Hyperscale Data, Inc.

1. DESCRIPTION OF BUSINESS

Hyperscale Data, Inc., a Delaware corporation (“Hyperscale Data” or the “Company”) is a diversified holding company pursuing growth by acquiring and developing undervalued businesses and disruptive technologies with a global impact. Through its wholly and majority-owned subsidiaries and strategic investments, the Company owns and/or operates data centers at which it mines 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, the Company extends credit to select entrepreneurial businesses through a licensed lending subsidiary.

The Company has the following reportable segments:

2. LIQUIDITY AND FINANCIAL CONDITION

As of March 31, 2025, the Company had cash and cash equivalents of $4.2 million (excluding restricted cash of $20.4 million), negative working capital of $149.1 million and a history of net operating losses. The Company has financed its operations principally through issuances of convertible debt, promissory notes and equity securities. These factors create substantial doubt about the Company’s ability to continue as a going concern for at least one year after the date that these condensed consolidated financial statements are issued.

The condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the condensed consolidated financial statements have been prepared based on the assumption that the Company will continue as a going concern and that contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

In making this assessment management performed a comprehensive analysis of the Company’s current circumstances, including its financial position, cash flow and cash usage forecasts, as well as obligations and debts. Although management has a long history of successful capital raises, the analysis used to determine the Company’s ability as a going concern does not include cash sources beyond the Company’s direct control that management expects to be available within the next 12 months.

Management expects that the Company’s existing cash and cash equivalents, accounts receivable and marketable securities as of March 31, 2025, will not be sufficient to enable the Company to fund its anticipated level of operations through one year from the date these financial statements are issued. Management anticipates raising additional capital through the private and public sales of the Company’s equity or debt securities and selling its crypto assets, or a combination thereof. Although management believes that such capital sources will be available, there can be no assurances that financing will be available to the Company when needed in order to allow the Company to continue its operations, or if available, on terms acceptable to the Company. If the Company does not raise sufficient capital in a timely manner, among other things, the Company may be forced to curtail or cease its operations altogether.

3. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Regulation S-X and do not include all the information and disclosures required by generally accepted accounting principles in the United States of America (“GAAP”). The Company has made estimates and judgments affecting the amounts reported in the Company’s condensed consolidated financial statements and the accompanying notes. The actual results experienced by the Company may differ materially from the Company’s estimates. The condensed consolidated financial information is unaudited but reflects all normal adjustments that are, in the opinion of management, necessary to provide a fair statement of results for the interim periods presented.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report”) as amended, filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2025. The condensed consolidated balance sheet as of December 31, 2024 was derived from the Company’s audited 2024 financial statements contained in the above referenced 2024 Annual Report. Results of the three months ended March 31, 2025, are not necessarily indicative of the results to be expected for the full year ending December 31, 2025.

Prior Period Revision - Statement of Cash Flows

For the three months ended March 31, 2025, the Company disclosed the borrowings of lines of credit and repayments of lines of credit as separate line items within notes payable activity of the financing activities section of the consolidated statement of cash flows. The Company has corrected these line items for the three months ended March 31, 2024 for comparability purposes.

Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies previously disclosed in the 2024 Annual Report.

Reclassifications

Certain prior period amounts have been reclassified for comparative purposes to conform to the current-period financial statement presentation, including the discontinued operations presentation of Gresham Worldwide, Inc. (“GIGA”) and AGREE financial results. These reclassifications had no effect on previously reported results of operations.

Recent Accounting Pronouncements

The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement may affect the Company’s financial reporting, the Company undertakes an analysis to determine any required changes to its condensed consolidated financial statements.

On December 14, 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires entities to disclose specific rate reconciliations, amount of income taxes separated by federal and individual jurisdiction, and the amount of income (loss) from continuing operations before income tax expense (benefit) disaggregated between federal, state, and foreign. The Company will adopt ASU 2023-09 as required for the year ending December 31, 2025. The Company is currently evaluating the impact of the new requirement for its income tax disclosure.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 requires additional disclosures of certain expenses in the notes of the financial statements, to provide enhanced transparency into the expense captions presented on the Consolidated Statements of Operations. Additionally, in January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), to clarify the effective date of ASU 2024-03. The new standard is effective for the Company for its annual periods beginning January 1, 2027 and for interim periods beginning January 1, 2028, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard.

