What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-22 compared with 2022-11-21 · 353 added, 714 removed, 106 unchanged (91% of the section changed)

1 unchanged sentence

In this quarterly report,

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

Inc., a Delaware corporation.

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.

the “Company,” “AAI,” “we,” “us” and “our” refer to Ault Alliance, Inc., a

Delaware corporation.

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

with a global impact.

Through our 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 metaverse platform,

oil exploration, crane services, defense/aerospace, industrial, automotive, medical/biopharma, consumer electronics, hotel operations

and textiles.

In addition, we own and operate hotels and extend credit to select entrepreneurial businesses through a licensed lending

Recent Events and Developments

On February 4, 2022, we and

our wholly owned subsidiary Ault Alliance, Inc.

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

our purchase of BitNile, Inc.

(“BNI”) from Ault Alliance.

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

each stand-alone wholly owned subsidiaries of ours.

On February 10, 2022, consistent

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

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

On January 23, 2023, we filed

a Certificate of Elimination with the Secretary of State of the State of Delaware with respect to our Series C convertible redeemable

preferred stock (“Series C Preferred Stock”) which, effective upon filing, eliminated the Series C Preferred Stock.

On February 8, 2023, 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 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.

On March 20, 2022, we and

our majority owned subsidiary Imperalis Holding Corp.

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

with TurnOnGreen, Inc.

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

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

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

The 10% original issuance discount promissory

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

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.

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

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.

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.

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.

On May 12, 2022, BNI closed

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

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

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

Bitcoin mining operations.

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 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

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 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

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,

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, 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.

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 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,

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.

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.

into a Share Exchange Agreement (the “Agreement”) with BMI and the other signatories thereto.

The Agreement provides that,

subject to the terms and conditions set forth therein, BMI will acquire all of the outstanding shares of capital stock of our then subsidiary,

BitNile.com, Inc.

(“BitNile.com”), of which we owned approximately 86%, and the remaining 14% was owned by minority shareholders

(the “Minority Shareholders”), as well as Ault Iconic, (formerly Ault Media Group) and the securities of Earnity beneficially

owned by BitNile.com (which represented approximately 19.9% of the outstanding equity securities of Earnity as of the date of the Agreement),

in exchange for the following:

(i) 8,637.5 shares of newly designated Series B Convertible Preferred Stock of BMI to be issued to our

company (the “Series B Preferred”), and (ii) 1,362.5 shares of newly designated Series C Convertible Preferred Stock of BMI

to be issued to the to the Minority Shareholders (the “Series C Preferred,” and together with the Series B Preferred, the

“Preferred Stock”).

The Series B Preferred and the Series C Preferred each have a stated value of $10,000 per share (the “Stated

Value”), for a combined stated value of the Preferred Stock to be issued by BMI of $100 million, and subject to adjustment, are

convertible into an aggregate of 400 million shares of common stock of BMI (the “BMI Common Stock”), which represent and pursuant

to the Agreement will represent approximately 92.4% of BMI’s outstanding BMI Common Stock on a fully-diluted basis as of the date

of the Agreement.

However, pending approval of the transaction by BMI’s shareholders, the Preferred Stock is subject to a 19.9%

beneficial ownership limitation, including the Series A Convertible Preferred Stock that we acquired from BMI in June of 2022.

The Agreement

provides that BMI will seek shareholder approval (the “Shareholder Approval”) following the closing.

Pursuant to the Certificates

of Designations of the Rights, Preferences and Limitations of the Series B Preferred and the Series C Preferred (collectively, the “Preferred

Stock Certificates”), each share of Preferred Stock will be convertible into a number of shares of BMI Common Stock determined by

dividing the Stated Value by $0.25 (the “Conversion Price”), or 40,000 shares of BMI Common Stock.

The Conversion Price will

be subject to certain adjustments, including potential downward adjustment if BMI closes a qualified financing resulting in at least $25

million in gross proceeds at a price per share that is lower than the Conversion Price then in effect.

The holders of Preferred Stock

will be entitled to receive dividends at a rate of 5% of the Stated Value per annum from issuance until February 7, 2033 (the “Dividend

During the first two years of the Dividend Term, dividends will be payable in additional shares of Preferred Stock rather

than cash, and thereafter dividends will be payable in either additional shares of Preferred Stock or cash as each holder may elect.

BMI fails to make a dividend payment as required by the Preferred Stock Certificates, the dividend rate will be increased to 12% for as

long as such default remains ongoing and uncured.

