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 operates as an artificial intelligence (“AI”) data center company anchored by Bitcoin. Through its wholly owned subsidiary, Sentinum, Inc., the Company owns and operates a large-scale data center platform that integrates AI compute infrastructure with Bitcoin mining operations under a unified, parallel compute model. This hybrid architecture enables Hyperscale Data to generate compute power for enterprise AI workloads through NVIDIA graphic processing unit clusters, while also operating high-efficiency Bitcoin mining systems that contribute to the Bitcoin network and the Company’s growing digital asset treasury. Through its other wholly owned subsidiary, Ault Capital Group, Inc. (“ACG”), the Company currently holds a portfolio of diversified businesses and strategic investments spanning commercial lending and trading, hotel operations, crane rental, AI-driven software and gaming platforms, and commercial electronics. In addition, ACG is actively engaged in extending private credit and structured finance through a licensed lending subsidiary. Hyperscale Data currently expects the divestiture of ACG (the “Divestiture”) to occur in the second quarter of 2026, though there can be no assurance that the Divestiture will be completed during such quarter. Upon the occurrence of the Divestiture, the Company would operate as a focused AI data center and Bitcoin infrastructure company. 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 with a maturity date of May 15, 2025. On June 3, 2025, we and the investor entered into an amendment to the A&R Forbearance Note, pursuant to which the maturity date of the A&R Forbearance Note was extended until June 30, 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, 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. 2 On June 6, 2025, we entered into a settlement agreement (the “Agreement”) with our defense affiliate Gresham Worldwide, Inc. (“GIGA”) and GIGA’s senior secured lenders pursuant in its Chapter 11 bankruptcy proceedings. On August 29, 2025, the United States Bankruptcy Court for the District of Arizona confirmed GIGA’s bankruptcy plan. Under that plan, GIGA’s senior lenders released GIGA and us in exchange for a settlement payment. That payment was made on September 30, 2025, and it is anticipated that the plan will be effective, and GIGA will emerge from bankruptcy, on November 28, 2025. On June 9, 2025, Sentinum entered into a Hosting Services Agreement (the “Agreement”) with a data center hosting company (the “Service Provider”). Under the Agreement, the Service Provider will provide Sentinum with operations and asset management services and access to approximately 20 megawatts of energy capacity and other critical infrastructure to be used for Sentinum’s Bitcoin mining operations. The Agreement has an initial term of one year with automatic one-year renewals unless either Sentinum or the Service Provider elects to terminate the Agreement 90 days prior to the end of the current term. Sentinum anticipates deploying approximately 6,800 S19j miners (the “Miners”) at the Service Provider’s data center. Sentinum will pay the Service Provider a non-refundable fee of $10 per Miner for the setup, installation and configuration of the Miners (the “Initial Setup Fee”) as well as an initial deposit of $800,000 (the “Initial Deposit” and together with the Initial Setup Fee, the “Initial Fees”). The Initial Fees shall be paid out of Bitcoin rewards and Bitcoin transaction fee awards (the “Earned BTC”) that would otherwise be due to Customer until such time as 100% of the Initial Fees have been paid. Thereafter, Sentinum is entitled to 70% of the Earned BTC and the Service Provider is entitled to 30%. The Agreement provides that, during periods of high demand on the utility grid, the Service Provider has the option to curtail the electrical load to the facility and redirect the electrical load to the utility grid. Upon any curtailment, the net profits from such energy sales shall be equally split between Sentinum and the Service Provider. On July 31, 2025, we entered into a securities purchase agreement (the “July 2025 SPA”) with Ault & Company, Inc. (“Ault & Company”), pursuant to which we agreed to sell, in one or more closings, to Ault & Company up to 100,000 shares of Series H convertible preferred stock (“Series H Preferred Stock”) for a total purchase price of up to $100.0 million. The July 2025 SPA provides that the financing may be conducted through one or more closings. As of the date of this filing, we have sold 4,000 shares of Series H Preferred Stock to Ault & Company. Each share of Series H Preferred Stock has a stated value of $1,000.00 and is convertible into shares of Class A common stock at a conversion price equal to the greater of (i) $0.10 per share and (ii) the lesser of (A) $0.79645 or (B) 105% of the volume weighted average price of the Class A common stock during the five trading days immediately prior to the date of conversion. The conversion price is subject to adjustment in the event of an issuance of Class A