What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-20 compared with 2024-11-19 · 355 added, 645 removed, 102 unchanged (91% of the section changed)

1 unchanged sentence

AND RESULTS OF OPERATIONS

In this quarterly report on Form 10-Q (the “Quarterly Report”),

the “Company,” “Hyperscale Data,” “we,” “us” and “our” refer to Hyperscale

Data, Inc., a Delaware corporation.

Hyperscale Data is a diversified holding company pursuing growth by acquiring undervalued businesses

and disruptive technologies with a global impact.

Through our wholly and majority owned subsidiaries and strategic investments, we own

and operate a data center at which we mine Bitcoin and offer colocation and hosting services for the emerging artificial intelligence

ecosystems and other industries, and provide mission-critical products that support a diverse range of industries, including metaverse

platform, oil exploration, crane services, defense/aerospace, industrial, automotive, medical/biopharma and hotel operations.

we own and operate hotels and extend credit to select entrepreneurial businesses through a licensed lending subsidiary.

In this quarterly report on Form 10-Q (the

“Quarterly Report”), the “Company,” “Hyperscale Data,” “we,” “us” and “our”

refer to Hyperscale Data, Inc., a Delaware corporation.

Hyperscale Data is a diversified holding company pursuing growth by acquiring

undervalued businesses and disruptive technologies with a global impact.

Through our wholly and majority owned subsidiaries and strategic

investments, we own and/or operate data centers at which we mine Bitcoin and offers colocation and hosting services for the emerging artificial

intelligence (“AI”) ecosystems and other industries, and provides products and services that support a diverse range of industries,

including crane rental services, hotel operations, defense, industrial, an AI software platform and a social gaming platform.

we extend credit to select entrepreneurial businesses through a licensed lending subsidiary.

Recent Events and Developments

On December 14, 2023, we, along with our

wholly owned subsidiaries Sentinum, Third Avenue, ACS, BNI Montana, Ault Lending, Ault Aviation and AGREE (collectively with our company,

Sentinum, Third Avenue, ACS, BNI Montana, Ault Lending and Ault Aviation, the “Guarantors”) entered into a Loan and Guaranty

Agreement (the “2023 Loan Agreement”) with institutional lenders, pursuant to which Ault & Company, Inc.

& Company”), a related party, borrowed $36 million and issued secured promissory notes to the lenders in the aggregate amount

of $38.9 million (collectively, the “Secured Notes”;

and the transaction, the “Loan”).

The 2023 Loan Agreement

was amended as of April 15, 2024.

Pursuant to the 2023 Loan Agreement, the

Guarantors, as well as Milton C.

Ault, III, our Executive Chairman and the Chief Executive Officer of Ault & Company, agreed to act

as guarantors for repayment of the Secured Notes.

In addition, certain Guarantors entered into various agreements as collateral in support

of the guarantee of the Secured Notes, including (i) a security agreement by Sentinum, pursuant to which Sentinum granted to the Lenders

a security interest in (a) 19,226 Antminers (the “Miners”), (b) all of the crypto currency mined or otherwise generated from

the Miners and (c) the membership interests of ACS, (ii) a security agreement by the Company, Ault Lending, BNI Montana and AGREE, pursuant

to which those entities granted to the lenders a security interest in substantially all of their assets, as well as a pledge of equity

interests in Ault Aviation, AGREE, Sentinum, Third Avenue, Ault Energy, LLC, our wholly owned subsidiary (“Ault Energy”),

ADTC, Eco Pack, and Circle 8 Holdco, (iii) a mortgage and security agreement by Third Avenue on the real estate property owned by Third

Avenue in St.

Petersburg, Florida (the “Florida Property”), (iv) a future advance mortgage by ACS on the real estate property

owned by ACS in Dowagiac, Michigan (the “Michigan Property”), (v) an aircraft mortgage and security agreement by Ault Aviation

on a private aircraft owned by Ault Aviation (the “Aircraft”), and (vi) deposit account control agreements over certain bank

accounts held by certain of our subsidiaries.

In addition, pursuant to the 2023 Loan Agreement,

we agreed to establish a segregated deposit account (the “Segregated Account”), which would be used as a further guarantee

of repayment of the Secured Notes.

$3.5 million of cash was paid into the Segregated Account on the closing date.

We are required to have

the minimum balance in the Segregated Account be not less than $7 million, $15 million, $20 million and $27.5 million on the five-month,

nine-month, one-year and two-year anniversaries of the closing date, respectively.

In addition, starting on March 31, 2024, we were required

to deposit $0.3 million monthly into the Segregated Account, which increases to $0.4 million monthly starting March 31, 2025.

we agreed to deposit into the Segregated Account, (i) up to the first $7 million of net proceeds, if any, from the sale of the Hilton

Garden Inn in Madison West, the Residence Inn in Madison West, the Courtyard in Madison West, and the Hilton Garden Inn in Rockford;

50% of cash dividends (on a per dividend basis) received from Circle 8 on or after June 30, 2024;

(iii) 30% of the net proceeds from any

bond offerings we conduct, which shall not exceed $9 million in the aggregate;

and (iv) 25% of the net proceeds from cash flows, collections

and revenues from loans or other investments made by Ault Lending (including but not limited to sales of loans or investments, dividends,

interest payments and amortization payments), which shall not exceed $5 million in the aggregate.

In addition, if we decide to sell certain

assets, we further agreed to deposit funds into the Segregated Account from the sale of those assets, including, (i) $15 million from

the sale of the Florida Property, (ii) $11 million from the sale of the Aircraft, (iii) $17 million from the sale of the Michigan Property,

(iv) $350 per Miner, subject to a de minimis threshold of $1 million, and (v) $10 million from the sale of Circle 8.

On May 15, 2024, the 2023 Loan Agreement

was amended to extend the date by which we were required to have a specified minimum balance in the Segregated Account from May 15, 2024

to July 22, 2024 and the specified minimum balance to be in the account as of such date was increased from $7 million to $7.4 million.

On July 25, 2024, the 2023 Loan Agreement was further amended to extend the date by which we were required to have a specified minimum

balance in the Segregated Account from July 22, 2024 to July 31, 2024 and to require that we deposit $600,000 in the Segregated account

on July 25, 2024.

On January 12, 2024, pursuant to the approval

provided by our stockholders at the annual meeting of stockholders, we filed an Amendment to our Certificate of Incorporation with the

State of Delaware to effectuate a reverse stock split of our common stock affecting both the authorized and issued and outstanding number

of such shares by a ratio of one-for-twenty-five.

The reverse stock split became effective on January 16, 2024.

All share amounts in this

report have been updated to reflect the reverse stock split.

On January 31, 2024, Ault Lending entered

into a securities purchase agreement (the “January 2024 SPA”) with Alzamend Neuro, Inc.

(“Alzamend”), pursuant

to which Alzamend agreed to sell, in one or more closings, to Ault Lending up to 6,000 shares of Series B convertible preferred stock

(the “ALZN Series B Preferred”) and warrants to purchase up to 6.0 million shares of Alzamend common stock (the “ALZN

Series B Warrants”) for a total purchase price of up to $6.0 million.

On January 31, 2024, Ault Lending purchased 1,220 shares

of ALZN Series B Preferred and warrants to purchase 122,000 shares for a total purchase price of $1.22 million.

The purchase price

was paid by the cancellation of $1.22 million of cash advances made by Ault Lending to Alzamend between November 9, 2023 and January 31,

Each share of ALZN Series B Preferred has a stated value of $1.00 per share and is convertible into a number of shares of Alzamend’s

common stock determined by dividing the stated value by $10.00, subject to adjustment in the event of an issuance of Alzamend common stock

at a price per share lower than the conversion price, as well as upon customary stock splits, stock dividends, combinations or similar

The ALZN Series B Warrants are exercisable on the first business day after the six-month anniversary of issuance

and have a five-year term, expiring on the fifth anniversary of the initial exercise date.

The exercise price of the ALZN Series

B Warrants is $12.00, subject to adjustment in the event of an issuance of Alzamend common stock at a price per share lower

than the conversion price, as well as upon customary stock splits, stock dividends, combinations or similar events.

On each of March 7, 2024, March 8, 2024,

March 18, 2024, March 19, 2024 and April 17, 2024 pursuant to the securities purchase agreement we entered into with Ault & Company,

dated as of November 6, 2023 (the “November 2023 SPA”), we sold to Ault & Company 500 shares of Series C Convertible

Preferred Stock and warrants to purchase 147,820 shares of common stock to the Purchaser, for a purchase price

of $0.5 million.