4. DECONSOLIDATION OF SUBSIDIARIES AND GIGA DISCONTINUED OPERATIONS

Deconsolidation of Avalanche International Corp. (“AVLP”)

On March 28, 2025, AVLP, a majority-owned subsidiary of the Company, 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 the Company no longer maintained a controlling financial interest. Accordingly, the Company deconsolidated AVLP effective as of the petition date. In connection with the deconsolidation, the Company 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. The Company evaluated the criteria for discontinued operations and determined that the operations of AVLP did not meet the requirements for such classification.

**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. The Company 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.

In connection with the Chapter 11 reorganization process, the Company concluded that the operations of GIGA met the criteria for discontinued operations as this strategic shift that will have a significant effect on the Company’s operations and financial results. As a result, the Company has 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.

The following table presents the results of GIGA operations:

The cash flow activity related to discontinued operations is presented separately on the statement of cash flows as summarized below:

5. CHANGE IN PLAN OF SALE OF AGREE HOTEL PROPERTIES

On April 30, 2024, the Company had a change in plan of sale for its 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 were reclassified in the accompanying financial statements back to their original asset and liability groups at their previous carrying values.

6. REVENUE DISAGGREGATION

The following tables summarize disaggregated customer contract revenues and the source of the revenue for the three months ended March 31, 2025 and 2024. Revenues from lending and trading activities included in consolidated revenues were primarily interest, dividend and other investment income, which are not considered to be revenues from contracts with customers under GAAP. Revenue is presented by reportable segment. The “Holding Co.” column includes revenue that is not allocated to a specific reportable segment but is generated within the holding company entity. While not a separate reportable segment, Holding Co. is included in the table below to reconcile to total consolidated revenue.

The Company’s disaggregated revenues consisted of the following for the three months ended March 31, 2025:

The Company’s disaggregated revenues consisted of the following for the three months ended March 31, 2024:

7. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy at March 31, 2025 (no material financial instruments that were measured at fair value on a recurring basis at December 31, 2024):

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

The changes in Level 3 fair value hierarchy during the three months ended March 31, 2025 and 2024 were as follows:

8. CRYPTO ASSETS

The following table presents revenue from mined crypto assets for the three months ended March 31, 2025 and 2024:

The following table presents the activities of the crypto assets (included in prepaid expenses and other current assets) for the three months ended March 31, 2025 and 2024:

9. PROPERTY AND EQUIPMENT, NET

At March 31, 2025 and December 31, 2024, property and equipment consisted of:

Summary of depreciation expense:

10. INTANGIBLE ASSETS, NET

At March 31, 2025 and December 31, 2024, intangible assets consisted of:

Certain of the Company’s trade names and trademarks were determined to have an indefinite life. The remaining definite-lived intangible assets are primarily being amortized on a straight-line basis over their estimated useful lives.

Summary of amortization expense:

As of March 31, 2025, intangible assets subject to amortization have an average remaining useful life of 6.6 years. The following table presents estimated amortization expense for each of the succeeding five calendar years and thereafter.

11. INVESTMENTS – RELATED PARTIES

Investments in Alzamend Neuro, Inc. (“Alzamend”), Ault & Company, Inc. (“Ault & Company”) and GIGA at March 31, 2025 and December 31, 2024, were comprised of the following:

Investment in Promissory Notes, Related Parties – Ault & Company and GIGA

Summary of interest income, related party, recorded within interest and other income on the condensed consolidated statement of operations:

At each reporting date, the Company applies its judgment to evaluate the collectability of the note receivable and makes a provision based on the assessed amount of expected credit loss. This judgment is based on parameters such as interest rates, market conditions and creditworthiness of the creditor.

The Company determined that the collectability of certain notes receivables is doubtful based on information available.

Investment in Alzamend Series B Convertible Preferred Stock, Warrants and Common Stock, Related Parties – Alzamend

The following tables summarize the changes in the Company’s investments in Alzamend common stock during the three months ended March 31, 2025 and 2024:

Ault Lending, LLC (“Ault Lending”) Investment in Alzamend Series B Convertible Preferred Stock and Warrants

In connection with a securities purchase agreement entered into with Alzamend in January 2024, Ault Lending purchased 2,100 shares of Alzamend Series B Convertible Preferred Stock and warrants to purchase 0.2 million shares of Alzamend common stock with a five-year term and an exercise price of $12.00 per share for a total purchase price of $2.1 million.

The Company has elected to account for investment in other investments securities, related party, using a measurement alternative under which they are measured at cost and adjusted for observable price changes and impairments.

Messrs. Ault, Horne and Nisser are each paid $50,000 annually by Alzamend.

12. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Other current liabilities at March 31, 2025 and December 31, 2024 consisted of:

13. DIVIDEND PAYABLE IN TURNONGREEN COMMON STOCK

In March 2024, the Company, in connection with a planned distribution of its common stock holdings of TurnOnGreen, announced the distribution to its stockholders of 25.0 million shares of TurnOnGreen common stock and warrants to purchase 25.0 million shares of TurnOnGreen common stock, which resulted in an adjustment to additional paid in capital and increase to non-controlling interest of $4.9 million based on the recorded value of the Company’s holdings in TurnOnGreen at the record date of the distribution.

14. ROI Transfers of White River Common Stock

In January 2024, ROI announced that it had concluded that, for regulatory reasons, ROI would be unable to effect the distribution of its shares of common stock of White River as contemplated by a registration statement previously filed by White River.

During the quarter ended March 31, 2024, ROI transferred 6.7 million shares of White River common stock with a fair value of $19.2 million at the date of transfer to certain of its accredited investors to resolve the matters discussed above.

In conjunction with the transfers to non-controlling interests, ROI converted a portion of their White River’s Series A Convertible Preferred Stock into common stock and recorded a non-cash $17.9 million gain on conversion.

15. NOTES PAYABLE

Notes payable at March 31, 2025 and December 31, 2024, were comprised of the following:

Amendment to AGREE Secured Construction Loans

The AGREE secured construction loans with an original due date of January 1, 2025, were amended on February 2, 2025, whereby AGREE agreed to pay monthly installments of interest only based on an annualized interest rate of Term SOFR plus 4.75%. In addition, AGREE agreed to make principal payments of $1.0 million in June 2025 and $2.0 million in September 2025 and December 2025 with the balance due March 1, 2026. AGREE has failed to make timely interest payments per the amended payment terms.

Notes Payable Maturities

Principal maturities of the Company’s notes payable, assuming the exercise of all extensions that are exercisable solely at the Company’s option, as of March 31, 2025 were:

Interest Expense

16. NOTES PAYABLE, RELATED PARTY

Notes payable, related party at March 31, 2025 and December 31, 2024, were comprised of the following:

Summary of interest expense, related party, recorded within interest expense on the condensed consolidated statement of operations:

17. CONVERTIBLE NOTES

Convertible notes payable at March 31, 2025 and December 31, 2024, were comprised of the following:

Orchid Convertible Promissory Notes

On February 5, 2025, the Company entered into an exchange agreement with an institutional investor, pursuant to which the Company 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 the Company 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. 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.

On March 14, 2025, the Company 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 the Company on May 16, 2024, with outstanding principal and accrued but unpaid interest of $0.7 million, (ii) a term note issued by the Company 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 the Company 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.

Forbearance Convertible Promissory Note

In February 2025, the Company 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 the Company’s 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 the Company’s 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.

SJC Convertible Promissory Note

On March 21, 2025, the Company entered into an exchange agreement with an institutional investor, pursuant to which the Company 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 the Company on January 14, 2025, with outstanding principal and accrued but unpaid interest of $2.6 million, (ii) a promissory note issued by the Company on March 7, 2025, with outstanding principal and accrued but unpaid interest of $0.5 million, (iii) a promissory note issued by the Company on March 12, 2025, with outstanding principal and accrued but unpaid interest of $1.5 million, and (iv) a promissory note issued by the Company 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. The Exchange Note will mature on December 31, 2025. The Exchange 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.

Embedded Derivatives

The Company identified embedded derivative features within certain convertible promissory notes issued during the quarter ended March 31, 2025, that required bifurcation and separate accounting as derivative liabilities under ASC 815. Specifically, the embedded conversion options associated with the Orchid convertible promissory notes and the SJC convertible promissory note were determined to meet the criteria for derivative classification.

The fair value of the embedded derivative liabilities was estimated using a Monte Carlo simulation model. The model incorporates key assumptions including the Company’s stock price, risk-free interest rate, expected volatility, credit-risk adjusted discount rate, and the specific terms of each conversion feature (including floor price, cap, and VWAP-based pricing). Due to the significant use of unobservable inputs, these derivative liabilities are classified within Level 3 of the fair value hierarchy.

The following table summarizes the key inputs used in the valuation of the embedded derivatives at inception:

The Monte Carlo simulation utilized 100,000 iterations and incorporated conversion mechanics, including the floor price and the VWAP-based conversion price as defined in each agreement. The incremental value attributable to the conversion feature was isolated to determine its impact on the overall fair value of the embedded option.

