GPUS.AMEXHyperscale Data, INC
10-Q: Hyperscale Data Q3 2025: Losses Persist Amid Capital Raises
Sentiment:
Quarterly Report
Hyperscale Data reports a significant net loss for Q3 and the nine months ended September 30, 2025, despite substantial capital raises and improved working capital.
Delay expectedThe planned divestiture of Ault Capital Group (ACG) is targeted for the second quarter of 2026, but the filing states there can be no assurance it will be completed during that quarter.The GIGA bankruptcy plan, confirmed on August 29, 2025, is anticipated to be effective and GIGA to emerge from bankruptcy on November 28, 2025, which is after the reporting period, indicating the process was not finalized within the quarter.
Capital raiseSubsequent to September 30, 2025, the company sold 172.7 million shares of Class A common stock through an At-the-Market (ATM) offering for gross proceeds of $86.2 million.Subsequent to September 30, 2025, the company sold 8,500 shares of Series B Convertible Preferred Stock for gross proceeds of approximately $8.5 million.The company entered into a securities purchase agreement on March 31, 2025, to sell up to 50,000 shares of Series B Convertible Preferred Stock for up to $50.0 million, with 23,914 shares already issued for $23.9 million during the nine months ended September 30, 2025.On July 31, 2025, the company entered into a securities purchase agreement with Ault & Company to sell up to 100,000 shares of Series H convertible preferred stock for up to $100.0 million, with 4,000 shares already sold for $4.0 million.The Series H Convertible Preferred Stock Purchase Agreement's termination date was extended to the later of December 31, 2027, or one year after sufficient Class A common stock authorization, indicating ongoing potential for capital raises through this instrument.
Worse than expectedThe company reported a net loss of $35.64 million for the nine months ended September 30, 2025, compared to a net loss of $58.23 million in the prior year, indicating continued significant losses.Total revenue decreased by 14% for the nine months ended September 30, 2025, to $75.21 million from $87.22 million in the prior year, showing a decline in overall business activity.Lending and trading activities revenue saw a substantial decrease of 60% for the nine months, indicating a significant downturn in this segment's performance.Gross margins declined to 24% for the nine months ended September 30, 2025, from 26% in the prior year, reflecting reduced profitability on revenue.
Summary
- Reported a net loss of $13.58 million for the three months ended September 30, 2025, and $35.64 million for the nine months ended September 30, 2025.
- Total revenue for the three months ended September 30, 2025, was $24.33 million, a 22% decrease from $31.06 million in the prior year period.
- Total revenue for the nine months ended September 30, 2025, was $75.21 million, a 14% decrease from $87.22 million in the prior year period.
- Working capital improved from negative $157.1 million at December 31, 2024, to negative $89.4 million at September 30, 2025.
- Cash and cash equivalents increased to $24.84 million at September 30, 2025, from $4.55 million at December 31, 2024.
- Successfully raised $86.2 million in gross proceeds from an At-the-Market (ATM) offering and $8.5 million from Series B Convertible Preferred Stock sales subsequent to September 30, 2025.
- Recognized a gain of $12.44 million on the deconsolidation of subsidiaries (AVLP, Eco Pack, and an ROI subsidiary) for the nine months ended September 30, 2025.
- Crypto assets mining revenue increased by 8% to $5.67 million for the three months ended September 30, 2025, driven by an 88% increase in average Bitcoin price, despite a 51% increase in network difficulty.
- Energy revenues from crane operations declined by 21% for the three months and 5% for the nine months ended September 30, 2025, due to a slowdown in demand from oil and gas customers.
- Lending and trading activities revenue significantly decreased by 97% for the three months and 60% for the nine months ended September 30, 2025.
- Gross margins decreased to 26% for the three months and 24% for the nine months ended September 30, 2025, primarily due to unfavorable crypto asset mining margins.
- Identified material weaknesses in internal control over financial reporting related to insufficient accounting resources, lack of segregation of duties, and ineffective user access and program change management controls for IT systems.
- The company anticipates completing the planned divestiture of Ault Capital Group (ACG) in the second quarter of 2026 to focus on AI data center and Bitcoin infrastructure.