On August 2, 2024, pursuant to the November 2023 SPA, we sold to Ault & Company 300 shares of Series

C Convertible Preferred Stock and warrants to purchase 88,692 shares of common stock to the Purchaser, for

a purchase price of $500,000.

As of the date of this report, Ault & Company has purchased an aggregate of 44,300 shares

of Series C Convertible Preferred Stock and warrants to purchase an aggregate of 13,096,823 shares of common stock, for an aggregate

purchase price of $44.3 million.

On March 11, 2024, we entered into a note

purchase agreement with two institutional investors (the “Buyers”) pursuant to which the Buyers purchased from the Company,

on March 12, 2024 in a registered direct offering to the Buyers an aggregate of $2.0 million principal face amount convertible promissory

notes (the “Notes”).

The Notes were sold to the Buyers for an aggregate purchase price of $1.8 million, which reflects

an original issue discount of $0.2 million.

The Notes accrue interest at the rate of 6% per annum, unless an event of default (as

defined in the Notes) occurs, at which time the Notes would accrue interest at 12% per annum.

The Notes were subsequently converted in

full into shares of common stock at a conversion price of $0.35 per share.

On March 26, 2024, pursuant to the January

2024 SPA, Ault Lending purchased 780 shares of ALZN Series B Preferred Stock and ALZN Series B Warrants to purchase

78,000 shares of Alzamend common, for a purchase price of $0.8 million.

As of the date of this report, Ault Lending

has purchased an aggregate of 2,000 shares of ALZN Series B Preferred and ALZN Series B Warrants to purchase an aggregate of

0.2 million shares of Alzamend common stock, for an aggregate purchase price of $2.0 million.

On March 25, 2024 we entered into an amendment

to the (i) November 2023 SPA, (ii) the related Certificate of Designation of Preferences, Rights and Limitations of the Series C

Preferred Convertible Stock and (iii) the number of Series C Warrants, to provide for (A) an increase in the dollar amount of the Series

C Convertible Preferred Stock that Ault & Company may purchase from us from $50.0 million to $75.0 million and (B) extended the

date of on which the final closing may occur to June 30, 2024, subject to Ault & Company’s ability to further extended such

date for ninety days.

On April 15, 2024, we established a record

date for our final distribution of securities of TurnOnGreen.

Stockholders as of this date were entitled to 0.83 shares of TurnOnGreen

common stock, along with warrants to purchase 0.83 shares of TurnOnGreen common stock (the “TurnOnGreen Securities”) for every

share of our common stock they held on the record date.

The final distribution was paid on April 29, 2024.

We distributed 25.0 million

TurnOnGreen Securities in the final distribution.

Effective April 29, 2024, we issued to an

accredited investor a term note with a principal face amount of $1.7 million.

The note bears interest at the rate of 15% per annum and

the note was issued with an original issuance discount.

The maturity date of the note was May 17, 2024.

The note contained a standard

and customary event of default for failure to make payments when due under the note.

The purchase price for the note was $1.6 million.

The term note was amended on May 16, 2024 to extend the maturity date to June 15, 2024 and further amended on June 18, 2024 to extend

the maturity date to July 31, 2024.

On June 4, 2024, we entered into a Loan

Agreement (the “2024 Credit Agreement”) with OREE Lending Company, LLC and Helios Funds LLC, as lenders.

The 2024 Credit Agreement

provides for an unsecured, non-revolving credit facility in an aggregate draw limit of up to $20.0 million, provided, however, that at

no point will we be allowed to have outstanding loans under the 2024 Credit Agreement in a principal amount received of more than $2.0

The lenders made a loan to the Company of $1.5 million on June 4, 2024.

The loans under the 2024 Credit Agreement are due

December 4, 2024, provided, however, that if on such date, we have executed an equity line of credit agreement relating to the sale of

shares of the Series D Preferred Stock, which was executed on June 20, 2024, have an effective registration statement relating thereto

and are not currently in default under such agreement, then the maturity date shall be automatically extended until June 4, 2025.

lenders are not obligated to make any further loans under the 2024 Credit Agreement after the maturity date described above.

the 2024 Credit Agreement will be evidenced by promissory notes (the “Promissory Notes”) and will include the addition of

an original issuance discount of 20% to the amount of each loan and all loans will bear interest at the rate of 15.0% per annum and may

be repaid at any time without penalty or premium.

On June 23, 2024,

Ault Disruptive entered into an Agreement and Plan of Merger (as it may be amended, supplemented or otherwise modified from time to time,

the “Merger Agreement”) by and among Ault Disruptive, ADRT Merger Sub, Inc., a Delaware corporation and a direct, wholly owned

subsidiary of Ault Disruptive (“Merger Sub”), and Gresham Worldwide, Inc., a California corporation (“GIGA”).

The transactions contemplated by the Merger Agreement are referred to herein as the “Business Combination.”

Pursuant to the

Merger Agreement and subject to the terms and conditions set forth therein, the Merger Sub was intended to merge with and into GIGA (the

“Merger”), with GIGA being the surviving corporation and thereby becoming a wholly owned subsidiary of Ault Disruptive.

the Closing of the Business Combination (the “Effective Time”), it was expected that Ault Disruptive would be renamed Gresham

Worldwide, Inc., and thereafter remain listed on the NYSE American under a new ticker symbol, “GWWI.”

However, on August

14, 2024, GIGA filed a petition for reorganization under Chapter 11 of the bankruptcy laws.

Consequently, Ault Disruptive was required

to terminate the Merger Agreement, which it did on August 15, 2024.

Ault Disruptive does not presently intend to enter into a new

agreement and plan of merger with a third party.

On September 27, 2024, Ault Disruptive announced

that it will redeem all of its outstanding shares of common stock which occurred as of the close of business on October 11, 2024, because

Ault Disruptive would not consummate an initial business combination within the time period required by its Amended and Restated Certificate

of Incorporation, as amended.

During the nine months ended September 30, 2024, shares of Ault Disruptive common stock were redeemed for

an aggregate redemption amount of $1.5 million.

On October 11, 2024, all remaining shares

of Ault Disruptive common stock were redeemed for a redemption amount of $0.8 million.

On July 18, 2024, we entered into a note

purchase agreement with an institutional investor pursuant to which the institutional investor agreed to acquire, and we agreed to issue

and sell in a registered direct offering to the institutional investor, a $5.4 million 10% OID Convertible Promissory Note (the “OID

The OID Note was sold to the institutional investor for a purchase price of $4.9 million, an original issue discount

On February 5, 2025, we entered into an

exchange agreement with an institutional investor, pursuant to which we issued to the investor a convertible promissory note in the principal

face amount of $1.9 million (the “February 2025 Convertible Note”), in exchange for the cancellation of an outstanding term

note we issued to the investor in April 2024.

That note had an outstanding principal amount and accrued but unpaid interest of $1.9 million.

The February 2025 Convertible Note accrued interest at the rate of 15% per annum, unless an event of default (as defined in the February

2025 Convertible Note) occurs, at which time the February 2025 Convertible Note would accrue interest at 18% per annum.

The February 2025

Convertible Note was to mature on May 5, 2025.

The February 2025 Convertible Note was convertible into shares of Class A common stock

at a fixed conversion price of $4.00 per share.

February 2025, we and an institutional investor (the “Investor”) entered into an amended and restated forbearance agreement

pursuant to which the Investor agreed to forebear through the close of business on May 15, 2025, from exercising the rights and remedies

it is entitled in consideration for our agreement to issue to the Investor an amended and restated convertible promissory note in the

amount of $3.5 million (the “A&R Forbearance Note”), consisting of (i) the amount then due under the original forbearance

agreement of $0.9 million, (ii) a forbearance extension fee of $0.3 million and (iii) a true-up amount of $2.3 million.

Subject to the

approval by the NYSE and our stockholders, the A&R Forbearance Note is convertible into shares of Class A common stock at a conversion

price equal to $2.00, subject to adjustment.

The A&R Forbearance Note accrues interest at the rate of 18% per annum and matures on

May 15, 2025.