common stock at a price per share lower than the conversion price then in effect, as well as upon customary stock splits, stock dividends, combinations or similar events. The holders of Series H Preferred Stock are entitled to cumulative cash dividends at an annual rate of 9.5%, or $95.00 per share, based on the stated value per share. Dividends shall accrue for 10 years from the date of issuance of such shares of Series H Preferred Stock and are payable monthly in arrears. For the first two years, we may elect to pay the dividend amount in shares of Class A common stock rather than cash. The holders of the Series H Preferred Stock are entitled to vote with the Class A common stock as a single class on an as-converted basis. On August 29, 2025, we entered into a sales agreement with Wilson-Davis & Co., Inc. to sell shares of our Class A common stock, having an aggregate offering price of up to $125 million from time to time, through an “at-the-market” (“ATM”) offering program. Between August 29, 2025 and November 4, 2025, we received gross proceeds of $125 million through the sale of 255.4 million shares of our Class A common stock through the ATM offering. On September 26, 2025, Ault Lending entered into a loan and security agreement (the “Loan Agreement”) with GIGA, pursuant to which Ault Lending agreed to loan GIGA up to $10.0 million (the “Loan”), subject to the terms and conditions of the Loan Agreement. The Loan, which is evidenced by the issuance by GIGA of a15% Senior Secured Original Issue Discount Convertible Promissory Note (the “GIGA Note”) in the original principal amount of $11.0 million, was to be funded in three tranches. The first tranche, in an amount of $6.5 million, was funded on September 30, 2025, and the remaining tranches, totaling $3.5 million, are expected to be funded pursuant to the terms of the Loan Agreement. The GIGA Note, which matures on November 15, 2028, was issued as part of GIGA’s confirmed Chapter 11 plan of reorganization and is secured by substantially all of GIGA’s assets. The GIGA Note is convertible into shares of GIGA common stock at a conversion price equal to the greater of (i) $0.10 per share (the “GIGA Floor Price”), which GIGA Floor Price shall not be adjusted for stock dividends, stock splits, stock combinations and other similar transactions and (ii) the lesser of a 5% premium to the volume weighted average price during the five trading days immediately prior to the trading day immediately preceding the date of conversion into shares of common stock or $1.00. 3 On November 7, 2025, we entered into an amendment to the July SPA to provide for an extension of the date on which the final closing (the “Termination Date”) may occur to the later of (i) December 31, 2027, and (ii) the date that shall be one year following the date upon which the Company has completed taking the requisite action(s) to enable it to issue shares of Class A common stock to each person holding instruments entitling such person to convert all of such convertible instrument, including but not limited to the Series H Preferred Stock, into shares of Class A common stock provided, however, that Ault & Company may extend the Termination Date for an additional ninety (90) days, by notice to the Company. Presentation of GIGA as Discontinued Operations On August 14, 2024, 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 June 6, 2025, we entered into a settlement agreement with GIGA and GIGA’s senior secured lenders pursuant. On August 29, 2025, the United States Bankruptcy Court for the District of Arizona confirmed GIGA’s bankruptcy plan. Under that plan, GIGA’s senior lenders released GIGA and us in exchange for a settlement payment. That payment was made on September 30, 2025, and it is anticipated that the plan will be effective, and GIGA will emerge from bankruptcy, on November 28, 2025. 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 Ault Global Real Estate Equities, Inc. (“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 determination 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 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 nine months ended September 30, 2025. We evaluated the criteria for discontinued operations and determined that the operations of AVLP did not meet the requirements for such classification. Deconsolidation of Eco Pack Technologies Limited (“Eco Pack”) On April 16, 2025, Eco Pack, a majority-owned subsidiary of ours, filed a voluntary liquidation under the insolvency regulations in the UK. As a result of the filing, we no longer maintained a controlling financial interest. Accordingly, we deconsolidated Eco Pack effective as of the filing date. In connection with the deconsolidation, we recognized a loss of $0.4 million, which is included in the condensed consolidated statement of operations for the nine months ended September 30, 2025. We evaluated the criteria for discontinued operations and determined that the operations of Eco Pack did not meet the requirements for such classification. 