- Gresham Worldwide, Inc. (GIGA) is anticipated to emerge from Chapter 11 bankruptcy on November 28, 2025, following a confirmed plan and settlement payment.
Sentiment
Score: 3
Explanation: The company continues to report substantial net losses and declining revenues across key segments for the nine-month period, indicating ongoing operational challenges. While significant capital raises have improved liquidity and alleviated immediate going concern doubts, the underlying business performance remains weak, and material weaknesses in internal controls persist. The strategic shift towards AI and Bitcoin is promising but has not yet translated into profitability.
Positives
- Working capital improved significantly from negative $157.1 million at December 31, 2024, to negative $89.4 million at September 30, 2025.
- Cash and cash equivalents increased substantially to $24.84 million at September 30, 2025, from $4.55 million at December 31, 2024.
- Successfully raised $86.2 million in gross proceeds from an ATM offering and $8.5 million from Series B Convertible Preferred Stock sales subsequent to September 30, 2025, enhancing liquidity.
- Crypto assets mining revenue increased by 8% to $5.67 million for the three months ended September 30, 2025, compared to the same period in 2024, driven by higher Bitcoin prices.
- Hotel operations revenue increased by 7% for the three months and 6% for the nine months ended September 30, 2025, reflecting improvements in occupancy and average daily rates.
- TurnOnGreen's revenues increased by 35% for the three months and 34% for the nine months ended September 30, 2025, due to sales from new customers.
- Recognized a significant gain of $12.44 million on the deconsolidation of subsidiaries (AVLP, Eco Pack, and an ROI subsidiary) for the nine months ended September 30, 2025.
- Interest expense decreased to $3.06 million for the three months and $14.57 million for the nine months ended September 30, 2025, compared to prior year periods, due to lower debt balances and reduced fees.
Negatives
- Reported a net loss of $13.58 million for the three months ended September 30, 2025, and $35.64 million for the nine months ended September 30, 2025.
- Total revenue decreased by 22% for the three months and 14% for the nine months ended September 30, 2025, compared to the prior year periods.
- Lending and trading activities revenue saw a drastic decrease of 97% for the three months and 60% for the nine months ended September 30, 2025.
- Crane operations revenue declined by 21% for the three months and 5% for the nine months ended September 30, 2025, due to reduced demand from oil and gas customers.
- Gross margins decreased to 26% for the three months and 24% for the nine months ended September 30, 2025, primarily due to unfavorable crypto asset mining margins.
- Selling and marketing expenses increased by 55% for the three months and 28% for the nine months ended September 30, 2025, mainly due to higher advertising and promotion costs at ROI.
- Incurred a total net loss on extinguishment of convertible notes of $3.4 million for the nine months ended September 30, 2025.
- Accumulated deficit increased to $702.21 million at September 30, 2025, from $628.95 million at December 31, 2024.
Risks
- Material weaknesses in internal control over financial reporting, including insufficient accounting resources, lack of segregation of duties, and ineffective user access and program change management controls, could lead to material misstatements.
- The company is involved in ongoing litigation, including the Arena Investors LP lawsuit, which seeks damages in excess of $3.75 million, and the outcome is inherently unpredictable.
- Fluctuations in Bitcoin price and network difficulty levels significantly impact crypto assets mining revenue and profitability.
- Market volatility in trading activities can cause significant volatility in periodic earnings.
- The planned divestiture of ACG in Q2 2026 has no assurance of completion within that timeframe, which could impact the company's strategic focus and financial results.
- Reliance on external financing through convertible debt, promissory notes, and equity securities to fund operations and growth initiatives, which may not always be available on favorable terms.
- Certain notes payable, including AGREE secured construction loans and notes from officers TurnOnGreen, are in default, posing liquidity and repayment risks.
Future Outlook
Management believes that the company's available liquidity, including cash raised subsequent to September 30, 2025, will be sufficient to meet its obligations and fund its operations for at least one year. The company anticipates completing the planned divestiture of Ault Capital Group (ACG) in the second quarter of 2026, at which time it expects to operate as a focused AI data center and Bitcoin infrastructure company. Management will continue to monitor liquidity and market conditions, seeking additional financing as necessary.