On March 14, 2025, we entered into an exchange

agreement with an institutional investor pursuant to which we issued to the investor a convertible promissory note in the principal face

amount of $4.2 million in exchange for the cancellation of (i) a term note issued by us on May 16, 2024, with outstanding principal and

accrued but unpaid interest of $0.7 million, (ii) a term note issued by us on May 20, 2024, with outstanding principal and accrued but

unpaid interest of $1.5 million, and (iii) the February 2025 Convertible Note issued by us on February 5, 2025, with outstanding principal

and accrued but unpaid interest of $2.0 million.

The note accrues interest at the rate of 15% per annum, unless an event of default (as

defined in the note) occurs, at which time the note would accrue interest at 18% per annum.

The note will mature on June 30, 2025.

note is convertible into shares of Class A common stock at a conversion price equal to the greater of (i) $0.40 per share (the “Floor

Price”) and (ii) the lesser of 75% of the VWAP (as defined in the note) of the Class A common stock during the five trading days

immediately prior to (A) the date of issuance of the note or (B) the date of conversion into shares of Class A common stock.

On March 21, 2025, we entered into an exchange

agreement with an institutional investor, pursuant to which we issued to the investor a convertible promissory note in the principal face

amount of $4.9 million (the “Exchange Note”) in exchange for the cancellation of (i) a term note issued by us on January 14,

2025, with outstanding principal and accrued but unpaid interest of $2.6 million, (ii) a promissory note issued by us on March 7, 2025,

with outstanding principal and accrued but unpaid interest of $0.5 million, (iii) a promissory note issued by us on March 12, 2025, with

outstanding principal and accrued but unpaid interest of $1.5 million, and (iv) a promissory note issued by us on March 13, 2025, with

outstanding principal and accrued but unpaid interest of $0.3 million.

The Exchange Note accrues interest at the rate of 15% per annum,

unless an event of default (as defined in the Exchange Note) occurs, at which time the note would accrue interest at 18% per annum.

Exchange Note will mature on December 31, 2025.

The note is convertible into shares of Class A common stock at a conversion price equal

to the greater of (i) the Floor Price and (ii) the lesser of 75% of the VWAP (as defined in the Exchange Note) of the Class A common stock

during the five trading days immediately prior to (A) the date of issuance of the Exchange Note or (B) the date of conversion into shares

of Class A common stock, but not greater than $10.00 per share.

On March 31, 2025, we entered into a securities

purchase agreement with an institutional investor pursuant to which we agreed to sell up to 50,000 shares of Series B Convertible Preferred

Stock (“Series B Preferred Stock”) for a total purchase price of up to $50.0 million.

The securities purchase agreement provides

that the transaction shall be conducted through 49 separate tranche closings, provided, however, that the investor has the ability, exercisable

in its sole discretion, to purchase any number of shares of Series B Preferred Stock prior to the dates of the tranche closings provided

for in the securities purchase agreement.

The initial tranche closing, which is expected to close promptly after the investor has converted

out of the Exchange Note, will consist of the sale and issuance to the investor of 2,000 shares of Series B Preferred Stock for an aggregate

of $2.0 million.

The OID Note will accrue interest at the rate of 15% per annum, unless an event of default occurs, at which time the

OID Note would accrue interest at 18% per annum.

The OID Note will mature on October 19, 2024.

In addition, the OID Note is convertible

at any time after NYSE American approval of a Supplemental Listing Application into shares of our common stock at a conversion price of

$0.22 per share (the “OID Conversion Price”), subject to adjustment.

However, we may not issue shares of common stock upon

conversion of the OID Note to the extent such issuance would result in an aggregate number of shares of common stock exceeding 19.99%

of the total shares of common stock issued and outstanding as of July 18, 2024, in accordance with the rules and regulations of the New

York Stock Exchange (the “NYSE Limit”) unless we first obtain stockholder approval (“Stockholder Approval”).

If, on September 2, 2024 (the “Adjustment

Date”), the closing bid price of our common stock is lower than the OID Conversion Price, then the OID Conversion Price will be

reduced to 85% of the closing bid price of the common stock on September 2, 2024.

However, if after July 19, 2024, and prior to the date

on which Stockholder Approval is obtained, the holder of the OID Note has converted a portion of the outstanding amount under the OID

Note into shares of our common stock in an aggregate amount equal to the NYSE Limit, then the Adjustment Date will be extended by such

number of days between such date and the date on which we obtain Stockholder Approval.

Pursuant to the securities purchase agreement, provided certain closing conditions have been met, the investor shall

purchase up to 4,800 shares of Series B Preferred Stock on a monthly basis, with the investor being required to purchase 1,000 shares

Each share of Series B Preferred Stock has

a stated value of $1,000.00 and is convertible into shares of Class A common stock at a at a conversion price equal to the greater of

(i) $0.40 (the “Floor Price”) and (ii) 75% of our lowest VWAP during the five trading days immediately preceding conversion,

subject to a maximum price of $10.00 per share, as adjusted for certain corporate actions.

Notwithstanding the foregoing, in no event

shall the Series B Preferred Stock be convertible at less than the Floor Price.

The holders of Series B Preferred Stock are entitled to

cumulative cash dividends at an annual rate of 15%, or $150.00 per share, based on the stated value per share.

Dividends shall accrue

for as long as any shares of Series B Preferred Stock remain issued and outstanding and are payable monthly in arrears.

For the first

two years, we may elect to pay the dividend amount in additional shares of Series B Preferred Stock rather than cash.

The holders of the

Series B Preferred Stock are entitled to vote with the Class A common stock as a single class on an as-converted basis.

April 1, 2025, we issued to an institutional investor a convertible promissory note in the principal face amount of $1.7 million

in consideration for an advance we received of $1.5 million.

The note accrues interest at the rate of 15% per annum.

The note will mature

on September 30, 2025.

2024, the loan and guarantee agreement, dated as of December 14, 2023, as amended, pursuant to which we have guaranteed financial obligations

of Ault & Company borrowings, was amended regarding our obligations to fund the restricted cash Segregated Account.

We agreed to deposit in the Segregated Account:

(i) $0.4 million monthly commencing on September 30, 2024 and ending on February 28, 2025;

and (ii) $0.5 million monthly commencing

on March 31, 2025 and ending on the earlier of the term loan maturity date, prepayment of the term loan in full or the date on which the

balance of the Segregated Account exceeds 110% of the outstanding balance of the term loan.

As of September 30, 2024 we had deposited

$6.5 million in the Segregated Account.

In October 2024, we deposited an additional $0.4 million in the Segregated Account.

On August 2, 2024, pursuant to the November

2023 SPA we entered into with Ault & Company, we sold 300 shares of Series C Convertible Preferred Stock and warrants to purchase

0.1 million shares of common stock to Ault & Company, for a purchase price of $0.3 million.

and November 2024, we sold to Ault & Company an aggregate of 2,230 shares of Series C Preferred Stock and Warrants to purchase 0.7

million shares of Class A common stock, for a total purchase price of $2.2 million.

11, 2024 we filed a Certificate of Designation, Rights and Preferences (the “Certificate of Designation”) with the Secretary

of State of the State of Delaware to establish the preferences, voting powers, limitations as to dividends or other distributions, qualifications,

terms and conditions of redemption and other terms and conditions of our Series E Preferred Stock.

The following is a summary description

of those terms and the general effect of the issuance of the shares of Series E Preferred Stock on our other classes of registered securities.

E Preferred Stock will, as to dividend rights and rights as to the distribution of assets upon our liquidation, dissolution or winding-up,

(1) senior to all classes or series of Common Stock and to all other equity securities issued by us other than equity securities

referred to in clauses (2) and (3);

(2) on parity with any future class or series of our equity securities expressly designated as ranking

on parity with the Series E Preferred Stock, (3) junior to our Series A Cumulative Redeemable Perpetual Preferred Stock and its Series

C Convertible Preferred Stock;

and all equity securities issued by us expressly designated as ranking senior to the Series E Preferred

and (4) junior to all our existing and future indebtedness.

To the extent

the shares of Series E Preferred Stock are issued, we will pay cumulative cash dividends on the Series E Preferred Stock when, as and

if declared by its board of directors (or a duly authorized committee of its board of directors), only out of funds legally available

for payment of dividends.

Dividends on the Series E Preferred Stock will accrue on the stated amount of $25.00 per share of the Series

E Preferred Stock at a rate per annum equal to 10.00% (equivalent to $3.00 per year), payable monthly in arrears.

E Preferred Stock is redeemable by us.

Holders of shares of the Series E Preferred Stock generally will have no voting rights, except

as required by law and as provided in the Certificate of Designation.