4 Deconsolidation of a Subsidiary of RiskOn International, Inc. (“ROI”) During the three months ended September 30, 2025, we recognized a gain of $2.7 million in connection with the bankruptcy proceedings for a subsidiary of ROI. We deconsolidated the subsidiary as we determined that we no longer maintained a controlling financial interest in the subsidiary. The gain recognized reflects the derecognition of the subsidiary’s remaining assets, liabilities, and equity balances. We evaluated the criteria for discontinued operations and determined that the operations of the subsidiary 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/ . 5 Results of Operations Results of Operations for the Three Months Ended September 30, 2025 and 2024 The following table summarizes the results of our operations for the three months ended September 30, 2025 and 2024. For the Three Months Ended September 30, 2025 2024 Revenue, crane operations $ 9,709,000 $ 12,327,000 Revenue, crypto assets mining 5,674,000 5,264,000 Revenue, hotel and real estate operations 6,161,000 5,680,000 Revenue, lending and trading activities 148,000 5,575,000 Revenue, other 2,636,000 2,215,000 Total revenue 24,328,000 31,061,000 Cost of revenue, crane operations 6,322,000 7,957,000 Cost of revenue, crypto assets mining 6,565,000 9,388,000 Cost of revenue, hotel and real estate operations 3,523,000 3,498,000 Cost of revenue, lending and trading activities - 495,000 Cost of revenue, other 1,653,000 1,178,000 Total cost of revenue 18,063,000 22,516,000 Gross profit 6,265,000 8,545,000 Operating expenses General and administrative 11,348,000 11,996,000 Selling and marketing 7,369,000 4,755,000 Research and development 1,605,000 4,598,000 Impairment of property and equipment - 11,791,000 Total operating expenses 20,322,000 33,140,000 Loss from operations (14,057,000 ) (24,595,000 ) Other income (expense): Interest and other income 637,000 766,000 Interest expense (3,063,000 ) (7,766,000 ) Gain (loss) on extinguishment of debt 1,137,000 (240,000 ) Gain on deconsolidation of subsidiary 2,747,000 - (Loss) gain on the sale of fixed assets (732,000 ) 32,000 Total other income (expense), net 726,000 (7,208,000 ) Loss before income taxes (13,331,000 ) (31,803,000 ) Income tax provision 251,000 52,000 Net loss from continuing operations (13,582,000 ) (31,855,000 ) Net income from discontinued operations - 2,216,000 Net loss (13,582,000 ) (29,639,000 ) Net loss attributable to non-controlling interest 569,000 4,090,000 Net loss attributable to Hyperscale Data (13,013,000 ) (25,549,000 ) Preferred dividends (2,243,000 ) (1,326,000 ) Net loss available to common stockholders $ (15,256,000 ) $ (26,875,000 ) Comprehensive loss Net loss available to common stockholders $ (15,256,000 ) $ (26,875,000 ) Other comprehensive loss Foreign currency translation adjustment - (221,000 ) Other comprehensive loss - (221,000 ) Total comprehensive loss $ (15,256,000 ) $ (27,096,000 ) 6 Revenues Revenues by business category for the three months ended September 30, 2025 and 2024 were as follows: For the Three Months Ended September 30, Increase 2025 2024 (Decrease) % Sentinum Revenue, crypto assets mining $ 5,674,000 $ 5,264,000 $ 410,000 8 % Revenue, commercial real estate leases 262,000 168,000 94,000 56 % Energy Revenue, crane operations 9,709,000 12,327,000 (2,618,000 ) -21 % Other - 26,000 (26,000 ) -100 % AGREE 5,899,000 5,512,000 387,000 7 % TurnOnGreen 1,742,000 1,290,000 452,000 35 % Fintech Revenue, lending and trading activities 148,000 5,575,000 (5,427,000 ) -97 % Other 894,000 899,000 (5,000 ) -1 % Total revenue $ 24,328,000 $ 31,061,000 $ (6,733,000 ) -22 % Sentinum Revenues from Sentinum’s crypto assets mining operations increased by $0.4 million, to $5.7 million for the three months ended September 30, 2025, compared to $5.3 million for the same period in 2024. The increase was primarily due to a $1.3 million, or 30%, increase in revenue from self-mined Bitcoin operations at Sentinum-owned and operated facilities. This increase was partially offset by the cessation of third-party hosted mining operations, which generated $0.9 million of revenue in the prior-year period but none in 2025. The increase in self-mining revenue was driven by an 88% increase in the average Bitcoin price during the three months ended September 30, 2025, compared to the same period in 2024, partially offset by a 51% increase in the average Bitcoin network difficulty level. Energy Energy revenues from Circle 8’s crane operations declined by $2.6 million, or 21%, for the three months ended September 30, 2025, compared to the same period in 2024. The decrease reflects a slowdown in demand from oil and gas customers, as many exploration projects were delayed or scaled back amid continued market uncertainty. Key contributing factors included fluctuations in crude oil prices, softer global demand and trade-related concerns, all of which impacted the pace of new project starts and the need for crane services. AGREE Revenues from AGREE’s hotel operations increased by $0.4 million, or 7%, for the three months ended September 30, 2025, compared to the same period in 2024. The increase reflects incremental improvements in both occupancy and average daily rates, indicating continued progress in hotel performance year-over-year. Fintech Revenues from our lending and trading activities decreased $5.4 million to approximately $0.1 million for the three months ended September 30, 2025, compared to $5.6 million the same period in 2024. 