Each share of Preferred Stock will also have an $11,000 liquidation preference in the

event of a liquidation, change of control event, dissolution or winding up of BMI, and will rank senior to all other capital stock of

BMI with respect thereto, except that the Series B Preferred and Series C Preferred shall rank pari passu.

Each share of Series B Preferred

was originally entitled to vote with the BMI Common Stock at a rate of 10 votes per share of Common Stock into which the Series B Preferred

is convertible, but that provision was subsequently eliminated.

Other than certain rights granted to the Company relating to amendments

or waiver of various negative covenants, the terms, rights, preferences and limitations of the Preferred Stock Certificates are essentially

The Agreement closed on March 6, 2023.

On March 28, 2023, we entered

into a securities purchase agreement (the “Purchase Agreement”) with certain institutional investors (the “Investors”),

pursuant to which we sold, in a private placement, an aggregate of 100,000 shares of our preferred stock, with each such share having

a stated value of $100.00 and consisting of (i) 83,000 shares of Series E Convertible Preferred Stock (the “Series E Preferred Stock”),

(ii) 1,000 shares of Series F Convertible Preferred Stock (the “Series F Preferred Stock”) and (iii) 16,000 shares of Series

G Convertible Preferred Stock (the “Series G Preferred Stock” and collectively, the “Preferred Shares”).

The Preferred

Shares are convertible into shares of our common stock at the option of the holders and, in certain circumstances, by us.

Each share of Series E Preferred

Stock and Series F Preferred Stock had a purchase price of $100.00, equal to each such share’s stated value.

The purchase price

of the Series E Preferred Stock and the Series F Preferred Stock was paid for by the Investors’ canceling outstanding secured promissory

notes in the principal amount of $8.4 million, whereas the purchase price of the shares of Series G Preferred Stock consisted of accrued

but unpaid interest on these notes, as well as for other good and valuable consideration.

Each Preferred Share is convertible into shares

of our common stock at a conversion price equal to 85% of the closing sale price of our common stock on the trading day prior to the date

of conversion, subject to a floor price of $0.10.

The Preferred Shares became convertible at the option of the holder following our receipt

of stockholder approval of the Reverse Split (as defined below).

The private placement closed on March 30, 2023.

We called a special meeting

of stockholders, which was held on May 15, 2023, to consider an amendment (the “Amendment”) to our Certificate of Incorporation

to authorize a reverse split of our common stock (the “Reverse Split”).

The Investors agreed in the Purchase Agreement to

not transfer, offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of the Preferred Shares until after the Reverse

Pursuant to the certificate of designation of the Series E Preferred Stock, the shares of Series E Preferred Stock had the right

to vote on such Amendment on an as converted to common stock basis.

In addition, pursuant to the certificate of designation of the Series

F Preferred Stock, the shares of Series F Preferred Stock had the right to vote on such Amendment.

Each Investor agreed to vote the shares

of the Series E Preferred Stock in favor of the Amendment and that the shares of the Series F Preferred Stock shall automatically be voted

in a manner that “mirrors” the proportions on which the shares of our common stock and Series E Preferred Stock are voted

on the Amendment.

The Amendment required the approval of the majority of the votes associated with our outstanding capital stock entitled

to vote on the proposal.

On May 15, 2023, we held the

special meeting of stockholders, at which meeting the Reverse Split was approved by the stockholders.

On May 15, 2023, we approved a ratio

with respect to the Reverse Split of one-for-three hundred.

The Reverse Split did not affect the number of authorized shares of common

stock or preferred stock or their par value per share.

As a result of the Reverse Split, each three hundred shares of common stock issued

and outstanding prior to the Reverse Split were converted into one share of common stock.

The Reverse Split became effective in the State

of Delaware on May 17, 2023.

All share amounts in this Quarterly Report have been updated to reflect the Reverse Split.

On May 1, 2023, we entered

into a securities purchase agreement (the “Series C Agreement”) with Ault & Company, Inc.

(“Ault & Company”),

a related party, pursuant to which we agreed to sell to Ault & Company up to 40,000 shares of Series C convertible preferred stock

and warrants to purchase up to 1.3 million shares of common stock for a total purchase price of up to $40 million.

The consummation of

the transactions contemplated by the Series C Agreement are subject to various customary closing conditions and the receipt of certain

third party consents.

In addition to customary closing conditions, the closing of the transaction is also conditioned upon the receipt

by Ault & Company of financing in an amount sufficient to consummate the transaction.

