DEF 14A: Hyperscale Data Seeks Stockholder Approval for $25 Million Preferred Stock Conversion to Meet NYSE American Listing Requirements

Hyperscale Data, Inc. is holding a special meeting of stockholders to approve the conversion of Series G Preferred Stock and warrants into Class A Common Stock for a total purchase price of up to $25 million, aiming to meet NYSE American listing requirements and secure necessary funding.

Summary

• Hyperscale Data, Inc. is convening a special meeting of stockholders on March 27, 2025, to vote on two proposals.
• The first proposal seeks approval for the conversion of 25,000 shares of Series G Convertible Preferred Stock and warrants into Class A Common Stock, with a total purchase price of up to $25 million.
• This conversion is pursuant to a Securities Purchase Agreement (SPA) dated December 21, 2024, with Ault & Company (A&C).
• The second proposal concerns the adjournment of the meeting if there are insufficient votes to approve the other proposals.
• The company needs to raise significant cash financing to operate and expand its operations, and will need to extinguish as much of its debt as possible.
• The company must also significantly increase its stockholders equity.
• The record date for determining stockholders eligible to vote is January 28, 2025.
• The proxy materials were mailed to stockholders on or about February 26, 2025.
• The meeting will be held virtually.
• The Board of Directors recommends voting FOR both proposals.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While the company is seeking funding to improve its financial position and meet listing requirements, the potential dilution and risks associated with the transaction temper the positive aspects.

Positives

• The proposed conversion could provide Hyperscale Data with up to $25 million in funding.
• Approval of the proposal is an integral element of the compliance plan the company intends to submit to the Exchange.
• The company has the ability to extend the final Closing Date for a period of up to ninety (90) days.
• The company has the ability to pay the dividend amount in Class A Common Stock rather than cash for the first two years.

Negatives

• The conversion will have a dilutive effect on existing stockholders' voting power and economic rights.
• The potential sale of a large number of shares by A&C may depress the market price of the company's Class A Common Stock.
• If the company is unable to raise its stockholders equity to the requisite level, all its securities currently traded on the Exchange, as well as other classes of securities that may trade on the Exchange in the future, would be delisted.
• The company was notified by the NYSE American on December 18, 2024 that due to the Company's disclosure in its Form 10-Q filed for the fiscal period ended September 30, 2024, which reported stockholders equity of approximately $2.2 million, it no longer meets the requirement that it must have no less than $6 million or more in stockholders equity.

Risks

• Failure to obtain stockholder approval for the conversion could force the company to seek alternative financing under less favorable terms.
• If the NYSE American does not accept the company's compliance plan, or if the company does not make progress consistent with the plan, the NYSE American will initiate delisting procedures.
• The company's Class A Common Stock will continue to be listed on the NYSE American and trade as usual subject to compliance with other NYSE American listing requirements.
• The company is prohibited from entering into any financing, whether debt or equity, other than conventional loans from a commercial bank, at a price per share less than the Conversion Price or entering into a variable rate financing transaction.

Future Outlook

The company anticipates needing to seek alternative methods of raising cash for future expansion of its business, likely under far less favorable terms than those offered by A&C, if it cannot obtain funding from A&C or reduce its aggregate debt.

Management Comments

• The Board of Directors unanimously recommends a vote FOR the approval of the issuance of shares of Class A Common Stock underlying the SPA Securities to A&C in order to comply with Rules 713(a) and (b) of the NYSE American.

Industry Context

Many companies, especially smaller ones, rely on preferred stock and warrant offerings to raise capital. The need for stockholder approval highlights the importance of corporate governance and transparency in such transactions.

Comparison to Industry Standards

• The terms of the Series G Preferred Stock, including the dividend rate and conversion price, should be compared to similar preferred stock offerings in the data and technology sectors.
• The warrant exercise price and term should be evaluated against industry benchmarks for warrant offerings.
• The potential dilution effect on existing stockholders is a common concern in such transactions and should be assessed in light of the company's growth prospects and capital needs.

Related Party Transactions

• The Securities Purchase Agreement is with Ault & Company (A&C), an affiliate of the Company.

Stakeholder Impact

• Existing stockholders face potential dilution of their voting power and economic rights.
• The company's ability to meet NYSE American listing requirements impacts its access to capital and investor confidence.
• Employees and customers may be affected by the company's financial stability and future growth prospects.

Next Steps

• Stockholders will vote on the proposals at the Special Meeting on March 27, 2025.
• The company will submit its compliance plan to the NYSE American.
• The company will monitor its compliance with the NYSE American listing requirements.

Key Dates

Keywords

Series G Preferred Stock, Class A Common Stock, Securities Purchase Agreement, NYSE American, Stockholder Approval, Conversion, Dilution, Listing Requirements, Financing, Warrants