Hyperscale Data, Inc.

1. DESCRIPTION OF BUSINESS

Hyperscale Data (“Hyperscale Data” or the “Company”), a Delaware corporation, through its wholly owned subsidiary Sentinum, Inc. (“Sentinum”), owns and operates a data center at which it mines digital assets and offers colocation and hosting services for the emerging AI ecosystems and other industries. Another of Hyperscale Data’s wholly owned subsidiaries, Ault Capital Group, Inc, (“ACG”), is a hybrid private equity firm and operating company that acquires, finances, builds and actively manages businesses across financial services, digital assets, industrial services, hospitality, defense technologies and other sectors. In addition, ACG is actively engaged in private credit and structured finance through Ault Lending, LLC (“Ault Lending”), a licensed lending subsidiary.

Hyperscale Data currently expects the divestiture of ACG (the “Divestiture”) to occur in 2027. Upon the occurrence of the Divestiture, the Company would be an owner and operator of data centers to support high-performance computing services, as well as a holder of the digital assets. Until the Divestiture occurs, the Company will continue to provide, through ACG and its wholly and majority-owned subsidiaries and strategic investments, mission-critical products and services that support a diverse range of industries, including an AI software platform, equipment rental services, defense/aerospace, industrial, automotive and hotel operations.

The Company has the following reportable segments:

2. 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, 2025 (the “2025 Annual Report”), as filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2026. The condensed consolidated balance sheet as of December 31, 2025 was derived from the Company’s audited 2025 financial statements contained in the 2025 Annual Report. Results of operations for the three and six months ended June 30, 2026 are not necessarily indicative of results to be expected for future interim periods or the full year ending December 31, 2026.

Liquidity and Going Concern

The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. As of June 30, 2026, the Company had cash and cash equivalents of approximately $36.8 million and restricted cash of approximately $28.3 million. The Company also had approximately $201.7 million of current liabilities as of June 30, 2026, including approximately $99.3 million of current notes payable, related party notes payable and convertible notes payable. The Company incurred a net loss of approximately $49.1 million and used approximately $9.9 million in cash to support operating activities during the six months ended June 30, 2026.

The Company expects to require substantial additional capital to fund its operations, satisfy existing obligations and execute its planned development of its Michigan data center. In connection with the phased deployment of approximately 20 MW of critical power capacity under the Company’s master services agreement with an AI infrastructure customer, the Company currently expects to make investments in excess of $100 million over time to construct, equip and commission the applicable service areas, power modules and related infrastructure. The amount and timing of these expenditures will depend on, among other factors, construction progress, equipment procurement, customer deployment schedules and the availability of financing.

The Company’s existing cash and other presently available sources of liquidity are not expected to be sufficient to fund its anticipated operating requirements, existing obligations and planned capital expenditures, including those associated with the Michigan data center, through the twelve-month period following the issuance of these condensed consolidated financial statements. Accordingly, these conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.

Management intends to address the Company’s liquidity requirements through a combination of capital-raising activities, including sales of equity securities, debt or other financing arrangements, cash generated from operations, potential sales or monetization of investments or other assets, and other strategic financing transactions. The Company has an effective registration statement and an at-the-market offering program under which it may sell shares of its Class A common stock from time to time. Management is also evaluating additional financing alternatives to fund the development of the Michigan data center.

The Company’s ability to obtain additional capital is subject to numerous factors, including market conditions, the trading price of its Class A common stock, operating performance, the value and liquidity of its assets and investments, and investor and lender demand. There can be no assurance that additional financing will be available when needed or, if available, that it will be available on terms acceptable to the Company or in amounts sufficient to meet the Company’s liquidity requirements. Because the Company’s plans are dependent on obtaining additional financing and other actions that are not entirely within the Company’s control, management cannot conclude that such plans are probable of being effectively implemented and sufficient to alleviate the substantial doubt. Accordingly, substantial doubt about the Company’s ability to continue as a going concern has not been alleviated. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies disclosed in the 2025 Annual Report, except as follows:

Related Party Receivables

The Company evaluates receivables from related parties based on the facts and circumstances of the arrangement, including the nature of the relationship between the parties and the substance of the transaction. Receivables from related parties that are determined to be substantively similar to unpaid capital contributions are presented as a deduction from stockholders’ equity rather than as assets.

