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Item 9A. Controls and Procedures

2024-08-30 compared with 2023-08-02 · 545 added, 668 removed, 318 unchanged (79% of the section changed)

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Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).

Based on that evaluation, and as a result of the material weaknesses described below, our Chief Executive Officer and Chief Financial Officer concluded that, as of May 31, 2023, our disclosure controls and procedures were not effective at the reasonable assurance level.

We maintain a system of disclosure controls and procedures that is designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to the our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer and principal accounting officer), as appropriate, to allow timely decisions regarding required disclosure.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of May 31, 2024, has concluded that our disclosure controls and procedures were not effective as of May 31, 2024, as a result of the material weaknesses in our internal control over financial reporting disclosed below.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) and 15d(f).

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with United States generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act.

Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on that evaluation, and as a result of the material weaknesses described below, our Chief Executive Officer and Chief Financial Officer concluded that, as of May 31, 2024, our disclosure controls and procedures were not effective.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual and interim financial statements will not be detected or prevented on a timely basis.

We have identified the following material weakness in the design of our internal controls:

• We have not designed and implemented controls to ensure we can record, process, summarize, and report financial data.

• We have not yet designed and implemented user access controls to ensure appropriate segregation of duties that would adequately restrict user and privileged access to the financially relevant systems and data to appropriate personnel.

• We have not yet designed and implemented controls to ensure we can record, process, summarize, and report financial data.

• We have not designed and implemented user access controls to ensure appropriate segregation of duties that would adequately restrict user and privileged access to the financially relevant systems and data to appropriate personnel.

• We did not design and maintain effective controls associated with related party transactions and disclosures.

Controls in place were not designed or implemented at a sufficient level of precision or rigor to effectively identify related party relationships and disclose their related transactions in our financial statements.

Controls were not designed or implemented at a sufficient level of precision or rigor to effectively identify related party relationships and disclose their related transactions in our financial statements.

• We also do not have a properly designed internal control system that identifies critical processes and key controls.

The material weaknesses did not result in any identified misstatements to the financial statements, and there were no changes to previously released financial results.

Notwithstanding these material weaknesses in internal control over financial reporting, our management has concluded that, based on their knowledge, the consolidated financial statements, and other financial information included in this Annual Report on Form 10-K present fairly, in all material respects our

financial condition, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

In order to remediate these material weaknesses, we have begun to take the following steps, among others:

Hiring additional qualified accounting and financial reporting personnel to support division of responsibilities;

Hiring additional qualified accounting and financial reporting personnel to support division of responsibilities, including utilizing an advisory, tax and assurance firm to assist with process documentation;

Improving and updating our systems;

Developing IT general controls to manage access and program changes across our key systems and the execution of improvements to application controls within our systems;

Implementing processes and controls to better identify and manage segregation of duties.

Developing IT general controls to manage access and program changes across our key systems and the execution of improvements to application controls within our systems, including implementing user access reviews for all systems on a quarterly basis;

Implementing processes and controls to better identify and manage segregation of duties, including executing an internal audit program to evaluate the design, implementation, and operating effectiveness of key business processes and IT controls.

We will not be able to fully remediate the material weaknesses until these steps have been completed and have been operating effectively for a sufficient period of time.

Internal Control over Financial Reporting

This annual report does not include an attestation report of the Company's registered public accounting firm due to the fact that the Company is a Smaller Reporting Company and exempt from the requirement.

Attestation Report

This Annual Report on Form 10-K does not include an attestation report of the Company's registered public accounting firm due to the fact that the Company is a non-accelerated filer and exempt from the requirement.

Changes in Internal Control over Financial Reporting

Except as set forth above, there were no changes in the Company’s internal control over financial reporting during the fourth quarter of 2023, which were identified in connection with management’s evaluation required by paragraph

(d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Except as set forth above, there were no changes in the Company’s internal control over financial reporting during the fourth quarter of 2024, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Other Information

Not applicable.

On August 28, 2024, the Company entered into the SEPA with YA Fund, which was amended on August 29, 2024.

Pursuant to the SEPA, subject to certain conditions and limitations, the Company has the option, but not the obligation, to sell to YA Fund, and YA Fund must subscribe for, an aggregate amount of up to $250.0 million of common stock, at the Company’s request any time during the commitment period commencing on September 30, 2024 (the “Effective Date”) and terminating on the first day of the month next following the 36-month anniversary of the Effective Date;

provided, that there is an effective resale registration statement on file with the SEC covering the shares of common stock issued and issuable under the SEPA.

In connection with the execution of the SEPA, the Company agreed to pay a structuring fee (in cash) to YA Fund in the amount of $25,000.

Additionally, the Company agreed to pay a commitment fee of $2,125,000 to YA Fund, payable on the date of the SEPA, in the form of the issuance of 456,287 shares of common stock (the “Commitment Shares”), representing $2,125,000 divided by the average of the daily VWAPs of the common stock during the three trading days immediately prior to August 28, 2024.

Each advance (each, an “Advance”) the Company requests in writing to YA Fund under the SEPA (notice of such request, an “Advance Notice”) may be for a number of shares of common stock up to such amount as is equal to 100% of the average daily volume traded of the common stock during the five trading days immediately prior to the date the Company requests each Advance.

At the Company's option, the shares of common stock purchased pursuant to an Advance delivered by the Company will be purchased at a price equal to (i) 96% of the VWAP of the common stock on the applicable date of delivery of the Advance Notice during regular trading hours on such date (the "Option 1 Market Price") or (ii) 97% of the lowest daily VWAP of the common stock during the three consecutive trading days commencing on the date of the delivery of the Advance Notice (the "Option 2 Market Price"), other than the daily VWAP on a day in which the daily VWAP is less than a minimum acceptable price as stated by the Company in the Advance Notice or there is no VWAP on

the subject trading day.

The Company may establish a minimum acceptable price in each Advance Notice in which the Company elects to use the Option 2 Market Price below which the Company will not be obligated to make any sales to YA Fund.

“VWAP” is defined as the daily volume weighted average price of the shares of common stock for such trading day on Nasdaq during regular trading hours as reported by Bloomberg L.P.

The SEPA will automatically terminate on the earliest to occur of (i) the first day of the month next following the 36-month anniversary of the Effective Date or (ii) the date on which the Company shall have made full payment of Advances pursuant to the SEPA.

The Company has the right to terminate the SEPA at no cost or penalty upon five trading days’ prior written notice to YA Fund, provided that there are no outstanding Advance Notices for which shares of common stock need to be issued.

The Company and YA Fund may also agree to terminate the SEPA by mutual written consent.

Any purchase under an Advance would be subject to certain limitations, including that YA Fund shall not purchase or acquire any shares that would result in it and its affiliates beneficially owning more than 4.99% of the then outstanding voting power or number of shares of common stock or any shares that, aggregated with shares issued under the SEPA, the March PPA or the May PPA, would exceed 19.99% of all shares of common stock outstanding on March 26, 2024 (the “Exchange Cap”), unless the Company obtains stockholder approval to issue shares of common stock in excess of the Exchange Cap in accordance with applicable Nasdaq rules.

Pursuant to the SEPA, the Company agreed to file a resale registration statement with the SEC for the resale under the Securities Act by YA Fund of the common stock issued under the SEPA, including the Commitment Shares.

The Company shall not have the ability to request any Advances until such resale registration statement is declared effective by the SEC.

Rule 10b5-1 Plan and Non-Rule 10b5-1 Trading Arrangement Adoptions, Terminations, and Modifications

During the fiscal quarter ended May 31, 2024 , Douglas Miller , a member of the Board , adopted a Rule 10b5-1 plan providing for the sale of up to 65,000 shares of the Company’s common stock.

Pursuant to this plan, Mr.

Miller may sell shares of common stock beginning on August 15, 2024, subject to the terms of the agreement, and the plan terminates on December 31, 2024.

The trading arrangement is intended to satisfy the affirmative defense of Rule 10b5-1(c).

Except as provided above, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408(a) of Regulation S-K), during the fiscal quarter ended May 31, 2024.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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Directors, Executive Officers and Corporate Governance

Executive Officers and Directors

The following table provides information regarding our Named Executive Officers (as defined below) and directors as of June 30, 2023.

Our directors and their ages as of the date of this filing are set forth below.

Each director is elected annually to serve until the next annual meeting of shareholders, or until his or her successor is duly elected.

Name Age Position(s) Period of Service

Executive Officers

Wes Cummins 46 Chief Executive Officer and Chairman of the Board of Directors Director from February 2007 to December 2020 and March 2021 to Present, sole officer from March 2012 to December 2020 and CEO, Secretary and Treasurer from March 2021 to Present

David Rench 45 Chief Financial Officer March 2021 to Present

Michael Maniscalco 43 Chief Technology Officer Executive Vice President of Technology from September 2021 to June 2023;

Chief Technology Officer beginning in July 2023

Non-Employee Directors

Ella Benson 38 Director April 2024 to Present

Chuck Hastings 46 Director April 2021 to Present

Kelli McDonald 45 Director April 2021 to Present

Rachel Lee 40 Director February 2024 to Present

Douglas Miller 67 Director April 2021 to Present

Virginia Moore 49 Director April 2021 to Present

Richard Nottenburg 70 Director June 2021 to Present

Executive officers

Kate Reed 38 Director and Chief Growth Officer November 2023 to Present;

Chief Growth Officer from May 2024 to Present

There are no family relationships between any of our directors or executive officers.

The biographies of our directors and certain information regarding each director’s experience, attributes, skills and/or qualifications that led to the conclusion that the director should be serving as a director of our Company are as follows:

Cummins has served as a member of our Board from 2007 until 2020 and from March 11, 2021 through present.

During that time Mr.

Cummins also served in various executive officer positions and he is currently serving as our chairman of the Board, chief executive officer, president, secretary and treasurer.

Cummins was also the founder and CEO of 272 Capital LP, a registered investment advisor, which he sold to B.

Cummins also served in various executive officer positions and he is currently serving as our chairman of the Board and Chief Executive Officer.

Cummins is also the founder and CEO of 272 Capital LP, a registered investment advisor, which he sold to B.

Riley Financial, Inc.

RILY) in August 2021.

Following the sale Mr.

Cummins joined B.

Riley as President of B.

Riley Asset Management.

Cummins intends to spend at least 40 hours per week on our business.

Following the sale, Mr, Cummins served as President of B.

Riley Asset Management until February 2024.

Cummins has been a technology investor for over 20 years and held various positions in capital markets including positions at investment banks and hedge funds.

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Riley & Co., from 2002 to 2011.

Cummins also serves as a member of the boards of Sequans Communications S.A.

SQNS), a fabless designer, developer and supplier of cellular semiconductor solutions for massive, broadband and critical Internet of Things markets and Vishay Precision Group, Inc.

(VPG), designer, manufacturer and marketer of sensors, and sensor-based measurement systems, as well as specialty resistors and strain gages based upon their proprietary technology.

Cummins served on the board of Telenav, Inc.

Cummins also serves as a member of the board of Sequans Communications S.A.

SQNS), a fabless designer, developer and supplier of cellular semiconductor solutions for massive, broadband and critical Internet of Things (IoT) markets.

Cummins served on the board of Telenav (NASDAQ:

TNAV) from August 2016 until February 2021.

Cummins also served on the board of Vishay Precision Group, Inc.

VPG) from July 2017 to June 2024.

He holds a BSBA from Washington University in St.

Louis where he majored in finance and accounting.

Rench became our chief financial officer in March 2021 and continues to serve in that capacity.

Prior to joining us, Mr.