The Series C Agreement contains customary termination

provisions for Ault & Company under certain circumstances, and the Series C Agreement shall automatically terminate if the closing

has not occurred prior to May 31, 2023, although such date may be extended by Ault & Company as set forth in the Series C Agreement.

As a holding company, our

23 unchanged sentences

In recent years, we have provided

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.

capital and relevant expertise to fuel the growth of businesses in metaverse platform, oil exploration, crane services, defense/aerospace,

industrial, automotive, medical/biopharma, consumer electronics, 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

1 unchanged sentence

Our phone number is 949-444-5464 and

our website address is www.bitnile.com.

our website address is www.ault.com.

Results of Operations

Results of Operations for the Three Months Ended September 30,

2022 and 2021

Results of Operations for the Three Months Ended March 31, 2023

The following table summarizes

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

For the Three Months Ended September 30,

the results of our operations for the three months ended March 31, 2023 and 2022.

For the Three Months Ended March 31,

Revenue, cryptocurrency mining

Revenue, hotel operations

Revenue, crane operations

Revenue, lending and trading activities

1 unchanged sentence

Total revenue

(30,794,000 )

Cost of revenue, products

1 unchanged sentence

Cost of revenue, hotel operations

Cost of revenue, lending and trading activities

Total cost of revenue

Gross profit (loss)

(36,065,000 )

Total operating expenses

1 unchanged sentence

( 31,418,000 )

Other income (expense):

Interest and other income

Accretion of discount on note receivable, related party

Interest expense

Change in fair value of marketable equity securities

Gain on extinguishment of debt

Realized gain on digital currencies and marketable securities

(13,730,000 )

(29,824,000 )

Loss on extinguishment of debt

Realized gain on marketable securities

Loss from investment in unconsolidated entity

Impairment of equity securities

Gain on the sale of fixed assets

Change in fair value of warrant liability

Loss income before income taxes

Loss before income taxes

( 49,092,000 )

Income tax (provision) benefit

(28,787,000 )

Net loss (income) attributable to non-controlling interest

Net loss attributable to BitNile Holdings, Inc.

Income tax benefit

( 48,829,000 )

(28,787,000 )

Net loss attributable to non-controlling interest

Net loss attributable to Ault Alliance, Inc.

( 48,646,000 )

(28,772,000 )

Preferred dividends

3 unchanged sentences

Comprehensive loss

Net loss available

to common stockholders

Net loss available to common stockholders

$ ( 48,875,000 )

2 unchanged sentences

Foreign currency translation adjustment

Net unrealized loss on derivative securities of related party

Other comprehensive income (loss)

Total comprehensive loss

2 unchanged sentences

Revenues by segment for the

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

For the Three Months Ended Sept 30,

three months ended March 31, 2023 and 2022 were as follows:

For the Three Months Ended

Revenue, cryptocurrency mining

Revenue, commercial real estate leases

Ault Global Real Estate Equities, Inc.

Ault Alliance:

Revenue, lending and trading activities

2 unchanged sentences

$ (1,640,000 )

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 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.

Our revenues decreased by

$1.6 million, or 5%, to $31.2 million for the three months ended March 31, 2023, from $32.8 million for the three months ended March

The $1.5 million increase

in our GIGA segment revenue for the three months ended March 31, 2023 included $0.4 million attributable to our recent acquisition of

Giga-tronics Incorporated on September 8, 2022.

The improved economic environment following COVID-19 disruptions, along with increased

military spending, drove growth in our GIGA segment, which provides customized solutions for military markets.

Additionally, revenue from

Enertec Systems 2001 Ltd., a subsidiary of Giga-tronics Incorporated, which is primarily recognized over time, increased by 7%, to $3.5 million

for the three months ended March 31, 2023, up $0.2 million from $3.3 million in the prior-year period.

TurnOnGreen revenues were

down $0.3 million for the three months ended March 31, 2023, compared to the three months ended March 31, 2022.

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.

$3.4 million due to the acquisition of SMC in June 2022.

Revenues from BNI’s

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 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

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

cryptocurrency mining operations increased $3.8 million as we increased our cryptocurrency mining activities from the prior period, partially

offset by lower Bitcoin prices and an increase in Bitcoin mining difficulty level in the current year period.

AGREE’s revenues decreased

by $0.5 million due to interruptions in business operations as the properties were being renovated

during the three months ended March 31, 2023.

The renovations were completed in April 2023 .

