Hyperscale Data, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 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/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. In addition, we extend credit to select entrepreneurial businesses through a licensed lending subsidiary. Recent Events and Developments 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. In 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. The 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. The 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. 1 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. 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 per month. 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. On 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. 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. The notes 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. Mr. Ault entered into a personal guaranty agreement for the benefit of the investor. Presentation of GIGA as Discontinued Operations On 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. 2 Change in Plan of Sales of AGREE Hotel Properties On April 30, 2024, we had a change in plan of sale for our four hotels owned and operated by AGREE. As a result, as of April 30, 2024, the assets no longer met the held for sale criteria and were required to be reclassified as held and used at the lower of adjusted carrying value or the fair value at the date of the not to sell. For presentation purposes, the assets and liabilities previously held for sale as of December 31, 2023, were reclassified in the December 31, 2023 balance sheet in the accompanying financial statements back to their original asset and liability groups at their previous carrying values. In connection with this change 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 year ended December 31, 2024. Deconsolidation of Avalanche International Corp. (“AVLP”) On March 28, 2025, AVLP, a majority-owned subsidiary of our, 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. 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. General As a holding company, our business objective is to increase stockholder value through developing and growing our subsidiaries. Under the strategy we have adopted, we are focused on managing and financially supporting our existing subsidiaries and partner companies, with the goal of pursuing monetization opportunities and maximizing the value returned to stockholders. We have, are and will consider initiatives including, among others: public offerings, the sale of individual partner companies, the sale of certain or all partner company interests in secondary market transactions, or a combination thereof, as well as other opportunities to maximize stockholder value. We anticipate returning value to stockholders after satisfying our debt obligations and working capital needs. From time to time, we engage in discussions with other companies interested in our subsidiaries or partner companies, either in response to inquiries or as part of a process we initiate. To the extent we believe that a subsidiary or partner company’s further growth and development can best be supported by a different ownership structure or if we otherwise believe it is in our stockholders’ best interests, we will seek to sell all or a portion of our position in the subsidiary or partner company. These sales may take the form of privately negotiated sales of stock or assets, mergers and acquisitions, public offerings of the subsidiary or partner company’s securities and, in the case of publicly traded partner companies, sales of their securities in the open market. Our plans may include taking subsidiaries or partner companies public through rights offerings and directed share subscription programs. We will continue to consider these (or similar) initiatives and the sale of certain subsidiary or partner company interests in secondary market transactions to maximize value for our stockholders. In recent years, we have provided capital and relevant expertise to fuel the growth of businesses in 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. We are a Delaware corporation with our corporate office located at 11411 Southern Highlands Pkwy, Suite 190, Las Vegas, NV 89141. Our phone number is 949-444-5464 and our website address is https://hyperscaledata.com/ . 3 Results of Operations 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 March 31, 2025 and 2024. For the Three Months Ended March 31, 2025 2024 Revenue, crane operations $ 13,769,000 $ 12,918,000 Revenue, crypto assets mining 5,198,000 11,447,000 Revenue, hotel and real estate operations 3,665,000 3,308,000 Revenue, lending and trading activities (28,000 ) 9,099,000 Revenue, other 2,417,000 1,593,000 Total revenue 25,021,000 38,365,000 Cost of revenue, crane operations 8,247,000 7,715,000 Cost of revenue, crypto assets mining 7,031,000 8,544,000 Cost of revenue, hotel and real estate operations 2,844,000 2,817,000 Cost of revenue, lending and trading activities - - Cost of revenue, other 1,616,000 1,101,000 Total cost of revenue 19,738,000 20,177,000 Gross profit 5,283,000 18,188,000 Operating expenses Research and development 129,000 111,000 Selling and marketing 2,334,000 4,048,000 General and administrative 9,204,000 10,372,000 Total operating expenses 11,667,000 14,531,000 (Loss) income from operations (6,384,000 ) 3,657,000 Other income (expense): Interest and other