Management Comments
- "management believes that the Company’s available liquidity, including cash raised subsequent to September 30, 2025, will be sufficient to meet its obligations and fund its operations for at least one year from the date these condensed consolidated financial statements are issued."
- "Accordingly, management has concluded that these financings alleviate the substantial doubt about the Company’s ability to continue as a going concern."
- "Management will continue to monitor the Company’s liquidity position and market conditions and may seek additional financing as necessary to support operations and future growth initiatives."
- "Our business objective is to increase stockholder value through developing and growing our subsidiaries."
- "We anticipate returning value to stockholders after satisfying our debt obligations and working capital needs."
Industry Context
The company's crypto assets mining operations are significantly impacted by the Bitcoin halving event and increasing Bitcoin network difficulty, partially offset by higher Bitcoin prices. The crane operations segment faces a slowdown due to decreased demand from oil and gas customers, influenced by crude oil price fluctuations, softer global demand, and trade-related concerns. The hotel operations segment shows incremental improvements in occupancy and average daily rates, indicating a positive trend in that sector.
Comparison to Industry Standards
- NA
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Stock Incentive Plan Approval | The Board of Directors approved the 2025 Stock Incentive Plan, authorizing the issuance of up to 8.0 million shares, and approved grants of options covering 6.2 million shares to employees at an exercise price of $0.72 per share. | 2025-07-31 | Aims to incentivize employees, but stock-based compensation expense will only be recognized upon stockholder and exchange approval. |
| Non-Qualified Stock Option Grants | The Board of Directors approved grants of 7.25 million non-qualified stock options to purchase shares of Class A common stock for directors and executive officers at an exercise price of $0.72 per share. | 2025-07-31 | Aims to incentivize directors and executive officers, contingent on stockholder and exchange approval, with vesting starting January 1, 2026. |
| Amendment to Series B Convertible Preferred Stock Conversion Price | The Certificate of Designation of Preferences, Rights and Limitations of the Series B Convertible Preferred Stock was amended to revise the definition of Conversion Price. | 2025-04-23 | Adjusts the terms under which Series B Preferred Stock can be converted into Class A common stock, potentially affecting dilution and shareholder value. |
Legal Proceedings
- The company is a defendant in a lawsuit filed by Arena Investors LP, seeking damages in excess of $3,750,000 for breach of contract based on a Guaranty dated April 27, 2023.
- A motion to dismiss partially against the company and entirely against ROI was filed on July 31, 2024; the court denied partial dismissal against the company but granted dismissal against ROI on January 21, 2025.
- The action was consolidated with another lawsuit, and Arena's claims in the second action were dismissed on July 29, 2025.
- Arena Investors LP filed a notice of appeal on September 11, 2025, and formally commenced the appeal on September 17, 2025.
- On October 3, 2025, the company and Arena executed various settlement documents, and all deadlines are stayed through March 16, 2026, with anticipation of withdrawal of the appeal and discontinuance of the action.
- Accrued loss contingencies related to litigation matters were $1.3 million as of September 30, 2025, down from $2.3 million at December 31, 2024.
Related Party Transactions
- Investment in promissory notes and other, related party, totaled $27.60 million at September 30, 2025, primarily with GIGA ($27.76 million) and Ault & Company ($-).
- Interest income from related parties was $566,000 for the three months and $1.71 million for the nine months ended September 30, 2025.
- Investment in Alzamend Series B Convertible Preferred Stock, warrants, and common stock, related parties, totaled $923,000 at September 30, 2025.
- Messrs. Horne and Nisser are each paid $50,000 annually by Alzamend, and Mr. Ault is paid $25,000 annually by Alzamend.
- Ault Lending purchased 2,100 shares of Alzamend Series B convertible preferred stock and warrants for $2.1 million in January 2024.
- Ault Lending converted a portion of its Alzamend Series B convertible preferred stock, reducing the investment carrying amount to $0.8 million at September 30, 2025.
- Ault & Company demand promissory note of $3.64 million was executed on September 9, 2025, formalizing prior advances and loans, bearing 9.5% interest.
- Notes from officers TurnOnGreen, in default, totaled $51,000 at September 30, 2025.