Revenues from our lending

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.

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

our periodic earnings.

and trading activities were negative $4.9 million due to significant unrealized losses for the three months ended March 31, 2023 from

our investment portfolio.

During the three months ended March 31, 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 for the three months ended March 31, 2023 included an approximate

$1.5 million unrealized loss from our investment in Alzamend.

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

fees charged to borrowers and interest generated from each loan.

from our trading activities for the three months ended March 31, 2023 included net losses 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

Energy revenues increased

by $13.1 million for the three months ended March 31, 2023, primarily due to the acquisition of the Circle 8 crane operations in December

Gross Margins

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.

Gross margins decreased to

7% for the three months ended March 31, 2023, compared to 68% for the three months ended March 31, 2022.

Our gross margins have typically

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

Our gross margins of 42.4%

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 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%.

Our gross margins of 7% recognized

during the three months ended March 31, 2023 were impacted by negative margins from our lending and trading activities and negative margins

from our BNI cryptocurrency mining segment due to the decline in the price of Bitcoin coupled with an increase in Bitcoin mining difficulty

Excluding the effects of margin from our lending and trading activities and cryptocurrency mining operations, our adjusted gross

margins for the three months ended March 31, 2023 and 2022 would have been 31% and 30%, respectively, with gross margins slightly lower

than our historical averages due to gross margins from SMC, which were 23%.

Research and Development

Research and development expenses

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

increased by $1.1 million for the three months ended March 31, 2023 due to expenditures related to development work on the BMI metaverse

Selling and Marketing

Selling and marketing expenses

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.

were $8.8 million for the three months ended March 31, 2023, compared to $6.5 million for the three months ended March 31, 2022, an increase

of $2.3 million, or 36%.

The increase was the result of $1.3 million higher advertising and promotion costs related to BMI’s metaverse

platform, including an increase of $0.6 million related to an advertising sponsorship agreement.

The increase is also attributable to

$0.8 million increases in sales and marketing costs from SMC, which was acquired in June 2022 and $0.3 million from GIGA, which was acquired

in September 2022

General and Administrative

General and administrative

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

expenses were $22.7 million for the three months ended March 31, 2023, compared to $13.7 million for the three months ended March

31, 2022, an increase of $9.0 million, or 66%.

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

· general and administrative costs of $3.0 million from Circle 8, which was acquired in December 2022;

· general and administrative costs of $2.2 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

· general and administrative costs of $1.3 million from GIGA, which was acquired in September 2022;

· higher stock-based compensation of $1.3 million;

· $1.0 million higher travel costs;

· $0.8 million increase in the accrual of a performance bonus related to realized gains on trading activities

during the period;

· 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

$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 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 $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 $0.1 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

$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 nine months ended September 30, 2022 and 2021.

For the Nine Months Ended September 30,

Revenue, cryptocurrency mining

Revenue, hotel operations

Revenue, lending and trading activities

Total revenue

Cost of revenue, products

Cost of revenue, cryptocurrency mining

Cost of revenue, hotel operations

Total cost of revenue

Total operating expenses

(Loss) income from operations

(28,000,000 )

Interest and other income

Accretion of discount on note receivable, related party

Interest expense

(35,827,000 )

Change in fair value of marketable equity securities

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

(Loss) income before income taxes

(62,507,000 )

Income tax (provision) benefit

Net (loss) income

(62,868,000 )

Net loss (gain) attributable to non-controlling interest

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

(61,807,000 )

Preferred dividends

Net (loss) income available to common stockholders

$ (62,046,000 )

Comprehensive (loss) income

Net (loss) income available to common stockholders

$ (62,046,000 )

Other comprehensive income (loss)

Foreign currency translation adjustment

Net unrealized loss on derivative securities of related party

Other comprehensive loss

Total comprehensive loss

$ (63,498,000 )

$ (6,581,000 )

Revenues by segment for the

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

For the Nine Months Ended September 30,

Revenue, cryptocurrency mining

Revenue, commercial real estate leases

Ault Alliance:

Revenue, lending and trading activities

Total revenue

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

$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

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 $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

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 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

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 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 1.9 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.

Selling and Marketing

Selling and marketing expenses

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 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 $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

· 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;

· $5.0 million increase in the accrual of a performance bonus related to realized gains on trading activities

during the period;

· 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.

· partially offset by a decrease in corporate legal fees of $1.0 million.