Digital assets associated with decentralized finance protocols

The Company participates in decentralized finance protocols in connection with certain of its financing activities. In connection with its Bitcoin-backed borrowings through the Morpho decentralized finance lending protocol, the Company exchanges Bitcoin for Coinbase Wrapped Bitcoin (“cbBTC”) and pledges the cbBTC as collateral for its borrowings.

The Company accounts for the exchange of Bitcoin for cbBTC as a disposal of Bitcoin and recognizes any resulting gain or loss in earnings. The cbBTC received is recognized at fair value on the exchange date, which establishes its initial carrying amount. Because cbBTC does not meet the scope requirements of ASC 350-60, Crypto Assets, the Company accounts for cbBTC as an intangible asset under ASC 350, Intangibles—Goodwill and Other, and subsequently measures it at cost less impairment.

The Company continues to recognize cbBTC pledged as collateral while the related borrowings remain outstanding and presents such cbBTC as crypto assets, restricted on the condensed consolidated balance sheets. Upon repayment of the borrowings, the collateral is released and exchanged for Bitcoin.

Reclassifications

Certain prior period amounts have been reclassified for comparative purposes to conform to the current-period financial statement presentation.

Recent Accounting Pronouncements

The Company continually assesses any new accounting pronouncements to determine their applicability. When management determines that a new accounting pronouncement may affect the Company’s financial reporting, the Company undertakes an analysis to determine whether any required changes should be made to its condensed consolidated financial statements.

Recently Adopted Accounting Standards

In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”). ASU 2025-05 provides a practical expedient to assume current economic conditions will not change for the remaining life of an asset when preparing forecasts as part of estimating credit losses. The new standard is effective for the Company for its annual periods beginning January 1, 2026 and interim period within those annual periods, with early adoption permitted and should be applied on a prospective basis. The Company adopted ASC 2025-05 during the three months ended March 31, 2026, which did not have a material impact on its consolidated financial position, results of operations, or cash flows.

Accounting Standards Not Yet Adopted

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. 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.

In January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2025-01”), 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 ASU 2025-01; however, because the standard primarily affects disclosure requirements, the Company does not expect adoption to have a material impact on its consolidated financial position, results of operations, or cash flows.

In May 2026, the FASB issued ASU 2026-01, Compensation - Stock Compensation (Topic 718) and Equity (Topic 505): Accounting for Paid-in-Kind Dividends (“ASU 2026-01”). ASU 2026-01 clarifies the accounting for certain paid-in-kind (“PIK”) dividends, including the recognition and measurement of PIK dividends that are settled through the issuance of additional equity instruments. The amendments are intended to improve consistency in the accounting for these arrangements. ASU 2026-01 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2026-01. The Company does not currently expect adoption of ASU 2026-01 to have a material impact on its consolidated financial position, results of operations, or cash flows.

3. BUSINESS COMBINATION – GRESHAM

As disclosed in the 2025 Annual Report, the Company completed the acquisition and reconsolidation of Gresham on November 28, 2025. The preliminary allocation of purchase consideration to the acquired assets and assumed liabilities remains subject to finalization of certain valuation analyses, including inventory, property and equipment, intangible assets, income taxes, and other working capital items.

During the six months ended June 30, 2026, the Company recorded no material measurement period adjustments related to the acquisition. The Company does not currently expect material changes to the preliminary allocation; however, final amounts may differ from the preliminary estimates.

4. REVENUE DISAGGREGATION

The following tables summarize disaggregated customer contract revenues and the source of the revenue for the three and six months ended June 30, 2026 and 2025. 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 generated at the parent company level that is not allocated to a specific reportable segment. Although Holding Co. is not a separate reportable segment, it is presented below to reconcile segment revenues to total consolidated revenue.