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. Revenues from our trading activities for the three months ended September 30, 2025 and 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 earnings. 7 TurnOnGreen TurnOnGreen’s revenues increased by $0.5 million, to $1.7 million for the three months ended September 30, 2025, compared to $1.2 million in the corresponding period in 2024. This rise was primarily due to sales from two new customers during the three months ended September 30, 2025. Other Other revenues were relatively consistent year-over-year, totaling $0.9 million for both the three months ended September 30, 2025 and 2024. Gross Margins Gross margins decreased to 26% for the three months ended September 30, 2025, compared to 28% for the three months ended September 30, 2024. The decline was primarily driven by unfavorable margins from our crypto asset mining activities, partially offset by favorable contributions from our lending and trading activities. Excluding the effects of margin from our mining, lending, and trading activities adjusted gross margins for each of the three months ended September 30, 2025 and 2024 would have been 38%. Research and Development Research and development expenses decreased by $3.0 million for the three months ended September 30, 2025, due to decreased expenditures related to development work on ROI’s Bitnile social gaming platform. Selling and Marketing Selling and marketing expenses were $7.4 million for the three months ended September 30, 2025, compared to $4.8 million for the three months ended September 30, 2024, an increase of $2.6 million, or 55%. The increase was primarily the result of an increase in sales and marketing expenses at ROI from higher advertising and promotion costs. General and Administrative General and administrative expenses were $11.3 million for the three months ended September 30, 2025, compared to $12.0 million for the same period in 2024, representing a decrease of $0.6 million, or 5%. The decrease was primarily driven by the deconsolidation of AVLP and Eco Pack, the completion and wind-down of Ault Disruptive Technologies Corporation (“Ault Disruptive”) following the full redemption of its public shares. 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 impact of the Bitcoin halving event that occurred earlier in 2024, we concluded 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 income, net was $0.7 million for the three months ended September 30, 2025, compared to other expense, net of $7.2 million for the three months ended September 30, 2024. Interest and other income totaled $0.6 million and $0.8 million for the three months ended September 30, 2025 and 2024, respectively. 8 Interest expense totaled $3.1 million for the three months ended September 30, 2025, compared to $7.8 million for the same period in 2024. Interest expense is lower due to lower debt balances as well as lower forbearance fees and amortization of debt discount. During the three months ended September 30, 2025, we recognized a gain of $2.7 million in connection with the bankruptcy proceedings for a subsidiary of ROI. We deconsolidated the subsidiary as we determined that we no longer maintained a controlling financial interest in the subsidiary. The gain recognized reflects the derecognition of the subsidiary’s remaining assets, liabilities, and equity balances. During the three months ended September 30, 2025, we recognized a gain on extinguishment of debt of $1.1 million related to the pay-off of an ROI note payable. During the three months ended September 30, 2025, we recognized a loss on the sale of fixed assets of $0.7 million in connection with the sale of equipment at Circle 8. Income Tax Provision Our effective tax rate from continuing operations was a provision of 1.9% for the three months ended September 30, 2025, compared to 0.2% for the same period in 2024. We recorded an income tax provision of $0.3 million and $0.1 million for the three months ended September 30, 2025 and 2024, respectively. 