Quarterly Report (10-q)

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended September 30, 2022

o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from ________ to ________.

Commission file number 1-12711

BITNILE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	94-1721931
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

11411 Southern Highlands Pkwy #240

Las Vegas, NV 89141

(Address of principal executive offices) (Zip code)

(949) 444-5464

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.001 par value	NILE	NYSE American
13.00% Series D Cumulative Redeemable Perpetual Preferred Stock, par value $0.001 per share	NILE PRD	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding year (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer þ	Smaller reporting company þ
Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

At November 18, 2022 the registrant had outstanding 356,761,203 shares of common stock.

BITNILE HOLDINGS, INC.

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	F-1

	Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and nine months ended September 30, 2022 and 2021	F-3

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021	F-4

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	F-8

	Notes to Condensed Consolidated Financial Statements	F-10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	17

Item 4.	Controls and Procedures	17

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	19
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	22
Item 4.	Mine Safety Disclosures	22
Item 5.	Other Information	22
Item 6.	Exhibits	23

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that involve a number of risks and uncertainties. Words such as “anticipates,” “expects,” “intends,” “goals,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” “will,” “would,” “should,” “could,” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, uncertain events or assumptions, and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on management’s expectations as of the date of this filing and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include those described throughout this report and our Annual Report on Form 10-K for the year ended December 31, 2021, particularly the “Risk Factors” sections of such reports. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in this Form 10-Q and in other documents we file from time to time with the Securities and Exchange Commission that disclose risks and uncertainties that may affect our business. The forward-looking statements in this Form 10-Q do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that had not been completed as of the date of filing of this Quarterly Report on Form 10-Q. In addition, the forward-looking statements in this Form 10-Q are made as of the date of this filing, and we do not undertake, and expressly disclaim any duty to update such statements, whether as a result of new information, new developments or otherwise, except to the extent that disclosure may be required by law.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

BITNILE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30,		December 31,
	2022		2021
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	10,126,000	$	15,912,000
Restricted cash		4,617,000		5,321,000
Marketable equity securities		8,561,000		40,380,000
Digital currencies		2,092,000		2,165,000
Accounts receivable		19,234,000		6,455,000
Accrued revenue		2,474,000		2,283,000
Inventories		28,848,000		5,482,000
Investment in promissory notes and other, related party		2,818,000		2,842,000
Loans receivable, current		6,861,000		13,337,000
Prepaid expenses and other current assets		14,441,000		15,436,000
TOTAL CURRENT ASSETS		100,072,000		109,613,000

Cash and marketable securities held in trust account		117,421,000		116,725,000
Intangible assets, net		14,095,000		4,035,000
Goodwill		54,544,000		10,090,000
Property and equipment, net		253,984,000		174,025,000
Right-of-use assets		7,404,000		5,243,000
Investments in common stock, related parties		12,394,000		13,230,000
Investments in other equity securities		45,556,000		30,482,000
Investment in unconsolidated entity		-		22,130,000
Loans receivable, non-current		500,000		1,000,000
Other assets		4,935,000		3,713,000
TOTAL ASSETS	$	610,905,000	$	490,286,000

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable and accrued expenses	$	50,607,000	$	22,755,000
Investment margin accounts payable		2,377,000		18,488,000
Operating lease liability, current		2,825,000		1,123,000
Notes payable, net		17,132,000		39,554,000
Convertible notes payable, current		1,469,000		-
TOTAL CURRENT LIABILITIES		74,410,000		81,920,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F- 1

BITNILE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

(Unaudited)

	September 30,			December 31,
	2022			2021

LONG TERM LIABILITIES
Operating lease liability, non-current		4,980,000			4,213,000
Notes payable		58,310,000			55,055,000
Convertible notes payable		13,878,000			468,000
Deferred underwriting commissions of Ault Disruptive subsidiary		3,450,000			3,450,000

TOTAL LIABILITIES		155,028,000			145,106,000

COMMITMENTS AND CONTINGENCIES
Redeemable noncontrolling interests in equity of subsidiaries		117,114,000			116,725,000

STOCKHOLDERS’ EQUITY
Series A Convertible Preferred Stock, $25 stated value per share,		-			-
$0.001 par value – 1,000,000 shares authorized; 7,040 shares
issued and outstanding at September 30, 2022 and December 31, 2021
(redemption amount and liquidation preference of $176,000 as of
September 30, 2022 and December 31, 2021)
Series B Convertible Preferred Stock, $10 stated value per share,		-			-
share, $0.001 par value – 500,000 shares authorized; 125,000 shares issued
and outstanding at September 30, 2022 and December 31, 2021 (liquidation
preference of $1,190,000 at September 30, 2022 and December 31, 2021)
Series D Cumulative Redeemable Perpetual Preferred Stock, $25 stated
value per share, $0.001 par value – 2,000,000 shares authorized;
shares authorized, 154,928 shares and 0 shares issued and outstanding at
September 30, 2022 and December 31, 2021, respectively (liquidation
preference of $3,665,450 and $0 as of September 30, 2022 and December 31, 2021, respectively)		-			-
Class A Common Stock, $0.001 par value – 500,000,000 shares authorized;		341,000			84,000
341,446,982 and 84,344,607 shares issued and outstanding at September 30,
2022 and December 31, 2021, respectively
Class B Common Stock, $0.001 par value – 25,000,000 shares authorized;		-			-
0 shares issued and outstanding at September 30, 2022 and December 31, 2021
Additional paid-in capital		557,418,000			385,644,000
Accumulated deficit		(207,647,000	)		(145,600,000	)
Accumulated other comprehensive loss		(1,557,000	)		(106,000	)
Treasury stock, at cost		(28,788,000	)		(13,180,000	)
TOTAL BITNILE HOLDINGS STOCKHOLDERS’ EQUITY		319,767,000			226,842,000

Non-controlling interest		18,996,000			1,613,000

TOTAL STOCKHOLDERS’ EQUITY		338,763,000			228,455,000

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	610,905,000		$	490,286,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F- 2

BITNLE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(Unaudited)


	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Revenue	$	27,031,000		$	7,803,000		$	43,539,000		$	24,272,000
Revenue, cryptocurrency mining		3,874,000			272,000			11,398,000			693,000
Revenue, hotel operations		5,513,000			-			12,809,000			-
Revenue, lending and trading activities		13,360,000			(38,869,000	)		32,224,000			19,615,000
Total revenue		49,778,000			(30,794,000	)		99,970,000			44,580,000
Cost of revenue, products		20,193,000			5,011,000			30,985,000			16,011,000
Cost of revenue, cryptocurrency mining		5,255,000			260,000			12,206,000			646,000
Cost of revenue, hotel operations		3,230,000			-			8,350,000			-
Total cost of revenue		28,678,000			5,271,000			51,541,000			16,657,000
Gross profit		21,100,000			(36,065,000	)		48,429,000			27,923,000