- Other related party advances totaled $26,000 at September 30, 2025.
- Interest expense from related parties was $22,000 for the three months and $41,000 for the nine months ended September 30, 2025.
- The company sold 960 shares of Series G Convertible Preferred Stock and warrants to Ault & Company for $1.0 million during the nine months ended September 30, 2025.
- The company sold 4,000 shares of Series H Preferred Stock to Ault & Company for $4.0 million during the three months ended September 30, 2025.
- Ault Lending entered into a loan and security agreement with GIGA on September 26, 2025, to loan GIGA up to $10.0 million, evidenced by a $11.0 million convertible promissory note.
- The Series H Convertible Preferred Stock Purchase Agreement with Ault & Company was amended on November 7, 2025, to extend its termination date.
Stakeholder Impact
- Shareholders: Experience significant dilution from ongoing Class A common stock sales through ATM offerings and conversions of preferred stock and convertible notes. Also impacted by substantial net losses and preferred dividends reducing net loss available to common stockholders.
- Creditors: Some notes payable and related party notes are in default, indicating increased credit risk. However, capital raises have improved overall liquidity, potentially easing immediate repayment concerns.
- Employees: Stock options were approved for directors, executive officers, and employees, contingent on stockholder and exchange approval, providing potential future incentives.
- Customers: Crane operations customers (oil and gas) are experiencing project delays and scale-backs, impacting the company's revenue in that segment. TurnOnGreen saw increased sales from new customers.
- Management: Actively engaged in strategic divestitures, capital raises, and remediation of internal control weaknesses, indicating a high level of operational and financial management focus.
Next Steps
- Complete the planned divestiture of Ault Capital Group (ACG) in the second quarter of 2026.
- GIGA is anticipated to emerge from Chapter 11 bankruptcy on November 28, 2025.
- Continue to monitor liquidity position and market conditions, and seek additional financing as necessary.
- Remediate identified material weaknesses in internal control over financial reporting, focusing on user access and change management for IT systems.
- Implement new applications and systems aligned with strong internal controls.
- Increase headcount in the accounting department with a focus on Sarbanes Oxley and internal control backgrounds.
- Anticipate filing a withdrawal of the Arena Investors LP appeal and a stipulation of discontinuance by March 16, 2026.
Key Dates
| Date | Description |
|---|---|
| 2023-04-27 | Date of Guaranty and Security Agreement between the Company, ROI, and Arena Investors LP. |
| 2023-12-14 | FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. |
| 2024-01-01 | Beginning of the nine-month period for comparative financial statements. |
| 2024-01-01 | ROI announced inability to effect distribution of White River common stock for regulatory reasons. |
| 2024-01-14 | Date of a term note issued by the Company, later cancelled in an exchange agreement on March 21, 2025. |
| 2024-04-15 | Filing date of the Annual Report on Form 10-K for the year ended December 31, 2024. |
| 2024-04-27 | Maturity date of ROI senior secured convertible note, in default. |
| 2024-04-30 | Change in plan of sale for AGREE hotel properties; assets reclassified as held and used. |
| 2024-05-16 | Date of a term note issued by the Company, later cancelled in an exchange agreement on March 14, 2025. |
| 2024-05-20 | Date of a term note issued by the Company, later cancelled in an exchange agreement on March 14, 2025. |
| 2024-05-30 | Arena Investors LP filed a Complaint against the Company and ROI. |
| 2024-06-24 | Original date of Purchase Agreement with Orion Equity Partners, LLC, later terminated. |
| 2024-07-01 | Beginning of the three-month period for comparative financial statements. |
| 2024-07-31 | Company and ROI filed a motion to dismiss the Arena Investors LP Complaint. |
| 2024-08-14 | GIGA filed a petition for reorganization under Chapter 11 of the bankruptcy laws; deconsolidated by the Company. |
| 2024-09-28 | Maturity date of Convertible promissory note OID only, in default. |