9 Results of Operations for the Nine Months Ended September 30, 2025 and 2024 The following table summarizes the results of our operations for the nine months ended September 30, 2025 and 2024. For the Nine Months Ended September 30, 2025 2024 Revenue, crane operations $ 35,060,000 $ 36,945,000 Revenue, crypto assets mining 15,556,000 25,201,000 Revenue, hotel and real estate operations 15,448,000 14,377,000 Revenue, lending and trading activities 1,946,000 4,911,000 Revenue, other 7,195,000 5,785,000 Total revenue 75,205,000 87,219,000 Cost of revenue, crane operations 22,710,000 23,704,000 Cost of revenue, crypto assets mining 20,670,000 26,971,000 Cost of revenue, hotel and real estate operations 9,652,000 9,633,000 Cost of revenue, lending and trading activities - 495,000 Cost of revenue, other 4,498,000 3,470,000 Total cost of revenue 57,530,000 64,273,000 Gross profit 17,675,000 22,946,000 Operating expenses General and administrative 30,417,000 33,730,000 Selling and marketing 15,980,000 12,528,000 Research and development 1,846,000 4,811,000 Impairment of property and equipment - 19,746,000 Total operating expenses 48,243,000 70,815,000 Loss from operations (30,568,000 ) (47,869,000 ) Other income (expense): Interest and other income 1,958,000 2,118,000 Interest expense (14,566,000 ) (18,825,000 ) Gain on conversion of investment in equity securities to marketable equity securities - 17,900,000 (Loss) gain on extinguishment of debt (3,432,000 ) 502,000 Loss from investment in unconsolidated entity - (1,958,000 ) Impairment of equity securities - (6,266,000 ) Gain on deconsolidation of subsidiary 12,437,000 - Provision for loan losses, related party - (3,068,000 ) (Loss) gain on the sale of fixed assets (1,291,000 ) 64,000 Total other expense, net (4,894,000 ) (9,533,000 ) Loss before income taxes (35,462,000 ) (57,402,000 ) Income tax provision 181,000 47,000 Net loss from continuing operations (35,643,000 ) (57,449,000 ) Net loss from discontinued operations - (779,000 ) Net loss (35,643,000 ) (58,228,000 ) Net loss (income) attributable to non-controlling interest (626,000 ) 2,469,000 Net loss attributable to Hyperscale Data (36,269,000 ) (55,759,000 ) Preferred dividends (6,424,000 ) (3,894,000 ) Net loss available to common stockholders $ (42,693,000 ) $ (59,653,000 ) Comprehensive loss Net loss available to common stockholders $ (42,693,000 ) $ (59,653,000 ) Other comprehensive income (loss) Foreign currency translation adjustment 6,000 (621,000 ) Other comprehensive income (loss) 6,000 (621,000 ) Total comprehensive loss $ (42,687,000 ) $ (60,274,000 ) 10 Revenues Revenues by business category for the nine months ended September 30, 2025 and 2024 were as follows: For the Nine Months Ended September 30, Increase 2025 2024 (Decrease) % Sentinum Revenue, crypto assets mining $ 15,556,000 $ 25,201,000 $ (9,645,000 ) -38 % Revenue, commercial real estate leases 1,023,000 725,000 298,000 41 % Energy Revenue, crane operations 35,060,000 36,945,000 (1,885,000 ) -5 % Other 29,000 94,000 (65,000 ) -69 % AGREE 14,425,000 13,652,000 773,000 6 % TurnOnGreen 5,026,000 3,751,000 1,275,000 34 % Fintech Revenue, lending and trading activities 1,946,000 4,911,000 (2,965,000 ) -60 % Other 2,140,000 1,940,000 200,000 10 % Total revenue $ 75,205,000 $ 87,219,000 $ (12,014,000 ) -14 % Sentinum Revenues from Sentinum’s crypto assets mining operations decreased $9.6 million to $15.6 million for the nine months ended September 30, 2025, compared to $25.2 million for the nine months ended September 30, 2024. The decrease was due primarily to a $4.0 million decline in revenue from mined crypto assets at Sentinum owned and operated facilities coupled with a $5.6 million decline in revenue from Sentinum crypto mining equipment hosted at third-party facilities. The $4.0 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 45% increase in the average Bitcoin mining difficulty level, partially offset by a 70% increase in the average Bitcoin price for the nine months ended September 30, 2025, compared to the corresponding period in 2024. No revenue was generated from third-party hosted mining operations in 2025. Energy Energy revenues from Circle 8’s crane operations declined by $1.9 million, or 5%, for the nine months ended September 30, 2025, compared to the same period in 2024. The decrease reflects a slowdown in demand from oil and gas customers, as many exploration projects were delayed or scaled back amid continued market uncertainty. Key contributing factors included fluctuations in crude oil prices, softer global demand and trade-related concerns, all of which impacted the pace of new project starts and the need for crane services. AGREE Revenues from AGREE’s hotel operations increased by $0.8 million, or 6%, for the nine months ended September 30, 2025, compared to the same period in 2024. The increase reflects incremental improvements in both occupancy and average daily rates, indicating continued progress in hotel performance year-over-year. Fintech Revenues from our lending and trading activities decreased $3.0 million to approximately $1.9 million for the nine months ended September 30, 2025, compared to the same period in 2024. The decrease was primarily attributable to lower realized gains from trading activities and a reduction in fee-generating transactions during the current period. Revenues for the nine months ended September 30, 2025, included a $1.5 million realized gain from the sale of an investment in other equity securities and $0.3 million in fee income, compared to $2.5 million in realized gains from trading activities and $2.3 million in fee income during the nine months ended September 30, 2024. 