Rench co-founded in 2010, and from 2010 to 2017 served as the VP of Finance and Operations of, a software startup company, Ihiji, until the company was acquired by Control4 in 2017.

After the acquisition of Ihiji, Mr.

Rench joined and served as Chief Financial Officer of Hirzel Capital, an investment management company, from 2017 to 2020.

Rench holds a BBA from the Neeley School of Business at Texas Christian University in Fort Worth, Texas, and an MBA from the Cox School of Business at Southern Methodist University in Dallas, Texas.

Michael Maniscalco

Maniscalco became our Executive Vice President of Technology in September 2022, and was named Chief Technology Officer in July 2023.

Maniscalco co-founded Ihiji, a remote network management services company, where he served as the Vice President of Product through February 2018, after Ihiji was acquired in 2017.

From 2018 until his employment with the Company, Mr.

Maniscalco founded and and served as Chief Executive Officer of Better Living Technologies from 2018 to 2022..

In addition, Mr.

Maniscalco has founded several other companies and organizations over the last five years.

Appointment of Officers

Our executive officers are appointed by, and serve at the discretion of, our Board.

There are no family relationships among any of our executive officers or directors.

Non-employee directors

We believe Mr.

Cummins is qualified to serve on our Board because of his business and leadership experience, as well as a result of having served as a director since starting our operating business.

Benson brings over a decade of experience in financial services and currently serves as a Director at Oasis Management Co., Ltd.

She has substantial experience working with public companies undergoing strategic transitions.

Benson served on the board of directors of Stratus Properties (NASDAQ:

STRS) from 2017 to 2020.

Prior to joining Oasis in 2013, Ms.

Benson was an analyst at GAM, an independent asset management firm, from 2009 to 2013.

Benson holds a Bachelor of Business Administration in Finance from the McCombs School of Business at the University of Texas at Austin.

Since May 2024, Ms.

Benson has served as a member of the Company’s Board where she is also the Chairperson of the Nominating and Governance Committee.

We believe Ms.

Benson is qualified to serve on our Board because of her substantial experience working with public companies undergoing strategic transitions

Chuck Hastings

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Earlier in his career, Mr.

Hastings served as a convertible bond trader at

Morgan Stanley in New York.

Hastings served as a convertible bond trader at Morgan Stanley in New York.

Hastings also serves as a Board member for IQvestment Holdings.

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in political science from Princeton University.

He is a recognized leader in the financial industry with more than two decades of global financial and business expertise.

Kelli McDonald

McDonald has a passion for high impact charity work in her local community.

McDonald works in merchandising and book sales for an independent bookstore.

She worked in early childhood education from 2006 to 2020.

She served as the Fundraising Chairperson and Social Media Manager for KSD NOW in the early inception of the district-wide supplemental nutrition program, helping social workers launch a now-vital service.

In addition to work in non-profit development, early childhood education and the Literacy Project, Ms.

McDonald founded NG Gives Back.

She earned a Bachelor of Arts degree from The University of Wisconsin Oshkosh.

We believe Mr.

Hastings is qualified to serve on our Board because he is a recognized leader in the financial industry with more than two decades of global financial and business expertise.

Lee brings 17 years of finance and investment experience and 10 years of board experience at growth companies, including publicly traded entities.

Most recently, Ms.

Lee served as a Partner and the Head of the Consumer Private Equity practice at Ares Management Corporation (NYSE:

ARES) and spent almost 15 years at the firm.

In her role as the Head of Consumer Private Equity, she led all aspects of deal activity from origination to monetization including due diligence, debt capital raises, tack-on acquisitions, legal negotiations, and exits via initial public offerings.

Before joining Ares in 2008, Ms.

Lee was in the investment banking division at J.P.

Morgan, where she participated in the execution of a variety of transactions, including leveraged buyouts, mergers and acquisitions, and debt and equity financings across various industries.

Lee also serves on the boards of Bank of Hope (NASDAQ:

HOPE) and Legacy Franchise Concepts and previously served on the boards of Cooper’s Hawk Winery and Restaurants and Floor and Decor Holdings (NYSE:

FND), among others.

She holds a B.S.

in Corporate Finance and a B.S.

in Accounting from the University of Southern California.

We believe Ms.

Lee is qualified to serve on our Board because of her finance and investment experience and 10 years of board experience at growth companies, including publicly traded entities.

Douglas Miller

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Prior to his roles as board member, Mr.

Miller served as senior vice president, chief financial officer and treasurer of Telenav, a wireless application developer specializing in personalized navigation services, from 2006 to 2012.

Miller served as senior vice president, chief financial officer and treasurer of Telenav, Inc.

a wireless application developer specializing in personalized navigation services, from 2006 to 2012.

From 2005 to 2006, Mr.

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in Accounting from Santa Clara University.

Virginia Moore

Moore is the Co-founder, and CEO since 2017, of Catavento, a home textiles company based in Los Angeles.

For 7 years prior to that, Ms.

Moore was a partner and Vice President of Corbis Global, a 100- person architectural and engineering outsourcing firm.

Earlier in her career she held positions in Marketing and Category Management with Coca-Cola, AC Nielsen and Universal Studios Home Entertainment.

Moore earned a Business Administration degree from Universidad Católica de Cordoba in her native Argentina and an MBA from ESADE Business School in Barcelona, Spain.

We believe Mr.

Miller is qualified to serve on our Board because of his board experience at publicly traded companies and his finance and accounting experience.

Richard Nottenburg

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Nottenburg was an officer with Motorola, Inc., ultimately serving as its Executive Vice President, Chief Strategy Officer and Chief Technology Officer.

We believe Dr.

Nottenburg is qualified to serve on our Board because of his industry expertise and board experience at publicly traded companies.

Reed brings expertise in technology leadership including Artificial Intelligence and Analytics, Cyber Security, and Cloud Computing.

Reed has served in various capacities at IBM Corporation since 2014.

She has been Director of Sales, Red Hat since 2021.

Prior to that she served as Strategic Partnership Executive, With Watson from 2019 to 2021, as Business Unit Executive, IBM Security Trusteer from 2017 to 2019 and initially as Strategy Leader – Enterprise Content Management, IBM Cloud.

Reed continues to lead revenue generating teams, designing technology strategies that align with organizational goals, ensuring seamless integration and leveraging the latest advancements to drive business success.

We believe Ms.

Reed is qualified to serve on our Board because of her industry expertise and experience designing technology strategies.

Executive Officers

Our executive officers and their ages as of the date of this filing are set forth below.

Our executive officers are elected by, and serve at the discretion of, our Board.

Name Age Position(s) Period of Service

Wes Cummins 46 Chief Executive Officer and Chairman of the Board Sole officer from March 2012 to December 2020;

Chief Executive Officer, Secretary and Treasurer from March 2021 to Present

David Rench 46 Chief Financial Officer March 2021 to Present

Michael Maniscalco 44 Chief Technology Officer Executive Vice President of Technology from September 2021 to June 2023;

Chief Technology Officer beginning in July 2023

The business experience for the past five years, and in some instances, for prior years, of each of our executive officers is as follows :

See description the above section entitled “Directors.”

Rench became our chief financial officer in March 2021 and continues to serve in that capacity.

Prior to joining us, Mr.

Rench co-founded in 2009, and from 2010 to 2017 served as the VP of Finance and Operations of, a software startup company, Ihiji, until the company was acquired by Control4 in 2017.

After the acquisition of Ihiji, Mr.

Rench joined and served as Chief Financial Officer of Hirzel Capital, an investment management company, from 2017 to 2020.

Rench holds a BBA from the Neeley School of Business at Texas Christian University in Fort Worth, Texas, and an MBA from the Cox School of Business at Southern Methodist University in Dallas, Texas.

Michael Maniscalco

Maniscalco became our Executive Vice President of Technology in February 2022, and was named Chief Technology Officer in July 2023.

Maniscalco co-founded Ihiji, a remote network management services company, where he served as the Vice President of Product through February 2018, after Ihiji was acquired in 2017.

From 2018 until his employment with the Company, Mr.

Maniscalco founded and served as Chief Executive Officer of Better Living Technologies from 2018 to 2022.

In addition, Mr.

Maniscalco has founded several other companies and organizations over the last five years.

Delinquent Section 16(a) Reports

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We intend to disclose future amendments to certain provisions of our code of business conduct and ethics, or waivers of these provisions, on our website or in public filings.

Board of Directors Composition

Our Board currently consists of six members.

Board Composition

Our Board currently consists of seven members.

Each of our current directors serves until the next annual meeting of our stockholders or earlier death, resignation or removal.

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Director Independence

Lead Independent Director

Our Board has appointed Douglas Miller as our lead independent director.

Our common stock is listed on The Nasdaq Global Select Market.

Under the Nasdaq Listing Rules, independent directors must comprise a majority of our Board.

In addition, the Nasdaq Listing Rules require that all the members of such committees be independent.

Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

Compensation committee members must also satisfy the independence criteria established by the Nasdaq Listing Rules in accordance with Rule 10C-1 under the Exchange Act.

Under the Nasdaq Listing Rules, a director will only qualify as an “independent director” if, among other qualifications, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

Our Board undertook a review of its composition, the composition of its committees and the independence of each director.

Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our Board has determined that Ms.

Hastings, Ms.

Miller and Dr.

Nottenburg do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the Nasdaq Listing Rules and the SEC.

Our Board has appointed Mr.

Miller as our lead independent director.

Our lead independent director is expected to provide leadership to our Board if circumstances arise in which the role of chief executive officer and chairperson of our Board may be, or may be perceived to be, in conflict, and perform such additional duties as our Board may otherwise determine and delegate.

Committees of the Board of Directors

Board Committees

Our Board has established an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee, each of which have the composition and responsibilities described below.

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Membership in each committee is shown in the following table.

Audit Committee

Compensation Committee

Nominating and Governance Committee

Audit Committee Compensation Committee Nominating and Governance Committee

Ella Benson ▲

Chuck Hastings ● ●

Kelli McDonald

Rachel Lee ● ●

Douglas Miller ▲ ●

Virginia Moore

Richard Nottenburg ● ▲ ●

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Audit Committee

Our Audit Committee is comprised of Messrs.

Miller, Hastings and Nottenburg.

Our Audit Committee is comprised of Mr.

Hastings and Dr.

Miller is the chairperson of our Audit Committee.

Each Audit Committee member meets the requirements for independence under the current Nasdaq Global Select Market listing standards and SEC rules and regulations.

Miller qualifies as an “audit committee financial expert” as defined in Item 407(d) of Regulation S-K promulgated under the Securities Act of 1933 (the “Securities Act”).

Each Audit Committee member meets the requirements for independence under the current Nasdaq Listing Rules and Rule 10A-3 under the Exchange Act .

Miller qualifies as an “audit committee financial expert” as defined in Item 407(d) of Regulation S-K promulgated under the Securities Act of 1933, as amended (the “Securities Act”).

This designation does not impose any duties, obligations, or liabilities that are greater than are generally imposed on members of our Audit Committee and our Board.

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Compensation Committee

Our Compensation Committee is comprised of Mr.

Our Compensation Committee is comprised of Dr.

Nottenburg, Ms.

McDonald, Ms.

Moore and Mr.

Nottenburg is the chairperson of our Compensation Committee.

The composition of our Compensation Committee meets the requirements for independence under the current Nasdaq Global Select Market listing standards and SEC rules and regulations.

Each member of this committee is a non- employee director, as defined in Rule 16b-3 promulgated under the Exchange Act.

The composition of our Compensation Committee meets the requirements for independence under the Nasdaq Listing Rules.

Each member of this committee is a “non-employee director,” as defined in Rule 16b-3 promulgated under the Exchange Act and an “outside director” as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended .

Our Compensation Committee is responsible for, among other things:

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Our Nominating and Governance Committee is comprised of Ms.

McDonald and Mr.

Moore is the chairperson of our Nominating and Governance Committee.

The composition of our Nominating and Governance Committee meets the requirements for independence under the current Nasdaq listing standards and SEC rules and regulations.

Nottenburg, and Mr.

Benson is the chairperson of our Nominating and Governance Committee.

The composition of our Nominating and Governance Committee meets the requirements for independence under the Nasdaq Listing Rules.

Our Nominating and Governance Committee is responsible for, among other things:

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Board’s Role in Risk Oversight

Our Board of directors is primarily responsible for overseeing our risk management processes.

Our Board is primarily responsible for overseeing our risk management processes.

Our Board, as a whole, determines our appropriate level of risk, assesses the specific risks that we face, and reviews management’s strategies for adequately mitigating and managing the identified risks.

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We believe this division of responsibilities is an effective approach for addressing the risks we face and that our Board leadership structure supports this approach.

Board Diversity

Each year, our Nominating and Governance Committee will review, with the Board, the appropriate characteristics, skills, and experience required for the Board as a whole and its individual members.

In evaluating the suitability of individual candidates, our nominating and governance committee will consider factors including, without limitation, an individual’s character, integrity, judgment, potential conflicts of interest, other commitments, and diversity.

While we have no formal policy regarding board diversity for our Board as a whole nor for each individual member, the Nominating and Governance Committee does consider such factors as gender, race, ethnicity and experience, area of expertise, as well as other individual attributes that contribute to the total diversity of viewpoints and experience represented on the Board.

In August 2021, the SEC approved a Nasdaq Stock Market proposal to adopt new listing rules relating to board diversity and disclosure.

As approved by the SEC, the new Nasdaq listing rules require all Nasdaq listed companies to disclose consistent, transparent diversity statistics regarding their boards of directors.

The rules also require most Nasdaq-listed companies to have, or explain why they do not have, at least two diverse directors, including one who self-identifies as female and one who self identifies as either an under-represented minority or LGBTQ+.

The Board Diversity Matrix below presents the Board’s diversity statistics in the format prescribed by the Nasdaq rules.

Board Diversity Matrix (as of July 25, 2023)

Total Number of Directors

Did Not Disclose Gender

Gender Identity

Demographic Background

African American or Black

Alaskan Native or Native American

Hispanic or Latinx

Native Hawaiian or Pacific Islander

Two or More Races or Ethnicities

Other (Race or Ethnicity)

Did Not Disclose Demographic Background

To see our Board Diversity Matrix as of August 30, 2022, please see our proxy statement filed with the SEC on

September 27, 2022.

Legal Proceedings

To our knowledge, (i) no director or executive officer has been a director or executive officer of any business which has filed a bankruptcy petition or had a bankruptcy petition filed against it during the past ten years;

(ii) no director or executive officer has been convicted of a criminal offense or is the subject of a pending criminal proceeding during the past ten years;

(iii) no director or executive officer has been the subject of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities during the past ten years;

and (iv) no director or officer has been found by a court to have violated a federal or state securities or commodities law during the past ten years.

Our Board is responsible for the oversight of cybersecurity risk management.

The Board delegates oversight of the cybersecurity risk management program to the Audit Committee.

The management of the program is the responsibility of our Risk Management Committee, comprised of our Chief Executive Officer, Chief Financial Officer and Chief Technology Officer.

The Risk Management Committee provides quarterly updates to the Audit Committee on our cybersecurity risk management program, including updates on (1) any critical cybersecurity risks;

(2) ongoing cybersecurity initiatives and strategies;

(3) applicable regulatory requirements;

and (4) industry standards.

The Risk Management Committee also notifies the Board of any cybersecurity incidents (suspected or actual) and provides updates on the incidents as well as cybersecurity risk mitigation activities as appropriate.

Executive Compensation

Compensation Overview

Our compensation programs are designed to:

• Attract, motivate, incentivize, and retain employees at the executive level who contribute to our long-term success;

• Provide compensation packages to our executives that are competitive, reward the achievement of our business objectives, and effectively align their interests with those of our stockholders;

• Focus on long-term equity incentives that correlate with the growth of sustainable long-term value for our stockholders.

Our Compensation Committee is responsible for the executive compensation programs for our Named Executive Officers and reports to our Board of Directors on its discussions, decisions, and other actions.

Our Chief Executive Officer makes recommendations for the respective executive officers that report to him to our Compensation Committee and typically attends Compensation Committee meetings.

Our Chief Executive Officer makes such recommendations (other than with respect to himself) regarding base salary, and short-term and long-term compensation, including equity incentives, for our executive officers based on our results, an executive officer's individual contribution toward these results, the executive officer's role and performance of his or her duties, and his or her achievement of individual goals.

Our Compensation Committee then reviews the recommendations and other data, including various compensation survey data and publicly available data of our peers, and makes decisions as to the target total direct compensation for each executive officer, including our Chief Executive Officer, as well as each individual compensation element.

While our Chief Executive Officer typically attends meetings of the Compensation Committee, the Compensation Committee meets outside the presence of our Chief Executive Officer when discussing his compensation and when discussing certain other matters, as well.

Our Compensation Committee is authorized to retain the services of one or more executive compensation advisors, as it sees fit, in connection with the establishment of our executive compensation programs and related policies.

In fiscal year ending May 31, 2023, the Compensation Committee retained Compensia Inc., a national compensation consulting firm with compensation expertise relating to technology and life science companies, to provide it with market information, analysis, and other advice relating to executive compensation on an ongoing basis.

The Compensation Committee engaged Compensia, Inc.

to, among other things, assist in developing an appropriate group of peer companies to help us determine the appropriate level of overall compensation for our executive officers, as well as to assess each separate element of compensation, with a goal of ensuring that the compensation we offer to our executive officers, individually as well as in the aggregate, is competitive and fair.

We do not believe the retention of, and the work performed by, Compensia, Inc.

creates any conflict of interest.

Compensation and Governance Practices and Policies

We endeavor to maintain strong governance standards in our policies and practices related to executive compensation.

Below is a summary of our key executive compensation and corporate governance practices.

What We Do What We Don’t Do

Annually assess the risk-reward balance of our compensation programs in order to mitigate undue risks in our programs ✗

No pension plans or Supplemental Executive Retirement Plans

Provide compensation mix that more heavily weights variable pay ✗

No hedging or pledging of our securities

An independent compensation consultant advises the Compensation Committee ✗

No excise tax gross-ups upon a change of control

The Compensation Committee reviews market data of companies that we believe are comparable to us.

With Compensia’s assistance, the Compensation Committee developed a peer group for use when making its compensation decisions for the fiscal year ending May 31, 2023, which consisted of publicly traded technology companies headquartered in the U.S.

that generally had a market capitalization between 0.25x and 4.0x the Company’s market capitalization.

The Compensation Committee referred to compensation data from this peer group and broader survey data (for similarly-sized companies) when making base salary, cash bonus and equity award decisions for our executive officers for the fiscal year ending May 31, 2023.

The following is a list of the public companies that composed our peer group for the fiscal year ending May 31, 2023:

Alkami Technology CleanSpark Paya

Backblaze Couchbase Riot Platforms

Bakkt Holdings Fastly Stronghold Digital Mining

Bit Digital Greenidge Generation Holdings Sumo Logic

Cantaloupe IronNet TeraWulf

Cipher Mining Marathon Digital Holdings Veritone

Base Salaries

The compensation of Named Executive Officers is generally determined and approved by the Compensation Committee of the Board of Directors.

The base salaries of each of the Named Executive Officers for the fiscal years ending May 31, 2022 and 2023 were as follows.

Named Executive Officer

Base Salary FY22

Michael Maniscalco

$200,000 $275,000

Annual Bonuses

We maintain an annual bonus program that rewards each of our Named Executive Officers for our performance against business objectives.

Our Board of Directors establishes performance goals for this program each year and then evaluates performance against these established goals to determine the amount of each award.

This program is based on performance over a fiscal year and pays out early in the following year, subject to the executive’s continued service through the payment date.

All awards under this program are subject to the discretion of the Compensation Committee and the Board of Directors.

For the fiscal year ending May 31, 2023, the target annual bonuses for our Named Executive Officers were as follows.

Named Executive Officer

Target Bonus (% of Salary)

Michael Maniscalco

Equity Compensation

During the fiscal year ended May 31, 2023, we granted restricted stock units (“RSUs”) and performance stock units (“PSUs”) to each of our Named Executive Officers.

We feel this equity mix effectively aligns Named Executive Officer compensation with shareholder returns while also achieving retention objectives.

During the fiscal year , grants to our Named Executive Officers were as follows:

Named Executive Officer

# of Restricted Stock Units

# of Performance-Based Restricted Stock Units (at target)

1,100,000 1,400,000

460,000 490,000

Michael Maniscalco

216,000 175,000

The RSUs are time-based and provide for vesting in tranches over three years.

The PSUs are performance-based and provide for earning between 50% -250% of the employee’s target units if certain financial targets are met during the measurement period, which consists of two fiscal years, and for vesting of any earned units on the third anniversary of grant.

Employment Agreements with Named Executive Officers

The Company currently has employment agreements with Mr.

Cummins, and Mr.

The employment agreements include non-compete and non-solicitation provisions.

See “Employment Agreements and Arrangements Between the Company and Named Executives” of this Item 11 for a description of the material terms of Mr.

Cummins’s and Mr Rench's employment agreements.

The Company does not currently have an employment agreement with Mr.

Welfare and other Benefits

See “Welfare and other benefits” of this Item 11 for a description of certain benefits provided to our Named Executive Officers.

The Company maintains a broad-based 401(k) plan for its employees including its Named Executive Officers.

Our Named Executive Officers did not participate in, or otherwise receive any benefits under, any pension or retirement plan sponsored by us during the fiscal year ending May 31, 2023.

Our Named Executive Officers did not participate in, or earn any benefits under, a nonqualified deferred compensation plan sponsored by us during the fiscal year ending May 31, 2023.

Potential Payments upon Termination or Change in Control

Except as provided below, the Named Executive Officers’ employment agreements do not provide for any special payments in the event of a termination of employment or a Change in Control of the Company while the agreement is in effect.

Under the terms of each Named Executive Officer’s restricted stock award (each, an “Award”), if the Named Executive Officer’s employment terminates before the Award is vested and the termination is on account of the Named Executive Officer’s death, disability or termination by the Company without Cause (as defined in the Award), the Named Executive Officer will vest in a portion of the unvested Award based on the number of full months of employment that the Named Executive Officer has completed as of the termination date, and since the grant date of the Award.

Under the terms of each Named Executive Officer’s PSU Award, the portion

of the Target Award that will be earned and vested is determined based on both the months of employment

completed as of the termination date and on achievement of certain performance factors defined in the Award during

the period prior to the termination of employment

In addition, if there is a change in control of the Company as defined in the Award (“Change in Control”) of the Company while the Award remains unvested, the Award will be treated in accordance with one of the following as determined by the Compensation Committee:

(1) the Award may be replaced with a new award that constitutes a “Replacement Award” under the terms of the Award and relevant tax rules;

(2) if the Company’s stock continues to be publicly traded on the Nasdaq Global Select Market (or another established securities market) after the Change in Control, then the Award will continue in place and be treated as a Replacement Award;

or (3) if, following the Change in Control, the Company’s stock is no longer publicly traded on The Nasdaq Global Select Market (or another established securities market), the unvested portion of the Award shall become vested immediately prior to the consummation of the Change in Control.