Operating expenses
Research and development		521,000			524,000			1,945,000			1,657,000
Selling and marketing		7,428,000			1,993,000			20,888,000			4,740,000
General and administrative		15,947,000			11,292,000			48,666,000			24,376,000
Impairment of deposit due to vendor bankruptcy filing		2,000,000			-			2,000,000			-
Impairment of mined cryptocurrency		515,000			-			2,930,000			-
Total operating expenses		26,411,000			13,809,000			76,429,000			30,773,000
Loss from operations		(5,311,000	)		(49,874,000	)		(28,000,000	)		(2,850,000	)
Other income (expenses)
Interest and other income		725,000			125,000			1,255,000			176,000
Accretion of discount on note receivable, related party		-			4,210,000						4,210,000
Interest expense		(3,972,000	)		(140,000	)		(35,827,000	)		(475,000	)
Change in fair value of marketable equity securities		114,000			(750,000	)		355,000			(705,000	)
Realized gain on digital currencies and marketable securities		595,000			30,000			661,000			428,000
Loss from investment in unconsolidated entity		-			-			(924,000	)		-
Gain on extinguishment of debt		-			-			-			929,000
Change in fair value of warrant liability		(3,000	)		259,000			(27,000	)		(130,000	)
Total other (expenses) income, net		(2,541,000	)		3,734,000			(34,507,000	)		4,433,000
(Loss) income before income taxes		(7,852,000	)		(46,140,000	)		(62,507,000	)		1,583,000
Income tax (provision) benefit		(144,000	)		3,366,000			(361,000	)		(144,000	)
Net (loss) income		(7,996,000	)		(42,774,000	)		(62,868,000	)		1,439,000
Net loss (income) attributable to non-controlling interest		725,000			(96,000	)		1,061,000			(93,000	)
Net (loss) income attributable to BitNile Holdings, Inc.		(7,271,000	)		(42,870,000	)		(61,807,000	)		1,346,000
Preferred dividends		(190,000	)		(4,000	)		(239,000	)		(13,000	)
Net (loss) income available to common stockholders	$	(7,461,000	)	$	(42,874,000	)	$	(62,046,000	)	$	1,333,000
Basic net (loss) income per common share	$	(0.03	)	$	(0.73	)	$	(0.27	)	$	0.03
Diluted net (loss) income per common share	$	(0.03	)	$	(0.73	)	$	(0.27	)	$	0.03
Weighted average basic common shares outstanding		294,141,000			58,987,000			225,662,000			49,714,000
Weighted average diluted common shares outstanding		294,141,000			58,987,000			225,662,000			50,145,000
Comprehensive (loss) income
Net (loss) income available to common stockholders	$	(7,461,000	)	$	(42,874,000	)	$	(62,046,000	)	$	1,333,000
Other comprehensive income (loss)
Foreign currency translation adjustment		306,000			(182,000	)		(1,452,000	)		(141,000	)
Net unrealized loss on derivative securities of related party		-			(4,849,000	)		-			(7,773,000	)
Other comprehensive income (loss)		306,000			(5,031,000	)		(1,452,000	)		(7,914,000	)
Total comprehensive loss	$	(7,155,000	)	$	(47,905,000	)	$	(63,498,000	)	$	(6,581,000	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F- 3

BITNILE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

Three Months Ended September 30, 2022


	Series A, B & D								Additional						Other			Non-						Total
	Preferred Stock				Common Stock				Paid-In			Accumulated			Comprehensive			Controlling			Treasury			Stockholders’
	Shares		Amount		Shares		Amount		Capital			Deficit			Loss			Interest			Stock			Equity
BALANCES, July 1, 2022		278,658	$	-		324,440,579	$	324,000	$	549,713,000		$	(200,184,000	)	$	(1,863,000	)	$	18,048,000		$	(20,639,000	)	$	345,399,000
Preferred stock issued		8,310		-		-		-		207,000			-			-			-			-			207,000
Preferred stock offering costs		-		-		-		-		(65,000	)		-			-			-			-			(65,000	)
Stock-based compensation		-		-		-		-		1,563,000			-			-			479,000			-			2,042,000
Issuance of Gresham Worldwide common stock for GIGA acquisition		-		-		-		-		1,669,000			-			-			-			-			1,669,000
Issuance of common stock for cash		-		-		17,006,403		17,000		4,540,000			-			-			-			-			4,557,000
Financing cost in connection with sales of common stock		-		-		-		-		(79,000	)		-			-			-			-			(79,000	)
Increase in ownership interest of subsidiary		-		-		-		-		(132,000	)		-			-			(1,539,000	)		-			(1,671,000	)
Non-controlling interest from GIGA acquisition		-		-		-		-		-			-			-			2,735,000			-			2,735,000
Purchase of treasury stock - Ault Alpha		-		-		-		-		-			-			-			-			(8,148,000	)		(8,148,000	)
Net loss		-		-		-		-		-			(7,271,000	)		-			-			-			(7,271,000	)
Preferred dividends		-		-		-		-		-			(190,000	)		-			-			-			(190,000	)
Foreign currency translation adjustments		-		-		-		-		-			-			306,000			-			-			306,000
Net loss attributable to non-controlling interest		-		-		-		-		-			-			-			(725,000	)		-			(725,000	)
Other		-		-		-		-		2,000			(2,000	)		-			(2,000	)		(1,000	)		(3,000	)
BALANCES, September 30, 2022		286,968	$	-		341,446,982	$	341,000	$	557,418,000		$	(207,647,000	)	$	(1,557,000	)	$	18,996,000		$	(28,788,000	)	$	338,763,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F- 4

BITNILE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

Three Months Ended September 30, 2021


	Series A & B								Additional						Other								Total
	Preferred Stock				Common Stock				Paid-In			Accumulated			Comprehensive			Non-Controlling		Treasury			Stockholders’
	Shares		Amount		Shares		Amount		Capital			Deficit			Loss			Interest		Stock			Equity
BALANCES, July 1, 2021		132,040	$	-		56,159,963	$	56,000	$	311,759,000		$	(77,190,000	)	$	(4,600,000	)	$	1,364,000	$	-		$	231,389,000
Issuance of common stock for restricted stock awards		-		-		449,373		-		-			-			-			-		-			-
Stock-based compensation:
Options		-		-		-		-		1,794,000			-			-			-		-			1,794,000
Restricted stock awards		-		-		-		-		2,312,000			-			-			-		-			2,312,000
Issuance of stock options at Gresham Worldwide		-		-		-		-		-			-			-			42,000		-			42,000
Issuance of common stock for cash		-		-		6,737,585		7,000		16,432,000			-			-			-		-			16,439,000
Financing cost in connection with sales of common stock		-		-		-		-		(411,000	)		-			-			-		-			(411,000	)
Adjustment to treasury stock for holdings in investment partnerships		-		-		-		-		-			-			-			-		(2,773,000	)		(2,773,000	)
Comprehensive loss:
Net loss		-		-		-		-		-			(42,870,000	)		-			-		-			(42,870,000	)
Preferred dividends		-		-		-		-		-			(4,000	)		-			-		-			(4,000	)
Net unrealized gain on derivatives in related party		-		-		-		-		-			-			(4,849,000	)		-		-			(4,849,000	)
Foreign currency translation adjustments		-		-		-		-		-			-			(182,000	)		-		-			(182,000	)
Net income attributable to non-controlling interest		-		-		-		-		-			-			-			96,000		-			96,000
Other		-		-		-		-		-			(2,000	)		-			-		-			(2,000	)
BALANCES, September 30, 2021		132,040	$	-		63,346,921	$	63,000	$	331,886,000		$	(120,066,000	)	$	(9,631,000	)	$	1,502,000	$	(2,773,000	)	$	200,981,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F- 5