The Company’s disaggregated revenues consisted of the following for the three months ended June 30, 2026:

The Company’s disaggregated revenues consisted of the following for the six months ended June 30, 2026:

The Company’s disaggregated revenues consisted of the following for the three months ended June 30, 2025:

The Company’s disaggregated revenues consisted of the following for the six months ended June 30, 2025:

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy at June 30, 2026 and December 31, 2025:

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 Company’s securities and liquidity risks. The Company estimates the fair value of its embedded conversion feature liabilities using a Monte Carlo simulation model. See Note 13 for additional information regarding the valuation methodology and significant assumptions used in the valuation of the embedded conversion features. There were no transfers into or out of Level 3 during the six months ended June 30, 2026 or during the year ended December 31, 2025.

The changes in Level 3 fair value hierarchy during the three and six months ended June 30, 2026 and 2025 were as follows:

6. CRYPTO ASSETS

The following table presents the Company’s significant crypto asset holdings as of June 30, 2026 and December 31, 2025:

The Company measures Bitcoin and Bitcoin, restricted, at fair value using quoted market prices in active markets for identical assets, which are classified within Level 1 of the fair value hierarchy.

cbBTC is a wrapped digital asset designed to represent Bitcoin for use on compatible blockchain networks and decentralized finance protocols. During the second quarter of 2026, the Company exchanged certain of its Bitcoin for cbBTC and pledged the cbBTC as collateral for borrowings through the Morpho decentralized finance lending protocol. The cbBTC is accounted for as an intangible asset under ASC 350 and is carried at cost less impairment. See Note 2 for additional information regarding the Company’s accounting policy for digital assets associated with decentralized finance protocols and Note 11 for additional information regarding the Morpho borrowings.

The following table presents the activities of the crypto assets for the six months ended June 30, 2026 and 2025:

The following table presents the activities of Bitcoin, restricted for the six months ended June 30, 2026:

The following table presents the activities of cbBTC, restricted for the six months ended June 30, 2026:

During the three and six months ended June 30, 2026, the Company recognized an impairment charge of approximately $7.1 million related to cbBTC, restricted, which is included in impairment of crypto assets, restricted in the condensed consolidated statements of operations.

7. PROPERTY AND EQUIPMENT, NET

At June 30, 2026 and December 31, 2025, property and equipment consisted of:

Summary of depreciation expense:

Impairment of Bitcoin Mining Equipment

During the three and six months ended June 30, 2026, the Company recognized an impairment charge of $2.3 million related to certain Bitcoin mining equipment located at its Michigan data center. The impairment assessment was triggered by the execution of the Company’s master services agreement with a third-party customer for AI compute and neocloud hosting services. As a result of the anticipated allocation of electrical capacity at the Michigan data center to support the customer’s deployments, the Company expects to substantially wind down its Bitcoin mining operations at that location. The impairment reflects the Company’s strategic reallocation of power capacity from Bitcoin mining to AI compute, neocloud and colocation services at the Michigan data center, rather than a deterioration in the physical condition of the equipment.

At the time of the assessment, management had not finalized its plans regarding the future deployment, relocation or disposition of the affected mining equipment. Given the anticipated reduction in use of the equipment at the Michigan data center and the uncertainty surrounding its future utilization, management concluded that the carrying amount of the asset group was not recoverable and recorded an impairment charge to reduce the carrying value of the equipment to its estimated fair value. Estimated fair value was determined primarily using observable market data for comparable Bitcoin mining equipment, consistent with an orderly liquidation value approach.

8. INTANGIBLE ASSETS, NET

At June 30, 2026 and December 31, 2025, 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 June 30, 2026, 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.

9. RELATED PARTY NOTE RECEIVABLE

On June 12, 2026, ACG entered into a Loan Agreement with Ault & Company, Inc. (“Ault & Company”), a related party, pursuant to which ACG agreed to provide Ault & Company a term loan in a principal amount of up to $5.0 million. On June 12, 2026, the full $5.0 million principal amount was advanced. The Loan Agreement and related transaction were reviewed and approved by a special committee of independent directors of the Company’s Board of Directors.