Voting rights for holders of the Series E Preferred Stock exist

primarily with respect to material and adverse changes in the terms of the Series E Preferred Stock and the creation of additional classes

or series of preferred stock that rank senior to the Series E Preferred Stock.

Further, unless

we have received the approval of two-thirds of the votes entitled to be cast by the holders of Series E Preferred Stock, we will not effect

any consummation of a binding share exchange or reclassification of the Series E Preferred Stock or a merger or consolidation of us with

another entity, unless (a) the shares of Series E Preferred Stock remain outstanding or, in the case of a merger or consolidation with

respect to which we are not the surviving entity, the shares of Series E Preferred Stock are converted into or exchanged for preference

securities, or (b) such shares remain outstanding or such preference securities are not materially less favorable than the Series E Preferred

Stock immediately prior to such consummation.

28, 2024 annual meeting of stockholders, voted upon and approved Proposal 5, an amendment to our Certificate of Incorporation to effect

a Reverse Split with a ratio of not less than one-for-two and not more than one-for-thirty-five at any time prior to June 27, 2025, with

the exact ratio to be set at a whole number within this range as determined by our board of directors in its sole discretion.

24, 2024, the board of directors authorized a special committee of the board to determine the ratio of the reverse split.

8, 2024, the special committee approved a one-for-thirty-five reverse split of the Class A common stock that will be effective in the

State of Delaware on Friday, November 22, 2024.

We anticipate that beginning with the opening of trading on Monday, November 25, 2024,

our Class A common stock will trade on the NYSE American on a split-adjusted basis.

15, 2024, we announced that we plan to issue a special one-time dividend (the “Distribution”) of 5.0 million shares of our

Class B Common Stock (the “Class B Common Stock”) to all holders of our Class A Common Stock (the “Class A Common Stock”)

and the Series C Convertible Preferred Stock on an as-converted basis.

date for the Distribution is November 29, 2024.

Stockholders who own our Class A Common Stock at the close of trading on that date will

be eligible to receive the shares of Class B Common Stock.

Further, we have set a payment date of December 16, 2024, subject to adjustment.

On the record date, we anticipate there will be approximately 1.1 million shares of Class A Common Stock and approximately 5.9 million

Class A Common Stock equivalents, based on the current conversion price of our Series C Convertible Preferred Stock, issued and outstanding

(collectively, the “Eligible Capital Stock”), for an aggregate of approximately 7.0 million shares of Eligible Capital Stock.

Consequently, the number of shares of Class B Common Stock issuable is approximately 0.71 for each share of Eligible Capital Stock.

foregoing figures reflect the implementation of the one-for-thirty-five reserve stock split that will be effectuated on November 25, 2024.

B Common Stock is identical to the currently outstanding Class A Common Stock, with the exception that each share thereof carries ten

times the voting power of a share of Class A Common Stock.

The Class B Common Stock is convertible at any time after the payment date

into Class A Common Stock on a one-for-one basis.

The note is convertible into shares of Class A common stock at a conversion price equal to the greater of (i)

the Floor Price and (ii) the lesser of 75% of the VWAP (as defined in the note) of the Class A common stock during the five trading days

immediately prior to (A) the date of issuance of the note or (B) the date of conversion into shares of Class A common stock.

On April 8, 2025, we issued to an accredited

investor a convertible promissory note in the principal face amount of $110,000 in consideration for $100,000.

The note accrues interest

at the rate of 15% per annum, unless an event of default (as defined in the note) occurs, at which time the note would accrue interest

at 18% per annum.

The note will mature on September 30, 2025.

The note is convertible into shares of Class A common stock at a conversion

price equal to the greater of (i) $0.45 and (ii) the lesser of (A) 75% of the VWAP (as defined in the note) of the Class A common stock

during the five trading days immediately prior to the date of issuance of the note or (B) 75% of the lowest VWAP of the Class A common

stock during the five trading days immediately prior to the date of conversion into shares of Class A common stock.

On April 15, 2025, we issued to two accredited

investors convertible promissory notes in the aggregate principal face amount of $5 million in aggregate gross consideration of $4 million

in cash paid by the investors, prior to placement agent fees and expenses of approximately $460,000.

The notes were issued with an original

issue discount of twenty percent (20%), or $1 million.

The notes do not accrue interest unless an event of default (as defined in the

notes) occurs, at which time the notes would accrue interest at 20% per annum.

The notes will mature on September 30, 2025.

are convertible into shares of Class A common stock at a conversion price equal to the greater of (i) $0.40 and (ii) 80% of the lowest

closing price of the Class A common stock during the five trading days immediately prior to the date of conversion into shares of Class

A common stock.

On May 13, 2025, the we entered

into an OID only term note agreement with an institutional investor with a principal amount of $1.4 million and an OID of $0.1 million.

The maturity date of the promissory note is May 27, 2025.

Ault entered into a personal guaranty agreement for the benefit of the investor.

Presentation of GIGA as Discontinued Operations

August 14, 2024, our majority owned subsidiary, Gresham Worldwide, Inc.

(“ GIGA”), filed

a petition for reorganization under Chapter 11 of the bankruptcy laws.

The filing placed GIGA under the control of the bankruptcy court,

which oversees its reorganization and restructuring process.

We assessed the inherent uncertainties associated with the outcome of the

Chapter 11 reorganization process and the anticipated duration thereof, and concluded that it was appropriate to deconsolidate GIGA and

its subsidiaries effective on the petition date.

We recognized a gain on deconsolidation of GIGA of $2.0 million included in net gain

(loss) from discontinued operations.

In connection with the Chapter

11 reorganization process , we concluded that the operations of GIGA met the criteria for discontinued operations as this strategic

shift that will have a significant effect on our operations and financial results.

As a result, we have presented the results of operations,

cash flows and financial position of GIGA as discontinued operations in the accompanying consolidated financial statements and notes for

all periods presented.

On August 14, 2024, our majority owned subsidiary,

Gresham Worldwide, Inc.

(“GIGA”), filed a petition for reorganization under Chapter 11 of the bankruptcy laws.

placed GIGA under the control of the bankruptcy court, which oversees its reorganization and restructuring process.

We assessed the inherent

uncertainties associated with the outcome of the Chapter 11 reorganization process and the anticipated duration thereof, and concluded

that it was appropriate to deconsolidate GIGA and its subsidiaries effective on the petition date.

We recognized a gain on deconsolidation

of GIGA of $2.0 million included in net gain (loss) from discontinued operations.

In connection with the Chapter 11 reorganization

process, we concluded that the operations of GIGA met the criteria for discontinued operations as this strategic shift that will have

a significant effect on our operations and financial results.

As a result, we have presented the results of operations, cash flows and

financial position of GIGA as discontinued operations in the accompanying consolidated financial statements and notes for all periods

Change in Plan of Sales of AGREE Hotel Properties

9 unchanged sentences

in plan of sale, we recorded a loss on impairment of property and equipment related to the real estate assets of AGREE of $8.0 million

during the nine months ended September 30, 2024.

during the year ended December 31, 2024.

Deconsolidation of Avalanche International

March 28, 2025, AVLP, a majority-owned subsidiary of our, filed a voluntary petition for liquidation under Chapter 7 of the U.S.

As a result of the filing, AVLP became subject to the control of the bankruptcy court, and we no longer maintained a controlling

financial interest.

Accordingly, we deconsolidated AVLP effective as of the petition date.

In connection with the deconsolidation, we

recognized a gain of $10.0 million, which is included in the condensed consolidated statement of operations for the three months ended

March 31, 2025.

We evaluated the criteria for discontinued operations and determined that the operations of AVLP did not meet the requirements

for such classification.

As a holding company, our business objective

21 unchanged sentences

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 metaverse platform, oil exploration, crane services, defense/aerospace, industrial, automotive, medical/biopharma

and hotel operations.

We have provided capital to subsidiaries as well as partner companies in which we have an equity interest or may

be actively involved, influencing development through board representation and management support.

We are a Delaware corporation 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.hyperscaledata.com.

In recent years, we have provided capital

and relevant expertise to fuel the growth of businesses in AI software platform, social gaming platform, equipment rental services, defense,

industrial and hotel operations.

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.

are a Delaware corporation with our corporate office located at 11411 Southern Highlands Pkwy, Suite 190, Las Vegas, NV 89141.

number is 949-444-5464 and our website address is https://hyperscaledata.com/ .