BITNILE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

Nine Months Ended September 30, 2022

															Accumulated
	Series A, B & D								Additional						Other			Non-						Total
	Preferred Stock				Common Stock				Paid-In			Accumulated			Comprehensive			Controlling			Treasury			Stockholders’
	Shares		Amount		Shares		Amount		Capital			Deficit			Loss			Interest			Stock			Equity
BALANCES, January 1, 2022		132,040	$	-		84,344,607	$	84,000	$	385,644,000		$	(145,600,000	)	$	(106,000	)	$	1,613,000		$	(13,180,000	)	$	228,455,000
Issuance of common stock for restricted stock awards		-		-		441,879		-		-			-			-			-			-			-
Preferred stock issued		154,928		-		-		-		3,873,000			-			-			-			-			3,873,000
Preferred stock offering costs		-		-		-		-		(602,000	)		-			-			-			-			(602,000	)
Stock-based compensation										5,190,000			-			-			556,000			-			5,746,000
Issuance of Gresham Worldwide common stock for GIGA acquisition		-		-		-		-		1,669,000			-			-			-			-			1,669,000
Issuance of common stock for cash		-		-		256,660,496		257,000		167,726,000			-			-			-			-			167,983,000
Financing cost in connection with sales of common stock		-		-		-		-		(4,103,000	)		-			-			-			-			(4,103,000	)
Increase in ownership interest of subsidiary		-		-		-		-		(1,980,000	)		-			-			(1,921,000	)		-			(3,901,000	)
Non-controlling interest from AVLP acquisition		-		-		-		-		-			-			-			6,738,000			-			6,738,000
Non-controlling interest from SMC acquisition		-		-		-		-		-			-			-			10,336,000			-			10,336,000
Non-controlling interest from GIGA acquisition		-		-		-		-		-			-			-			2,735,000			-			2,735,000
Purchase of treasury stock - Ault Alpha		-		-		-		-		-			-			-			-			(15,607,000	)		(15,607,000	)
Net loss		-		-		-		-		-			(61,807,000	)		-			-			-			(61,807,000	)
Preferred dividends				-		-		-		-			(239,000	)		-			-			-			(239,000	)
Foreign currency translation adjustments		-		-		-		-		-			-			(1,452,000	)		-			-			(1,452,000	)
Net loss attributable to non-controlling interest		-		-		-		-		-			-			-			(1,061,000	)		-			(1,061,000	)
Other		-		-		-		-		1,000			(1,000	)		1,000			-			(1,000	)		-
BALANCES, September 30, 2022		286,968	$	-		341,446,982	$	341,000	$	557,418,000		$	(207,647,000	)	$	(1,557,000	)	$	18,996,000		$	(28,788,000	)	$	338,763,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F- 6

BITNILE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

Nine Months Ended September 30, 2021


	Series A & B								Additional						Other								Total
	Preferred Stock				Common Stock				Paid-In			Accumulated			Comprehensive			Non-Controlling		Treasury			Stockholders’
	Shares		Amount		Shares		Amount		Capital			Deficit			Loss			Interest		Stock			Equity

BALANCES, January 1, 2021		132,040	$	-		27,753,562	$	28,000	$	171,396,000		$	(121,396,000	)	$	(1,718,000	)	$	822,000	$	-		$	49,132,000
Issuance of common stock for restricted stock awards		-		-		449,373		-		-			-			-			-		-			-
Stock-based compensation:
Options		-		-		-		-		1,833,000			-			-			-		-			1,833,000
Restricted stock awards		-		-		-		-		2,312,000			-			-			-		-			2,312,000
Issuance of stock options at Gresham Worldwide		-		-		-		-		-			-			-			587,000		-			587,000
Issuance of common stock for cash		-		-		34,684,910		35,000		160,448,000			-			-			-		-			160,483,000
Financing cost in connection with sales of common stock		-		-		-		-		(4,952,000	)		-			-			-		-			(4,952,000	)
Adjustment to treasury stock for holdings in investment partnerships		-		-		-		-		-			-			-			-		(2,773,000	)		(2,773,000	)
Issuance of common stock for conversion of convertible notes payable		-		-		183,214		-		449,000			-			-			-		-			449,000
Issuance of common stock for conversion of convertible notes payable, related party		-		-		275,862		-		400,000			-			-			-		-			400,000
Comprehensive loss:																			-		-
Net income		-		-		-		-		-			1,346,000			-			-		-			1,346,000
Preferred dividends				-		-		-		-			(13,000	)		-			-		-			(13,000	)
Net unrealized loss on derivatives in related party		-		-		-		-		-			-			(7,773,000	)		-		-			(7,773,000	)
Foreign currency translation adjustments		-		-		-		-		-			-			(141,000	)		-		-			(141,000	)
Net income attributable to non-controlling interest		-		-		-		-		-			-			-			93,000		-			93,000
Other		-		-		-		-		-			(3,000	)		1,000			-		-			(2,000	)
BALANCES, September 30, 2021		132,040	$	-		63,346,921	$	63,000	$	331,886,000		$	(120,066,000	)	$	(9,631,000	)	$	1,502,000	$	(2,773,000	)	$	200,981,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F- 7

BITNILE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the Nine Months Ended September 30,
	2022			2021
Cash flows from operating activities:
Net (loss) income	$	(62,868,000	)	$	1,439,000
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization		11,977,000			1,713,000
Interest expense – debt discount		26,958,000			61,000
Gain on extinguishment of debt		-			(929,000	)
Change in fair value of warrant liability		(917,000	)		(259,000	)
Accretion of original issue discount on notes receivable – related party		-			(4,213,000	)
Accretion of original issue discount on notes receivable		(618,000	)		(366,000	)
Increase in accrued interest on notes receivable – related party		(148,000	)		(119,000	)
Stock-based compensation		5,746,000			4,732,000
Impairment of deposit due to vendor bankruptcy filing		2,000,000			-
Impairment of cryptocurrencies		2,930,000			-
Realized gains on sale of marketable securities		(19,194,000	)		(15,154,000	)
Unrealized losses on marketable securities		16,937,000			6,353,000
Unrealized losses (gains) on investments in common stock, related parties		5,676,000			(6,150,000	)
Unrealized gains on equity securities		(32,949,000	)		(2,795,000	)
Loss from investment in unconsolidated entity		924,000			-
Loss on remeasurement of investment in unconsolidated entity		2,700,000			-
Changes in operating assets and liabilities:
Marketable equity securities		68,532,000			(34,196,000	)
Accounts receivable		(3,022,000	)		(1,270,000	)
Accrued revenue		(109,000	)		(166,000	)
Inventories		(5,867,000	)		(492,000	)
Prepaid expenses and other current assets		1,780,000			(5,155,000	)
Digital currencies		(12,227,000	)		-
Other assets		(2,944,000	)		(407,000	)
Accounts payable and accrued expenses		8,974,000			(1,082,000	)
Other current liabilities		-			2,210,000
Lease liabilities		(1,334,000	)		(666,000	)
Net cash provided by (used in) operating activities		12,937,000			(56,911,000	)
Cash flows from investing activities:
Purchase of property and equipment		(84,500,000	)		(28,145,000	)
Investment in promissory notes and other, related parties		(2,200,000	)		(4,994,000	)
Investments in common stock and warrants, related parties		(4,840,000	)		(19,590,000	)
Investment in real property, related party		-			(2,670,000	)
Proceeds from sale of investment in real property, related party		-			2,670,000
Purchase of SMC, net of cash received		(8,239,000	)		-
Purchase of GIGA, net of cash received		(3,687,000	)		-
Cash received upon acquisition of AVLP		1,245,000			-
Acquisition of non-controlling interests		(3,901,000	)		-
Purchase of marketable equity securities		(1,981,000	)		(2,144,000	)
Sales of marketable equity securities		11,748,000			430,000
Investments in loans receivable		(7,081,000	)		-
Principal payments on loans receivable		10,525,000			-
Sale of digital currencies		8,952,000			-
Investments in equity securities		(22,449,000	)		(14,287,000	)
Net cash used in investing activities		(106,408,000	)		(68,730,000	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F- 8

BITNILE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited)


	For the Nine Months Ended September 30,
	2022			2021
Cash flows from financing activities:
Gross proceeds from sales of common stock	$	167,983,000		$	160,483,000
Financing cost in connection with sales of common stock		(4,103,000	)		(4,952,000	)
Proceeds from sales of preferred stock		3,873,000			-
Financing cost in connection with sales of preferred stock		(602,000	)		-
Proceeds from notes payable		18,565,000			724,000
Repayment of margin accounts		(16,111,000	)		-
Payments on notes payable		(67,698,000	)		(2,263,000	)
Payments of preferred dividends		(239,000	)		(13,000	)
Purchase of treasury stock		(15,607,000	)		(2,773,000	)
Payments on revolving credit facilities, net		-			(125,000	)
Net cash provided by financing activities		86,061,000			151,081,000

Effect of exchange rate changes on cash and cash equivalents		920,000			(73,000	)