The fair value of the embedded derivative liabilities at inception and as of March 31, 2025 was as follows:

Loss on Extinguishment of Convertible Notes

During the three months ended March 31, 2025, the Company recognized a total net loss on extinguishment of convertible notes of $4.6 million. This amount includes:

Contractual Maturities

Principal maturities of the Company’s convertible notes payable, assuming the exercise of all extensions that are exercisable solely at the Company’s option, as of March 31, 2025 were:

18. COMMITMENTS AND CONTINGENCIES

Contingencies

Litigation Matters

The Company is involved in litigation arising from other matters in the ordinary course of business. The Company is regularly subject to claims, suits, regulatory and government investigations, and other proceedings involving labor and employment, commercial disputes, and other matters. Such claims, suits, regulatory and government investigations, and other proceedings could result in fines, civil penalties, or other adverse consequences.

Certain of these outstanding matters include speculative, substantial or indeterminate monetary amounts. The Company records a liability when it believes that it is probable that a loss has been incurred and the amount can be reasonably estimated. If the Company determines that a loss is reasonably possible and the loss or range of loss can be estimated, the Company discloses the reasonably possible loss. The Company evaluates developments in its legal matters that could affect the amount of liability that has been previously accrued, and the matters and related reasonably possible losses disclosed, and makes adjustments as appropriate. Significant judgment is required to determine both likelihood of there being a loss and the estimated amount of a loss related to such matters.

Arena Litigation

Arena Investors, LP (ROI Litigation)

On May 30, 2024, Arena Investors, LP (“Arena”), in its capacity as collateral agent for five noteholders, filed a Complaint (the “ROI Complaint”) in the Supreme Court of the State of New York, County of New York against the Company and ROI, in action captionedArena Investors, LP v. Ault Alliance, Inc. and RiskOn International, Inc., Index No. 652792/2024.

This litigation relates to the $4.2 million ROI senior secured convertible note disclosed in Note 26.

The ROI Complaint asserts a cause of action for breach of contract against the Company based on a Guaranty, dated April 27, 2023, and entered into, amongst others, the Company and Arena, and seeks damages in the amount of in excess of $3.75 million, plus interest, attorneys’ fees, costs, expenses, and disbursements.

The ROI Complaint also asserts a cause of action for breach of contract against ROI based on an alleged breach of that certain Security Agreement, dated April 27, 2023, and entered into among ROI and Arena. In connection with this cause of action, Arena seeks, among other things, costs and expenses from the Company and ROI.

On July 31, 2024, the Company and ROI filed a motion to dismiss seeking to partially dismiss the ROI Complaint, as against the Company, and to dismiss the ROI Compliant, in its entirety, as against ROI.

On or about January 21, 2025, the Court entered an order denying the part of the motion which sought partial dismissal of the ROI Complaint, as against Company, and granting the part of the motion which sought dismissal of the ROI Complaint, in its entirety, as against ROI.

On February 18, 2025, the Company filed an Answer to the ROI Complaint and asserted numerous affirmative defenses.

Based on the Company’s assessment of the facts underlying the claims, the uncertainty of litigation, and the preliminary stage of the case, the Company cannot reasonably estimate the potential loss or range of loss that may result from this action. Notwithstanding, the Company has recorded the unpaid portion of the notes. An unfavorable outcome may have a material adverse effect on the Company’s business, financial condition and results of operations.

Other Litigation Matters

With respect to the Company’s other outstanding matters, based on the Company’s current knowledge, the Company believes that the amount or range of reasonably possible loss will not, either individually or in aggregate, have a material adverse effect on the Company’s business, consolidated financial position, results of operations, or cash flows. However, the outcome of such matters is inherently unpredictable and subject to significant uncertainties.

The Company had accrued loss contingencies related to litigation matters of $2.1 million and $2.3 million as of March 31, 2025 and December 31, 2024, respectively.

19. STOCKHOLDERS’ EQUITY

Class A Common Stock

Class A common stock confers upon the holders the rights to receive notice to participate and vote at any meeting of stockholders of the Company, to receive dividends, if and when declared, and to participate in a distribution of surplus of assets upon liquidation of the Company.

Class B Common Stock

The Class B common stock is identical to the Class A common stock, with the exception that each share thereof carries 10 times the voting power of a share of Class A common stock. The Class B common stock is convertible at any time into Class A common stock on a one-for-one basis.