The loan bears interest at a fixed rate of 8.5% per annum, payable monthly in arrears, and matures on June 11, 2029, at which time all outstanding principal and accrued interest become due. Upon an event of default, the interest rate increases to 18.0% per annum. The loan may be prepaid by the borrower without penalty upon prior notice. The proceeds of the loan are restricted to the repayment of existing indebtedness and working capital purposes.

The loan is supported by the personal guaranty of the Company’s Executive Chairman, Milton C. Ault, III, in his capacity as the Chief Executive Officer of Ault & Company, but is otherwise unsecured.

At June 30, 2026, the outstanding principal balance was $5.0 million. Due to the related-party relationship between the Company and Ault & Company, including Ault & Company’s significant ownership interest in the Company and overlapping ownership and management relationships, the Company evaluated the appropriate balance sheet presentation of the note under applicable accounting guidance. Based on this evaluation, the Company presents the $5.0 million principal balance as a deduction from stockholders’ equity rather than as an asset in the accompanying condensed consolidated balance sheet.

Accrued interest receivable of approximately $21,000 is included in other assets. During the three months ended June 30, 2026, the Company recognized approximately $21,000 of interest income related to the note.

10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Other current liabilities at June 30, 2026 and December 31, 2025 consisted of:

11. NOTES PAYABLE

Notes payable at June 30, 2026 and December 31, 2025, were comprised of the following:

Second Amendment to AGREE Construction Loans

In January 2026, the Company’s indirect, wholly owned subsidiary AGREE amended the terms of its construction loans related to the AGREE properties. The amendment extended the maturity dates of the loans to January 1, 2027, subject to a potential one-year extension to January 1, 2028 upon satisfaction of certain conditions. The agreement also modifies the interest rate to Term SOFR plus 5.75%, with required monthly interest payments based on Term SOFR plus 4.75%, with the difference accruing and payable at maturity or earlier repayment. On April 1, 2026, the borrowers were required to make a principal payment of $3.0 million followed by monthly principal payments of $1.0 million through maturity. As of the date of this filing, AGREE and its subsidiaries have not made the required principal payments. While such non-payment constitutes an event of default under the loan agreements, the lenders have not provided a notice of default. The modification also requires the borrowers to fund interest reserves totaling approximately $2.0 million and provides temporary waivers of certain financial covenants through the scheduled maturity date. The interest reserves have not been funded as of the date of this filing. In connection with the modification, the borrowers paid an extension fee of approximately $0.3 million.

Morpho Bitcoin-Backed Borrowings

During the second quarter of 2026, the Company entered into borrowing arrangements through Morpho, a decentralized finance lending protocol, under which the Company may borrow against cbBTC pledged as collateral. As of June 30, 2026, the Company had outstanding borrowings of approximately $16.0 million, collateralized by cbBTC with a carrying amount of approximately $25.4 million. The borrowings bear interest at a variable rate, which approximated 5% per annum as of June 30, 2026, and do not have a stated contractual maturity date. The borrowings remain outstanding until repaid or otherwise settled, provided that the required collateralization levels are maintained. The borrowings may be repaid at any time without prepayment penalty. If the fair value of the pledged cbBTC declines below specified collateralization thresholds, the Company may be required to pledge additional cbBTC as collateral or a portion of the pledged cbBTC may be liquidated to satisfy the outstanding borrowings. The pledged cbBTC continues to be recognized as crypto assets, restricted, on the Company’s consolidated balance sheet while serving as collateral for the outstanding borrowings.

Circle 8 Equipment Financing Notes

In March 2026, Circle 8 entered into a secured promissory note in the principal amount of $1.5 million for the purchase of a crane. The secured promissory note accrues interest at 5.9% per annum and will mature in March 2031.

