shares.

Thus, we and the Underwriters agreed to terminate the Underwriting Agreement and entered into a side letter

to terminate such Underwriting Agreement (the “Side Letter”).

Following the execution of the Side Letter, on June 1, 2022,

we entered into a new underwriting agreement (the “New Underwriting Agreement”) with the Underwriters, relating to a firm

commitment public offering of 144,000 newly issued shares of our Series D Preferred Stock at a public offering price of $25.00 per share.

On June 3, 2022, we closed the offering of the sale of the 144,000 shares of our Series D Preferred Stock for gross proceeds of approximately

$3.6 million, before deducting offering expenses.

Net proceeds to us, after payment of commissions, non-accountable fees and offering

expenses, were approximately $3.1 million.

On June 14, 2022, we entered

into an At-The-Market issuance sales agreement with Ascendiant Capital to sell shares of Series D Preferred Stock having an aggregate

offering price of up to $46.4 million from time to time, through an “at the market offering” program (the “2022 Preferred

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.

On June 1, 2022, we converted

our convertible promissory notes of Avalanche International Corp.

(“AVLP”) and accrued interest into common stock of AVLP.

We converted $20.0 million principal and $5.9 million of accrued interest receivable at a conversion price of $0.50 per share and received

51,889,168 shares of common stock increasing our common stock ownership of AVLP from less than 20% to approximately 92%.

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.

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.

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

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

The Notes are further secured by a guaranty we provided.

August 15, 2022, BNI entered into a Master Agreement (the “Master Agreement”) and Order Form (the “Order Form”

and together with the Master Agreement, the “Hosting Documents”) with Compute North LLC (“Compute North”) providing

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.

Under the Master Agreement,

BNI granted Compute North a continuing first-position security interest in the Hosted Miners, as collateral for BNI’s obligations

under the Hosting Documents.

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.

As a holding company, our

business objective is designed to increase stockholder value.

Under the strategy we have adopted, 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.

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 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.

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

3 unchanged sentences

a process we initiate.

To the extent we believe that a subsidiary or 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 stockholders’ best interests, we will seek

to sell some or all of our position in the subsidiary or partner company.

These sales may take the form of privately negotiated sales

of stock or assets, mergers and acquisitions, public offerings of the subsidiary or partner company’s securities and, in the case

of publicly traded partner companies, sales of their securities in the open market.

Our plans may include taking subsidiaries or partner

companies public through rights offerings and directed share subscription programs.

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 stockholders.

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.

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 stockholders’ best interests, we will seek to sell some

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

These sales may take the form of privately negotiated sales of stock or assets,

mergers and acquisitions, public offerings of the subsidiary or partner company’s securities and, in the case of publicly traded

partner companies, sales of their securities in the open market.

Our plans may include taking subsidiaries or partner companies public

through rights offerings and directed share subscription programs.

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 stockholders.

Over the recent past we have

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

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

3 unchanged sentences

Results of Operations

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

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 June 30, 2022 and 2021.

For the Three Months Ended June 30,

Revenue, cryptocurrency mining

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

For the Three Months Ended

Revenue, cryptocurrency mining, net

Revenue, hotel operations

2 unchanged sentences

Cost of revenue

Total operating expenses

(Loss) income from operations

(23,719,000 )

Interest and other income

Change in fair value of equity

securities, 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

Change in fair value of warrant liability

(Loss) income before income taxes

(25,868,000 )

Income tax (provision) benefit

Net (loss) income

(26,085,000 )

Net loss attributable to non-controlling interest

Net (loss) income attributable to Ault Alliance, Inc.

(25,764,000 )

Preferred dividends

Net (loss) income available to common stockholders

$ (25,808,000 )

Comprehensive (loss) income

Net (loss) income available to common stockholders

$ (25,808,000 )

Other comprehensive income (loss)

Foreign currency translation adjustment

Other comprehensive loss

Total comprehensive (loss) income

$ (27,279,000 )

Revenues by segment for the

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

For the Three Months Ended June 30,

Revenue, cryptocurrency mining

Revenue, commercial real estate leases

Ault Global Real Estate Equities, Inc.

Ault Alliance:

Revenue, lending and trading activities

(52,331,000 )

Total revenue

$ (44,763,000 )

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.

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.

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.

AGREE revenues were $4.6 million

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

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, IL.

Ault Alliance

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

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

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

Our gross margins of 28.8%

recognized during the three 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 three months ended June 30,

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

Operating expenses

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.

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.

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,

2021, an increase of $11.0 million, or 138%.

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;

· $2.5 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.

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.

Change in fair value of equity securities,

related party

Change in fair value of

equity securities, related party resulting from the warrant securities that we received as a result of our investment in AVLP was nil

for the three months ended June 30, 2022, compared to a loss of $5.9 million for the three months ended June 30, 2021.

Interest Expense

Interest expense was $2.0 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.

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.

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

the foregoing reasons, our net loss for the three months ended June 30, 2022 was $25.8 million,

compared to net income of $36.3 million for the three months ended June 30, 2021.

