Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

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 company" 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 another of its wholly owned subsidiaries, Ault Capital Group, Inc. ("ACG"), the Company currently holds a portfolio of diversified businesses and strategic investments spanning commercial lending and trading, an AI software platform, equipment rental services, defense/aerospace, industrial, automotive, medical and hotel operations. 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 2027, 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 December 19, 2025, we entered into an At-the-Market Issuance Sales Agreement with Spartan Capital Securities, LLC ("Spartan"), as sales agent to sell shares of our Class A common stock, having an aggregate offering price of up to $50 million from time to time, through an "at the market offering" (the "ATM Offering") as defined in Rule 415 under the Securities Act. On December 19, 2025, we filed a prospectus supplement with the SEC relating to the offer and sale of up to $50 million of Class A common stock in the ATM Offering. On January 16, 2026, we amended the At-the-Market Issuance Sales Agreement and filed a prospectus supplement to indicate that Spartan will serve as the lead sales agent and to add Wilson-Davis as an additional sales agent.

As of May 15, 2026, we have sold 137.6 million shares of our Class A common stock under the ATM Offering for gross proceeds of approximately $24.7 million.

On February 13, 2026, we entered into an At-the-Market Issuance Sales Agreement with Wilson Davis, as sales agent to sell shares of our 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") as defined in Rule 415 under the Securities Act. On February 13, 2026, we filed a prospectus supplement with the SEC relating to the offer and sale of up to $35.4 million of Series D Preferred in the Series D Preferred ATM Offering.

As of May 15, 2026, we have sold 22,743 shares of our Series D Preferred under the Series D Preferred ATM Offering for gross proceeds of approximately $0.5 million.

In April 2026, we entered into a short-term term note with an institutional investor for gross proceeds of $10.0 million. The note was issued with an original issue discount of $0.8 million and has a principal face amount of $10.8 million. The note bears interest at 12% per annum and matures on June 29, 2026. Beginning May 8, 2026, we are 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 may be prepaid at any time without penalty. Repayment obligations under the note are guaranteed by Ault & Company and Milton C. Ault, III, our Executive Chairman.

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, working capital needs and other senior capital commitments.

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, 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.

Hyperscale Data is a Delaware corporation with its 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/.

Results of Operations

Results of Operations for the Three Months Ended March 31, 2026 and 2025

The following table summarizes the results of our operations for the three months ended March 31, 2026 and 2025.

		For the Three Months Ended March 31,
		2026				2025
Revenue, crane operations		$	11,001,000			$	13,769,000
Revenue, defense solutions			10,182,000				-
Revenue, crypto assets mining			5,077,000				5,198,000
Revenue, hotel and real estate operations			3,856,000				3,665,000
Revenue, lending and trading activities			11,521,000				(28,000	)
Revenue, other			2,442,000				2,417,000
Total revenue			44,079,000				25,021,000
Cost of revenue, crane operations			7,180,000				8,247,000
Cost of revenue, defense solutions			7,036,000				-
Cost of revenue, crypto assets mining			7,610,000				7,031,000
Cost of revenue, hotel and real estate operations			2,990,000				2,844,000
Cost of revenue, lending and trading activities			1,944,000				-
Cost of revenue, other			2,250,000				1,616,000
Total cost of revenue			29,010,000				19,738,000
Gross profit			15,069,000				5,283,000
Operating expenses
General and administrative			18,526,000				9,195,000
Selling and marketing			5,612,000				2,334,000
Research and development			4,800,000				129,000
Change in fair value of crypto assets			7,405,000				9,000
Total operating expenses			36,343,000				11,667,000
Loss from operations			(21,274,000	)			(6,384,000	)
Other (expense) income:
Interest and other income			769,000				240,000
Interest expense			(6,546,000	)			(3,839,000	)
Change in fair value of crypto assets, restricted			(4,682,000	)			-
Gain (loss) on extinguishment of debt			489,000				(4,569,000	)
Change in fair value of embedded derivative liabilities			1,324,000				-
Gain on deconsolidation of subsidiary			-				10,049,000
Loss on the sale of fixed assets			-				(161,000	)
Total other expense, net			(8,646,000	)			1,720,000
Loss before income taxes			(29,920,000	)			(4,664,000	)
Income tax provision			216,000				59,000
Net loss			(30,136,000	)			(4,723,000	)
Net income attributable to non-controlling interest			186,000				518,000
Net loss attributable to Hyperscale Data			(29,950,000	)			(4,205,000	)
Preferred dividends			(2,506,000	)			(1,966,000	)
Net loss attributable to common stockholders		$	(32,456,000	)		$	(6,171,000	)
Comprehensive loss
Net loss attributable to common stockholders		$	(32,456,000	)		$	(6,171,000	)
Other comprehensive (loss) income
Foreign currency translation adjustment			(806,000	)			6,000
Other comprehensive (loss) income			(806,000	)			6,000
Total comprehensive loss		$	(33,262,000	)		$	(6,165,000	)