| 2024-09-30 | End of the three and nine months for comparative financial statements. |
| 2024-10-31 | Maturity date of 15% term notes, in default. |
| 2024-11-05 | Date of Event of Default Redemption Notice from Arena Investors LP to the Company. |
| 2024-11-15 | FASB issued ASU No. 2024-03, Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. |
| 2024-12-16 | Due date of Circle 8 revolving credit facility. |
| 2024-12-31 | End of the prior fiscal year for balance sheet comparison. |
| 2025-01-01 | Beginning of the current nine-month period for financial statements. |
| 2025-01-01 | Effective date for ASU 2023-09 adoption. |
| 2025-01-21 | Court entered an Order denying partial dismissal against the Company and granting dismissal against ROI in Arena litigation. |
| 2025-02-02 | AGREE secured construction loans amended. |
| 2025-02-05 | Company entered into an exchange agreement with Orchid, issuing a $1.9 million convertible promissory note. |
| 2025-02-18 | Company filed an Answer to the Arena Investors LP Complaint. |
| 2025-02-25 | Company and an institutional investor entered into an amended and restated forbearance agreement. |
| 2025-03-01 | Due date of AGREE secured construction loans (original). |
| 2025-03-07 | Date of a promissory note issued by the Company, later cancelled in an exchange agreement on March 21, 2025. |
| 2025-03-12 | Date of a promissory note issued by the Company, later cancelled in an exchange agreement on March 21, 2025. |
| 2025-03-13 | Date of a promissory note issued by the Company, later cancelled in an exchange agreement on March 21, 2025. |
| 2025-03-14 | Company entered into an exchange agreement with an institutional investor, issuing a $4.2 million convertible promissory note. |
| 2025-03-21 | Company entered into an exchange agreement with SJC Lending, LLC, issuing a $4.9 million convertible promissory note. |
| 2025-03-28 | AVLP filed a voluntary petition for liquidation under Chapter 7; deconsolidated by the Company. |
| 2025-03-31 | Company entered into a securities purchase agreement to sell up to 50,000 shares of Series B Convertible Preferred Stock. |
| 2025-03-31 | Due date of AGREE secured construction loans (amended). |
| 2025-04-01 | Company issued a convertible promissory note for $1.65 million in consideration for $1.5 million cash advance. |
| 2025-04-08 | Company issued a convertible promissory note for $110,000 in consideration for $100,000. |
| 2025-04-15 | Company issued convertible promissory notes for $5.0 million to Target Capital 14 LLC and Secure Net Capital LLC. |
| 2025-04-16 | Eco Pack filed a voluntary liquidation under UK insolvency regulations; deconsolidated by the Company. |
| 2025-04-22 | Board of Directors approved amendment to Certificate of Designation of Series B Convertible Preferred Stock. |
| 2025-04-23 | Company filed a Certificate of Amendment to the Certificate of Designation of Series B Convertible Preferred Stock. |
| 2025-05-05 | Maturity date of February 2025 Convertible Note. |
| 2025-05-13 | Company entered into an OID-only term note agreement with an institutional investor. |
| 2025-05-15 | Maturity date of 10% OID convertible promissory note. |
| 2025-05-15 | Original forbearance agreement expiration date and A&R Forbearance Note maturity date. |
| 2025-05-27 | Maturity date of OID-only term note agreement. |
| 2025-05-28 | Company and Orion Equity Partners, LLC mutually agreed to terminate the Purchase Agreement. |
| 2025-06-03 | Company and investor entered into an amendment to the A&R Forbearance Note, extending maturity. |
| 2025-06-06 | Company entered into a settlement agreement with GIGA and GIGA's senior secured lenders. |
| 2025-06-09 | Sentinum entered into a Hosting Services Agreement with a data center hosting company. |
| 2025-06-30 | Maturity date of convertible promissory note issued March 14, 2025. |
| 2025-06-30 | Extended maturity date of A&R Forbearance Note. |
| 2025-07-01 | Beginning of the current three-month period for financial statements. |
| 2025-07-29 | Court entered an Order consolidating Arena litigation actions. |
| 2025-07-31 | Board of Directors approved grants of 7.25 million non-qualified stock options and the 2025 Stock Incentive Plan. |
