BITNILE HOLDINGS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

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.



Recent Events and Developments

On February 4, 2022, we and our wholly owned subsidiary Ault Alliance, Inc.
(“Ault Alliance“) entered into a securities purchase agreement providing for our
purchase of BitNile, Inc. (“BNI”) from Ault Alliance. As a result of this
transaction, both BNI and Ault Alliance are each stand-alone wholly owned
subsidiaries of ours.

On February 10, 2022, consistent with our objective to have BNI operate the
entirety of our business that relates to cryptocurrencies, Ault Alliance
assigned the entirety of its interest in Alliance Cloud Services, LLC (“ACS”) to
BNI.




On February 25, 2022, we entered into an At-The-Market issuance sales agreement
with Ascendiant Capital Markets, LLC ("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.



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, 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.
Immediately 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. and Digital Power Corporation. Following the closing of the
Transaction, IMHC will dissolve its dormant subsidiary.



On March 30, 2022, we fully paid our $66 million senior secured notes (the
“Senior Notes”) and accrued interest. The 10% original issuance discount
promissory notes were sold in December 2021 and were due and payable on March
31, 2022
.




On April 22, 2022, Ault Alliance entered into an Asset Purchase Agreement (the
"Asset Purchase Agreement") with EYP Group Holdings, Inc. and each of its
subsidiaries and affiliates listed on the signature page to the Asset Purchase
Agreement (collectively, "EYP"), pursuant to which Ault Alliance agreed to
purchase substantially all of the assets of EYP (such assets, the "Assets," and
such transaction, the "Asset 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. Ault
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
conditions. 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.



  1







On April 26, 2022, Digital Power Lending, LLC ("DP Lending") made an additional
$4 million investment in Alzamend Neuro, Inc. ("Alzamend"), a related party and
early clinical-stage biopharmaceutical company focused on developing novel
products for the treatment of neurodegenerative diseases and psychiatric
disorders. During 2021, DP Lending entered into a securities purchase agreement
(the "SPA") with Alzamend to invest $10 million in Alzamend common stock and
warrants, subject to the achievement of certain milestones. DP Lending had
previously funded $6 million pursuant to the terms of the SPA and the
achievement of certain milestones related to the U.S. Food and Drug
Administration approval of Alzamend's Investigational New Drug application and
Phase 1a human clinical trials for AL001. On April 26, 2022, DP Lending funded
the remaining amount due to achievement of the final milestone, the receipt of
the full data set from Alzamend's Phase 1 clinical trial for AL001. 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 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.



On 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.



On 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.


  2







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. After
BNI makes the first six Monthly Payments, BNI may elect to pay a forbearance fee
of $125,000 to an Investor, or an aggregate of $250,000 to the two Investors
(each, a "Monthly Forbearance") in lieu of a Monthly Payment, which Monthly
Forbearance would extend the maturity date of such Notes by one month, provided
that BNI may not elect to make a Monthly Forbearance in consecutive months. BNI
may prepay the full outstanding principal and accrued but unpaid interest at any
time, provided that if BNI prepays the Notes, BNI is required to pay the
Investors the amount of interest that would have accrued from the date of
prepayment until the first anniversary of the issuance date of the Notes. The
purchase price for the Notes was $10 million.



Pursuant to the NPA, BNI, DP Lending and Helios Funds LLC, as the collateral
agent on behalf of the Investors (the "Agent") entered into a security agreement
(the "Security Agreement"), pursuant to which (i) DP Lending granted to the
Investors a security interest in marketable securities, investments and other
property having a value of $10 million in a DP Lending brokerage account and
(ii) BNI granted to the Investors a security interest in 4,000 S19 Pro Antminers
(the "Miners"), provided that the number of Miners would be reduced 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 Notes. The Notes are further secured by a guaranty
we
provided.



On 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. The 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.



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.



General



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. 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. We anticipate returning value to stockholders after satisfying our debt
obligations and working capital needs.



From time to time, we engage in discussions with other companies interested in
our subsidiaries or partner companies, either in response to inquiries or as
part of 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.



  3






We are a Delaware corporation with our corporate office located at 11411
Southern Highlands Pkwy, Suite 240, Las Vegas, NV 89141. Our phone number is
949-444-5464 and our website address is www.bitnile.com.