Circle 8 Financing Agreement

In April 2026, Circle 8 finalized a financing arrangement and received $10.0 million in equipment financing. In connection with the financing, Circle 8 issued a promissory note with a five-year term requiring monthly payments of approximately $0.2 million. The note bears interest at a variable rate based on the five-year U.S. Treasury rate plus 2%, with an initial rate of approximately 5.7%.

Term Notes

In January and February 2026, the Company issued two short-term term notes to an institutional investor for aggregate gross proceeds of $10.0 million. Repayment obligations under the note were guaranteed by Ault & Company and Milton C. Ault, III, the Company’s Executive Chairman. During the three months ended June 30, 2026, the notes were repaid in full.

In April 2026, the Company entered into a short-term term note with an institutional investor for gross proceeds of $10.0 million. The note was issued with an OID of $0.8 million and had a principal face amount of $10.8 million. The note bore interest at 12% per annum and matured on June 29, 2026. Beginning May 8, 2026, the Company was required to make weekly principal payments of $0.7 million through June 26, 2026, with the remaining outstanding principal balance and accrued interest due at maturity. The note was prepaid and fully satisfied during the three months ended June 30, 2026. Accordingly, no amounts were outstanding under the term note as of June 30, 2026. Repayment obligations under the note were guaranteed by Ault & Company and Milton C. Ault, III, the Company’s Executive Chairman.

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 June 30, 2026 were:

Interest Expense

12. NOTES PAYABLE, RELATED PARTY

Notes payable, related party at June 30, 2026 and December 31, 2025, were comprised of the following:

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

13. CONVERTIBLE NOTES

Convertible notes payable at June 30, 2026 and December 31, 2025, were comprised of the following:

SJC Convertible Promissory Note Amendment

In January 2026, the Company entered into an amendment with SJC pursuant to which the maturity date of the convertible promissory note was extended to June 30, 2026.

Yorkville Prepaid Advance

On June 11, 2026, the Company entered into a prepaid advance agreement with Yorkville, pursuant to which the Company issued a prepaid advance having an aggregate principal amount of $16.0 million in exchange for net cash proceeds of $15.0 million, reflecting a 6% OID. The prepaid advance bears interest at 4% per annum and matures on December 11, 2027.

While amounts remain outstanding under the agreement, Yorkville may periodically deliver purchase notices requiring the Company to issue shares of its Class A common stock in partial or full satisfaction of amounts outstanding under the prepaid advance. The purchase price per share is equal to the lower of (i) $0.2153 or (ii) 90% of the lowest daily VWAP of the Company’s Class A common stock during the applicable five-trading-day pricing period, subject to a minimum purchase price of $0.10 per share.

The Company concluded that the variable-priced conversion and settlement provisions embedded within the prepaid advance require bifurcation as an embedded derivative liability under Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging (“ASC 815”). Accordingly, the embedded derivative was initially recognized at fair value upon issuance, with a corresponding debt discount recorded against the debt host. The embedded derivative is subsequently remeasured at fair value each reporting period, with changes in fair value recognized in other income (expense), net.

Embedded Derivatives

The Company identified embedded derivative features within certain convertible promissory notes that required bifurcation and separate accounting as derivative liabilities under ASC 815. These features primarily relate to conversion options with variable pricing mechanisms.

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 pricing based on the Volume-Weighted Average Price, or VWAP). Due to the significant use of unobservable inputs, these derivative liabilities are classified within Level 3 of the fair value hierarchy. See Note 5 for additional information, including the initial recognition and rollforward of embedded derivative liabilities.

The following table summarizes the key inputs used in the valuation of the embedded derivatives at inception and as of June 30, 2026:

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.

Loss on Extinguishment of Convertible Notes

During the six months ended June 30, 2026, the Company didnot recognize any gains or losses on extinguishment of convertible notes.

During the six months ended June 30, 2025, the Company recognized a net loss on extinguishment of convertible notes of $4.6 million, consisting primarily of losses recognized on certain exchange or refinancing transactions where newly issued instruments were determined to be substantially different from the original debt instruments under applicable accounting guidance.