Impairment of Mined Cryptocurrency

Impairment of mined cryptocurrency

for the three months ended March 31, 2023 and 2022 was $0.1 million and $0.4 million, respectively, attributable to the volatility of

the Bitcoin market as market price of Bitcoin drops below the Company’s carrying value within the respective periods.

Interest and Other Income

Interest and other income was

$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.

$1.2 million for the three months ended March 31, 2023, compared to $0.4 million for the three months ended March 31, 2022.

in interest and other income is primarily due to higher interest rates resulting in higher income from ADRT’s cash and marketable

securities held in the trust account.

Interest Expense

Interest expense was $13.7

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 $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.

Change in Fair Value of Marketable Equity Securities

Change in fair value of marketable

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 $0.7 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.

million for the three months ended March 31, 2023, compared to $29.8 million for the three months ended March 31, 2022.

The $29.8 million

interest expense for the three months ended March 31, 2022 related primarily to amortization of debt discount of $26.3 million from the

issuance of warrants, a non-cash charge, and original issue discount, in connection with the $66.0 million of senior notes issued in December

2021, which were fully paid in March 2022.

Interest expense for the three months ended March 31, 2023 includes $9.0 amortization of debt

discount primarily related to new debt agreements compared to the prior year period.

Loss on Extinguishment of Debt

Loss on extinguishment of

debt was $0.1 million for the three months ended March 31, 2023, compared to $0 for the three months ended March 31, 2022.

period loss on extinguishment of debt relates to the issuance of $8.5 million fair value of convertible preferred stock liabilities to

satisfy $8.4 million of principal amount of secured promissory notes.

Loss From Investment in Unconsolidated Entity

Loss from investment in unconsolidated

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

entity was $0 for the three months ended March 31, 2023, compared to $0.5 million for the three months ended March 31, 2022, 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 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

$1.5 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.

Impairment of Equity Securities

Cumulative downward adjustments

for impairments for our equity securities without readily determinable fair values held at March 31, 2023 were $9.6 million.

Other Comprehensive (Loss) Income

Other comprehensive gain was

$0.2 million compared to other comprehensive loss of $0.3 million for the three months ended March 31, 2023 and 2022, respectively.

balance of other comprehensive income for both years was caused by foreign currency translation adjustments between our functional currency,

Dollar, and the British Pound and Israeli Shekel.

Liquidity and Capital Resources

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.

On March 31, 2023, we had

cash and cash equivalents of $9.2 million (excluding restricted cash of $1.9 million), compared to cash and cash equivalents of $10.5

million (excluding restricted cash of $3.6 million) at December 31, 2022.

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 $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.

activities totaled $12.2 million for the three months ended March 31, 2023, compared to $29.4 million for the three months ended

March 31, 2022.

Cash provided by operating activities for the three months ended March 31, 2023 included $22.0 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 $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 $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:

· 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 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

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 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.

The Senior Notes were repaid in March 2022.

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

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

The margin accounts payable were repaid during the three

months ended March 31, 2022.

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.

activities was $2.8 million for the three months ended March 31, 2023, compared to $28.8 million for the three months ended March 31,

Net cash used in investing activities for the three months ended March 31, 2023 was primarily related to capital expenditures, partially

offset by proceeds from the sale of fixed assets of $4.5 million.

Net cash used in financing

activities was $8.1 million for the three months ended March 31, 2023, compared to net cash provided by financing activities of $22.2 million

for the three months ended March 31, 2022, and reflects the following transactions:

· 2022 Common ATM Offering – During the three months ended March 31, 2023, we sold an aggregate

of 0.1 million shares of common stock pursuant to the 2022 Common ATM Offering for gross proceeds of $4.2 million.

Effective March 17,

2023, we terminated the 2022 Common ATM Offering;

· 2022 Preferred ATM Offering – During the three months ended March 31, 2023, we sold an aggregate

of 90,184 shares of Series D Preferred Stock pursuant to the 2022 Preferred ATM Offering for net proceeds of $1.2 million;

· $19.7 million payments on notes payable, partially offset by $5.0 million proceeds from notes payable;

· $2.7 million proceeds from convertible notes payable, partially offset by $0.2 million payments on convertible

notes payable.

Financing Transactions Subsequent to March

Financing transactions subsequent

to March 31, 2023 included the following:

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 nine months ended September 30, 2022 are issued.

the period between April 1, 2023 through May 18, 2023, we sold an aggregate of 105,475 shares of

Series D Preferred Stock pursuant to the 2022 Preferred ATM Offering for net proceeds of $ 1.1 million.