11 Revenues from our trading activities for the nine months ended September 30, 2025 and 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 earnings. TurnOnGreen TurnOnGreen’s revenues increased by $1.3 million, to $5.0 million for the nine months ended September 30, 2025, compared to $3.8 million in the corresponding period in 2024. This increase was primarily due to higher sales from two new customers during the nine months ended September 30, 2025. Other Other revenues increased by $0.2 million, to $2.1 million for the nine months ended September 30, 2025, compared to $1.9 million in the corresponding period in 2024. This increase was primarily due to higher corporate aircraft charter revenue from third parties. Gross Margins Gross margins decreased to 24% for the nine months ended September 30, 2025, compared to 26% for the same period in 2024. The decline was primarily driven by unfavorable margins from our crypto asset mining operations, partially offset by favorable contributions from our lending and trading activities. Excluding the impact of lending and trading activities and crypto asset mining, adjusted gross margins for the nine months ended September 30, 2025 and 2024 would have been 36% for both periods. Research and Development Research and development expenses decreased by $3.0 million for the nine months ended September 30, 2025, due to decreased expenditures related to development work on ROI’s Bitnile social gaming platform. Selling and Marketing Selling and marketing expenses were $16.0 million for the nine months ended September 30, 2025, compared to $12.5 million for the nine months ended September 30, 2024, an increase of $3.5 million, or 28%. The increase was primarily the result of an increase in sales and marketing expenses at ROI from higher advertising and promotion costs. General and Administrative General and administrative expenses were $30.4 million for the nine months ended September 30, 2025, compared to $33.7 million for the nine months ended September 30, 2024, a decrease of $3.3 million. The decrease was primarily driven by the deconsolidation of AVLP and Eco Pack, the completion and wind-down of Ault Disruptive following the full redemption of its public shares, lower salaries and benefits, lower performance-based bonuses at Ault Lending and a reduction in stock-based compensation expense. 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 impact of the Bitcoin halving event that occurred earlier in 2024, we concluded 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. 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 determination not to sell. 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 $9.2 million during the nine months ended September 30, 2024. The fair values of property and equipment related to the real estate assets of AGREE were based on a discounted cash flow income approach for the hotel properties and a comparable sales market approach for the vacant land assets. 12 Other Expense, Net Other expense, net was $4.9 million and $9.5 million for the nine months ended September 30, 2025 and 2024, respectively. Interest and other income totaled $2.0 million and $2.1 million for the nine months ended September 30, 2025 and 2024, respectively. Interest expense totaled $14.6 million for the nine months ended September 30, 2025, compared to $18.8 million for the same period in 2024. Interest expense is lower due to lower debt balances as well as lower forbearance fees and amortization of debt discount. For the nine months ended September 30, 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 nine months ended September 30, 2025. During the nine months ended September 30, 2025, we recognized a total net loss on extinguishment of convertible notes of $3.4 million. This amount includes: · A loss of $2.6 million was recognized in connection with the February 25, 2025 issuance of an amended and restated forbearance agreement with an institutional investor. As part of this agreement, we issued an amended and restated convertible promissory note (the “A&R Forbearance Note”) with a principal amount of $3.5 million. The A&R Forbearance Note was determined to be substantially different from the original note due to significant modifications, including an increased principal balance and the addition of a conversion feature. Accordingly, the original note was derecognized, and extinguishment accounting was applied. The $2.6 million loss reflects the excess of the value of the A&R Forbearance Note over the net carrying amount of the original note; · A loss of $1.3 million related to a 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; · A loss of $1.0 million related to a 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 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. During the nine months ended September 30, 2024, the holder of ROI convertible notes converted $2.3 million of their 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, 2025, we recognized a gain on extinguishment of debt of $1.1 million related to the pay-off of an ROI note payable. Loss from investment in unconsolidated entity was $1.3 million for the nine months ended September 30, 2024, representing our share of losses from our