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 June 30, 2026, were:

14. COMMITMENTS AND CONTINGENCIES

Contingencies

Litigation Matters

The Company is involved in litigation arising from 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.

Dowagiac Data Center Litigation

On May 26, 2026, a purported class action complaint was filed against Alliance Cloud Services, LLC (“Alliance Cloud Services”), an indirect, wholly owned subsidiary of the Company, in the United States District Court for the Western District of Michigan. The complaint alleges that operations at the Company’s Michigan data center have generated excessive noise, asserting claims for private nuisance, public nuisance and negligence, and seeks unspecified monetary damages and other relief on behalf of a proposed class of nearby residents.

On July 24, 2026, Alliance Cloud Services filed a partial motion to dismiss the public nuisance and negligence claims. On July 28, 2026, the Court entered an order permitting the plaintiffs to file an amended complaint in response to the motion. If an amended complaint is filed, the pending motion will be denied without prejudice as moot; otherwise, the Court will consider the motion after briefing is complete.

The Company believes the claims are without merit and intends to vigorously defend the action. At this stage of the proceedings, the Company is unable to reasonably estimate the possible loss or range of loss, if any, associated with this matter.

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.

15. 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 any liquidation of the Company.

On December 19, 2025, the Company entered into an at-the-market issuance sales agreement providing for the sale of up to $50.0 million of additional shares of Class A common stock under its effective shelf registration statement. On January 16, 2026, the Company entered into an amended and restated At-the-Market Issuance Sales Agreement (the “Prior ATM Agreement”) with Spartan Capital Securities, LLC (“Spartan Capital”), as lead sales agent, and Wilson-Davis & Co., Inc., as an additional sales agent, pursuant to which the Company was permitted to sell shares of its Class A common stock from time to time through at-the-market offerings.

On May 27, 2026, the Company provided notice of its election to terminate the Prior ATM Agreement, with such termination becoming effective on June 8, 2026. Prior to its termination, the Company had sold approximately 137.6 million shares of its Class A common stock under the Prior ATM Agreement for aggregate gross proceeds of approximately $24.6 million.

On June 18, 2026, the Company entered into a new At-the-Market Issuance Sales Agreement (the “2026 ATM Agreement”) with Spartan Capital, pursuant to which the Company may offer and sell shares of its Class A common stock having an aggregate offering price of up to $300.0 million from time to time through an at-the-market offering.

During the three and six months ended June 30, 2026, the Company sold approximately 126.2 million shares under the 2026 ATM Agreement for aggregate gross proceeds of approximately $25.5 million, before deducting commissions and offering expenses.

On April 16, 2026, the Company filed a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware to increase the number of authorized shares of its Class A common stock from 500 million shares to 2.5 billion shares.

Tender Offer

On June 8, 2026, the Company completed a cash tender offer to repurchase shares of its Class A common stock. Pursuant to the tender offer, the Company repurchased 8,731,574 shares of its Class A common stock from stockholders who validly tendered their shares at a purchase price of $0.21 per share, for an aggregate purchase price of approximately $1.8 million.

The repurchased shares were retired during the quarter ended June 30, 2026 and are reflected as a reduction of stockholders’ equity in the accompanying condensed consolidated financial statements.

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 at the option of the holder of the Class B common stock.

Series D Preferred ATM Offering Activity

On February 13, 2026, the Company entered into an at-the-market issuance sales agreement to sell shares of the Company’s 13.00% Series D Cumulative Redeemable Perpetual Preferred Stock, par value $0.001 per share (the “Series D Preferred”), having an aggregate offering price of up to $35.4 million from time to time, through an “at the market offering” (the “Series Preferred D ATM Offering”). During the period between January 1, 2026 through June 30, 2026, the Company sold an aggregate of 33,984 shares of Series D Preferred Stock pursuant to its Series Preferred D ATM offering for net proceeds of $0.6 million.