Notwithstanding any of the foregoing, the Committee may determine that any unvested portion of the Award will be cancelled and terminated for consideration instead.

Notwithstanding

the foregoing, for PSU Awards, if the Change in Control occurs prior to the date that the Committee determines the

number of units earned under the Award, the Named Executive Officer will vest in a portion of the Award based on

the months of employment completed as of the Change in Control, applied to the higher of 100% of the target Award and the amount earned based on actual performance as of the end of the last full calendar quarter preceding the Change in Control date.

If payment of an Award in connection with a Change in Control would result in liability for an excise tax under

Section 4999 of the Code for “excess parachute payments” as defined in Section 280G of the Code, the amount of

the Award may be reduced to avoid imposition of the excise tax, if such reduction results in a greater post-tax

benefit to the Named Executive Officer as compared to payment of the full amount of the Award and imposition of

the excise tax.

Executive Compensation

We are a “smaller reporting company” under applicable SEC rules and are providing disclosure regarding our executive compensation arrangements pursuant to the rules applicable to emerging growth companies, which means that we are not required to provide a compensation discussion and analysis and certain other disclosures regarding our executive compensation.

Executive Officers”), consisting of Wes Cummins, our Chief Executive Officer, Secretary, Treasurer, Chairman of the Board, David Rench, our Chief Financial Officer, and Michael Maniscalco, our Chief Technology Officer.

We are a “smaller reporting company” under applicable SEC rules and are providing disclosure regarding our executive compensation arrangements pursuant to the rules applicable to smaller reporting companies, which means that we are not required to provide a compensation discussion and analysis and certain other disclosures regarding our executive compensation.

The following discussion relates to the compensation of each of the Company’s Chief Executive Officer and its two other most highly compensated individuals who were serving as executive officers at the end of the fiscal year ended May 31, 2024, for services rendered in all capacities during such year (the “Named Executive Officers”), consisting of Wes Cummins, our Chief Executive Officer, Secretary, Treasurer, Chairman of the Board, David Rench, our Chief Financial Officer, and Michael Maniscalco, our Chief Technology Officer.

Summary Compensation Table

Name and Principal Position(s) Year Salary ($) (1)

Bonus ($) Non-Equity Incentive Plan Compensation ($) (2)

The following table presents information regarding the total compensation awarded to, earned by, or paid to Named Executive Officers as of May 31, 2024 and May 31, 2023 for services rendered in all capacities to us for the years ended May 31, 2024 and May 31, 2023.

Name and Principal Position(s) Year Salary ($) Bonus ($) Non-Equity Incentive Plan Compensation ($) (1)

All Other Compensation ($) (2)

1 unchanged sentence

Chief Executive Officer, President, Secretary and Treasurer 2023 $ 312,500 $ 150,000 $ — $ 5,492,078 $ 5,954,578

2021 52,083 — — — 52,083

David Rench 2024 $ 475,000 $ 475,000 $ — $ 767,990 $ 1,717,990

Chief Financial Officer 2023 $ 272,292 $ 339,375 $ — $ 2,098,578 $ 2,710,245

2021 41,667 20,000 — — 61,667

Michael Maniscalco 2024 $ 375,000 $ 367,875 $ — $ 432,698 $ 1,175,573

1 unchanged sentence

2023 $ 200,000 $ 92,500 $ — $ 854,941 $ 1,147,441

__________________

2021 amounts represent compensation for partial year service from March 2021 through May 31, 2021.

(1) Consists of value of restricted stock awards made outside of the 2022 Incentive Plan.

1 unchanged sentence

Maniscalco joined the Company in September 2021 as EVP, Technology, and became Chief Technology Officer on July 5, 2023.

Employment Agreements

Narrative Disclosure to Summary Compensation Table

Employment Agreements with Named Executive Officers

Cummins Agreement

Wes Cummins is our Chief Executive Officer.

Cummins is our Chief Executive Officer.

On January 4, 2022, we and Mr.

Cummins entered into an Employment Agreement, effective as of November 1, 2021 (the “Cummins Employment Agreement”).

Cummins entered into an Employment Agreement, effective as of November 1, 2021, as amended on September 25, 2023 (as amended, the “Cummins Employment Agreement”).

Pursuant to the Cummins Employment Agreement, Mr.

Cummins receives a base salary of $300,000 per annum, subject to annual review, and shall also be eligible for an annual bonus of up to 100% of his base salary, to be determined at our sole discretion.

Cummins receives a base salary of $600,000 per annum, subject to review and adjustment (but not downward) from time to time during the term of the Cummins Employment Agreement based on Mr.

Cummins’s performance, and is also eligible for an annual bonus, to be determined at the Board’s sole discretion.

The term of the Cummins Employment Agreement ends on October 31, 2024, with automatic one (1) year extensions unless notice not to renew is given by either party at least 60 days prior to the relevant end date.

The Cummins Employment Agreement grants Mr.

Cummins an incentive award of 500,000 restricted shares of our common stock (“Restricted Stock”).

The Restricted Stock will vest in accordance with the following schedule (pending an effective registration statement covering the resale of shares of common stock comprising the stock award, which has yet to occur at the time of this filing):

Number of Shares Vesting Date*

__________________

* Shares will vest on such date or the date, if later, on which the SEC declares effective a registration statement covering the resale of the shares of restricted stock (such date, the “Later Date”).

The Cummins Employment Agreement granted Mr.

Cummins an incentive award of 500,000 restricted shares of our common stock (“Restricted Stock”), which are fully vested as of the date hereof.

The Cummins Employment Agreement requires Mr.

2 unchanged sentences

It also provides for unlimited annual paid vacation, and reimbursement of reasonable business expenses, and provides that either party may terminate the employment arrangement pursuant to the notice requirements set forth in the Cummins Employment Agreement.

We may terminate the Cummins Employment Agreement upon Mr.

Cummins’s breach of any term of the Cummins Employment Agreement or where there is just Cause (as defined in the Cummins Employment Agreement) for termination.

Cummins may terminate the Cummins Employment Agreement in the event that we discontinue operating its business at the location where the Employee is employed, at his sole option, or with notice of a minimum of 2 weeks.

Cummins employment is terminated without Cause or resigns with Good Reason (as defined in the Incentive Plan (as defined below)), during the 24-month period following a Change in Control (as defined in the Incentive Plan), Mr.

Cummins shall be entitled to a severance payment equal to 2 times the following amount:

Cummins’s base salary plus Mr.

Cummins’s target bonus, each for the year in which the termination of employment occurs, subject to adjustments if such severance payments cause Mr.

Cummins to be liable for federal excise tax under Section 4999 of the Internal Revenue Code levied on certain "excess parachute payments" as defined in Code Section 280G.

The Cummins Employment Agreement contains restrictive covenants prohibiting Mr.

Cummins from disclosing our confidential information at any time, from competing with us in any geographic area where we do business during his employment, and from soliciting our employees, contractors or customers, during his employment and for one year thereafter.

In June 2023, the Compensation Committee increased Mr.

Cummins’s annual base salary to $600,000.

Rench Agreement

David Rench is our Chief Financial Officer.

Rench is our Chief Financial Officer.

On January 4, 2022, we and Mr.

Rench entered into an Employment Agreement, effective as of November 1, 2021 (the “Rench Employment Agreement”).

Rench entered into an Employment Agreement, effective as of November 1, 2021 (as amended, the “Rench Employment Agreement”).

Pursuant to the Rench Employment Agreement, Mr.

Rench receives a base salary of $240,000 per annum, subject to annual review, and shall also be eligible for an annual bonus of up to 75% of his base salary, to be determined at our sole discretion.

Rench receives a base salary of $240,000 per annum, subject to review and adjustment (but not downward) from time to time during the term of the Cummins Employment Agreement based on Mr.

Rench’s performance, and is also eligible for an annual bonus, to be determined at the Board’s sole discretion.

The term of the Rench Employment Agreement ends on October 31, 2024, with automatic one (1) year extensions unless notice not to renew is given by either party at least 60 days prior to the relevant end date.

The Rench Employment Agreement grants Mr.

Rench an incentive award of 166,666 shares of Restricted Stock.

Number of Shares Vesting Date*

__________________

* Shares will vest on such date or the Later Date, if later.

Rench an incentive award of 166,666 shares of Restricted Stock, which are fully vested as of the date hereof.

The Rench Employment Agreement requires Mr.

Rench to devote forty (40) hours per week to his employment duties and obligations, and provides that Mr.

Rench to devote 40 hours per week to his employment duties and obligations, and provides that Mr.

Rench will be entitled to participate in all benefit plans provided to our employees in accordance with our applicable plan, policy or practices, as well as in any long-term incentive program established by us.

We may terminate the Rench Employment Agreement upon Mr.

Rench’s breach of any term of the Rench Employment Agreement or where there is just Cause (as defined in the Rench Employment Agreement) for termination.

Rench may terminate the Rench Employment Agreement in the event that we discontinue operating its business at the location where the Employee is employed, at his sole option, or with notice of a minimum of 2 weeks.

Rench employment is terminated without Cause or resigns with Good Reason (as defined in the Incentive Plan), during the 24-month period following a Change in Control (as defined in the Incentive Plan), Mr.

Rench shall be entitled to a severance payment equal to 2 times the following amount:

Rench’s base salary plus Mr.

Rench’s target bonus, each for the year in which the termination of employment occurs, subject to adjustments if such severance payments cause Mr.

Rench to be liable for federal excise tax under Section 4999 of the Internal Revenue Code levied on certain "excess parachute payments" as defined in Code Section 280G.

The Rench Employment Agreement contains restrictive covenants prohibiting Mr.

Rench from disclosing our confidential information at any time, from competing with us in any geographic area where we do business during his employment, and from soliciting our employees, contractors or customers, during his employment and for one year thereafter.

On July 18, 2022, the Compensation Committee increased Mr.

Rench’s annual base salary to $275,000, effective August 1, 2022.

On October 10, 2023, the Compensation Committee increased Mr.

Rench’s annual base salary to $475,000, effective September 1, 2023.

Maniscalco Agreement

The Company does not currently have an employment agreement with Mr.

1 unchanged sentence

Maniscalco is entitled to participate in all benefit plans provided to our employees in accordance with our applicable plan, policy or practices, as well as in any long-term incentive program established by us.

Potential Payments upon Termination or Change in Control

In addition to any payments provided by the Named Executive Officers’ employment agreements, as described above, under the terms of each Named Executive Officer’s restricted stock award (each, an “Award”), if the Named Executive Officer’s employment terminates before the Award is vested and the termination is on account of the Named Executive Officer’s death, disability or termination by the Company without Cause (as defined in the Award), the Named Executive Officer will vest in a portion of the unvested Award based on the number of full months of employment that the Named Executive Officer has completed as of the termination date, and since the grant date of the Award.

Under the terms of each Named Executive Officer’s PSU Award, the portion of the Target Award that will be earned and vested is determined based on both the months of employment completed as of the termination date and on achievement of certain performance factors defined in the Award during the period prior to the termination of employment.

In addition, if there is a change in control of the Company (as defined in the Award, a “Change in Control”) while the Award remains unvested, the Award will be treated in accordance with one of the following as determined by the Compensation Committee:

(1) the Award may be replaced with a new award that constitutes a “Replacement Award” under the terms of the Award and relevant tax rules;

Notwithstanding any of the foregoing, the Committee may determine that any unvested portion of the Award will be cancelled and terminated for consideration instead.

Notwithstanding the foregoing, for PSU Awards, if the Change in Control occurs prior to the date that the Committee determines the number of units earned under the Award, the Named Executive Officer will vest in a portion of the Award based on the months of employment completed as of the Change in Control, applied to the higher of 100% of the target Award and the amount earned based on actual performance as of the end of the last full calendar quarter preceding the Change in Control date.