Net (decrease) increase in cash and cash equivalents and restricted cash		(6,490,000	)		25,367,000

Cash and cash equivalents and restricted cash at beginning of period		21,233,000			18,680,000

Cash and cash equivalents and restricted cash at end of period	$	14,743,000		$	44,047,000

Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	5,202,000		$	712,000

Non-cash investing and financing activities:
Conversion of convertible notes payable into shares of common stock	$	-		$	449,000
Settlement of accounts payable with digital currency	$	417,000		$	119,000
Conversion of investment in unconsolidated entity for acquisition of AVLP	$	20,706,000		$	-
Conversion of convertible notes payable, related party into shares of common stock	$	400,000		$	400,000
Conversion of debt and equity securities to marketable securities	$	40,324,000		$	2,656,000
Conversion of loans receivable to marketable securities	$	3,650,000		$	-
Conversion of interest receivable to marketable securities	$	250,000		$	-
Conversion of loans receivable to debt and equity securities	$	-		$	150,000
Recognition of new operating lease right-of-use assets and lease liabilities	$	2,188,000		$	-

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F- 9

1. DESCRIPTION OF BUSINESS

BitNile Holdings, Inc., a Delaware corporation (“BitNile” or the “Company”) was incorporated in September 2017. BitNile is a diversified holding company pursuing growth by acquiring undervalued businesses and disruptive technologies with a global impact. Through its wholly- and majority-owned subsidiaries and strategic investments, the Company owns and operates a data center at which it mines Bitcoin, and provides mission-critical products that support a diverse range of industries, including oil exploration, defense/aerospace, industrial, automotive, medical/biopharma, karaoke audio equipment, hotel operations and textiles. In addition, the Company extends credit to select entrepreneurial businesses through a licensed lending subsidiary. BitNile was founded by Milton “Todd” Ault, III, its Executive Chairman and is led by Mr. Ault, William B. Horne, its Chief Executive Officer and Vice Chairman and Henry Nisser, its President and General Counsel. Together, they constitute the Executive Committee, which manages the day-to-day operations of the Company. All major investment and capital allocation decisions are made for the Company by Mr. Ault and the other members of the Executive Committee. The Company has seven reportable segments:

BitNile, Inc. (“BNI”) – cryptocurrency mining operations;

Ault Alliance, Inc. (“Ault Alliance”) – commercial lending, activist investing, advanced textiles processing technology, media, and digital learning;

Gresham Worldwide, Inc. (“GWW”) – defense solutions;

Imperalis Holding Corp., to be renamed TurnOnGreen, Inc. (“TurnOnGreen”) – commercial electronics solutions;

The Singing Machine Company, Inc. (“SMC”) – karaoke audio equipment;

Ault Global Real Estate Equities, Inc. (“AGREE”) – hotel operations and other commercial real estate holdings; and

Ault Disruptive Technologies Corporation (“Ault Disruptive”) – a special purpose acquisition company (“SPAC”).

2. LIQUIDITY AND FINANCIAL CONDITION

As of September 30, 2022, the Company had cash and cash equivalents of $10.1 million and working capital of $25.7 million. The Company has financed its operations principally through issuances of convertible debt, promissory notes and equity securities. The Company believes its current cash on hand is sufficient to meet its operating and capital requirements for at least the next twelve months from the date these financial statements are issued.

3. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Regulation S-X and do not include all the information and disclosures required by generally accepted accounting principles in the United States of America (“GAAP”). The Company has made estimates and judgments affecting the amounts reported in the Company’s condensed consolidated financial statements and the accompanying notes. The actual results experienced by the Company may differ materially from the Company’s estimates. The condensed consolidated financial information is unaudited but reflects all normal adjustments that are, in the opinion of management, necessary to provide a fair statement of results for the interim periods presented. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2022. The condensed consolidated balance sheet as of December 31, 2021 was derived from the Company’s audited 2021 financial statements contained in the above referenced Form 10-K. Results of the three and nine months ended September 30, 2022, are not necessarily indicative of the results to be expected for the full year ending December 31, 2022.

F- 10

Significant Accounting Policies

Other than as noted below, there have been no material changes to the Company’s significant accounting policies previously disclosed in the 2021 Annual Report.

Business Combination

The Company allocates 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. The purchase price allocation process requires management to make significant estimates and assumptions at the acquisition date with respect to intangible assets. 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. Direct transaction costs associated with the business combination are expensed as incurred. The Company includes the results of operations of the business that it has acquired in its 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 acquirer 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.

Oil and Gas Properties

The Company uses the successful efforts method of accounting for oil and natural gas producing properties, as further defined under Accounting Standards Codification (“ASC”) 932, Extractive Activities - Oil and Natural Gas. Under this method, costs to acquire mineral interests in oil and natural gas properties are capitalized. The costs of non-producing mineral interests and associated acquisition costs are capitalized as unproved properties pending the results of leasing efforts and drilling activities of exploration and production (“E&P”) operators on our interests. As unproved properties are determined to have proved reserves, the related costs are transferred to proved oil and gas properties. Capitalized costs for proved oil and natural gas mineral interests are depleted on a unit-of-production basis over total proved reserves. For depletion of proved oil and gas properties, interests are grouped in a reasonable aggregation of properties with common geological structural features or stratigraphic conditions.

Impairment of Oil and Gas Properties

The Company evaluates its producing properties for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When assessing proved properties for impairment, the Company compares the expected undiscounted future cash flows of the proved properties to the carrying amount of the proved properties to determine recoverability. If the carrying amount of proved properties exceeds the expected undiscounted future cash flows, the carrying amount is written down to the properties’ estimated fair value, which is measured as the present value of the expected future cash flows of such properties. The factors used to determine fair value include estimates of proved reserves, future commodity prices, timing of future production, and a risk-adjusted discount rate. The proved property impairment test is primarily impacted by future commodity prices, changes in estimated reserve quantities, estimates of future production, overall proved property balances, and depletion expense. If pricing conditions decline or are depressed, or if there is a negative impact on one or more of the other components of the calculation, we may incur proved property impairments in future periods.

Unproved oil and gas properties are assessed periodically for impairment of value, and a loss is recognized at the time of impairment by charging capitalized costs to expense. Impairment is assessed when facts and circumstances indicate that the carrying value may not be recoverable, at which point an impairment loss is recognized to the extent the carrying value exceeds the estimated recoverable value. Factors used in the assessment include but are not limited to commodity price outlooks and current and future operator activity in the respective basins. The Company recognized no impairment of unproved properties for the three and nine months ended September 30, 2022 and 2021.

Reclassifications

Certain prior period amounts have been reclassified for comparative purposes to conform to the current-period financial statement presentation. These reclassifications had no effect on previously reported results of operations.

F- 11

Recently Adopted Accounting Standards

In May 2021, the Financial Accountings Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-04, “Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815- 40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.” The guidance became effective for the Company on January 1, 2022. The Company adopted the guidance on January 1, 2022, and has concluded the adoption did not have a material impact on its unaudited condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses,” (“ASU No. 2016-13”) to improve information on credit losses for financial assets and net investment in leases that are not accounted for at fair value through net income. ASU 2016-13 replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses. This guidance is effective for the Company beginning on January 1, 2023, with early adoption permitted. The Company does not expect that the adoption of this standard will have a significant impact on its condensed consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, “Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)-Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. ASU 2020-06 also simplifies the diluted net income per share calculation in certain areas. The amendments in ASU 2020-06 are effective for smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Effective January 1, 2022, the Company early adopted ASU 2020-06 using the modified retrospective approach, which resulted in no impact on its condensed consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, “Revenue from Contracts with Customers.” The guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. The guidance should be applied prospectively to acquisitions occurring on or after the effective date. The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. The Company is currently evaluating this guidance to determine the impact it may have on its condensed consolidated financial statements.