income 240,000 523,000 Interest expense (3,839,000 ) (5,631,000 ) Gain on conversion of investment in equity securities to marketable equity securities - 17,900,000 (Loss) gain on extinguishment of debt (4,569,000 ) 1,405,000 Loss from investment in unconsolidated entity - (667,000 ) Gain on deconsolidation of subsidiary 10,049,000 - Provision for loan losses, related party - (3,068,000 ) (Loss) gain on the sale of fixed assets (161,000 ) 68,000 Total other expense, net 1,720,000 10,530,000 (Loss) income before income taxes (4,664,000 ) 14,187,000 Income tax provision (benefit) 59,000 (1,000 ) Net (loss) income from continuing operations (4,723,000 ) 14,188,000 Net loss from discontinued operations - (3,336,000 ) Net (loss) income (4,723,000 ) 10,852,000 Net loss (income) attributable to non-controlling interest 518,000 (7,135,000 ) Net (loss) income attributable to Hyperscale Data, Inc. (4,205,000 ) 3,717,000 Preferred dividends (1,966,000 ) (1,260,000 ) Net (loss) income available to common stockholders $ (6,171,000 ) $ 2,457,000 Comprehensive loss Net (loss) income available to common stockholders $ (6,171,000 ) $ 2,457,000 Other comprehensive (loss) income Foreign currency translation adjustment 6,000 63,000 Other comprehensive income 6,000 63,000 Total comprehensive (loss) income $ (6,165,000 ) $ 2,520,000 4 Revenues Revenues by business category for the three months ended March 31, 2025 and 2024 were as follows: For the Three Months Ended March 31, Increase 2025 2024 (Decrease) % Sentinum, Inc. (“Sentinum”) Revenue, crypto assets mining $ 5,198,000 $ 11,447,000 $ (6,249,000 ) -55 % Revenue, commercial real estate leases 516,000 302,000 214,000 71 % Energy Revenue, crane operations 13,769,000 12,918,000 851,000 7 % Other 29,000 39,000 (10,000 ) -26 % AGREE 3,149,000 3,006,000 143,000 5 % TurnOnGreen 1,592,000 1,225,000 367,000 30 % Fintech Revenue, lending and trading activities (28,000 ) 9,099,000 (9,127,000 ) -100 % Other 796,000 329,000 467,000 142 % Total revenue $ 25,021,000 $ 38,365,000 $ (13,344,000 ) -35 % Sentinum Revenues from Sentinum’s crypto assets 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 Energy revenues from Circle 8’s crane operations increased by $0.9 million, or 7%, for the three months ended March 31, 2025, compared to the same period in 2024. The increase was primarily driven by reduced pricing pressure and improved utilization of the crane fleet relative to the prior-year period. Fintech 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. On February 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 Lending”). 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 changes. These gains and losses have caused, and will continue to cause, significant volatility in our periodic earnings. TurnOnGreen TurnOnGreen’s revenues increased by $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. 5 Other 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 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 period. In both periods, gross margins were further pressured by low or negative gross margin contributions from our crypto asset mining operations. 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 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 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 $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 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. During the three months ended March 31, 2025, we recognized a total net loss on extinguishment of convertible notes of $4.6 million. This amount includes: · 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; 6 · A loss of $1.0 million related to the Orchid convertible promissory note issued on March 14, 2025. Although 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; and · A loss of $1.3 million related to the SJC convertible promissory note issued on March 21, 2025. Although 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 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 $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. 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. 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 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 31, 2024. Liquidity and Capital Resources 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 $4.0 million for the three months ended March 31, 2025, compared to $10.2 million for the three months ended March 31, 2024. Cash 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 investing activities for the three months ended March 31, 2024 included $1.4 million cash provided by investing activities from discontinued operations. Net cash provided by financing activities 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: · $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; 7 · $1.9 million payments of preferred dividends; · $0.9 million gross proceeds from sales of Series G preferred stock, related party; and · $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. The Notes 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 Note On May 13, 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. Mr. Ault entered into a personal guaranty agreement for the benefit of the investor. 8 Critical Accounting Estimates There have been no material changes to our critical accounting estimates previously disclosed in the 2024 Annual Report. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable for a smaller reporting company.