If payment of an Award in connection with a Change in Control would result in liability for an excise tax under Section 4999 of the Code for “excess parachute payments” as defined in Section 280G of the Code, the amount of the Award may be reduced to avoid imposition of the excise tax, if such reduction results in a greater post-tax benefit to the Named Executive Officer as compared to payment of the full amount of the Award and imposition of the excise tax.

Severance Agreements

None of our employees have severance agreements.

Except for the payments provided by the Named Executive Officers’ employment agreements, as described above , none of our employees have severance agreements.

Welfare and other benefits

We provide health, dental, and vision insurance benefits to the Named Executive Officers, on the same terms and conditions as provided to all other eligible U.S.

employees except for an employee in North Dakota with separate benefit arrangements due to North Dakota state laws.

We maintain a broad-based 401(k) plan including the Named Executive Officers.

The Named Executive Officers did not participate in, or otherwise receive any benefits under, any pension or retirement plan sponsored by the Company during the fiscal year ended May 31, 2024.

The Named Executive Officers did not participate in, or earn any benefits under, a non-qualified deferred compensation plan sponsored by the Company during the fiscal year ended May 31, 2024.

Outstanding Equity Awards At May 31, 2024

Number of Shares or Units of Stock That Have Not Vested (#)

Market Value of Shares or Units of Stock That Have Not Vested ($)

The following table summarizes, for each of the Named Executive Officers, the number of shares of common stock underlying outstanding stock awards held as of May 31, 2024.

Name Grant Date Number of Shares or Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock That Have Not Vested ($)

Wes Cummins 8/5/2022 250,000 (1) $ 507,500

4/4/2023 400,000 (2) $ 888,000

David Rench 8/5/2022 125,000 (3) $ 253,750

4/4/2023 140,000 (4) $ 310,800

Michael Maniscalco 8/5/2022 70,833 (5) $ 143,791

4/4/2023 50,000 (6) $ 111,000

1/31/2024 200,000 (7) $ 1,028,000

(1) Consists of restricted stock units that vest as follows:

83,333 on each of August 5, 2023, August 5, 2024 and February 5, 2025 and 83,334 on each of February 5, 2024 and August 5, 2025.

83,333 on each of August 5, 2024 and February 5, 2025 and 83,334 on August 5, 2025.

(2) Consists of restricted stock units that vest as follows:

200,000 on April 4, 2024 and 100,000 on each of October 4, 2024, April 4, 2025, October 4, 2025 and April 4, 2026.

(3) Consists of performance stock units, at threshold, that may be earned during the two fiscal years beginning in 2023 and 2024 if certain financial performance criteria are met and will vest on April 4, 2026.

100,000 on each of October 4, 2024, April 4, 2025, October 4, 2025 and April 4, 2026.

(3) Consists of restricted stock units that vest as follows:

41,667 on each of August 5, 2023, February 5, 2024, February 5, 2025 and August 5, 2025 and 41,666 on August 5, 2024.

41,667 on each of February 5, 2025 and August 5, 2025 and 41,666 on August 5, 2024.

(4) Consists of restricted stock units that vest as follows:

70,000 on April 4, 2024 and 35,000 on each of October 4, 2024, April 4, 2025, October 4, 2025 and April 4, 2026.

(6) Consists of performance stock units, at threshold, that may be earned during the two fiscal years beginning in 2023 and 2024 if certain financial performance criteria are met and will vest on April 4, 2026.

35,000 on each of October 4, 2024, April 4, 2025, October 4, 2025 and April 4, 2026.

(5) Consists of restricted stock units that vest as follows:

30,556 on August 5, 2023, and 23,611 on each of February 5, 2024, August 5, 2024, February 5, 2025 and August 5, 2025.

23,611 on February 5, 2025, 23,610 on August 5, 2024 and 23,612 on August 5, 2025.

(6) Consists of restricted stock units that vest as follows:

25,000 on April 4, 2024 and 12,500 on each of October 4, 2024, April 4, 2025, October 4, 2025 and April 4, 2026.

(9) Consists of performance stock units, at threshold, that may be earned during the two fiscal years beginning in 2023 and 2024 if certain financial performance criteria are met and will vest on April 4, 2026.

Equity Compensation Plans

The following table sets forth certain information, as of May 31, 2023, regarding the shares of the Company’s common stock authorized for issuance under the Company’s equity compensation plans.

Number of shares of Common Stock issuable upon exercise of outstanding options, warrants or rights (1)

Weighted average of exercise price of outstanding

Number of shares of Common Stock remaining available for future issuance

2022 Incentive Plan

— $0.00 5,085,720

2022 Non-Employee Director Stock Plan

— $0.00 1,359,229

Compensation plans not approved by shareholders (1)

895,839 $0.00 —

12,500 on each of October 4, 2024, April 4, 2025, October 4, 2025 and April 4, 2026.

(7) Consists of restricted stock units that vest as follows:

33,333 on each of July 31, 2024, January 31, 2025, January 31, 2026 and July 31, 2026 and 33,334 on each of July 31, 2025 and January 31, 2027.

Director Compensation Table

The following table sets forth information concerning the compensation paid to certain of our non-employee directors

who served on our Board during fiscal year ended May 31, 2024:

Name Fees Earned or Paid in Cash ($) Stock Awards

All Other Compensation ($) Total

Ella Benson (2)

$ 3,634 $ 332,792 (7) $ — $ 336,426

(1) Reflects restricted stock units which were not granted under the 2022 Incentive Plan or 2022 Non-Employee Director Stock Plan.

Employee Benefit Plans

On October 9, 2021, our Board approved two equity incentive plans, which our stockholders approved on January 20, 2022.

The two plans consist of the 2021 Incentive Plan (the “Incentive Plan”), which provides for grants of various equity awards to our employees and consultants, and the 2021 Non-Employee Director Stock Plan (the “Director Plan” and, together with the Incentive Plan, the “Plans”), which provides for grants of restricted stock to non-employee directors and for deferral of cash and stock compensation if such deferral provisions are activated at a future date.

The Incentive Plan

The following is a summary of the material features of the Incentive Plan, qualified in its entirety by reference to the Incentive Plan.

Administration

The Compensation Committee administers the Incentive Plan.

The Compensation Committee has full and exclusive discretionary power to interpret the terms and the intent of the Incentive Plan and any award agreement or other agreement or document ancillary to or in connection with the Incentive Plan, to select eligible employees and third-party service providers to receive awards (“Participants”), to determine eligibility for awards and to adopt such rules, regulations, forms, instruments, and guidelines for administering the Incentive Plan as it may deem necessary or proper.

Such authority shall include, but not be limited to, selecting award recipients, establishing all award terms and conditions, including the terms and conditions set forth in award agreements, granting awards as an alternative to or as the form of payment for grants or rights earned or due under compensation plans, service contracts or other of our arrangements, construing any ambiguous provision of the Incentive Plan or any award agreement, and,

subject to stockholder or Participant approvals as may be required, adopting modifications and amendments to the Incentive Plan or any award agreement.

All actions taken and all interpretations and determinations made by the Compensation Committee shall be final and binding upon Participants, us, and all other interested individuals.

The Compensation Committee may delegate its administrative duties or powers to one or more of its members or to one or more of our officers, our affiliates or subsidiaries, or to one or more agents or advisors.

However, the authority to grant awards to individuals who are subject to Section 16 of the Exchange Act, cannot be delegated to anyone who is not a member of the Compensation Committee.

As used in this summary, the term “Incentive Plan Administrator” means the Compensation Committee and any delegate, as appropriate.

Any employee of, and any third-party service provider to, us, an affiliate or a subsidiary is eligible to participate in the Incentive Plan if selected by the Incentive Plan Administrator.

We are not able to estimate the number of individuals that the Incentive Plan Administrator will select to participate in the Incentive Plan or the type or size of awards that the Incentive Plan Administrator will approve.

Therefore, the benefits to be allocated to any individual or to various groups of individuals are not presently determinable.

Under the Incentive Plan, if approved by stockholders, we will be able to grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards and other stock-based awards.

Options granted under the Incentive Plan may be incentive stock options (“ISOs”) or nonqualified stock options.

Options entitle the Participant to purchase a specified number of shares of common stock from us at a specified option price, subject to applicable vesting conditions and such other provisions as the Incentive Plan Administrator may determine consistent with the Incentive Plan, including, without limitation, restrictions on transferability of the underlying shares.

The per-share option price will be fixed by the Incentive Plan Administrator at the time the option is granted, but cannot be less than the per- share fair market value of the underlying common stock on the date of grant (or, with respect to ISOs, in the case of a holder of more than 10 percent of outstanding voting securities, 110 percent of such per share fair market value).

The option price may be paid, in the Incentive Plan Administrator’s discretion, in cash or its equivalent, with shares of common stock, by a cashless, broker-assisted exercise, or a combination thereof, or any other method accepted by the Compensation Committee.

The minimum vesting period for an option is generally one year.

The maximum period in which a vested option may be exercised will be fixed by the Incentive Plan Administrator at the time the option is granted but cannot exceed 10 years (five years for ISOs granted to a holder of more than 10 percent of our outstanding voting securities).

The Award Agreement will set forth the extent to which a Participant may exercise the option following termination of employment.

No employee may be granted ISOs that are first exercisable in a calendar year for common stock having an aggregate fair market value (determined as of the date the option is granted) exceeding $100,000.

A stock appreciation right (“SAR”) entitles the Participant to receive an amount upon exercise equal to the excess of the fair market value of one share of common stock on the exercise date over the grant price of the SAR.

SARs shall be subject to applicable vesting conditions and such other provisions as the Incentive Plan Administrator may determine consistent with the Incentive Plan, including, without limitation, mandatory holding periods for any shares received upon exercise.

The grant price per SAR shall be determined by the Incentive Plan Administrator, but cannot be less than the fair market value of one share of common stock on the grant date.

The minimum vesting period for a SAR is generally one year.

The maximum period in which a vested SAR may be exercised will be fixed by the Incentive Plan Administrator at the time the SAR is granted, but generally cannot exceed 10 years.

The Award Agreement shall set forth the extent to which a Participant may exercise the SAR following termination of employment.

The amount payable upon the exercise of an SAR may, in the Incentive Plan

Administrator’s discretion, be settled in cash, common stock, or a combination thereof, or any other manner approved by the Incentive Plan Administrator.

Restricted Stock and Restricted Stock Units.

Restricted stock is common stock issued to a Participant subject to applicable vesting and other restrictions.

Restricted stock units are similar to restricted stock except that no shares of common stock are actually issued to the Participant unless and until the restrictions on the award lapse.

An award of restricted stock or restricted stock units will be forfeitable, or otherwise restricted, until conditions established at the time of the grant are satisfied.

These conditions may include, for

example, a requirement that the Participant complete a specified period of service or the attainment of certain performance objectives.

Any restrictions imposed on an award of restricted stock or restricted stock units will be prescribed by the Incentive Plan Administrator.

The minimum vesting period for restricted stock and restricted stock units is generally one year.

The Award Agreement shall set forth the extent to which a Participant may retain restricted stock or restricted stock units following termination of employment.

Participants may be granted full voting rights with respect to restricted stock during the applicable restriction period, but will have no voting rights with respect to restricted stock units until common stock is issued in settlement thereof.

Restricted stock will become freely transferable by the Participant after all conditions and restrictions have been satisfied.

Vested restricted stock units may, in the Incentive Plan Administrator’s discretion, be settled in cash, common stock, or a combination of cash and common stock or any other manner approved by the Incentive Plan Administrator.