Results of Operations

Results of Operations for the Three Months Ended September 30, 2024 and 2023

Results of Operations for the Three Months Ended March 31, 2025 and 2024

The following table summarizes the results

of our operations for the three months ended September 30, 2024 and 2023.

For the Three Months Ended September 30,

Revenue, crypto assets mining

Revenue, hotel and real estate operations

Revenue, crane operations

Revenue, lending and trading activities

Total revenue

Cost of revenue, products

Cost of revenue, crypto assets mining

Cost of revenue, hotel and real estate operations

Cost of revenue, crane operations

Cost of revenue, lending and trading activities

Total cost of revenue

Operating expenses

Research and development

Selling and marketing

General and administrative

Impairment of property and equipment

Impairment of mined crypto assets

Total operating expenses

Loss from operations

(24,595,000 )

(20,350,000 )

Other income (expense):

Interest and other income

Interest expense

Loss on extinguishment of debt

Change in fair value of warrant liability

Gain (loss) on the sale of fixed assets

Total other expense, net

Loss before income taxes

(31,803,000 )

(27,288,000 )

Income tax provision (benefit)

Net loss from continuing operations

(31,855,000 )

(26,723,000 )

Net gain (loss) from discontinued operations

(29,639,000 )

(28,082,000 )

Net loss attributable to non-controlling interest

Net loss attributable to Hyperscale Data, Inc.

(25,549,000 )

(21,771,000 )

Preferred dividends

Net loss available to common stockholders

$ (26,875,000 )

$ (22,183,000 )

Comprehensive loss

Net loss available to common stockholders

$ (26,875,000 )

$ (22,183,000 )

Other comprehensive income (loss)

Foreign currency translation adjustment

Other comprehensive income

Total comprehensive loss

$ (27,096,000 )

$ (22,465,000 )

Revenues by segment for the three months

ended September 30, 2024 and 2023 were as follows:

For the Three Months Ended September 30,

Revenue, crypto assets mining

$ (2,294,000 )

Revenue, commercial real estate leases

of our operations for the three months ended March 31, 2025 and 2024.

For the Three Months Ended March 31,

Revenue, crane operations

Revenue, lending and trading activities

(15,931,000 )

Total revenue

$ (12,029,000 )

Revenues from Sentinum’s crypto assets

mining operations decreased by $2.2 million, primarily due to an estimated $5.3 million unfavorable impact from the April 19, 2024 Bitcoin

halving event on the Bitcoin network, coupled with a 76% increase in the average Bitcoin mining difficulty level for the three months

ended September 30, 2024, compared to the corresponding period in 2023.

This decrease was partially offset by a 128% increase in the average

Bitcoin price and a $0.3 million reduction in revenue from Sentinum’s crypto mining equipment hosted at third-party facilities for

the three months ended September 30, 2024, compared to the corresponding period in 2023.

Halving is a key part of the Bitcoin protocol

and serves to control the overall supply and reduce the risk of inflation in crypto assets using a proof-of-work consensus algorithm.

The Bitcoin halving event reduced the block subsidy by half from 6.25 to 3.125 Bitcoin.

Transaction fees were not directly impacted by

Energy revenues from Circle 8’s crane

operations decreased by $0.2 million, or 1%, for the three months ended September 30, 2024, remaining essentially flat compared to the

prior period.

Revenues from our

lending and trading activities were $5.6 million for the three months ended September 30, 2024, driven primarily by $2.6 million in realized

gains from trading activities, $2.6 million in fee income, and $0.6 million in unrealized gains on investment positions.

In comparison,

revenues from lending and trading activities for the same period in 2023 were negative $0.2 million, due to a $3.0 million unrealized

loss from our investment in Alzamend and $0.8 million in net unrealized losses on investments in marketable equity securities, partially

offset by $3.0 million in realized gains from trading activities and $0.5 million dividend income.

Revenues from our

trading activities for the three months ended September 30, 2024 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

to the significant change in our ownership and voting rights, we determined that we no longer met the criteria of the primary beneficiary

and, accordingly, we deconsolidated SMC as of November 20, 2023.

SMC revenues were $0 for the three months ended September 30,

2024, a decrease of $15.9 million compared to the corresponding period in 2023.

TurnOnGreen's revenues increased by $0.1

million for the three months ended September 30, 2024, compared to the corresponding period in 2023.

This rise was primarily due to higher

sales from a single, higher-margin customer in the defense industry during the three months ended September 30, 2024.

Gross Margins

Gross margins rose to 28% for the three

months ended September 30, 2024, compared to 20% for the same period in 2023.

This increase was influenced by our lending and trading

activities, which contributed favorably in 2024 but had a negative impact in 2023.

In both periods, gross margins were adversely affected

by negative margins from our crypto assets mining operations.

Excluding the impacts of both our lending and trading activities and our

crypto assets mining operations, adjusted gross margins for the three months ended September 30, 2024, and 2023 would have been 38% and

33%, respectively.

Gross margins improved due to the deconsolidation of the lower margin of SMC business.

Research and Development

Research and development expenses increased

by $3.5 million for the three months ended September 30, 2024, due to increased expenditures related to development work on ROI’s

BitNile gaming platform.

Selling and Marketing

Selling and marketing expenses were $4.8

million for the three months ended September 30, 2024, compared to $7.6 million for the three months ended September 30, 2023, a decrease

of $2.9 million, or 38%.

The decrease was primarily the result of a $2.0 million decrease in sales and marketing expenses at ROI primarily

due to lower advertising and promotion costs and a $1.2 million decrease in sales and marketing expenses from SMC due to the deconsolidation

of SMC as of November 20, 2023 .

General and Administrative

General and administrative expenses were

$12.0 million for the three months ended September 30, 2024, compared to $16.3 million for the three months ended September 30, 2023,

a decrease of $4.3 million, or 27%.

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

· $2.8 million decrease in general and administrative expenses from SMC due to the deconsolidation

of SMC as of November 20, 2023;

· $1.4 million lower professional fees;

· $1.4 million lower salaries and benefits.

Partially offset by:

· $1.0 million higher operating expenses at AGREE;

· $0.9 million higher operating expenses at Circle 8.

Impairment of Property and Equipment

During the three months ended

September 30, 2024, due to increases in the Bitcoin mining difficulty level, which compounded the continued impact of the Bitcoin halving

event, we concluded that indicated that an impairment triggering event had occurred.

Testing performed indicated the estimated fair value

of our miners to be less than their net carrying value as of September 30, 2024, and an impairment charge of $10.5 million was recognized,

decreasing the net carrying value of our crypto assets mining equipment to their estimated fair value.

In addition, we recorded $1.2

million in impairment charges related to real estate assets of AGREE during the three months ended September 30, 2024.

Other Income (Expense), Net

Other expense, net was $7.2 million for

the three months ended September 30, 2024, compared to other expense, net of $6.9 million for the three months ended September 30,

Interest and other income was $0.8 million

for the three months ended September 30, 2024, compared to $0.3 million for the three months ended September 30, 2023.

Interest expense was $7.8 million for the

three months ended September 30, 2024, compared to $6.1 million for the three months ended September 30, 2023.

Interest expense for the

three months ended September 30, 2024 included contractual interest of $5.4 million, amortization of debt discount of $1.4 million and

forbearance and extension fees of $1.1 million.

Interest expense for the three months ended September 30, 2023 included contractual interest

of $5.0 million, amortization of debt discount of $0.6 million and forbearance and extension fees of $0.5 million.

During the three months ended September

30, 2024, an investor converted $0.7 million of a convertible note into 3.0 million shares of Class A common stock that had a fair value

of $0.9 million at the time of conversion and we recognized a $0.2 million loss on extinguishment of debt.

Income Tax Provision (Benefit)

The income tax provision (benefit) was $52,000

and ($0.6) million during the three months ended September 30, 2024 and 2023, respectively.

The effective income tax provision (benefit)

rate was 0.2% and (2.1%) for the three months ended September 30, 2024 and 2023, respectively.

The lower income tax provision during the

three months ended September 30, 2024 related primarily to lower dividend income compared to the prior year period as a result of the

decline in cash and marketable securities held in the trust account as a result of redemptions of Ault Disruptive common stock subject

to possible redemption.

Results of Operations for the Nine Months Ended September 30, 2024 and 2023

The following table summarizes the results

of our operations for the nine months ended September 30, 2024 and 2023.