F- 12

4. REVENUE DISAGGREGATION

The following tables summarize disaggregated customer contract revenues and the source of the revenue for the three and nine months ended September 30, 2022 and 2021. Revenues from lending and trading activities included in consolidated revenues were primarily interest, dividend and other investment income, which are not considered to be revenues from contracts with customers under GAAP.

The Company’s disaggregated revenues consisted of the following for the three months ended September 30, 2022:

	Three months ended September 30, 2022
	GWW		TurnOn Green		Ault Alliance		SMC		BNI		AGREE		Total
Primary Geographical Markets
North America	$	2,472,000	$	1,428,000	$	-	$	16,138,000	$	4,146,000	$	5,513,000	$	29,697,000
Europe		2,288,000		32,000		201,000		306,000		-		-		2,827,000
Middle East and other		3,022,000		202,000		-		670,000		-		-		3,894,000
Revenue from contracts with customers		7,782,000		1,662,000		201,000		17,114,000		4,146,000		5,513,000		36,418,000
Revenue, lending and trading activities (North America)		-		-		13,360,000		-		-		-		13,360,000
Total revenue	$	7,782,000	$	1,662,000	$	13,561,000	$	17,114,000	$	4,146,000	$	5,513,000	$	49,778,000

Major Goods or Services
Power supply units	$	2,799,000	$	1,480,000	$	-	$	-	$	-	$	-	$	4,279,000
Digital currency mining, net		-		-		-		-		3,874,000		-		3,874,000
Hotel operations		-		-		-		-		-		5,513,000		5,513,000
Karaoke machines and related		-		-		-		17,114,000		-		-		17,114,000
Other		4,983,000		182,000		201,000		-		272,000		-		5,638,000
Revenue from contracts with customers		7,782,000		1,662,000		201,000		17,114,000		4,146,000		5,513,000		36,418,000
Revenue, lending and trading activities		-		-		13,360,000		-		-		-		13,360,000
Total revenue	$	7,782,000	$	1,662,000	$	13,561,000	$	17,114,000	$	4,146,000	$	5,513,000	$	49,778,000

Timing of Revenue Recognition
Goods transferred at a point in time	$	5,821,000	$	1,662,000	$	201,000	$	17,114,000	$	4,146,000	$	5,513,000	$	34,457,000
Services transferred over time		1,961,000		-		-		-		-		-		1,961,000
Revenue from contracts with customers	$	7,782,000	$	1,662,000	$	201,000	$	17,114,000	$	4,146,000	$	5,513,000	$	36,418,000

The Company’s disaggregated revenues consisted of the following for the nine months ended September 30, 2022:

	Nine months ended September 30, 2022
	GWW		TurnOn Green		Ault Alliance		SMC		BNI		AGREE		Total
Primary Geographical Markets
North America	$	5,094,000	$	3,262,000	$	19,000	$	16,138,000	$	12,220,000	$	12,809,000	$	49,542,000
Europe		7,007,000		79,000		201,000		306,000		-		-		7,593,000
Middle East and other		9,429,000		512,000		-		670,000		-		-		10,611,000
Revenue from contracts with customers		21,530,000		3,853,000		220,000		17,114,000		12,220,000		12,809,000		67,746,000
Revenue, lending and trading activities (North America)		-		-		32,224,000		-		-		-		32,224,000
Total revenue	$	21,530,000	$	3,853,000	$	32,444,000	$	17,114,000	$	12,220,000	$	12,809,000	$	99,970,000

Major Goods or Services
Power supply units	$	6,928,000	$	3,592,000	$	-	$	-	$	-	$	-	$	10,520,000
Healthcare diagnostic systems		2,285,000		-		-		-		-		-		2,285,000
Defense systems		6,842,000		-		-		-		-		-		6,842,000
Digital currency mining		-		-		-		-		11,398,000		-		11,398,000
Hotel operations		-		-		-		-		-		12,809,000		12,809,000
Karaoke machines and related		-		-		-		17,114,000		-		-		17,114,000
Other		5,475,000		261,000		220,000		-		822,000		-		6,778,000
Revenue from contracts with customers		21,530,000		3,853,000		220,000		17,114,000		12,220,000		12,809,000		67,746,000
Revenue, lending and trading activities		-		-		32,224,000		-		-		-		32,224,000
Total revenue	$	21,530,000	$	3,853,000	$	32,444,000	$	17,114,000	$	12,220,000	$	12,809,000	$	99,970,000

Timing of Revenue Recognition
Goods transferred at a point in time	$	12,934,000	$	3,853,000	$	220,000	$	17,114,000	$	12,220,000	$	12,809,000	$	59,150,000
Services transferred over time		8,596,000		-		-		-		-		-		8,596,000
Revenue from contracts with customers	$	21,530,000	$	3,853,000	$	220,000	$	17,114,000	$	12,220,000	$	12,809,000	$	67,746,000

F- 13

The Company’s disaggregated revenues consisted of the following for the three months ended September 30, 2021:

	Three Months ended September 30, 2021
	GWW		TurnOnGreen			Ault Alliance			Total
Primary Geographical Markets
North America	$	1,415,000	$	1,103,000		$	608,000		$	3,126,000
Europe		1,848,000		(97,000	)		-			1,751,000
Middle East		2,949,000		-			-			2,949,000
Other		161,000		88,000			-			249,000
Revenue from contracts with customers		6,373,000		1,094,000			608,000			8,075,000
Revenue, lending and trading activities (North America)		-		-			(38,869,000	)		(38,869,000	)
Total revenue	$	6,373,000	$	1,094,000		$	(38,261,000	)	$	(30,794,000	)
Major Goods
Power supply units	$	1,256,000	$	1,094,000		$	-		$	2,350,000
Defense systems		2,940,000		-			-			2,940,000
Digital currency mining		-		-			272,000			272,000
Other		2,177,000		-			336,000			2,513,000
Revenue from contracts with customers		6,373,000		1,094,000			608,000			8,075,000
Revenue, lending and trading activities		-		-			(38,869,000	)		(38,869,000	)
Total revenue	$	6,373,000	$	1,094,000		$	(38,261,000	)	$	(30,794,000	)

Timing of Revenue Recognition
Goods transferred at a point in time	$	3,336,000	$	1,094,000		$	607,000		$	5,037,000
Services transferred over time		3,037,000		-			-			3,037,000
Revenue from contracts with customers	$	6,373,000	$	1,094,000		$	607,000		$	8,074,000

The Company’s disaggregated revenues consisted of the following for the nine months ended September 30, 2021:

	Nine Months Ended September 30, 2021
	GWW		TurnOnGreen		Ault Alliance		Total
Primary Geographical Markets
North America	$	5,444,000	$	3,600,000	$	1,459,000	$	10,503,000
Europe		5,600,000		318,000		—		5,918,000
Middle East		7,845,000		—		—		7,845,000
Other		309,000		390,000		—		699,000
Revenue from contracts with customers		19,198,000		4,308,000		1,459,000		24,965,000
Revenue, lending and trading activities (North America)						19,615,000		19,615,000
Total revenue	$	19,198,000	$	4,308,000	$	21,074,000	$	44,580,000
Major Goods
Power supply units	$	1,734,000	$	4,308,000	$	—	$	6,042,000
Power supply systems		5,253,000		—		—		5,253,000
Defense systems		7,731,000		—		—		7,731,000
Digital currency mining						693,000		693,000
Other		4,480,000		—		766,000		5,246,000
Revenue from contracts with customers		19,198,000		4,308,000		1,459,000		24,965,000
Revenue, lending and trading activities						19,615,000		19,615,000
Total revenue	$	19,198,000	$	4,308,000	$	21,074,000	$	44,580,000

Timing of Revenue Recognition
Goods transferred at a point in time	$	10,957,000	$	4,308,000	$	1,459,000	$	16,724,000
Services transferred over time		8,241,000		—		—		8,241,000
Revenue from contracts with customers	$	19,198,000	$	4,308,000	$	1,459,000	$	24,965,000