Performance Shares and Performance Units.

A performance share award entitles a Participant to receive a payment equal to the fair market value of a specific number of shares of common stock, subject to applicable performance and vesting conditions.

A performance unit award is similar to a performance share award except that a performance unit award is not necessarily tied to the value of common stock.

The Incentive Plan Administrator will prescribe, as set forth in an award agreement, the performance conditions that must be satisfied during the applicable performance period for an award of performance shares or performance units to be earned.

The Incentive Plan Administrator may also impose time-based vesting conditions on the payment of earned performance shares or performance units.

The minimum performance period or vesting period for performance shares and performance units is generally one year.

The award agreement shall set forth the extent to which a Participant may retain performance units and performance shares following termination of employment.

To the extent that performance units or performance shares are earned and vested, the obligation may be settled in cash, common stock or a combination of cash and common stock.

If the award is settled in shares of common stock, the shares may be subject to additional restrictions deemed appropriate by the Incentive Plan Administrator.

Cash-Based Awards and Other Stock-Based Awards.

The Incentive Plan also allows the Incentive Plan Administrator to make cash-based awards and other stock-based awards to Participants on such terms and conditions as the Incentive Plan Administrator prescribes, including without limitation, time-based and performance-based vesting conditions.

The minimum vesting period for other stock-based awards is generally one year.

The award agreement shall set forth the extent to which a Participant may retain cash-based and other stock and equity-based awards following termination of employment.

To the extent that any cash-based and other stock and equity-based awards are granted, they may, in the Incentive Plan Administrator’s discretion, be settled in cash or common stock.

Dividend Equivalents

Participants may be granted dividend equivalents based on the dividends declared on shares that are subject to any award during the period between the grant date and the date the Award is exercised, vests or expires.

The payment of dividends and dividend equivalents prior to an award becoming vested is prohibited, and the Incentive Plan Administrator shall determine the extent to which dividends and dividend equivalents may accrue during the vesting period.

Minimum Vesting of Stock-Based Awards

Awards granted under the Incentive Plan are generally subject to a minimum vesting period of at least one year.

Awards may be subject to cliff-vesting or graded-vesting conditions, with graded vesting starting no earlier than one year after the grant date.

The Incentive Plan Administrator may provide for shorter vesting periods in an award agreement for no more than five percent of the maximum number of shares authorized for issuance under the Incentive Plan.

Transferability

In general, awards available under the Incentive Plan will be nontransferable except by will or the laws of descent and distribution.

Performance Objectives

The Compensation Committee shall have full discretionary authority to select performance measures and related performance goals upon which payment or vesting of an award depends.

Performance measures may relate to financial metrics, non-financial metrics, GAAP and non-GAAP metrics, business and individual objectives or any other performance metrics that the Compensation Committee deems appropriate.

The Compensation Committee may provide in any award that any evaluation of performance may include or exclude any of the following events that occurs during a performance period:

(a) asset write- downs, (b) litigation or claim judgments or settlements, (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, (d) any reorganization and restructuring programs, (e) extraordinary nonrecurring items as described in management’s discussion and analysis of financial condition and results of operations appearing in the our annual report to stockholders for the applicable year, (f) acquisitions or divestitures, and (g) foreign exchange gains and losses.

The Compensation Committee shall retain the discretion to adjust performance-based awards upward or downward, either on a formula or discretionary basis or any combination, as the Committee determines.

Change in Control

Unless otherwise provided in an award agreement or otherwise determined by the Compensation Committee, upon a Change in Control the following shall occur:

For awards other than performance awards, a Replacement Award (that is, an award with a value and terms that are at least as favorable as the outstanding award) may be issued;

For awards other than performance awards, if a Replacement Award is not issued and our common stock ceases to be publicly traded after the Change in Control, such awards shall be immediately vested and exercisable upon such Change in Control;

For unearned performance awards, the award shall be (i) earned on a pro-rata basis at the higher of actual or target performance and (ii) measured as of the end of the calendar quarter before the effective date of the Change in Control, or, if the award is stock-price based, as of the effective date of the Change in Control;

For earned but unvested performance awards, the award shall be immediately vested and payable as of the effective date of the Change in Control;

For awards other than performance awards, if our common stock continues to be publicly traded after a Change in Control, such awards shall continue under their applicable terms, unless otherwise determined by the Compensation Committee.

Notwithstanding the forgoing, in the case of awards other than performance awards, the Compensation Committee may cancel such awards, and the award holders shall receive shares or cash equal to the difference between the amount stockholders receive for their shares pursuant to the Change in Control event and the purchase price per share, if any, under the award.

Except as may be provided in a severance compensation agreement between us and the Participant, if, in connection with a Change in Control, a Participant’s payment of any awards will cause the Participant to be liable for federal excise tax levied on certain “excess parachute payments,” then either (i) all payments otherwise due or (ii) the reduced payment amount to avoid an excess parachute payment, whichever will provide the Participant with the greater after-tax economic benefit taking into account any applicable excise tax, shall be paid to the Participant.

In no event will any Participant be entitled to receive any kind of gross-up payment or reimbursement for any excise taxes payable in connection with Change in Control payments.

Share Authorization

The maximum aggregate number of shares of common stock that may be issued under the Incentive Plan was initially 13,333,333 shares.

On January 1st of each year, for a period of not more than nine years, beginning on January 1, 2023 and ending on (and including) January 1, 2031, the number of shares authorized under the Incentive Plan automatically increases in an amount equal to 3% of the total number of shares of common stock outstanding on December 31st of the preceding calendar year.

On January 1, 2023, 2,834,229 shares were added to the Incentive Plan, resulting in a new number of shares authorized under the Incentive Plan of 16,167,562, all of which can be issued pursuant to the exercise of incentive stock options.

In connection with any corporate event or transaction (including, but not limited to, a change in our shares or our capitalization) such as a merger, consolidation, reorganization, recapitalization, separation, partial or complete liquidation, stock dividend, stock split, reverse stock split, split up, spin off, or other distribution of our stock or property, combination of shares, exchange of shares, dividend in kind, or other like change in capital structure, number of outstanding shares or distribution (other than normal cash dividends) to our stockholders, or any similar corporate event or transaction, the Compensation Committee, in its sole discretion, in order to prevent dilution or enlargement of Participants’ rights under the Incentive Plan, shall substitute or adjust, as applicable, the number and kind of shares that may be issued under the Incentive Plan or under particular forms of awards, the number and kind of shares subject to outstanding awards, the option price or grant price applicable to outstanding awards, and other value determinations applicable to outstanding awards.

The Compensation Committee may also make appropriate adjustments in the terms of any awards under the Incentive Plan to reflect or relate to such changes or distributions and to modify any other terms of outstanding awards, including modifications of performance goals and changes in the length of performance periods.

If an award entitles the holder to receive or purchase shares of common stock, the shares covered by such award or to which the award relates shall be counted against the aggregate number of shares available for awards under the Incentive Plan as follows:

With respect to any awards, the number of shares available for awards shall be reduced by one share for each share covered by such award or to which the award relates;

Awards that do not entitle the holder to receive or purchase shares and awards that are settled in cash shall not be counted against the aggregate number of shares available for awards under the Incentive Plan.

In addition, any shares related to awards which terminate by expiration, forfeiture, cancellation, or otherwise without issuance of shares shall be available again for grant under the Incentive Plan.

In no event, however, will the following shares again become available for awards or increase the number of shares available for grant under the Incentive Plan:

(i) shares tendered by the Participant in payment of the exercise price of an option;

(ii) shares withheld from exercised awards for tax withholding purposes;

(iii) shares subject to a SAR that are not issued in connection with the settlement of that SAR;

(iv) shares repurchased by us with proceeds received from the exercise of an option.

Amendment and Termination

No award may be granted under the Incentive Plan after 10 years from the date the Incentive Plan was approved by stockholders.

The Compensation Committee may, at any time and from time to time, alter, amend, modify, suspend, or terminate the Incentive Plan and any award agreement in whole or in part;

provided, however, that,

(i) without the prior approval of our stockholders, options or SARs issued under the Incentive Plan will not be repriced, repurchased (including a cash buyout), replaced, or re-granted through cancellation, or by lowering the option price of a previously granted option or the grant price of a previously granted SAR (except in connection with a permitted adjustment in authorized shares described above), and

(ii) any amendment of the Incentive Plan must comply with the rules of the primary stock exchange or trading market, if any, that our common stock is publicly traded on (the “Trading Market”), and (iii) no material amendment of the Incentive Plan shall be made without stockholder approval if stockholder approval is required by law, regulation, or Trading Market rule.

The Compensation Committee may make adjustments in the terms and conditions of, and the criteria included in, awards in recognition of unusual or nonrecurring events affecting us or our financial statements or of changes in applicable laws, regulations, or accounting principles, whenever the Compensation Committee determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the Incentive Plan.

Notwithstanding the foregoing, no termination, amendment, suspension, or modification of the Incentive Plan or an award agreement shall adversely affect in any material way any award previously granted under the Incentive Plan, without the written consent of the Participant holding such award.

Federal Income Tax Consequences

We have been advised by counsel regarding the federal income tax consequences of the Incentive Plan.

No income is recognized by a Participant at the time an option or SAR is granted.

If the option is an ISO, no income will be recognized upon the Participant’s exercise of the option (except that the alternative minimum tax may apply).

Income is recognized by a Participant when they dispose of shares acquired under an ISO.

The exercise of a nonqualified stock option or SAR generally is a taxable event that requires the Participant to recognize, as ordinary income, the difference between the shares’ fair market value and the option price.

If a Participant disposes of shares acquired under an ISO before two years after the ISO was granted, or before one year after the ISO was exercised, this is a “disqualifying disposition” and any gain recognized by the Participant upon the disposition of such shares will be taxed as ordinary income to the extent such gain does not exceed the fair market value of such shares on the date the ISO was exercised over the option price.

Income is recognized on account of the award of restricted stock and performance shares when the shares first become transferable or are no longer subject to a substantial risk of forfeiture unless the Participant makes an election to recognize income on the grant date under Section 83(b) of the Code.

At the applicable time, the Participant recognizes income equal to the fair market value of the common stock.

With respect to awards of performance units, restricted stock units, and cash-based awards, a Participant will recognize ordinary income equal to any cash that is paid and the fair market value of common stock that is received in settlement of an award.

Except in the case of a disqualifying distribution of shares acquired upon the exercise of an ISO, as described above, upon the sale or other disposition of shares acquired by a Participant under the Incentive Plan, the Participant will recognize short-term or long-term capital gain or loss, depending on whether such shares have been held for more than one year at such time.

Such capital gain or loss will equal the difference between the amount realized on the sale of the shares and the Participant’s tax basis in such shares (generally, the amount previously included in income by the Participant in connection with the grant or vesting of the shares or the exercise of the related option).

We generally will be entitled to claim a federal income tax deduction on account of the exercise of a nonqualified stock option or SAR or upon the taxability to the recipient of restricted stock and performance shares, the settlement

of a performance unit or restricted stock unit, and the payment of a cash-based or other stock-based award (subject to tax limitations on our deductions in any year that certain remuneration paid to certain executives exceeds $1 million).

The amount of the deduction is equal to the ordinary income recognized by the Participant.

We will not be entitled to a federal income tax deduction on account of the grant or the exercise of an ISO unless the Participant has made a “disqualifying disposition” of the shares acquired on exercise of the ISO, in which case we will be entitled to a deduction at the same time and in the same amount as the Participant’s recognition of ordinary income.