For the Nine Months Ended September 30,

Revenue, crypto assets mining

Revenue, hotel and real estate operations

Revenue, crane operations

Revenue, lending and trading activities

Revenue, other

Total revenue

Cost of revenue, products

Cost of revenue, crane operations

Cost of revenue, crypto assets mining

Cost of revenue, hotel and real estate operations

Cost of revenue, crane operations

Cost of revenue, lending and trading activities

Cost of revenue, other

Total cost of revenue

3 unchanged sentences

General and administrative

Impairment of property and equipment

Impairment of goodwill and intangible assets

Impairment of mined crypto assets

Total operating expenses

Loss from operations

(47,869,000 )

(97,155,000 )

(Loss) income from operations

Other income (expense):

1 unchanged sentence

Interest expense

(18,825,000 )

(35,180,000 )

Gain on conversion of investment in equity securities to marketable equity securities

Gain (loss) on extinguishment of debt

(Loss) gain on extinguishment of debt

Loss from investment in unconsolidated entity

Impairment of equity securities

Gain on deconsolidation of subsidiary

Provision for loan losses, related party

Change in fair value of warrant liability

Gain on the sale of fixed assets

(Loss) gain on the sale of fixed assets

Total other expense, net

(37,440,000 )

Loss before income taxes

(57,402,000 )

(134,595,000 )

Income tax provision

Net loss from continuing operations

(57,449,000 )

(135,146,000 )

(Loss) income before income taxes

Income tax provision (benefit)

Net (loss) income from continuing operations

Net loss from discontinued operations

(58,228,000 )

(139,804,000 )

Net loss attributable to non-controlling interest

Net loss attributable to Hyperscale Data, Inc.

(55,759,000 )

(131,100,000 )

Net (loss) income

Net loss (income) attributable to non-controlling interest

Net (loss) income attributable to Hyperscale Data, Inc.

Preferred dividends

Net loss available to common stockholders

$ (59,653,000 )

Net (loss) income available to common stockholders

$ (6,171,000 )

Comprehensive loss

Net loss available to common stockholders

$ (59,653,000 )

Net (loss) income available to common stockholders

$ (6,171,000 )

Other comprehensive income (loss)

Other comprehensive (loss) income

Foreign currency translation adjustment

Other comprehensive income

Total comprehensive loss

$ (60,274,000 )

Total comprehensive (loss) income

$ (6,165,000 )

Revenues by segment for the nine months

ended September 30, 2024 and 2023 were as follows:

For the Nine Months Ended September 30,

Revenues by business category for the three

months ended March 31, 2025 and 2024 were as follows:

For the Three Months Ended March 31,

Sentinum, Inc.

Revenue, crypto assets mining

$ (6,249,000 )

Revenue, commercial real estate leases

1 unchanged sentence

Revenue, lending and trading activities

(21,939,000 )

Total revenue

$ (13,344,000 )

$ (17,019,000 )

Revenues from Sentinum’s crypto assets

mining operations increased $4.2 million due primarily to a $3.5 million increase in revenue from Sentinum crypto mining equipment hosted

at third-party facilities and a 128% increase in the average Bitcoin price, partially offset by an 76% increase in the average Bitcoin

mining difficulty level for the nine months ended September 30, 2024, compared to the corresponding period in 2023, and an $9.7 million

unfavorable impact from the April 19, 2024 Bitcoin halving event occurred on the Bitcoin network.

mining operations decreased $6.2 million to $5.2 million for the three months ended March 31, 2025, compared to $11.4 million for the

three months ended March 31, 2024.

The decrease was due primarily to a $3.7 million decline in revenue from mined crypto assets at

Sentinum owned and operated facilities coupled with a $2.6 million decline in revenue from Sentinum crypto mining equipment hosted at

third-party facilities.

The $5.2 million decrease in revenue from mined crypto assets at Sentinum owned and operated facilities was due

to the April 2024 Bitcoin halving event that occurred on the Bitcoin network and a 42% increase in the average Bitcoin mining difficulty

level, partially offset by a 74% increase in the average Bitcoin price for the three months ended March 31, 2025, compared to the corresponding

period in 2024.

Energy revenues from Circle 8’s crane

operations decreased by $0.8 million, or 2%, for the nine months ended September 30, 2024, remaining essentially flat compared to the

prior period.

This decrease was primarily due to lower utilization of the crane fleet, as five cranes were out of service during the three

months ended June 30, 2024.

Revenues from our

lending and trading activities were $4.9 million for the nine months ended September 30, 2024, driven primarily by $2.5 million in realized

gains from trading activities and $2.7 million in fee income, partially offset by a $0.6 million unrealized loss from our investment in

In comparison, revenues from lending and trading activities for the same period in 2023 were $4.3 million, driven primarily

by $8.5 million in net realized and unrealized gains on investments in marketable equity securities and $1.6 million in dividend income,

partially offset by a $3.6 million unrealized loss from our investment in Alzamend and a $2.0 million impairment for equity securities

that do not have readily determinable fair values related to Fintech lending operations.

Revenues from our

trading activities for the nine months ended September 30, 2024 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

to the significant change in our ownership and voting rights, we determined that we no longer met the criteria of the primary beneficiary

and, accordingly, we deconsolidated SMC as of November 20, 2023.

SMC revenues were $0 for the nine months ended September 30, 2024,

a decrease of $21.9 million compared to the corresponding period in 2023.

operations increased by $0.9 million, or 7%, for the three months ended March 31, 2025, compared to the same period in 2024.

was primarily driven by reduced pricing pressure and improved utilization of the crane fleet relative to the prior-year period.

Revenues from our lending and trading activities

decreased $9.1 million to approximately $0 for the three months ended March 31, 2025, compared to the same period in 2024.

14, 2024, RiskOn International, Inc.

(“ROI”) transferred 2.5 million shares of White River Energy Corp.

(“White River”)

common stock with a recorded value of $0.5 million and a fair value of $7.5 million at the date of transfer to Ault Lending, LLC (“Ault

As of March 31, 2024, the 2.5 million shares of White River common stock held by Ault Lending had a fair value of $9.4

million and Ault Lending recorded an unrealized gain of $8.9 million during the quarter ended March 31, 2024 included in revenue from

lending and trading activities.

Revenues from our trading activities for

the three months ended March 31, 2025 included net gains on equity securities, including unrealized gains and losses from market price

These gains and losses have caused, and will continue to cause, significant volatility in our periodic earnings.

TurnOnGreen’s revenues increased by

million for the nine months ended September 30, 2024, compared to the corresponding period in 2023.

This rise was primarily due to higher

sales from a single, higher-margin customer in the defense industry during the nine months ended September 30, 2024.

$0.4 million, to $1.6 million for the three months ended March 31, 2025, compared to $1.2 million in the corresponding period in 2024.

This rise was primarily due to higher sales from a single customer in the defense industry during the three months ended March 31, 2025.

Other revenues increased by $0.5 million,

to $0.8 million for the three months ended March 31, 2025, compared to $0.3 million in the corresponding period in 2024.

This rise was

primarily due to higher corporate aircraft charter revenue from third parties.

Gross Margins

Gross margins rose to 26% for the nine months

ended September 30, 2024, compared to 23% for the same period in 2023.

This increase was influenced by our lending and trading activities,

which contributed favorably to our gross margins for the nine months ended September 30, 2024 and 2023.

In both periods, gross margins

were adversely affected by negative margins from our crypto assets mining operations.

Excluding the impacts of both our lending and trading

activities and our crypto assets mining operations, adjusted gross margins for the nine months ended September 30, 2024, and 2023 would

have been 36% and 33%, respectively.

Gross margins improved due to the deconsolidation of the lower margin of SMC business.

Gross margins declined to 21% for the three

months ended March 31, 2025, compared to 47% for the same period in 2024.

The decrease was primarily driven by the performance of our

lending and trading activities, which negatively impacted gross margins in the current period but contributed favorably in the prior-year

In both periods, gross margins were further pressured by low or negative gross margin contributions from our crypto asset mining

Excluding the impact of lending and trading activities as well as crypto asset mining, adjusted gross margins were 36% and

35% for the three months ended March 31, 2025 and 2024, respectively.

Research and Development

Research and development expenses increased

by $1.5 million for the nine months ended September 30, 2024, due to increased expenditures primarily related to development work on ROI’s

BitNile gaming platform.

Research and development expenses remained

consistent at $0.1 million for both the three months ended March 31, 2025 and 2024.

Selling and Marketing

Selling and marketing expenses were $2.3

million for the nine months ended September 30, 2024, compared to $25.0 million for the nine months ended September 30, 2023, a decrease

of $12.5 million, or 48%.