Preferred Stock

Preferred stock as of June 30, 2026 consisted of the following:

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

The Company is authorized to issue 25.0 million shares of preferred stock, $0.001 par value. As of June 30, 2026, the rights, preferences, privileges and restrictions on the remaining authorized 18.2 million shares of preferred stock had 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.

Related Party Note Receivable

At June 30, 2026, the Company presented the $5.0 million principal balance of its note receivable from Ault & Company as a deduction from stockholders’ equity. See Note 9 for additional information.

16. INCOME TAXES

The Company calculates its interim income tax provision in accordance with ASC Topic 270, Interim Reporting, and ASC Topic 740, Income Taxes. The difference between the effective tax rate 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.

17. NET LOSS PER SHARE

Net loss per share is computed by dividing the net loss to common stockholders by the weighted average number of shares of Class A and Class B common stock outstanding. The calculation of the basic and diluted earnings per share is the same for all periods presented as the effect of the potential common stock equivalents is anti-dilutive due to the Company’s net loss position for all periods presented. Anti-dilutive securities, which are convertible into or exercisable for the Company’s Class A common stock, consisted of the following at June 30, 2026 and 2025:

18. SEGMENT AND CUSTOMERS INFORMATION

The Company had the following reportable segments as of June 30, 2026 and 2025; 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 six months ended June 30, 2026:

The following data presents the revenues, expenditures and other operating data of the Company and its operating segments for the three months ended June 30, 2026:

The following data presents the revenues, expenditures and other operating data of the Company and its operating segments for the six months ended June 30, 2025:

The following data presents the revenues, expenditures and other operating data of the Company and its operating segments for the three months ended June 30, 2025:

19. 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:

**20. SUBSEQUENT EVENTS **

Class A Common Stock ATM Offering Activity

During the period between July 1, 2026 through August 13, 2026, the Company sold an aggregate of 70.8 million shares of Class A common stock pursuant to the ATM Offering for gross proceeds of $9.2 million.

Series D Preferred ATM Offering Activity

During the period between July 1, 2026 through August 13, 2026, the Company issued an aggregate of 11,369 shares of Series D Preferred Stock pursuant to its Series Preferred D ATM Offering for gross proceeds of $0.2 million.

Morpho Bitcoin-Backed Borrowings

Subsequent to June 30, 2026, the Company received aggregate net proceeds of approximately $31.6 million from additional Bitcoin-backed borrowings through the Morpho decentralized finance lending protocol. The additional borrowings were entered into under terms consistent with the Company’s existing Morpho borrowing arrangements, including the pledge of Bitcoin as collateral.

In August 2026, the Company sold approximately 686 Bitcoin for aggregate proceeds of approximately $43.4 million and used a portion of the proceeds to repay in full all amounts outstanding under its Morpho Bitcoin-backed borrowing arrangements. Following the repayment, the Bitcoin pledged as collateral for the Morpho borrowings was released and the Company had no outstanding borrowings under the Morpho protocol.

Yorkville Prepaid Advance

Subsequent to June 30, 2026, Yorkville delivered purchase notices pursuant to the prepaid advance agreement requiring the Company to issue shares of its Class A common stock in partial satisfaction of amounts outstanding under the prepaid advance. Between July 1, 2026 and August 6, 2026, the Company issued an aggregate of approximately 27.7 million shares of its Class A common stock in satisfaction of approximately $3.1 million of amounts outstanding under the prepaid advance, consisting of approximately $3.0 million of principal and $0.1 million of accrued interest. Following such issuances, approximately $13.0 million of principal remained outstanding under the prepaid advance.

Ault & Company Related Party Lending Arrangement

On August 18, 2026, ACG entered into a Loan Agreement (the “Loan Agreement”) with Ault & Company pursuant to which ACG agreed to provide Ault & Company with a non-revolving line of credit of up to $15.0 million. Advances under the Loan Agreement are subject to ACG’s availability of capital, as determined by ACG in its sole discretion, and amounts repaid may not be reborrowed. ACG is not obligated to make additional advances after six months from the effective date of the Loan Agreement.