Except in the case of a disqualifying disposition of shares acquired on exercise of an ISO, a Participant’s sale or other disposition of shares acquired under the Incentive Plan should have no tax consequences for us.

The Director Plan

The following is a summary of the material features of the Director Plan, qualified in its entirety by reference to the Director Plan.

Awards and Deferrals

The Director Plan permits (1) the grant of shares of common stock to each of our non-employee directors and (2) if and when authorized by the Board, the deferral by the directors of some or all of their directors’ cash retainer fee and stock compensation.

The Director Plan will have a term of ten years from the date on which it is approved by stockholders.

Administration

Our Chief Financial Officer (“Director Plan Administrator”) will administer the Director Plan.

The Director Plan Administrator will interpret all provisions of the Director Plan, establish administrative regulations to further the purposes of the Director Plan and take any other action necessary for the proper operation of the Director Plan.

All decisions and acts of the Director Plan Administrator shall be final and binding upon all participants in the Director Plan.

Each of our non-employee director is eligible to be a participant in the Director Plan (a “Director”) until they no longer serve as a non-employee director.

The Board currently includes six (6) non-employee directors.

Share Authorization

The maximum aggregate number of shares of common stock that may be issued under the Director Plan is 1,833,333 shares.

The aggregate fair market value (determined as of the grant date) of shares that may be issued as stock compensation to a Director in any year shall not exceed $750,000, provided, however, that with respect to new directors joining the Board, the maximum amount shall be $1,000,000 for the first year, or portion thereof, of service.

In connection with the occurrence of any corporate event or transaction (including, but not limited to, a change in our shares or our capitalization) such as a merger, consolidation, reorganization, recapitalization, separation, partial or complete liquidation, stock dividend, stock split, reverse stock split, split up, spin-off, or other distribution of our stock or property, combination of shares, exchange of shares, dividend in kind, or other like change in capital structure, number of outstanding shares or distribution (other than normal cash dividends) to our stockholders, or any similar corporate event or transaction, the Director Plan Administrator, in its sole discretion, in order to prevent dilution or enlargement of the Directors’ rights under the Director Plan, shall substitute or adjust, as applicable, the number and kind of shares that may be issued under the Director Plan, the number and kind of shares subject to outstanding grants, the annual grant limits, and other value determinations applicable to outstanding grants.

The Director Plan Administrator may also make appropriate adjustments in the terms of any grants under the

Director Plan to reflect or relate to such changes or distributions and to modify any other terms of outstanding grants.

Grant of Shares

As of the first day of each compensation year (as defined in the Director Plan), we will, unless a different formula is selected in accordance with the last sentence of this paragraph, grant each Director a number of shares of our common stock for such year determined by (i) dividing the amount of each Director’s cash retainer for the compensation year by the fair market value of the shares on the first day of the compensation year, and (ii) rounding such number of shares up to the nearest whole share.

We may revise the foregoing formula for any year without stockholder approval, subject to the Plan’s overall share limits.

First Amendment to the Director Plan, adopted as of April 4, 2023 and effective as of November 10, 2022, adjusted the definition of the compensation year and changed the annual amount of shares of common stock to be awarded to the number of shares having a fair market value as of the date of grant of $160,000, rounded up to the nearest whole share.

Vesting of Shares

Shares granted under the Director Plan will vest on the first anniversary of the grant date unless otherwise determined by the Director Plan Administrator.

Unvested shares will be forfeited when a Director’s service as a director terminates, except that (i) a Director’s unvested shares shall become fully vested upon the Director’s death or disability and (ii) a Director who elects not to stand for reelection as a Director for the following compensation year shall vest in a pro-rata portion of their outstanding grants at the annual meeting at which their service as a Director terminates.

Deferral Elections

While the deferral provision is not initially effective, at any point after the Director Plan is approved, the Board may determine that non-employee directors may defer all or part of their cash compensation (in 10% increments) into a deferred cash account, and they may defer all or part of their stock compensation (in 10% increments) into a deferred stock account.

Prior to the Board’s taking action to permit deferrals under the Director Plan, no cash or stock deferrals shall be permitted.

Deferred cash and stock accounts, once permitted and created, would be unfunded and maintained for record keeping purposes only, and directors wishing to defer amounts under the 2021 Directors’ Plan would be required to make their deferral elections by December 31st (or such earlier date as the Director Plan Administrator may designate) of the calendar year preceding the calendar year in which such compensation is earned or granted or, if later, within 30 days after first becoming eligible to make deferrals under the Director Plan.

Distributions of Deferrals

Distributions of deferrals under the Director Plan, once permitted, would generally be paid in a lump sum unless the Director specifies installment payments over a period up to 10 years.

Deferred cash account amounts would be paid in cash, and deferred stock would be paid in whole shares of common stock.

Unless otherwise elected by the Director, distributions would begin on February 15th of the year following the year in which the Director ceases to be a non-employee director.

A Director could also elect to have their distributions commence on (a) the February 15th of the year following the later of the year in which they cease to be a non-employee director and the year in which they attain a specified age, or (b) the February 15th of the year following the year in which they attain a specified age, without regard to whether they are still a non- employee director.

Cash deferral accounts would be credited with earnings and losses on such basis as determined by the Board or its designee, and stock deferral accounts would be credited with additional shares equal to the value of any dividends paid during the deferral period on deferred stock.

Under limited hardship circumstances, Directors could withdraw some or all of the amounts of deferred cash and stock in their deferral accounts.

Change in Control

Unless otherwise determined by the Director Plan Administrator in connection with a grant, a Change in Control shall have the following effects on outstanding awards.

On a Change in Control in which a Director receives a replacement award with a value and terms that are at least as favorable as the Director’s outstanding awards (a “Replacement Award”), the Director’s outstanding awards shall remain outstanding subject to the terms of the Replacement Award.

On a Change in Control in which our shares cease to be publicly traded, the Director’s outstanding awards shall become immediately vested unless the Director receives Replacement Awards.

On a Change in Control in which our shares continue to be publicly traded, a Director’s outstanding awards shall remain outstanding and be treated as Replacement Awards.

Notwithstanding the forgoing, the Director Plan Administrator may determine that any or all outstanding awards granted under the Director Plan will be canceled and terminated upon a Change in Control, and that in connection with such cancellation and termination, the Director shall receive for each share of common stock subject to such award a cash payment (or the delivery of shares of stock, other securities or a combination of cash, stock and securities equivalent to such cash payment) equal to the consideration received by our stockholders for a share of common stock in such Change in Control.

Amendment and Termination

The Director Plan Administrator may, at any time, alter, amend, modify, suspend, or terminate the Director Plan in whole or in part;

provided, however, that, without the prior approval of our stockholders, no such amendment shall increase the number of shares that may be granted to any Director, except as otherwise provided in the Director Plan, or increase the total number of shares that may be granted under the Director Plan.

In addition, any amendment of the Director Plan must comply with the rules of the Trading Market, and no material amendment of the Director Plan shall be made without stockholder approval if stockholder approval is required by law, regulation, or stock exchange rule.

Federal Income Tax Consequences

With respect to shares granted under the Director Plan, unless deferred if and when the Board authorizes the deferral feature, the Director will be taxed on the fair market value of such shares at ordinary income rates at the time such shares vest or, if the Director made an election under Section 83(b), on the grant date.

We will receive a corresponding deduction for the same amount at the same time.

With respect to cash or shares deferred under the Director Plan, Directors will be taxed on amounts distributed to them from their deferred cash and deferred stock accounts at ordinary income rates at the time of such distributions.

We will receive a deduction for the same amounts at the same time.

Upon the sale or other disposition of shares acquired by a Director under the Director Plan, the Director will recognize short-term or long-term capital gain or loss, depending on whether such shares have been held for more than one year at such time.

Such capital gain or loss will equal the difference between the amount realized on the sale of such shares and the Director’s tax basis in such shares (generally, the amount previously included in income by the Director in connection with the grant or vesting of such shares).

Such sale or other disposition by a Director should have no tax consequences for us.

Other Information

The number of shares to be issued in each year is not determinable, as it varies based on the amount of stock awards determined to be paid to Directors as part of their retainer fees.

Welfare and other benefits

We provide health, dental, and vision insurance benefits to our Named Executive Officers, on the same terms and conditions as provided to all other eligible U.S.

employees except for a recently hired employee in North Dakota for whom separate benefit arrangements are being put together due to North Dakota laws.

We maintain a broad-based 401(k) plan including our Named Executive Officers.

Our Named Executive Officers did not participate in, or otherwise receive any benefits under, any pension or retirement plan sponsored by the Company during the fiscal year ended May 31, 2023.

Our Named Executive Officers did not participate in, or earn any benefits under, a non-qualified deferred compensation plan sponsored by the Company during the fiscal year ended May 31, 2023.

Director Compensation

The following table presents the compensation for each person who served as a director on our Board during fiscal year ended May 31, 2023.

Fees Earned or Paid in Cash ($)

Chuck Hastings

Charles Hastings $ 41,667 $ 329,148 (8) $ — $ 370,815

Rachel Lee (3)

$ 14,605 $ 343,018 (9) $ 1,955 $ 359,578

2 unchanged sentences

Douglas Miller $ 77,083 $ 329,148 (11) $ — $ 406,231

$45,000 $210,503 $255,503

Virginia Moore (5)

1 unchanged sentence

Richard Nottenburg $ 59,167 $ 1,373,148 (13) $ 2,300 $ 1,434,615

Kate Reed (6)

$ 20,000 $ 360,011 (14) $ — $ 380,011

(1) Amounts shown represent the aggregate grant date fair value, computed in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718, of awards of restricted stock granted during fiscal year ended May 31, 2024.

Each director held 76,191 unvested shares of restricted stock as of May 31, 2023.

Benson has served as a director since April 2024.

Lee has served as a director since February 2024.

McDonald served as director through February 2024.

Moore served as director through February 2024.

Reed was appointed the Chief Growth Officer of the Company in May of 2024.

Benson held unvested restricted stock awards for 101,461 shares of common stock as of May 31, 2024.

Hastings held unvested restricted stock awards for 33,685 shares of common stock as of May 31, 2024.

Lee held unvested restricted stock awards for 79,219 shares of common stock as of May 31, 2024.

(10) 33,685 shares of common stock associated with unvested restricted stock awards were forfeited upon Ms.

McDonald's resignation from the Company's Board of Directors effective February 2024.

Miller held unvested restricted stock awards for 33,685 shares of common stock as of May 31, 2024.

(12) 33,685 shares of common stock associated with unvested restricted stock awards were forfeited upon Ms.

Moore's resignation from the Company's Board of Directors effective February 2024.

Nottenburg held unvested restricted stock awards for 333,685 shares of common stock as of May 31, 2024.

Reed held unvested restricted stock awards for 57,160 shares of common stock and unvested restricted stock units of 300,000 shares of common stock as of May 31, 2024.

Non-Employee Director Compensation Policy

The following table shows the annual cash retainer fees for non-employee directors:

11 unchanged sentences

Directors also receive customary reimbursement for reasonable out-of-pocket expenses related to Board service.

In addition to the annual cash retainer fees, directors also receive an annual grant of restricted stock valued at

$160,000, calculated using the closing price of the Common Stock on the Nasdaq Global Select Market on the date

of grant, which is the date of each annual meeting of stockholders, and vesting on the first anniversary of the date of

On April 21, 2023, directors received (i) a grant of 76,191 shares of restricted stock that will vest on November 10,

2023 in order to compensate directors who were elected on November 10, 2022 for the subsequent 12 months, and

(ii) a grant of 18,630 vested shares in light of the fact that the non-employee directors did not receive a grant of

equity on April 21, 2022 as originally contemplated under the Director Plan.