Revenues

Revenues by business category for the three months ended March 31, 2026 and 2025 were as follows:

		For the Three Months Ended March 31,								Increase
		2026				2025				(Decrease)				%
Sentinum
Revenue, crypto assets mining		$	5,077,000			$	5,198,000			$	(121,000	)			-2	%
Revenue, commercial real estate leases			253,000				516,000				(263,000	)			-51	%
Energy
Revenue, crane operations			11,001,000				13,769,000				(2,768,000	)			-20	%
Other			-				29,000				(29,000	)			-100	%
Fintech			11,521,000				(28,000	)			11,549,000				n/m
Gresham			10,182,000				-				10,182,000				n/m
AGREE			3,603,000				3,149,000				454,000				14	%
TurnOnGreen			1,736,000				1,592,000				144,000				9	%
Other			706,000				796,000				(90,000	)			-11	%
Total revenue		$	44,079,000			$	25,021,000			$	19,058,000				76	%

n/m - not meaningful

Sentinum

Revenues from Sentinum's crypto asset mining operations decreased by $0.1 million to $5.1 million for the three months ended March 31, 2026, compared to $5.2 million for the same period in 2025. The decrease in mining revenue was driven by an 18% decrease in the average Bitcoin price and a 27% increase in the average Bitcoin network difficulty level during the three months ended March 31, 2026, compared to the same period in 2025.

Energy

Energy revenues from Circle 8's crane operations declined by $2.8 million, or 20%, for the three months ended March 31, 2026, compared to the same period in 2025. 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.

Fintech

Revenues from our lending and trading activities increased by $11.5 million to $11.5 million for the three months ended March 31, 2026, compared to ($28,000) for the same period in 2025. The increase was driven primarily by litigation-related proceeds associated with legacy ownership interests held by Ault Lending and unrealized gains on investments in other equity securities.

Revenues from our trading activities for the three months ended March 31, 2026 also 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.

Gresham

Revenues from Gresham were $10.2 million for the three months ended March 31, 2026. No revenues from Gresham were included in the comparable prior-year period because we did not reconsolidate Gresham until its emergence from Chapter 11 bankruptcy proceedings in late 2025.

AGREE

Revenues from AGREE's hotel operations increased by $0.5 million, or 14%, for the three months ended March 31, 2026, compared to the same period in 2025. The increase reflects incremental improvements in both occupancy and average daily rates, indicating continued progress in hotel performance year-over-year.

TurnOnGreen

TurnOnGreen's revenues increased by $0.1 million, to $1.7 million for the three months ended March 31, 2026, compared to $1.6 million in the corresponding period in 2025. The increase was primarily attributable to increased sales to a new electric vehicle charging customer.

Other

Other revenues decreased by $0.1 million, or 11%, for the three months ended March 31, 2026, compared to the same period in 2025. The decrease was primarily driven by reduced corporate aircraft charter revenue from third parties during the period.

Gross Margins

Gross margins increased to 34% for the three months ended March 31, 2026, compared to 21% for the three months ended March 31, 2025. The improvement was primarily driven by favorable contributions from lending and trading activities, which generated approximately $9.6 million of gross profit, as well as the inclusion of Gresham revenue following its emergence from bankruptcy. These improvements were partially offset by unfavorable margins from crypto asset mining activities and lower margins from crane operations.

Excluding the effects of crypto asset mining and lending and trading activities, adjusted gross margins decreased to 29% for the three months ended March 31, 2026, compared to 36% for the three months ended March 31, 2025, primarily reflecting a shift in revenue mix, including the inclusion of Gresham operations and lower crane operations margins.