Results of Operations


Results of Operations for the Three Months Ended June 30, 2022 and 2021

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



                                                         For the Three Months Ended June 30,
                                                            2022                     2021

 Revenue                                             $         7,849,000       $       8,564,000
 Revenue, cryptocurrency mining                                3,976,000                 291,000
 Revenue, hotel operations                                     4,598,000                       -
 Revenue, lending and trading activities                         943,000   
          53,274,000
 Total revenue                                                17,366,000              62,129,000
 Cost of revenue                                              12,369,000               6,278,000
 Gross profit                                                  4,997,000              55,851,000

 Total operating expenses                                     28,716,000              10,028,000
 (Loss) income from operations                               (23,719,000 ) 
          45,823,000
 Interest and other income                                        81,000                  14,000
 Interest expense                                             (2,031,000 )               (22,000 )
 Change in fair value of marketable equity
securities                                                       241,000   

(1,915,000 )

 Realized loss on marketable securities                          (43,000 )                     -
 Loss from investment in unconsolidated entity                  (391,000 )                     -
 Gain on extinguishment of debt                                        -                 447,000
 Change in fair value of warrant liability                        (6,000 )               290,000
 (Loss) income before income taxes                           (25,868,000 ) 

44,637,000

 Income tax (provision) benefit                                 (217,000 ) 

(3,504,000 )

 Net (loss) income                                           (26,085,000 ) 

41,133,000

 Net loss attributable to non-controlling interest               321,000               1,083,000
 Net (loss) income attributable to BitNile
Holdings, Inc.                                               (25,764,000 ) 

42,216,000

 Preferred dividends                                             (44,000 )                (4,000 )
 Net (loss) income available to common
stockholders                                         $       (25,808,000 ) 

$ 42,212,000

Comprehensive (loss) income

 Net (loss) income available to common
stockholders                                         $       (25,808,000 ) 

$ 42,212,000

Other comprehensive income (loss)

 Foreign currency translation adjustment                      (1,471,000 )               134,000
 Net unrealized loss on derivative securities of
related party                                                          -   

(5,893,000 )

 Other comprehensive loss                                     (1,471,000 ) 

(5,759,000 )

 Total comprehensive (loss) income                   $       (27,279,000 ) 
   $      36,453,000




  4







Revenues



Revenues by segment for the three months ended June 30, 2022 and 2021 are as
follows:



                                         For the Three Months Ended June 30,           Increase
                                            2022                     2021             (Decrease)           %
GWW                                  $        6,503,000       $        6,475,000     $      28,000             0 %
TurnOnGreen                                   1,062,000                1,831,000          (769,000 )         -42 %
BNI
Revenue, cryptocurrency mining                3,976,000                  291,000         3,685,000          1266 %
Revenue, commercial real estate
leases                                          272,000                  185,000            87,000            47 %
Ault Global Real Estate Equities,
Inc. ("AGREE")                                4,598,000                        -         4,598,000             -
Ault Alliance:
Revenue, lending and trading
activities                                      943,000               53,274,000       (52,331,000 )         -98 %
Other                                            12,000                   73,000           (61,000 )         -84 %
Total revenue                        $       17,366,000       $       62,129,000     $ (44,763,000 )         -72 %




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
30, 2021.



GWW


GWW revenues were flat at $6.5 million for both the three months ended June 30,
2022
and 2021.



TurnOnGreen



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.



BNI


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. 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



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. On 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.



  5






Revenues 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.



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 30, 2021. 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


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 to:

· 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 2021;

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

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

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

   EYP.




Loss From Operations



We 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.



  6







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.



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



Net (Loss) Income


For the foregoing reasons, our net loss for the three months ended June 30, 2022
was $25.8 million, compared to net income of $42.2 million for the three months
ended June 30, 2021.



Other Comprehensive Loss



Other comprehensive loss was $1.5 million for the three months ended June 30,
2022, compared to other comprehensive income of $5.8 million for the three
months ended June 30, 2021. Other comprehensive loss of $1.5 million for the
three months ended June 30, 2022 was attributable to changes in currency
exchange rates. Other comprehensive loss for the three months ended June 30,
2021 was primarily due to unrealized losses in the warrant derivative securities
that we received as a result of our investment in AVLP.



  7






Results of Operations for the Six Months Ended June 30, 2022 and 2021

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



                                                        For the Six Months Ended June 30,
                                                            2022                   2021

 Revenue                                             $       16,508,000       $    16,469,000
 Revenue, cryptocurrency mining                               7,524,000    

421,000

 Revenue, hotel operations                                    7,296,000                     -
 Revenue, lending and trading activities                     18,864,000    
       58,485,000
 Total revenue                                               50,192,000            75,375,000
 Cost of revenue                                             22,863,000            11,386,000
 Gross profit                                                27,329,000            63,989,000

 Total operating expenses                                    50,018,000            16,964,000
 (Loss) income from operations                              (22,689,000 )  
       47,025,000
 Interest and other income                                      530,000                51,000
 Interest expense                                           (31,855,000 )            (337,000 )
 Change in fair value of marketable equity
securities                                                      241,000                45,000
 Realized gain on marketable securities                          66,000    

397,000

 Loss from investment in unconsolidated entity                 (924,000 )                   -
 Gain on extinguishment of debt                                       -    

929,000

 Change in fair value of warrant liability                      (24,000 )  

(388,000 )

 (Loss) income before income taxes                          (54,655,000 )  

47,722,000

 Income tax (provision) benefit                                (217,000 )  

(3,510,000 )

 Net (loss) income                                          (54,872,000 )  

44,212,000

 Net loss attributable to non-controlling interest              336,000                 3,000
 Net (loss) income attributable to BitNile
Holdings, Inc.                                              (54,536,000 )  