Preferred Stock

Preferred stock as of March 31, 2025 consisted of the following:

Preferred stock as of December 31, 2024 consisted of the following:

The Company is authorized to issue 25.0 million shares of preferred stock, $0.001 par value. As of March 31, 2024, the rights, preferences, privileges and restrictions on the remaining authorized 18.3 million shares of preferred stock have not been determined. The Board is authorized to designate a new series of preferred shares and determine the number of shares, as well as the rights, preferences, privileges and restrictions granted to or imposed upon any series of preferred shares.

$50.0 Million Securities Purchase Agreement for Sale of Series B Convertible Preferred Stock

On March 31, 2025, the Company entered into a securities purchase agreement with an institutional investor pursuant to which the Company 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 and is convertible into shares of Class A common stock at a conversion price equal the lesser of a 25% discount to the Company’s volume weighted average price during the five trading days immediately prior to (A) the date of execution of the securities purchase agreement or (B) the date of conversion into shares of Class A common stock, but not greater than $10 per share. 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 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, the Company 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.

Subsequent Event – Series B Convertible Preferred Stock Amendment

On April 23, 2025, the Company filed a Certificate of Amendment to the Certificate of Designation of Preferences, Rights and Limitations of the Series B Convertible Preferred Stock. The amendment, which was approved by the Board of Directors on April 22, 2025, became effective upon filing with the Secretary of State of the State of Delaware. The amendment revised the definition of “Conversion Price” to the greater of (i) the Floor Price and (ii) 75% of the Company’s 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.

20. INCOME TAXES

The Company calculates its interim income tax provision in accordance with ASC Topic 270,Interim Reporting, and Accounting Standards Codification (“ASC”) Topic 740, Income Taxes. The effective tax rate (“ETR”) from continuing operations was 1.3% for the three months ended March 31, 2025, and 0.0% for the same period in 2024. The Company 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. The difference between the ETR and the federal statutory rate of 21% is primarily due to items recognized for financial reporting purposes that are permanently disallowed for U.S. federal income tax purposes, as well as changes in the valuation allowance.

21. NET INCOME (LOSS) PER SHARE

The following table presents the calculation of basic and diluted net income per share for the three months ended March 31, 2024:

For the three ended March 31, 2025, net loss per share is computed by dividing the net loss to common stockholders by the weighted average number of common shares outstanding. The calculation of the basic and diluted earnings per share is the same for the three months ended March 31, 2025, as the effect of the potential common stock equivalents is anti-dilutive due to the Company’s net loss position for the period. Anti-dilutive securities, which are convertible into or exercisable for the Company’s common stock, consist of the following at March 31, 2025:

22. SEGMENT AND CUSTOMERS INFORMATION

The Company had the following reportable segments as of March 31, 2025 and 2024; see Note 1 for a brief description of the Company’s business.

The following data presents the revenues, expenditures and other operating data of the Company and its operating segments for the three months ended March 31, 2025:

The following data presents the revenues, expenditures and other operating data of the Company and its operating segments for the three months ended March 31, 2024:

23. CONCENTRATIONS OF CREDIT AND REVENUE RISK

Significant customers are those that represent more than 10% of the Company’s total revenue or accounts receivable balances for the periods and as of each balance sheet date presented. For each significant customer, revenue as a percentage of total revenue and gross accounts receivable as a percentage of total gross accounts receivable as of the periods presented were as follows:

24. SUBSEQUENT EVENTS

Issuances of Series D Preferred Stock

From April 1, 2025 through May 12, 2025, the Company issued a total of 52,700 shares of its Series D preferred stock for the settlement of ELOC advances totaling $0.6 million.

Sale of Series G Preferred Stock

On April 10, 2025, the Company 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 a purchase price of $0.1 million.

10% OID Convertible Promissory Note

Between April 9, 2025 and May 5, 2025, the Company issued 611,812 shares of Class A common stock upon the conversion of $3.6 million of principal and interest on the 10% OID convertible promissory note. The Class A Common Stock was issued at a price of $5.87 per share.

Orchid Convertible Promissory Note

Between April 24, 2025 and May 5, 2025, the Company issued 184,623 shares of Class A common stock upon the conversion of $0.2 million of principal and interest on the Orchid convertible promissory note. The Class A Common Stock was issued at a price of $1.28 per share.

April 1, 2025 Convertible Promissory Note

On April 1, 2025, the Company 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.

April 15, 2025 Convertible Promissory Note

On April 15, 2025, the Company entered into securities purchase agreements (the “Agreements”) with institutional investors (the “Investors”), pursuant to which the Company 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 the Company, 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, the Company 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.