Research and Development

Research and development expenses increased by approximately $4.7 million for the three months ended March 31, 2026, reflecting increased investment in the development of our AI and blockchain initiatives as these efforts continue to scale.

Selling and Marketing

Selling and marketing expenses were $5.6 million for the three months ended March 31, 2026, compared to $2.3 million for the three months ended March 31, 2025, an increase of $3.3 million, or 140%, reflecting increased investment in brand-building initiatives and expanded marketing campaigns to support our growth strategy.

General and Administrative

General and administrative expenses were $18.5 million for the three months ended March 31, 2026, compared to $9.2 million for the same period in 2025, representing an increase of $9.3 million, or 101%. The increase was primarily driven by the inclusion of Gresham following its emergence from bankruptcy, higher corporate-level expenses at the holding company level, and increased professional fees, including consulting and legal costs, as well as higher travel-related expenses.

Change in Fair Value of Crypto Assets

We recorded a $7.4 million loss related to the change in fair value of crypto assets for the three months ended March 31, 2026, reflecting a decline in Bitcoin market prices during the period. We held approximately $26.3 million of Bitcoin as of March 31, 2026, compared to $46.2 million as of December 31, 2025, and the decrease in market prices resulted in an overall unfavorable fair value adjustment recognized in earnings.

Other Income (Expense), Net

Other expense, net was $8.6 million for the three months ended March 31, 2026, compared to other income, net of $1.7 million for the three months ended March 31, 2025. The change was primarily driven by the absence of the prior year gain on deconsolidation of a subsidiary, as well as higher interest expense and losses on the change in fair value of crypto assets, restricted, partially offset by gains recognized in the current period.

Interest and other income totaled $0.8 million for the three months ended March 31, 2026, compared to $0.2 million for the same period in 2025, primarily reflecting higher income from various non-operating sources.

Interest expense increased to $6.5 million for the three months ended March 31, 2026, compared to $3.8 million for the same period in 2025, primarily due to higher average outstanding debt balances and financing costs during the period.

We recorded a $4.7 million loss related to the change in fair value of restricted crypto assets, restricted for the three months ended March 31, 2026, reflecting a decline in Bitcoin market prices during the period. We held approximately $16.7 million of crypto assets, restricted as of March 31, 2026, whereas no crypto assets, restricted were held as of December 31, 2025, and the decrease in market prices resulted in an overall unfavorable fair value adjustment recognized in earnings.

We recorded a $4.7 million loss related to the change in fair value of crypto assets, restricted for the three months ended March 31, 2026, reflecting a decline in Bitcoin market prices during the period. We held approximately $16.7 million of Bitcoin as of March 31, 2026, compared to $0 as of December 31, 2025, and the decrease in market prices resulted in an overall unfavorable fair value adjustment recognized in earnings.

During the three months ended March 31, 2026, we recognized a gain on extinguishment of debt of approximately $0.5 million, compared to a loss of $4.6 million in the prior year period, reflecting the settlement of certain debt obligations on favorable terms.

Additionally, we recognized a $1.3 million gain related to the change in fair value of embedded derivative liabilities during the three months ended March 31, 2026, primarily driven by changes in our stock price and other key valuation inputs, including volatility and discount rates, associated with certain convertible financing instruments.

For the three months ended March 31, 2025, we recognized a $10.0 million gain on deconsolidation of a subsidiary (Avalanche International Corp.) following its filing for Chapter 7 liquidation, which resulted in us no longer maintaining a controlling financial interest. This gain did not recur in the current period.

Income Tax Provision

We recorded an income tax provision of approximately $0.2 million for the three months ended March 31, 2026, compared to $0.1 million for the same period in 2025. The effective tax rate for the three months ended March 31, 2026 was approximately 0.8%, compared to 1.3% for the same period in 2025. The effective tax rate differs from the statutory rate primarily due to the impact of valuation allowances and the mix of income and losses across jurisdictions.

Liquidity and Capital Resources

As of March 31, 2026, we had $10.5 million in cash and cash equivalents and $25.7 million in restricted cash, compared to $13.1 million in cash and cash equivalents and $36.1 million in restricted cash as of December 31, 2025.