F- 14

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy:

	Fair Value Measurement at September 30, 2022
	Total		Level 1		Level 2		Level 3
Investment in common stock of Alzamend Neuro, Inc. (“Alzamend”) – a related party	$	12,394,000	$	12,394,000	$	-	$	-
Investments in marketable equity securities		8,561,000		8,561,000		-		-
Cash and marketable securities held in trust account		117,421,000		117,421,000		-		-
Investments in other equity securities		3,916,000		-		-		3,916,000
Total assets measured at fair value	$	142,292,000	$	138,376,000	$	-	$	3,916,000

	Fair Value Measurement at December 31, 2021
	Total		Level 1		Level 2		Level 3
Investment in common stock of Alzamend – a related party		13,230,000		13,230,000		-		-
Investments in marketable equity securities		40,380,000		40,380,000		-		-
Cash and marketable securities held in trust account		116,725,000		116,725,000		-		-
Investments in other equity securities		9,215,000		-		-		9,215,000
Total assets measured at fair value	$	179,550,000	$	170,335,000	$	-	$	9,215,000

The Company assesses the inputs used to measure fair value using the three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the market. For investments where little or no public market exists, management’s determination of fair value is based on the best available information which may incorporate management’s own assumptions and involves a significant degree of judgment, taking into consideration various factors including earnings history, financial condition, recent sales prices of the issuer’s securities and liquidity risks.

The following table summarizes the changes in investments in other equity securities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) for the nine months ended September 30, 2022:

	Investments in other equity securities
Balance at January 1, 2022	$	9,215,000
Investment in preferred stock		6,495,000
Change in fair value of financial instruments		25,850,000
Conversion to marketable securities		(37,644,000	)
Balance at September 30, 2022	$	3,916,000

Other equity securities also include investments in entities that do not have a readily determinable fair value and do not report net asset value per share. These investments are accounted for using a measurement alternative under which they are measured at cost and adjusted for observable price changes and impairments. Observable price changes result from, among other things, equity transactions for the same issuer executed during the reporting period, including subsequent equity offerings or other reported equity transactions related to the same issuer. For these transactions to be considered observable price changes of the same issuer, the Company evaluates whether these transactions have similar rights and obligations, including voting rights, distribution preferences, conversion rights, and other factors, to the investments the Company holds. Any investments adjusted to their fair value by applying the measurement alternative are disclosed as nonrecurring fair value measurements, including the level in the fair value hierarchy that was used.

F- 15

As of September 30, 2022 and December 31, 2021, investments in other equity securities valued using a measurement alternative of $41.6 million and $21.4 million, respectively, are included in other equity securities in the accompanying condensed consolidated balance sheets.

The following table presents information on certain assets measured at fair value on a recurring basis by level within the fair value hierarchy as of September 30, 2022 and December 31, 2021. There were no observable price changes or indicators of impairment for these investments during the nine months ended September 30, 2022.

	Fair Value Measurement Using
	Total		Quoted prices in active markets for identical assets (Level 1)		Other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
As of September 30, 2022
Investments in other equity securities that do not report net asset value	$	41,641,000	$	-	$	-	$	41,641,000

	Fair Value Measurement Using
	Total		Quoted prices in active markets for identical assets (Level 1)		Other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
As of December 31, 2021
Investments in other equity securities that do not report net asset value	$	21,241,000	$	-	$	-	$	21,241,000

6. MARKETABLE EQUITY SECURITIES

Marketable equity securities with readily determinable market prices consisted of the following as of September 30, 2022 and December 31, 2021:

	Marketable equity securities at September 30, 2022
			Gross unrealized		Gross unrealized
	Cost		gains		losses			Fair value
Common shares	$	16,182,000	$	281,000	$	(7,902,000	)	$	8,561,000

	Marketable equity securities at December 31, 2021
			Gross unrealized		Gross unrealized
	Cost		gains		losses			Fair value
Common shares	$	53,475,000	$	32,000	$	(13,127,000	)	$	40,380,000

The Company’s investment in marketable equity securities are revalued on each balance sheet date.

F- 16

7. PROPERTY AND EQUIPMENT, NET

At September 30, 2022 and December 31, 2021, property and equipment consisted of:

	September 30, 2022			December 31, 2021
Cryptocurrency machines and related equipment	$	131,141,000		$	10,763,000
Computer, software and related equipment		20,315,000			8,884,000
Office furniture and equipment		2,750,000			702,000
Oil and natural gas properties, unproved properties		972,000			-
Land		25,646,000			25,696,000
Building and improvements		76,012,000			68,959,000
		256,836,000			115,004,000
Accumulated depreciation and amortization		(14,180,000	)		(5,096,000	)
Property and equipment placed in service, net		242,656,000			109,908,000
Deposits on cryptocurrency machines		11,328,000			64,117,000
Property and equipment, net	$	253,984,000		$	174,025,000

Summary of depreciation expense:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Depreciation expense	$	3,942,000	$	265,000	$	10,229,000	$	711,000

Ault Energy Oil and Gas Properties

On July 11, 2022, the Company announced the formation of Ault Energy, LLC (“Ault Energy”), as an indirect wholly-owned subsidiary of the Company through Ault Alliance. Ault Energy is partnering with White River Holdings Corp. (“White River”), a wholly owned subsidiary of Ecoark Holdings, Inc. (“Ecoark”), on drilling projects across 30,000 acres in Texas, Louisiana and Mississippi. Ault Energy, as the designee of Ault Lending, LLC (“Ault Lending”), has the right to purchase up to 25%, or such higher percentages at the discretion of White River, in various drilling projects of White River. In August 2022, Ault Energy purchased a 40% working interest of the Harry O’Neal 20-9 No.1 drilling project in Mississippi for $972,000 included in property and equipment. The Company has not recorded any depletion as the Harry O’Neal 20-9 No.1 drilling project was considered an unproved property as of September 30, 2022.

Compute North Bankruptcy

On September 22, 2022, Compute North Holdings, Inc. (along with its affiliated debtors, collectively, “Compute North”), 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.). At the time of Compute North’s bankruptcy filing, BitNile had 6,572 Bitcoin miners with a carrying amount of $38.0 million, classified within property and equipment on the consolidated balance sheet, with Compute North at the Wolf Hollow hosting facility in Texas. Additionally, the Company has a deposit of approximately $2.0 million with Compute North for services yet to be performed by Compute North. The ultimate outcome of the bankruptcy process, and its impact on the deposit held by the Company, remains to be determined. The Company assessed this financial exposure and recorded an impairment of the deposit totaling $2 million during the three months ended September 30, 2022. The Company has inspected the Bitcoin miners that are installed at the hosting facility in Texas. No impairment on the mining equipment was recorded as of September 30, 2022. The Company has retained counsel to assist in this matter.

8. BUSINESS COMBINATIONS

Avalanche International Corp. (“AVLP”) Acquisition

On June 1, 2022, the Company converted the principal amount under the convertible promissory notes issued to it by AVLP and accrued unpaid interest into common stock of AVLP. The Company converted $20.0 million in 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 its common stock ownership of AVLP from less than 20% to approximately 92%.

Prior to the conversion of the convertible promissory notes, the Company accounted for its investment in AVLP as an investment in an unconsolidated entity under the equity method of accounting. In connection with the conversion of the convertible promissory notes, the Company’s consolidated financial statements now include all of the accounts of AVLP, and any significant intercompany balances and transactions have been eliminated in consolidation.

F- 17

The consideration transferred for the Company’s approximate 92% ownership interest in connection with this acquisition aggregated $20.7 million, which represented the fair value of the Company’s holdings in AVLP immediately prior to conversion. The carrying amount of the Company’s holdings in AVLP immediately prior to conversion was $23.4 million, resulting in a $2.7 million loss for the related remeasurement, which was recognized in interest and other income.