44,215,000

 Preferred dividends                                            (49,000 )              (9,000 )
 Net (loss) income available to common
stockholders                                         $      (54,585,000 )  

$ 44,206,000

Comprehensive (loss) income

 Net (loss) income available to common
stockholders                                         $      (54,585,000 )  

$ 44,206,000

Other comprehensive income (loss)

 Foreign currency translation adjustment                     (1,758,000 )              41,000
 Net unrealized loss on derivative securities of
related party                                                         -    

(2,924,000 )

 Other comprehensive loss                                    (1,758,000 )  

(2,883,000 )

 Total comprehensive (loss) income                   $      (56,343,000 )  
  $    41,323,000




  8







Revenues



Revenues by segment for the six months ended June 30, 2022 and 2021 are as
follows:



                                         For the Six Months Ended June 30,           Increase
                                           2022                    2021             (Decrease)           %
 GWW                                 $      13,748,000       $      12,825,000     $     923,000             7 %
 TurnOnGreen                                 2,191,000               3,213,000        (1,022,000 )         -32 %

BNI

 Revenue, cryptocurrency mining              7,524,000                 

421,000 7,103,000 1687 %

 Revenue, commercial real estate
leases                                         550,000                 281,000           269,000            96 %
 AGREE                                       7,296,000                       -         7,296,000             -
 Ault Alliance:
 Revenue, lending and trading
activities                                  18,864,000              

58,485,000 (39,621,000 ) -68 %

 Other                                          19,000                 

150,000 (131,000 ) -87 %

 Total revenue                       $      50,192,000       $      75,375,000     $ (25,183,000 )         -33 %




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 30,
2021.



GWW


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,
2021. 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


TurnOnGreen revenues for the six months ended June 30, 2022 of $2.2 million
declined $1.0 million, or 32%, from $3.2 million for the six months ended June
30, 2021
, due to supply chain challenges.



BNI


Revenues from BNI's cryptocurrency mining operations were $7.5 million for the
six months ended June 30, 2022, compared to $0.4 million for six months ended
June 30, 2021. During 2021, we purchased Bitcoin mining equipment and increased
our cryptocurrency mining activities. Our decision to increase our
cryptocurrency mining operations in 2022 was based on several factors, which
positively affected the number of active miners we operated, including the
market prices of digital currencies, and favorable power costs available at
our
Michigan data center.



AGREE



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. On 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 $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.



  9







Revenues 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.



Gross Margins



Gross margins decreased to 54.4% for the six months ended June 30, 2022,
compared to 84.9% for the six months ended June 30, 2021. Our gross margins have
typically ranged between 30% and 35%, with slight variations depending on the
overall composition of our revenue.



Our gross margins of 54.4% recognized during the six months ended June 30, 2022
were impacted by the favorable margins from our lending and trading activities
and modest margins on cryptocurrency mining operations due to the decline in the
price of Bitcoin. Excluding the effects of margin from our lending and trading
activities and cryptocurrency mining operations, our adjusted gross margins for
the six months ended June 30, 2022 and 2021 would have been 31.4% and 33.2%,
respectively, consistent with our historical range.



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, 2021. 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 $13.5 million for the six months ended June
30, 2022, compared to $2.7 million for the six months ended June 30, 2021, an
increase of $10.7 million, or 390%. The increase was the result of $8.2 million
higher advertising and promotion costs at Ault Alliance, including $6.4 million
related to an advertising sponsorship agreement as well as a $1.4 million
increase in sales and marketing personnel and a $0.4 million increase in
consulting expense. 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.



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,
an increase of $19.6 million, or 150%. 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 2021;

· non-cash stock compensation costs of $3.6 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;

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

by ACS; and

· 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.



  10







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 Expense



Interest expense was $31.9 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. 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 is due, in part, 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 $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.



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.



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.
Realized 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.



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.



Gain on Extinguishment of Debt




Gain on extinguishment of debt was $0 for the six months ended June 30, 2022,
compared to a gain of $0.9 million for the six months ended June 30, 2021. The
prior year gain on extinguishment of debt represents forgiveness of Paycheck
Protection Program loans.



Net (Loss) Income



For the foregoing reasons, our net loss for the six months ended June 30, 2022
was $54.6 million, compared to net income of $44.2 million for the six months
ended June 30, 2021.



  11






Other Comprehensive (Loss) Income

Other comprehensive loss was $1.8 million for the six months ended June 30,
2022, compared to other comprehensive loss of $2.9 million for the six months
ended June 30, 2021. Other comprehensive loss of $1.8 million for the six months
ended June 30, 2022 was attributable to changes in currency exchange rates.
Other comprehensive loss for the six months ended June 30, 2021 was primarily
due to unrealized losses in the warrant derivative securities that we received
as a result of our investment in AVLP.



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.



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.


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.



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, 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.



· 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.



· 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.



  12







Critical Accounting Policies



Business Combination


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, 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.



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.

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