In the next 12 months, in addition to funding our operations, we expect to satisfy obligations related to scheduled debt maturities, interest payments, operating lease obligations, accrued preferred dividend obligations, and planned capital expenditures associated with our data center infrastructure, mining operations and other operating businesses. As of March 31, 2026, our short-term obligations primarily consisted of approximately $94.6 million of current notes payable and convertible notes payable, approximately $2.0 million of current operating lease liabilities, and approximately $60.6 million of accounts payable and accrued expenses.

To fund our short-term liquidity requirements, management expects to utilize a combination of existing cash and restricted cash balances, cash generated from operations, proceeds from financings, capital raising activities, sales of investments or other assets, and other available liquidity sources. As of March 31, 2026, we also held approximately $26.3 million of crypto assets, excluding the $16.7 million of crypto assets, restricted.

Our longer-term liquidity requirements beyond the next 12 months primarily relate to long-term debt obligations, lease commitments, strategic capital expenditures, investments in infrastructure expansion and strategic growth initiatives, and other long-term operating commitments. Management continually evaluates opportunities to refinance existing indebtedness, extend maturities, raise additional capital, monetize investments or assets, and pursue other strategic transactions to support our long-term liquidity objectives.

We believe our existing liquidity sources, anticipated cash generated from operations and access to external financing sources will provide us with the flexibility necessary to support our operations and address our anticipated obligations over at least the next 12 months. However, our ability to maintain adequate liquidity will depend on, among other factors, operating performance, capital market conditions, the availability of additional financing, and the market value of our assets and investments.

Total cash, cash equivalents and restricted cash decreased by approximately $12.9 million during the three months ended March 31, 2026, primarily reflecting cash used in investing activities, partially offset by cash provided by financing activities.

Net cash used in operating activities was approximately $0.2 million for the three months ended March 31, 2026, compared to $4.0 million for the same period in 2025.

Net cash used in investing activities was approximately $22.8 million for the three months ended March 31, 2026, compared to $1.2 million for the same period in 2025. Cash used in investing activities during the three months ended March 31, 2026 was primarily attributable to:

·

$10.6 million of capital expenditures related to property and equipment;

·

$7.7 million of investments in non-marketable equity securities;

·

$3.8 million of purchases of crypto assets; and

·

$2.9 million of investments in loans receivable.

These uses were partially offset by $1.1 million collections on loans receivable and $1.0 million of proceeds from the sale of property and equipment.

Net cash provided by financing activities was approximately $10.6 million for the three months ended March 31, 2026, compared to $4.7 million for the same period in 2025.

Cash provided by financing activities during the 2026 period primarily consisted of:

·

$18.3 million of proceeds from notes payable;

·

$10.6 million of gross proceeds from the sale of Class A common stock, net of $0.3 million in offering costs;

·

$0.9 million of proceeds from related party notes payable; and

·

$0.8 million of proceeds from convertible notes.

These inflows were partially offset by:

·

$14.3 million of payments on notes payable;

·

$2.5 million of preferred dividend payments;

·

$1.7 million of repayments of related party notes payable; and

·

$1.4 million of repayments on convertible notes.

Financing Transactions Subsequent to March 31, 2026

Class A Common Stock ATM Offering Activity

During the period between April 1, 2026 through May 15, 2026, we sold an aggregate of 91.1 million shares of Class A common stock pursuant to the ATM Offering for gross proceeds of $14.0 million.

Series D Preferred ATM Offering Activity

During the period between April 1, 2026 through May 15, 2026, we sold an aggregate of 20,245 shares of Series D Preferred Stock pursuant to our Series Preferred D ATM Offering for gross proceeds of $0.4 million.

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%.

The financing is secured by first-priority liens on certain cranes and related equipment owned by Circle 8. Proceeds from the financing were used to repay amounts outstanding under the Circle 8 revolving credit facility and for general operating purposes.

Term Note

In April 2026, we 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 has a principal face amount of $10.8 million. The note bears interest at 12% per annum and matures on June 29, 2026. Beginning May 8, 2026, we are 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 may be prepaid at any time without penalty. Repayment obligations under the note are guaranteed by Ault & Company and Milton C. Ault, III, our Executive Chairman.

Critical Accounting Estimates

There have been no material changes to our critical accounting estimates previously disclosed in the 2025 Annual Report.