The Company estimated the fair values of assets acquired and liabilities assumed using valuation techniques, such as the income, cost and market approaches. The fair values are based on available historical information and on future expectations and assumptions deemed reasonable by management but are inherently uncertain. The income method to measure the fair value of intangible assets, is based on forecasts of the expected future cash flows attributable to the respective assets. Significant estimates and assumptions inherent in the valuations reflected a consideration of other marketplace participants and included the amount and timing of future cash flows (including expected growth rates and profitability), the underlying product or technology life cycles, economic barriers to entry and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and circumstances could affect the accuracy or validity of the estimates and assumptions.

The allocation of the total consideration transferred to the assets acquired, including intangible assets and goodwill, and the liabilities assumed is preliminary and could be revised as a result of additional information obtained due to the finalization of a third-party valuation report, leases and related commitments, tax related matters and contingencies and certain assets and liabilities, including receivables and payables. Amounts will be finalized within the measurement period, which will not exceed one year from the acquisition date. Goodwill represents the excess of the purchase price over the preliminary fair value of identifiable assets acquired and liabilities assumed at the acquisition date and is primarily attributable to the assembled workforce and expected synergies at the time of the acquisition. The goodwill resulting from this acquisition is not tax deductible.

The following table presents the final allocation of the consideration transferred to the assets acquired and liabilities assumed based on their fair values.

	Preliminary allocation
Total purchase consideration	$	20,706,000
Fair value of non-controlling interest		6,738,000
Total consideration	$	27,444,000

Identifiable net liabilities assumed:
Cash	$	1,245,000
Prepaid expenses and other current assets		55,000
Property and equipment		5,057,000
Note receivable		800,000
Accounts payable and accrued expenses		(5,018,000	)
Convertible notes payable, principal		(9,734,000	)
Fair value of embedded derivative		(1,226,000	)
Fair value of bifurcated conversion option		(4,425,000	)
Fair value of bifurcated put option		(200,000	)
Net liabilities assumed		(13,446,000	)
Goodwill	$	40,890,000

The Company consolidates the results of AVLP on a one-month lag, therefore the statements of operations include results for AVLP for the three months ended August 31, 2022.

Overview of SMC Acquisition

Beginning in June 2022, the Company, through its subsidiary Ault Lending, began making open market purchases of SMC common stock. These purchases granted the Company a greater than 20% effective ownership on June 9, 2022, and subsequently, on June 15, 2022, the Company owned more than 50% of the issued and outstanding common stock of SMC. The Company’s ownership of SMC stood at approximately 57% as of September 30, 2022.

As of June 15, 2022 (“Acquisition Date”), 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 the Company’s previously held ownership interest to $10.5 million, based on the trading price of SMC common stock. The Company also recognized non-controlling interest at fair value as of the Acquisition Date in the amount of $10.3 million.

The tradenames and developed technology intangible assets were valued using the relief-from-royalty method. The relief-from-royalty method is one of the methods under the income approach wherein estimates of a company’s earnings attributable to the intangible asset are based on the royalty rate the company would have paid for the use of the asset if it did not own it. Royalty payments are estimated by applying royalty rates between of 0.5% and 1.0% to the prospective revenue attributable to the intangible asset. The resulting annual royalty payments are tax-affected and then discounted to present value.

The Company determined an estimated fair value of customer relationships using an income approach utilizing a discounted cash flow methodology. The analysis included assumptions regarding the development of new businesses and organic growth rates, a discount rate of 12% using a weighted average cost of capital analysis, and capital expenditure requirements associated with any new initiatives developed by SMC. Significant assumptions utilized in the income approach were based on company specific information and projections which are not observable in the market and are therefore considered Level 3 fair value measurements.

The allocation of the total consideration transferred to the assets acquired, including intangible assets and goodwill, and the liabilities assumed, is preliminary and could be revised as a result of additional information obtained due to the finalization of a third-party valuation report, leases and related commitments, tax related matters and contingencies and certain assets and liabilities, including receivables and payables. Amounts will be finalized within the measurement period, which will not exceed one year from the Acquisition Date. The goodwill resulting from this acquisition is not tax deductible.

F- 18

The following table presents the preliminary allocation of the consideration transferred to the assets acquired and liabilities assumed based on their fair values.

	Preliminary Allocation
Total purchase consideration	$	10,517,000
Fair value of non-controlling interest		10,336,000
Total consideration	$	20,853,000

Identifiable net assets acquired:
Cash	$	2,278,000
Accounts receivable		9,891,000
Prepaid expenses and other current assets		673,000
Inventories		12,840,000
Property and equipment, net		529,000
Right-of-use assets		1,073,000
Other assets		83,000
Intangible assets:
Tradenames (19 year estimated useful life)		2,470,000
Customer relationships (16 year estimated useful life)		1,380,000
Proprietary technology (3 year estimated useful life)		600,000
Accounts payable and accrued expenses		(10,052,000	)
Notes payable		(2,972,000	)
Lease liabilities		(1,124,000	)
Net assets acquired		17,669,000
Goodwill	$	3,184,000

Unaudited Pro Forma Financial Information

The following unaudited pro forma consolidated results of operations for the nine months ended September 30, 2022 have been prepared as if the SMC acquisition had occurred on January 1, 2022.

	Nine Months Ended
	September 30, 2022
Total revenues	$	131,609,000
Net loss attributable to BitNile Holdings, Inc.	$	(62,202,000	)

The unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the acquisition been consummated as of that time, nor is it intended to be a projection of future results.

Overview of GIGA acquisition

On September 8, 2022, Giga-tronics Incorporated (“GIGA”) acquired 100% of the capital stock of GWW from the Company in exchange for 2.92 million shares of GIGA’s common stock and 514.8 shares of GIGA’s Series F Convertible Preferred Stock (“Series F”) that are convertible into an aggregate of 3.96 million shares of GIGA’s common stock. GIGA also assumed GWW’s outstanding equity awards representing the right to receive up to 749,626 shares of GIGA’s common stock, on an as-converted basis. The transaction described above resulted in a change of control of GIGA. Assuming the Company was to convert all of the Series F, the common stock owned by the Company after such conversion would result in the Company owning approximately 71.2% of GIGA’s outstanding shares.

F- 19

On September 8, 2022, the Company loaned GIGA $4.25 million by purchasing a convertible note that carries an interest rate of 10% per annum and matures on February 14, 2023. The convertible note between the Company and GIGA is eliminated in consolidation beginning on September 8, 2022. The Company received the right to appoint four members of a seven member GIGA board of directors. These factors contributed to the Company’s determination that GWW be treated as the accounting acquirer.

The Company believes there are synergies between GIGA and GWW. GIGA manufactures specialized electronics equipment for use in both military test and airborne operational applications. GIGA focuses on the design and manufacture of custom microwave products for military airborne, sea, and ground applications as well as the design and manufacture of high-fidelity signal simulation and recording solutions for RADAR and electronic warfare test applications. GIGA’s results of operations subsequent to the acquisition are included in the Company’s GWW defense business segment.

In respect of the above transactions, the acquired assets and assumed liabilities, together with acquired processes and employees, represent a business as defined in ASC 805, Business Combinations. The transactions were accounted for as a reverse acquisition using the acquisition method of accounting with GIGA treated as the legal acquirer and GWW treated as the accounting acquirer. In identifying GWW as the acquiring entity for accounting purposes, GIGA and GWW took into account a number of factors, including the relative voting rights, executive management and the corporate governance structure of the Company. GWW is considered the accounting acquirer since the Company controls the board of directors of GIGA following the transactions and received a 71.2% beneficial ownership interest in GIGA. However, no single factor was the sole determinant in the overall conclusion that GWW is the acquirer for accounting purposes; rather all factors were considered in arriving at such conclusion.