Other Comprehensive Loss

comprehensive loss was $1.5 million for the three months ended June 30, 2022, compared to

other comprehensive income of $0.1 million for the three months ended June 30, 2021.

comprehensive loss for the three months ended June 30, 2022 and 2021 was attributable to

foreign currency translation adjustments between our functional currency, the U.S.

and the British Pound and Israeli Shekel.

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

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,

Revenue, cryptocurrency mining

Revenue, hotel operations

Revenue, lending and trading activities

Total revenue

Cost of revenue

Impairment of mined cryptocurrency

Total operating expenses

(Loss) income from operations

(22,689,000 )

Income from operations

Interest and other income

Change in fair value of equity securities, related party

in fair value of equity securities, related party

Interest expense

10 unchanged sentences

(28,787,000 )

Net loss attributable to non-controlling interest

Net loss (income) attributable to non-controlling interest

Net (loss) income attributable to Ault Alliance, Inc.

8 unchanged sentences

Foreign currency translation adjustment

Other comprehensive loss

Other comprehensive (loss) income

Total comprehensive (loss) income

1 unchanged sentence

Revenues by segment for the

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

For the Six Months Ended June 30,

Revenue, cryptocurrency mining

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

1 unchanged sentence

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

$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

$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.

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

$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.

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.

Cryptocurrency

Revenues from our cryptocurrency

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 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.

December 22, 2021, AGREE 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, IL.

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 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 $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.

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.

Gross margins increased to

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

1 unchanged sentence

Our gross margins of 68.0%

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 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 $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,

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

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 $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

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 $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.

The increase is also attributable to a $0.4 million increase in costs incurred at TurnOnGreen

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

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 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 $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 $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%.

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

· general and administrative costs of $3.7 million from our hotel operations, which were acquired in December

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

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

· $2.5 million increase in the accrual of a performance bonus related to realized gains on trading activities

during the period;

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

· 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;

· 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 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

$0.5 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.

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.

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

Change in fair value of equity securities,

2 unchanged sentences

equity securities, related party resulting from the warrant securities that we received as a result of our investment in AVLP was nil

for the six months ended June 30, 2022, compared to a loss of $2.9 million for the six months ended June 30, 2021.

for the three months ended March 31, 2022, compared to a gain of $3.0 million for the three months ended March 31, 2021.

Interest Expense

Interest expense was $29.8

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 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

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

of operations and comprehensive (loss) income.

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 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.

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 $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 $0.1 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 $0.9 million for the six months ended June 30, 2022, compared to $3,000 for the six months ended June 30, 2021, representing

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

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

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.

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

Gain on extinguishment of

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

the foregoing reasons, our net loss for the six months ended June 30, 2022 was $54.6 million,

compared to net income of $41.3 million for the six months ended June 30, 2021.

the foregoing reasons, our net loss for the three months ended March 31, 2022 was $28.8 million,

compared to net income of $6.0 million for the three months ended March 31, 2021.

Other Comprehensive (Loss) Income

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

comprehensive income of $41,000 for the six months ended June 30, 2021.

Other comprehensive

loss for the six months ended June 30, 2022 and 2021 was attributable to foreign currency

translation adjustments between our functional currency, the U.S.

Dollar, and the British

Pound and Israeli Shekel.

comprehensive loss was $0.3 million for the three months ended March 31, 2022 compared to

$0.1 million for the three months ended March 31, 2021.

Other comprehensive income for the

three months ended March 31, 2021 was primarily due to foreign currency translation adjustments

between our functional currency, the U.S.

Dollar, and the British Pound and Israeli Shekel.

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 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 $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 $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 $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 $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 $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 $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:

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

sales agreement with Ascendiant Capital to sell shares of common stock having an aggregate offering price of up to $200 million from time

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.

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

our public offering of 144,000 shares of our Series D Preferred Stock at a price to the public of $25.00 per share.

Gross proceeds from

the offering were approximately $3.6 million, before deducting offering expenses.

Net proceeds to us, after payment of commissions, non-accountable

fees and offering expenses were $3.1 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 accredited investors providing for the issuance of Senior Notes that bore interest at 8% per annum

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.

4 unchanged sentences

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.

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 three months ended March 31, 2022 are issued.

Critical Accounting Policies

Business Combination

allocate the purchase price of an acquired business to the tangible and intangible assets acquired and liabilities assumed based upon

their estimated fair values on the acquisition date.

Any excess of the purchase price over the fair value of the net assets acquired is

recorded as goodwill.

Acquired customer relations, technology, tradenames and know how are recognized at fair value.

The purchase price

allocation process requires management to make significant estimates and assumptions, especially at the acquisition date with respect

to intangible assets.

Direct transaction costs associated with the business combination are expensed as incurred.

The allocation of the

consideration transferred in certain cases may be subject to revision based on the final determination of fair values during the measurement

period, which may be up to one year from the acquisition date.

We include the results of operations of the business that we have acquired

in our consolidated results prospectively from the date of acquisition.

the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest

in the acquire is re-measured to fair value at the acquisition date;

any gains or losses arising from such re-measurement are recognized

in profit or loss.

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

1 unchanged sentence

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

What changed 10-Q/A

Item 2. Management’s Discussion and Analysis