Each advance under the Loan Agreement will be evidenced by a promissory note that bears interest at a fixed rate of 8.5% per annum and matures three years from its date of issuance, at which time all outstanding principal and accrued interest under such note become due and payable. Upon the occurrence and during the continuance of an event of default, outstanding amounts bear interest at the applicable default rate. Ault & Company may prepay advances without penalty or premium upon notice. The form of promissory note provides for customary enforcement and collection provisions.

The $5.0 million term loan previously advanced by ACG to Ault & Company on June 12, 2026 was incorporated into the new lending arrangement. Upon execution of the Loan Agreement, the prior note was cancelled and replaced by a note issued pursuant to the Loan Agreement, and the outstanding principal and accrued interest under the prior note became an advance under the Loan Agreement. On August 18, 2026, ACG made an additional advance of $2.0 million to Ault & Company under the Loan Agreement, evidenced by a promissory note issued pursuant to the Loan Agreement. As a result, as of August 18, 2026, aggregate principal advances outstanding under the Loan Agreement were $7.0 million.

In connection with the Loan Agreement, Milton C. Ault III, the Chief Executive Officer and controlling stockholder of Ault & Company and Executive Chairman of the Company, provided an absolute and unconditional personal guaranty of Ault & Company’s payment obligations under the lending arrangement.

The proceeds of advances under the Loan Agreement are restricted to the repayment of Ault & Company’s existing indebtedness, the redemption of certain outstanding preferred equity of Ault & Company and working capital purposes. The Loan Agreement prohibits Ault & Company from using any portion of the proceeds to extend credit, directly or indirectly, to any director, executive officer or equivalent person of Ault & Company or any of its affiliates in a manner that would constitute a personal loan prohibited by Section 13(k) of the Exchange Act.

Investment in Alzamend, Related Party

On July 31, 2026, Ault Lending entered into a securities purchase agreement with Alzamend Neuro, Inc. (“Alzamend”), a related party, pursuant to which Ault Lending agreed to purchase up to $25.0 million of Alzamend’s newly designated Series D Convertible Preferred Stock in one or more closings. At the initial closing on July 31, 2026, Ault Lending purchased $7.5 million of Alzamend Series D Convertible Preferred Stock. Subject to the terms and conditions of the securities purchase agreement, Ault Lending has committed to purchase an additional (i) $2.5 million in a second closing within ten (10) days after a resale registration statement has been declared effective and (ii) $1.0 million on each monthly anniversary thereafter until the entire $25.0 million has been purchased. Ault Lending may, at its option, purchase any shares of Series D Convertible Preferred Stock prior to a scheduled closing date.

The Series D Convertible Preferred Stock is convertible into shares of Alzamend common stock at a variable conversion price, subject to a stated floor price and maximum price and other terms and conditions set forth in the securities purchase agreement and certificate of designation.

Reverse Stock Split

On August 6, 2026, the Company’s Board of Directors authorized the formation of a special committee and delegated to the committee the authority to determine the ratio and effective date of a reverse stock split of the Company’s Class A common stock and Class B common stock. Subsequently, the committee approved a one-for-five reverse stock split, which is expected to become effective on August 24, 2026. The Company expects its Class A common stock to begin trading on the NYSE American on a split-adjusted basis on August 25, 2026.

The reverse stock split, when effective, will reduce the number of issued and outstanding shares of Class A common stock and Class B common stock in the same one-for-five proportion, as well as the number of shares available for issuance under the Company’s equity incentive plans and the number of shares issuable upon exercise of outstanding stock options and warrants. The par value of the Class A common stock and Class B common stock will remain unchanged at $0.001 per share. No fractional shares will be issued in connection with the reverse stock split; stockholders otherwise entitled to fractional shares will receive cash in lieu thereof.

Because the reverse stock split had not become effective as of the date these condensed consolidated financial statements were issued, the share and per-share amounts presented herein have not been adjusted to reflect the reverse stock split.