The fair value of the purchase consideration was $9.5 million, consisting of $4.0 million for GIGA’s common stock and prefunded warrants, $0.4 million fair value of vested stock incentives, $3.7 million cash and $1.3 million related to an existing loan agreement between Ault Lending and GIGA, which was deemed settled.

The tradenames and developed technology intangible assets were valued using the relief-from-royalty method. The relief-from-royalty method is one of the methods under the income approach wherein estimates of a company’s earnings attributable to the intangible asset are based on the royalty rate the company would have paid for the use of the asset if it did not own it. Royalty payments are estimated by applying royalty rates between 1.0% and 7.0% to the prospective revenue attributable to the intangible asset. The resulting annual royalty payments are tax-affected and then discounted to present value.

The Company determined an estimated fair value of customer relationships using an income approach utilizing a discounted cash flow methodology. The analysis included assumptions regarding the development of new businesses and organic growth rates, a discount rate of 22% using a weighted average cost of capital analysis, and capital expenditure requirements associated with any new initiatives developed by GIGA. Significant assumptions utilized in the income approach were based on company specific information and projections which are not observable in the market and are therefore considered Level 3 fair value measurements.

The total purchase price to acquire GIGA has been allocated to the assets acquired and assumed liabilities based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill. The goodwill resulting from this acquisition is not tax deductible. The fair value of the acquired assets and assumed liabilities as of the date of acquisition are based on preliminary estimates assisted, in part, by a third-party valuation expert. The estimates are subject to change upon the finalization of appraisals and other valuation analyses, which are expected to be completed no later than one year from the date of acquisition. Although the completion of the valuation activities may result in asset and liability fair values that are different from the preliminary estimates included herein, it is not expected that those differences would alter the understanding of the impact of this transaction on the consolidated financial position and results of operations of the Company.

The preliminary purchase price allocation is as follows:

	Preliminary allocation
Total purchase consideration	$	6,763,000
Fair value of non-controlling interest		2,735,000
Total consideration	$	9,498,000

Identifiable net assets acquired (liabilities assumed):
Cash	$	107,000
Trade accounts receivable		536,000
Inventories		5,180,000
Prepaid expenses		116,000
Accrued revenue		363,000
Property and equipment		331,000
Right-of-use asset		370,000
Other long-term assets		446,000
Intangible assets:
Tradename (12 year estimated useful life)		1,040,000
Developed Technology (8 year estimated useful life)		1,410,000
Existing customer relationships (10-15 year estimated useful life)		3,910,000
Accounts payable		(2,831,000	)
Loans payable, net of discounts and issuance costs		(387,000	)
Accrued payroll and benefits		(1,488,000	)
Lease obligations		(491,000	)
Other current liabilities		(368,000	)
Other non-current liabilities		(17,000	)
Net assets acquired		8,227,000
Goodwill	$	1,271,000

F- 20

9. GOODWILL

The following table summarizes the changes in the Company’s goodwill for the nine months ended September 30, 2022:

	Goodwill
Balance as of January 1, 2022	$	10,090,000
Acquisition of AVLP		40,890,000
Acquisition of SMC		3,184,000
Acquisition of GIGA		1,271,000
Effect of exchange rate changes		(891,000	)
Balance as of September 30, 2022	$	54,544,000

10. INCREASE IN OWNERSHIP INTEREST OF SUBSIDIARIES

On May 12, 2022, BNI closed a $1.8 million membership interest purchase agreement whereby BNI acquired the 30% minority interest of Alliance Cloud Services, LLC (“ACS”) which BNI did not previously own, resulting in ACS becoming a wholly-owned subsidiary of BNI. ACS owns and operates the Company’s Michigan data center, where BNI conducts the Company’s Bitcoin mining operations.

Between June 15, 2022 and September 30, 2022, Ault Lending increased the Company’s ownership interest in SMC through the open market purchase of approximately 274,000 shares for $2.1 million.

11. INVESTMENTS – RELATED PARTIES

Investments in Alzamend and Ault & Company at September 30, 2022 and December 31, 2021, were comprised of the following:

Investment in Promissory Notes, Related Parties

	Interest	Due	September 30,		December 31,
	rate	date	2022		2021
Investment in promissory note of Ault & Company	8%	December 31, 2022	$	2,500,000	$	2,500,000
Accrued interest receivable, Ault & Company				318,000		170,000
Other				-		172,000
Total investment in promissory note, related party			$	2,818,000	$	2,842,000

Investment in Common Stock and Options, Related Parties

	September 30,		December 31,
	2022		2021
Investment in common stock and options of Alzamend	$	12,394,000	$	13,230,000

F- 21

The following table summarizes the changes in the Company’s investments in Alzamend and Ault & Company during the nine months ended September 30, 2022:

	Investment in warrants and common stock of Alzamend			Investment in promissory notes of Ault & Company
Balance at January 1, 2022	$	13,230,000		$	2,842,000
Investment in common stock and options of Alzamend		4,840,000			-
Unrealized loss in common stock of Alzamend		(5,676,000	)		-
Amortization of related party investment		-			(173,000	)
Accrued interest		-			149,000
Balance at September 30, 2022	$	12,394,000		$	2,818,000

Investments in Alzamend Common Stock

The following table summarizes the changes in the Company’s investments in Alzamend common stock during the nine months ended September 30, 2022:

	Shares of		Per Share		Investment in
	Common Stock		Price		Common Stock
Balance at January 1, 2022		6,947,000	$	1.90	$	13,230,000
March 9, 2021 securities purchase agreement^*		2,667,000	$	1.50		4,000,000
Open market purchases after initial public offering		801,000	$	1.05		840,000
Unrealized loss in common stock of Alzamend						(5,676,000	)
Balance at September 30, 2022		10,415,000	$	1.19	$	12,394,000

Pursuant to the March 9, 2021 securities purchase agreement, in aggregate, Alzamend agreed to sell up to 6,666,667 shares of its common stock to Ault Lending for $10.0 million, or $1.50 per share, and issue to Ault Lending warrants to acquire 3,333,334 shares of Alzamend common stock with an exercise price of $3.00 per share. As of December 31, 2021, Ault Lending funded $6.0 million, including the conversion of notes and advances of $0.8 million, and the remaining $4.0 million was funded upon Alzamend achieving certain milestones during the nine months ended September 30, 2022.

12. INVESTMENT IN UNCONSOLIDATED ENTITY – AVLP

Equity Investments in Unconsolidated Entity – AVLP

The Company converted its AVLP convertible promissory note on June 1, 2022 as part of the acquisition of AVLP (see Note 8). Equity investments in the then unconsolidated entity, AVLP, at December 31, 2021, were comprised of the following:

Investment in Promissory Notes

	Interest rate	Due date	December 31, 2021
Investment in convertible promissory note	12%	2022-2026	$	17,799,000
Investment in promissory note – Alpha Fund	8%	June 30, 2022		3,600,000
Accrued interest receivable				2,092,000
Other				600,000
Total investment in promissory notes, gross				24,091,000
Less: provision for loan losses				(2,000,000	)
Total investment in promissory note			$	22,091,000

F- 22

The following table summarizes the changes in the Company’s equity investments in the then unconsolidated entity, AVLP, during the nine months ended September 30, 2022:

	Investment in			Investment in
	warrants and			promissory notes			Total
	common stock			and advances			investment
Balance at January 1, 2022	$	39,000		$	22,091,000		$	22,130,000
Investment in convertible promissory notes		-			2,200,000			2,200,000
Loss from equity investment		(39,000	)		(885,000	)		(924,000	)
Accrued interest		-			143,000			143,000
Loss on remeasurement upon conversion		-			(2,700,000	)		(2,700,000	)
Conversion of AVLP convertible promissory notes		-			(17,040,000	)		(17,040,000	)
Elimination of intercompany debt after conversion		-			(3,809,000	)		(3,809,000	)
Balance at September 30, 2022	$	-		$	-		$

DPW

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