The decrease was primarily the result of an $10.2 million decrease in sales and marketing expenses at ROI primarily

due to lower advertising and promotion costs and a $2.4 million decrease in sales and marketing expenses from SMC due to the deconsolidation

of SMC as of November 20, 2023 .

million for the three months ended March 31, 2025, compared to $4.0 million for the three months ended March 31, 2024, a decrease of $1.7

million, or 42%.

The decrease was primarily the result of a $1.6 million decrease in sales and marketing expenses at ROI from lower advertising

and promotion costs.

General and Administrative

General and administrative expenses were

$33.7 million for the nine months ended September 30, 2024, compared to $53.1 million for the nine months ended September 30, 2023,

a decrease of $19.3 million, or 36%.

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

· $7.9 million decrease in general and administrative expenses from SMC due to the deconsolidation

of SMC as of November 20, 2023 ;

· $4.6 million lower stock compensation expense;

· $4.0 million lower salaries and benefits;

· $1.2 million lower professional fees;

· $1.2 million lower performance bonus related to realized gains on trading activities.

Impairment of Property and Equipment

During the three months ended

September 30, 2024, due to increases in the Bitcoin mining difficulty level, which compounded the continued impact of the Bitcoin halving

event, we concluded that indicated that an impairment triggering event had occurred.

Testing performed indicated the estimated fair value

of our miners to be less than their net carrying value as of September 30, 2024, and an impairment charge of $10.5 million was recognized,

decreasing the net carrying value of our crypto assets mining equipment to their estimated fair value.

In addition, we recorded $9.2

million in impairment charges related to real estate assets of AGREE during the nine months ended September 30, 2024.

Other Income (Expense), Net

$9.2 million for the three months ended March 31, 2025, compared to $10.4 million for the three months ended March 31, 2024, a decrease

of $1.2 million, or 11% primarily due to lower professional fees, lower stock compensation and lower salaries and benefits expense.

Other Expense, Net

Other expense, net was $4.0 million for

the nine months ended September 30, 2024, compared to other expense, net of $37.4 million for the nine months ended September 30,

Interest and other income was $2.1 million

for the nine months ended September 30, 2024, compared to $3.6 million for the nine months ended September 30, 2023.

The decrease in interest

and other income is primarily due to the decline in Ault Disruptive’s interest income as a result of the decline in cash and marketable

securities held in the trust account as a result of redemptions of Ault Disruptive common stock subject to possible redemption.

Interest expense was $18.8 million for the

nine months ended September 30, 2024, compared to $35.2 million for the nine months ended September 30, 2023.

Interest expense for the

nine months ended September 30, 2024 included contractual interest of $10.7 million, amortization of debt discount of $4.8 million, and

forbearance and extension fees of $3.3 million.

Interest expense for the nine months ended September 30, 2023 included amortization of

debt discount of $18.2 million, contractual interest of $9.6 million and forbearance and extension fees of $7.3 million.

Gain on conversion of investment in equity

securities to marketable equity securities of $17.9 million relates to ROI conversion of White River common stock.

During the nine months

ended September 30, 2024, ROI transferred 14.5 million shares of White River common stock with a fair value of $19.2 million at the date

In conjunction with the transfers, ROI converted a portion of their White River’s Series A Convertible Preferred Stock

into common stock and recorded a noncash $17.9 million gain on conversion.

the three months ended March 31, 2025, compared to other expense, net of $10.5 million for the three months ended March 31, 2024.

Interest and other income totaled $0.2 million

and $0.5 million for the three months ended March 31, 2025 and 2024, respectively.

Interest expense was $6.4

million for the three months ended March 31, 2025, compared to $5.6 million for the three months ended March 31, 2024.

Interest expense

for the three months ended March 31, 2025 included contractual interest of $3.8 million, amortization of debt discount of $0.1 million

and forbearance and extension fees of $12,000.

Interest expense for the three months ended March 31, 2024 included amortization of debt

discount of $2.1 million, contractual interest of $2.0 million and forbearance and extension fees of $1.5 million.

For the three months ended

March 31, 2024, we recognized a noncash gain of $17.9 million related to the conversion of White River common stock by ROI into marketable

equity securities.

During the period, ROI transferred 6.7 million shares of White River common stock with a fair value of $19.2 million

at the date of transfer.

In connection with these transfers, ROI converted a portion of its White River Series A convertible preferred

stock into common stock.

No such gains were recognized during the three months ended March 31, 2025.

the three months ended March 31, 2025, we recognized a total net loss on extinguishment of convertible notes of $4.6 million.

· A gain of $0.3 million resulting from the conversion of $0.7 million of convertible notes into 0.2 million

shares of Class A common stock, which had a fair value of $0.4 million at the time of conversion;

· A loss of $2.6 million related to the issuance of the A&R Forbearance Note.

The A&R Forbearance

Note, with a principal amount of $3.5 million, was determined to be substantially different from the original note due to significant

changes in terms, including the addition of a conversion feature and increased principal amount.

As such, extinguishment accounting was

applied, and a loss was recognized based on the difference between the value of the A&R Forbearance Note and the net carrying amount

of the original note;

· A loss of $1.0 million related to the Orchid convertible promissory note issued on March 14, 2025.

the principal amount of the new note equaled the aggregate principal and accrued interest of the notes exchanged, the fair value of the

new note, including the embedded derivative liability, exceeded the carrying amount of the original notes.

As a result, a loss on extinguishment

of $1.0 million was recognized;

· A loss of $1.3 million related to the SJC convertible promissory note issued on March 21, 2025.

the principal of the new note matched the principal and accrued interest of the exchanged notes, the combined fair value of the new note

and its embedded derivative exceeded the carrying amount of the original instruments.

Accordingly, a $1.3 million loss on extinguishment

was recognized.

During the three months ended March 31,

2024, ROI converted $2.3 million of ROI senior secured convertible notes that had a fair value of $0.9 million at the time of conversion

and recognized a $1.4 million gain on extinguishment of debt.

During the three months ended September 30, 2024, holders of our convertible

notes converted $2.0 million of convertible notes that had a fair value of $2.7 million at the time of conversion and recognized a $0.7

million loss on extinguishment of debt.

During the three months ended September

30, 2024, an investor converted $0.7 million of a convertible note into 3.0 million shares of Class A common stock that had a fair value

of $0.9 million at the time of conversion and we recognized a $0.2 million loss on extinguishment of debt.

2024, ROI investors converted $2.3 million of ROI senior secured convertible notes with a fair value of $0.9 million at the time of conversion.

As a result, ROI recognized a $1.4 million gain on extinguishment of debt.

Loss from investment in unconsolidated entity

was $2.0 million for the nine months ended September 30, 2024, representing our share of losses from our equity method investment in SMC.

For the nine months ended September 30,

2024, the provision for loan losses on the related party note receivable from Ault & Company was $3.1 million, due to uncertainties

regarding collection.

This compares to no provision for the same period in 2023.

Cumulative downward adjustments for impairments

for our equity securities without readily determinable fair values held at were $6.3 million for the nine months ended September 30, 2024.

was $0.7 million for the three months ended March 31, 2024, representing our share of losses from our equity method investment in Algorhythm

Holdings, Inc.

On March 28, 2025, AVLP, a majority-owned

subsidiary of ours, filed a voluntary petition for liquidation under Chapter 7 of the U.S.

Bankruptcy Code.

As a result of the filing,

AVLP became subject to the control of the bankruptcy court, and we no longer maintained a controlling financial interest.

we deconsolidated AVLP effective as of the petition date.

In connection with the deconsolidation, we recognized a gain of $10.0 million,

which is included in the condensed consolidated statement of operations for the three months ended March 31, 2025.

During the three months ended March 31,

2024, we recorded a $3.1 million loan loss reserve related to the promissory note from Ault & Company, Inc.

(“Ault & Company”),

due to uncertainties surrounding collection.

The reserve was recorded within provision for loan losses – related party.

Income Tax Provision

The income tax provision was $47,000 and

$0.5 million during the nine months ended September 30, 2024 and 2023, respectively.

The effective income tax provision rate was 0.1%

and 0.4% for the nine months ended September 30, 2024 and 2023, respectively.

The lower income tax provision during the nine months ended

September 30, 2024 related primarily to lower dividend income compared to the prior year period as a result of the decline in cash and

marketable securities held in the trust account as a result of redemptions of Ault Disruptive common stock subject to possible redemption.