equity method investment in Algorhythm Holdings, Inc. 13 On March 28, 2025, AVLP, formerly 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 nine months ended September 30, 2025. On April 16, 2025, Eco Pack, formerly a majority-owned subsidiary of ours, filed a voluntary liquidation under the insolvency regulations in the UK. As a result of the filing, we no longer maintained a controlling financial interest. Accordingly, we deconsolidated Eco Pack effective as of the filing date. In connection with the deconsolidation, we recognized a loss of $0.4 million, which is included in the condensed consolidated statement of operations for the nine months ended September 30, 2025. During the three months ended September 30, 2025, we recognized a gain of $2.7 million in connection with the bankruptcy proceedings for a subsidiary of ROI. We deconsolidated the subsidiary as we determined that we no longer maintained a controlling financial interest in the subsidiary. The gain recognized reflects the derecognition of the subsidiary’s remaining assets, liabilities, and equity balances. 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. During the nine months ended September 30, 2024, we recorded a $3.1 million loan loss reserve related to the promissory note from 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 a provision of 0.5% for the nine months ended September 30, 2025, compared to 0.1% for the same period in 2024. We recorded an income tax provision of $0.2 million and $47,000 for the nine months ended September 30, 2025 and 2024, respectively. Liquidity and Capital Resources As of September 30, 2025, we had cash and cash equivalents of $24.8 million, excluding restricted cash of $22.8 million, compared to $4.5 million in cash and cash equivalents, excluding $20.5 million in restricted cash, as of December 31, 2024. The increase in cash and cash equivalents was primarily driven by cash inflows from financing activities, including the sale of common stock, preferred stock and proceeds from notes payable and convertible notes. These inflows were partially offset by cash used in operating activities, debt repayments and purchases of property and equipment. Net cash used in operating activities totaled $24.8 million for the nine months ended September 30, 2025, compared to $10.2 million for the nine months ended September 30, 2024. Cash used in operating activities for the nine months ended September 30, 2025 included $13.1 million proceeds from the sale of crypto assets from our Sentinum crypto assets mining operations and $4.0 million proceeds from the sale of an investment in equity securities, offset by operating losses and changes in working capital. 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 operations. Net cash used in investing activities was $12.9 million for the nine months ended September 30, 2025, compared to net cash used in investing activities of $11.8 million for the nine months ended September 30, 2024. Net cash used in investing activities for the nine months ended September 30, 2025 included: · $7.6 million investments in notes receivable, related party, offset by $2.5 million collections of notes receivable, related party; · $6.1 million capital expenditures; · $4.2 million purchases of crypto assets; 14 · $1.5 million investments in loans receivable; · $2.4 million proceeds from the sale of fixed assets; and · $1.3 million proceeds from the sale of investments in common stock, related party. Net cash used in investing activities for the nine months ended September 30, 2024 included $3.8 million cash provided by investing activities from discontinued operations. Net cash provided by financing activities was $60.4 million for the nine months ended September 30, 2025, compared to $22.6 million for the nine months ended September 30, 2024, and primarily reflects the following transactions: · $37.6 million net proceeds from the sale of Class A common stock; · $23.9 million gross proceeds from sales of Series B preferred stock; · $5.2 million gross proceeds from convertible notes payable, offset by $3.5 million payments on convertible notes payable; · $5.0 million gross proceeds from sales of Series G preferred stock and Series H preferred stock, related party. · $3.5 million gross proceeds from sales of Series D preferred stock; · $49.5 million payments on notes payable, offset by $41.1 million gross proceeds from notes payable; and · $6.3 million payments of preferred dividends. 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 operations. Financing Transactions Subsequent to September 30, 2025 Sales of Series B Convertible Preferred Stock From October 1, 2025 through November 17, 2025, we sold a total of 8,500 shares of our Series B convertible preferred stock for cash totaling $8.5 million. Issuance of Class A Common Stock pursuant to the ATM Offering From October 1, 2025 through November 4, 2025, we received gross proceeds of $86.2 million through the sale of 172.7 million shares of our Class A common stock through the ATM offering. 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. 15