| 2025-07-31 | Company entered into a securities purchase agreement with Ault & Company to sell up to 100,000 shares of Series H convertible preferred stock. |
| 2025-08-12 | Grants of 7.25 million non-qualified stock options issued to directors and executive officers. |
| 2025-08-22 | Maturity date of AVLP convertible promissory notes. |
| 2025-08-29 | United States Bankruptcy Court for the District of Arizona confirmed GIGA's bankruptcy plan. |
| 2025-08-29 | Company entered into a sales agreement with Wilson-Davis & Co., Inc. for an ATM offering program. |
| 2025-09-09 | Company executed a Demand Promissory Note in favor of Ault & Company. |
| 2025-09-11 | Arena Investors LP filed a notice of appeal in connection with the Consolidation and Dismissal Order. |
| 2025-09-17 | Arena Investors LP formally commenced the appeal. |
| 2025-09-22 | Company announced a planned dividend of 20 million shares of its Class B Common Stock. |
| 2025-09-26 | Ault Lending entered into a loan and security agreement with GIGA for up to $10.0 million. |
| 2025-09-30 | End of the current quarterly reporting period. |
| 2025-09-30 | Maturity date of convertible promissory note issued April 1, 2025. |
| 2025-09-30 | Maturity date of convertible promissory note issued April 8, 2025. |
| 2025-09-30 | Maturity date of convertible promissory notes issued April 15, 2025. |
| 2025-09-30 | Settlement payment made under GIGA's bankruptcy plan. |
| 2025-10-01 | Beginning of the period for subsequent events related to ATM offering and Series B Preferred Stock sales. |
| 2025-10-03 | Company and Arena Investors LP executed various settlement documents. |
| 2025-10-06 | Record date for the planned dividend of Class B Common Stock. |
| 2025-10-17 | Maturity date of Circle 8 equipment financing notes (earliest). |
| 2025-10-31 | Payment date for the planned dividend of Class B Common Stock. |
| 2025-11-04 | End date for ATM offering sales reported in subsequent events. |
| 2025-11-07 | Company and Ault & Company entered into an amendment to the Series H Convertible Preferred Stock Purchase Agreement, extending its termination date. |
| 2025-11-14 | Date of outstanding shares of Class A and Class B common stock. |
| 2025-11-15 | Maturity date of the GIGA Note. |
| 2025-11-17 | End date for Series B Preferred Stock sales and conversions reported in subsequent events. |
| 2025-11-17 | Filing date of the Quarterly Report on Form 10-Q. |
| 2025-11-28 | Anticipated effective date for GIGA to emerge from bankruptcy. |
| 2025-12-31 | Maturity date of SJC convertible promissory note. |
| 2026-01-01 | Beginning of vesting period for 2025 Stock Incentive Plan and option grants. |
| 2026-03-16 | Stayed deadline in Arena litigation, by which withdrawal of appeal and stipulation of discontinuance are anticipated. |
| 2026-06-30 | Target completion date for the planned divestiture of ACG. |
| 2027-01-01 | Effective date for ASU 2024-03 adoption for annual periods. |
| 2027-12-31 | Extended termination date for Series H Convertible Preferred Stock Purchase Agreement. |
| 2028-01-01 | Effective date for ASU 2024-03 adoption for interim periods. |
| 2028-11-15 | Maturity date of the GIGA Note. |
| 2029-07-20 | Maturity date of Circle 8 equipment financing notes (latest). |
Recommendation
strong sellHyperscale Data continues to report substantial net losses and declining overall revenue for the nine-month period, indicating fundamental operational challenges. While recent capital raises have significantly improved the cash position and alleviated immediate going concern doubts, these raises come at the cost of substantial shareholder dilution. The company's negative working capital remains high, and material weaknesses in internal controls signal significant governance and financial reporting risks. The strategic shift to AI and Bitcoin is still in its early stages and has not yet demonstrated consistent profitability. Given the persistent losses, revenue declines in key segments, and ongoing risks, the stock presents a high-risk profile with limited near-term upside potential for investors.
Keywords
AI data center, Bitcoin mining, SEC filing, Quarterly Report, Financial results, Cryptocurrency, Corporate governance, Liquidity, Capital raise, Convertible debt, Risk factors, Sentinum, Ault Capital Group, TurnOnGreen, AGREE, ROI
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