Our effective tax rate from continuing operations

was 1.3% for the three months ended March 31, 2025, compared to 0.0% for the same period in 2024.

We recorded an income tax provision

of $0.1 million for the three months ended March 31, 2025, and recognized an income tax benefit of $1,000 for the three months ended March

Liquidity and Capital Resources

On September 30, 2024, we had cash and cash

equivalents of $7.2 million (excluding restricted cash of $8.3 million), compared to cash and cash equivalents of $6.1 million (excluding

restricted cash of $5.0 million) at December 31, 2023.

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 convertible notes,

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

As of March 31, 2025, we had cash and cash

equivalents of $4.2 million, excluding restricted cash of $20.4 million, compared to $4.5 million in cash and cash equivalents and $20.5

million in restricted cash as of December 31, 2024.

The decrease in cash and cash equivalents was primarily driven by cash used in operating

activities, debt repayments, and purchases of property and equipment.

These outflows were partially offset by cash inflows from financing

activities, including the sale of preferred stock and proceeds from notes payable and convertible notes.

Net cash used in operating activities totaled

$10.2 million for the nine months ended September 30, 2024, compared to $2.2 million for the nine months ended September 30, 2023.

Cash used in operating activities for the nine months ended September 30, 2024 included $20.0 million proceeds from the sale of crypto

assets from our Sentinum crypto assets mining operations, offset by operating losses and changes in working capital.

$4.0 million for the three months ended March 31, 2025, compared to $10.2 million for the three months ended March 31, 2024.

used in operating activities for the three months ended March 31, 2025 included $5.2 million proceeds from the sale of crypto assets

from our Sentinum crypto assets mining operations, offset by operating losses and changes in working capital.

Net cash used in operating

activities for the three months ended March 31, 2024 included $0.6 million cash used in operating activities from discontinued operations.

Net cash used in investing activities was

$1.2 million for the three months ended March 31, 2025, compared to net cash used in investing activities of $1.7 million for the three

months ended March 31, 2024.

Net cash used investing activities for the three months ended March 31, 2025 included capital expenditures

of $2.8 million partially offset by proceeds from collections on notes receivable, related party of $1.9 million.

Net cash used in

operating activities for the nine months ended September 30, 2024 included $6.4 million cash used in operating activities from discontinued

Net cash used in investing

activities was $11.8 million for the nine months ended September 30, 2024, compared to $22.9 million for the nine months ended September

Net cash used in investing activities for the nine months ended September 30, 2024 was primarily related to $4.8 million

capital expenditures.

Net cash used in investing activities for the nine months ended September 30, 2024 included $3.8 million cash used

in investing activities from discontinued operations.

investing activities for the three months ended March 31, 2024 included $1.4 million cash provided by investing activities from discontinued

Net cash provided by financing activities

was $22.6 million for the nine months ended September 30, 2024, compared to $23.8 million for the nine months ended September 30,

was $4.7 million for the three months ended March 31, 2025, compared to $13.0 million for the three months ended March 31, 2024,

and primarily reflects the following transactions:

· During the period between January 1, 2024 through March 13, 2024,

we sold an aggregate of 25.6 million shares of common stock pursuant to the At-The-Market issuance sales agreement, as amended, entered

into with Ascendiant Capital Markets, LLC in 2023 (the “2023 Common ATM Offering”) for gross proceeds of $14.6 million and

effective March 14, 2024, the 2023 Common ATM Offering was terminated ;

· $49.3 million proceeds from notes payable, partially offset by $47.0 million payments on notes payable;

· $6.7 million proceeds from convertible notes payable, partially offset by $1.3 million payments on notes

· $2.8 million proceeds from sales of Series C preferred stock, related

· $1.8 million proceeds from subsidiaries’ sale of stock to

non-controlling interests;

· $17.9 million gross proceeds from notes payable, offset by $13.8 million payments on notes payable;

· $1.9 million gross proceeds from sales of Series D preferred stock;

· $1.9 million payments of preferred dividends;

· $1.9 million payments on notes payable, related party.

Net cash provided by financing

activities for the nine months ended September 30, 2024 included $2.6 million cash provided by financing activities from discontinued

Financing Transactions Subsequent to September 30, 2024

In October 2024, we sold

to Ault & Company an aggregate of 1,400 shares of Series C Preferred Stock and Warrants to purchase 0.4 million shares of Class A

common stock, for a total purchase price of $1.4 million.

· $0.9 million gross proceeds from sales of Series G preferred stock, related party;

· $0.3 million payments on convertible notes payable.

Net cash provided by financing activities

for the three months ended March 31, 2024 included $0.5 million cash used in financing activities from discontinued operations.

Financing Transactions Subsequent to March 31, 2025

Sales of Series G Preferred Stock and Warrants

In April 2025, we sold to

Ault & Company 100 shares of Series G preferred stock and Series G warrants to purchase 16,898 shares of Class A common stock, for

an aggregate purchase price of $0.1 million.

Issuances of Series D Preferred Stock

From April 1, 2025 through

May 15, 2025, we issued a total of 52,700 shares of our Series D preferred stock for the settlement of equity line of credit advances

totaling $0.6 million.

April 2025 Convertible Promissory Note

On April 1, 2025, we issued to an institutional

investor, a convertible promissory note in the principal face amount of $1.7 million (the “April 2025 Note”) in consideration

for an advance of $1.5 million previously made by the investor to us (the “Transaction”).

The April 2025 Note has a principal

face amount of $1.7 million and was issued with an OID of 10%.

The April 2025 Note accrues interest at the rate of 15% per annum, unless

an event of default (as defined in the April 2025 Note) occurs, at which time the April 2025 Note would accrue interest at 18% per annum.

The April 2025 Note will mature on September 30, 2025.

The April 2025 Note is convertible into shares of our class A common stock at any

time after NYSE approval of the SLAP at a conversion price equal to the greater of (i) $0.40 per share, which shall not be adjusted for

stock dividends, stock splits, stock combinations and other similar transactions and (ii) the lesser of 75% of the VWAP (as defined in

the April 2025 Note) of the Class A common stock during the five trading days immediately prior to the closing date or the date of conversion.

April 8, 2025 Convertible Note

On April 8, 2025, we issued to an accredited

investor a convertible promissory note in the principal face amount of $110,000 in consideration for $100,000.

The note accrues interest

at the rate of 15% per annum, unless an event of default (as defined in the note) occurs, at which time the note would accrue interest

at 18% per annum.

The note will mature on September 30, 2025.

The note is convertible into shares of Class A common stock at a conversion

price equal to the greater of (i) $0.45 and (ii) the lesser of (A) 75% of the VWAP (as defined in the note) of the Class A common

stock during the five trading days immediately prior to the date of issuance of the note or (B) 75% of the lowest daily VWAP of the Class

A common stock during the five trading days immediately prior to the date of conversion into shares of Class A common stock.

April 15, 2025 Convertible Promissory Notes

On April 15, 2025, we entered into securities

purchase agreements (the “Agreements”) with institutional investors (the “Investors”), pursuant to which we issued

to the Investors convertible promissory notes in the aggregate principal face amount of $5.0 million (the “Notes”) in

aggregate gross consideration of $4.0 million in cash paid by the Investors to us, prior to placement agent fees and expenses of approximately

$0.5 million (the “Transaction”).

The Notes have an aggregate principal face

amount of $5.0 million and were issued with an original issue discount of 20%, or $1.0 million.

The Notes do not accrue interest unless

an event of default at which time the Notes would accrue interest at 20% per annum.

The Notes will mature on September 30, 2025.

are convertible into shares (the “Conversion Shares”) of the Company’s class A common stock at any time after NYSE American

approval of the supplemental listing application at a conversion price equal to the greater of (i) $0.40 per share (the “Floor Price”),

which Floor Price shall not be adjusted for stock dividends, stock splits, stock combinations and other similar transactions and (ii)

80% of the lowest closing price of the Class A common stock during the five trading days immediately prior to the date of conversion into

shares of Class A common stock.

May 13, 2025 OID Only Term

2025, we entered into an OID only term note agreement with an institutional investor with a principal amount of $1.4 million and an OID

of $0.1 million.

The maturity date of the promissory note is May 27, 2025.

Ault entered into a personal guaranty agreement for the

benefit of the investor.

Critical Accounting Estimates

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What changed 10-Q

Item 2. Management’s Discussion and Analysis