12% Term Note

On April 5, 2023, we issued

a term note with a principal amount of $1.1 million, bearing an interest rate of 12%.

The term note was issued at a discount, with net

proceeds to us amounting to $1.0 million.

The note is scheduled to mature on June 5, 2023.

We have the option to extend the maturity date

by one month, upon payment of a $30,000 extension fee.

Ault & Company, a related party, guaranteed the term note.

Original Issuance Discount Term Notes

On May 15, 2023, we issued

a term note with a principal amount of $1.3 million, which does not bear interest unless there is an event of default.

The term note was

issued at a discount, with net proceeds to us amounting to $1.0 million.

We are obligated to repay $1.0 million of the note on June 15,

2023 and the remaining $0.3 million on June 30, 2023.

Upon an event of default, we will pledge our ownership of the membership interests

in 456 Lux Hotel NYC, LLC, which is a limited partner in NYREIC 456 LP.

Milton “Todd” Ault, III, our Executive Chairman, and

his wife, guaranteed repayment of the term note.

On May 16, 2023, we issued

a term note with a principal amount of $120,000, which does not bear interest.

The term note was issued at a discount, with net proceeds

to us amounting to $100,000.

The note is scheduled to mature on June 16, 2023.

We have the option to extend the maturity date by 15 days,

upon payment of an extension fee equal to 1% of the amount then outstanding.

On May 17, 2023, we issued

a term note with a principal amount of $1.3 million, which does not bear interest unless there is an event of default.

The term note was

issued at a discount, with net proceeds to us amounting to $1.0 million.

The note is scheduled to mature on July 17, 2023.

Milton “Todd”

Ault, III, our Executive Chairman, and Ault & Company guaranteed repayment of the term note.

BMI Securities Purchase Agreement

On April 27, 2023, BMI entered

into a securities purchase agreement with certain accredited investors providing for the issuance of senior secured convertible notes

with an aggregate principal face amount of $6.9 million convertible into shares of BMI common stock and five-year warrants to purchase

an aggregate of 63.0 million shares of BMI common stock at an exercise price of $0.1091 per share, subject to adjustment.

The Notes are

secured by a guaranty provided by us, as well as by Milton “Todd” Ault, III, our Executive Chairman, and Ault & Company

guaranteed repayment of the term note.

BMI and the investors entered

into a registration rights agreement whereby BMI agreed to file a registration statement to register the conversion shares and warrant

The senior secured convertible

notes bear no interest as they were issued with an original issuance discount.

The maturity date of the Notes is April 27, 2024.

senior secured convertible notes are convertible at a price per share equal to the lower of (i) $0.1091 or (ii) the greater of (A) $0.0168

and (B) 85% of the lowest volume weighted average price of BMI common stock during the 10 trading days prior to the date of conversion,

subject to adjustment.

Critical Accounting Policies

Variable Interest Entities

The accounting guidance requires

an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling

financial interest in a variable interest entity;

to require ongoing reassessments of whether an enterprise is the primary beneficiary

of a Variable Interest Entity (“VIE”);

to eliminate the solely quantitative approach previously required for determining the

primary beneficiary of a VIE;

to add an additional reconsideration event for determining whether an entity is a VIE when any changes in

facts and circumstances occur such that holders of the equity investment at risk, as a group, lose the power from voting rights or similar

rights of those investments to direct the activities of the entity that most significantly impact the entity’s economic performance;

and to require enhanced disclosures that will provide readers of financial statements with more transparent information about an enterprise’s

involvement in a VIE.

For VIEs, the Company assesses

whether it is the primary beneficiary as prescribed by the accounting guidance on the consolidation of a VIE.

The Company evaluates its

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

Consolidation.

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

Entities are considered to be the

primary beneficiary if they have both of the following characteristics:

(i) the power to direct the activities that, when taken together,

most significantly impact the VIE’s performance;

and (ii) the obligation to absorb losses and right to receive the returns from

the VIE that would be significant to the VIE.

The Company’s judgment with respect to its level of influence or control of an entity

involves the consideration of various factors including the form of its ownership interest, its representation in the entity’s governance,

the size of its investment, estimates of future cash flows, its ability to participate in policy making decisions and the rights of the

other investors to participate in the decision making process and to replace the Company as manager and/or liquidate the joint venture,

if applicable.

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.

We 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, trade names 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.

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.

If 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.

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

Item 2. Management’s Discussion and Analysis