In addition to the annual cash retainer fees, directors also receive an annual grant of restricted stock valued at $160,000, calculated using the closing price of the common stock on the Nasdaq Global Select Market on the date of grant, which is the date of each annual meeting of stockholders, and vesting on the first anniversary of the date of grant.

On November 9, 2023, each director received a grant of restricted stock awards for 33,685 shares of common stock that will vest on November 9, 2024 in order to compensate such elected or re-elected director (at the Annual Meeting of the Company's stockholders held on November 9, 2023) to serve on the Company's Board for the subsequent 12 months.

Directors who are employees of the Company do not receive any additional compensation for Board service.

Compensation Committee Interlocks and Insider Participation

None of the members of our Compensation Committee is, or has been, our officer or employee.

None of our executive officers currently serves, or during the year ended May 31, 2021 served, as a member of the Board, or as a member of the compensation or similar committee, of any entity that has one or more executive officers serving on our Board or Compensation Committee.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth certain information with respect to the beneficial ownership of our common stock, as of July 25, 2023, by:

Equity Compensation Plans

On October 9, 2021, our Board approved two equity incentive plans, which our stockholders approved on January 20, 2022.

The two plans consist of the 2021 Incentive Plan (the “Incentive Plan”), which provides for grants of various equity awards to our employees and consultants, and the 2021 Non-Employee Director Stock Plan (as amended, the “Director Plan” and, together with the Incentive Plan, the “Plans”), which provides for grants of restricted stock to non-employee directors and for deferral of cash and stock compensation if such deferral provisions are activated at a future date.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides certain information with respect to all of the Company’s equity compensation plans in effect as of May 31, 2024:

Number of shares of Common Stock issuable upon exercise of outstanding options, warrants or rights

Weighted average exercise price of outstanding options, warrants or rights

Number of shares of Common Stock remaining available for future issuance

Incentive Plan

8,354,997 (1)

Director Plan

638,895 — 720,333

Plans not approved by shareholders

8,993,892 — 720,333

(1) Includes 5,244,986 shares of our Common Stock underlying outstanding RSU awards subject to time-based vesting and 3,110,011 shares subject to certain performance share unit awards, of which 2,800,000 shares which were awarded to certain executives.

These certain executive awards were subsequently canceled.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information with respect to the beneficial ownership of our common stock, as of August 26, 2024 (unless otherwise noted) by:

(a) each of our Named Executive Officers

4 unchanged sentences

Unless otherwise indicated below, to our knowledge, based on information furnished to us, the persons and entities named in the table have sole voting and investment power with respect to all shares that they beneficially own, subject to applicable community property laws.

Any securities that are exercisable for, or convertible into, shares of Common Stock within 60 days of July 25, 2023 are deemed to be outstanding and to be beneficially owned by the person holding the securities for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

We have based our calculation of the percentage ownership of our common stock on 103,950,005 shares of our common stock.

Shares Beneficially Owned (b)

Name and Address(a) Number Percentage

Directors and Officers:

Wes Cummins 23,394,201 (b) 22.5 %

David Rench 207,664 (c) *

Chuck Hastings 559,321 (d) *

Kelli McDonald 194,821 (e) *

Douglas Miller 194,821 (f) *

Virginia Moore 462,438 (g)

Richard Nottenburg 194,821 (h) *

Michael Maniscalco 47,222(i) *

Officers and Directors as a group (8 people) 25,255,309 (b)-(i)

c/o GMR Limited Trinity Chamber PO BOX 4301 Tortola, British Virgin Islands

7,440,148 (j)

Any securities that are exercisable for, or convertible into, shares of common stock within 60 days of August 26, 2024 are deemed to be outstanding and to be beneficially owned by the person holding the securities for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

We have based our calculation of the percentage ownership of our common stock on 157,438,246 shares of our common stock outstanding on August 27, 2024.

Number of Shares Beneficially Owned Percentage of Common Stock

Directors & Named Executive Officers:

Wes Cummins (2)

23,281,455 14.79 %

* Less than 1%.

(a) Unless otherwise indicated, the business address of each person or entity named in the table is c/o Applied Blockchain, Inc., 3811 Turtle Creek Blvd., Suite 2100, Dallas, TX 75219.

(b) Includes (i) 17,590,238 shares of common stock held by Cummins Family Ltd, of which Mr.

Cummins is the CEO, (ii) 742,166 shares of common stock held by Wesley Cummins IRA Account, (iii) 2,030,686 shares of Common Stock held by B.

Riley Asset Management, LLC, of which Mr.

Cummins is the President and (iv) 83,333 shares of common stock issuable upon vesting of RSUs held by Mr.

Cummins within 60 days of July 25, 2023.

Rench within 60 days of July 25, 2023.

(d) Includes 76,191 shares of restricted Common Stock held directly by Mr.

Hastings which will vest on November 11, 2023.

(e) Includes 76,191 shares of restricted Common Stock held directly by Ms.

McDonald which will vest on November 11, 2023.

(f) Includes 76,191 shares of restricted Common Stock held directly by Mr.

Miller which will vest on November 11, 2023.

(g) Includes (i) 267,617 shares of common stock, held directly by Mr.

Moore and (ii) 76,191 shares of restricted Common Stock held directly by Ms.

Moore which will vest on November 11, 2023.

(h) Includes 76,191 shares of restricted Common Stock held directly by Dr.

Nottenburg which will vest on November 11, 2023.

(i) Includes 30,556 shares of Common Stock issuable upon vesting of RSUs held by Mr.

Maniscalco within 60 days of July 25, 2023.

(j) Guo Chen, as 50% owner and sole director of GMR Limited, and Bo Dong, as 50% owner of GMR, each have voting and dispositive power over the 7,440,148 shares of our common stock held by GMR Limited.

Dong disclaims beneficial ownership of such shares.

Chuck Hastings

Michael Maniscalco (3)

Douglas Miller

Richard Nottenburg

Kate Reed (4)

David Rench (5)

All current directors and executive officers as a group (9 persons) 25,342,361 16.10 %

5% or greater holders:

CIM APLD Lender Holdings, LLC (6)

9,265,366 5.89 %

Hood River Capital Management LLC (7)

9,596,231 6.10 %

* Less than 1% of outstanding shares.

(1) Except as otherwise indicated, the address of each person named in this table is c/o Applied Digital Corporation, 3811 Turtle Creek Boulevard, Suite 2100, Dallas, Texas 75219.

(2) Includes (i) 17,590,238 shares of common stock held by Cummins Family Ltd, of which Mr.

Cummins is the CEO, (ii) 3,964,764 shares of common stock held directly including restricted stock and common stock held by Wesley Cummins IRA Account, (iii) 1,626,453 shares of Common Stock held by 272 Capital, LP, of which, of which Mr.

Cummins was the President and CEO until his resignation effective February 5, 2024, and (iv) 100,000 shares of Common Stock issuable upon vesting of RSUs held by Mr.

Cummins within 60 days of August 27, 2024.

(3) Includes 12,500 shares of restricted Common Stock issuable upon vesting of RSUs held by Mr.

Maniscalco within 60 days of August 27, 2024.

(4) Does not include 300,000 shares of Common Stock issuable upon vesting of RSUs held by Ms.

Reed which were granted to Ms.

Reed upon her employment as the Company's Chief Growth Officer, which will not vest within 60 days of August 27, 2024.

(5) Includes 35,000 shares of restricted Common Stock issuable upon vesting of RSUs held by Mr.

Rench within 60 days of August 27, 2024.

(6) Based upon information contained in a Schedule 13G jointly filed by CIM APLD Lender Holdings, LLC (“APLD Lender Holdings”), APLD Lender Holdings Parent, LLC (“APLD Lender Holdings Parent”), CIM Infrastructure Fund III, L.P.

(“CIM IF III”), CIM Infrastructure Fund III GP, LLC (“CIM IF III GP”), CIM Applied Digital Parallel, LLC (“Applied Digital Parallel”), CIM Infrastructure Fund III (Lux) SCSp (“Luxembourg SCSp”), CIM Infrastructure III GP (Lux), S.a.r.l.

(“Luxembourg S.a r.l.”), CIM Group Management, LLC (“CIM Group Management”), CIM Group Management Holdings, LLC (“CIM Group Management Holdings”) and CIM Group, LLC (“CIM Group”) on June 17, 2024.

Includes 9,265,366 shares of common stock.

APLD Lender Holdings Parent is the managing member of APLD Lender Holdings.

The controlling owners of APLD Lender Holdings Parent are CIM IF III and Applied Digital Parallel.

CIM IF III GP is the general partner of CIM IF III.

Luxembourg SCSp is the majority owner of Applied Digital Parallel.

Luxembourg S.a r.l.

is the general partner of Luxembourg SCSp.

CIM Group Management is the manager of CIM IF III GP and the sole owner of Luxembourg S.a r.l.

CIM Group Management Holdings is the sole owner of CIM Group Management.

CIM Group is the majority owner of CIM Group Management Holdings.

(7) Based upon information contained in a Schedule 13F filed by Hood River Capital Management LLC on August 14, 2024.

Includes 9,596,231 shares of common stock.

Certain Relationships and Related Transactions, and Director Independence

Related Transactions

Related Party Transactions

In addition to the compensation arrangements discussed in the sections titled “Management” and “Executive Officer and Director Compensation,” the following is a description of each transaction since June 1, 2022 and each currently proposed transaction in which:

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any of our directors, executive officers, or holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest.

GMR Limited (“GMR”) holds more than 5% of our outstanding Common Stock.

Guo Chen, a 50% owner and sole director of GMR, is also deemed to beneficially own shares of our Common Stock held by GMR.

GMR and subsidiaries made payments to the Company of approximately $9.2 million during the fiscal year ended May 31, 2023

GMR Limited Service Order

As of May 31.

2024, GMR Limited (“GMR”) held more than 5% of our outstanding common stock.

Each of Guo Chen, a 50% owner and sole director of GMR, and Bo Dong, 50% owner of GMR, are deemed to beneficially own shares of our common stock held by GMR.

GMR and subsidiaries made payments to the Company of approximately $9.2 million during the fiscal year ended May 31, 2023, and approximately $6.0 million during the fiscal year ended May 31, 2024.

Chen owns 60% of Alternity Fund Ltd., which owns 100% of GOI.

Jason Zhang, a former director of the Company, owned 15% of Alternity during the fiscal year ended May 31, 2024.

On December 8th, 2021, we entered into a Service Order with GOI pursuant to which we provide energized space for mining activities of GOI.

During fiscal

year 2023, Global Operating Infrastructure LLC paid approximately $6.4 million to Company pursuant to the Service Order.

GOI paid approximately $6.4 million during the fiscal year ended May 31, 2023, and approximately $6.1 million during the fiscal year ended May 31, 2024, to the Company pursuant to the Service Order.

On July 25, 2024, GMR Limited reported that they have ceased to be the beneficial owner of more than 5% of our outstanding common stock.

Riley Loan & Security Agreement

Bryant Riley, chairman of the board and co-chief executive officer, of B.

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Riley Securities, Inc., each of which is a wholly-owned subsidiary of RILY, with a total possible principal amount up to $50 million.

As of May 31, 2023 the total loan balance was $36.5 million, all of which has been subsequently repaid as of July 17, 2023.

As of May 31, 2024 the total loan balance of $44.5 million was repaid in full.

AI Bridge Loan

On January 30, 2024, the Company issued the AI Bridge Loan payable to AI Bridge Funding LLC (the “Lender”), providing for an unsecured loan in the aggregate principal amount of up to $20.0 million, of which $15.0 million was available immediately and funded upon the execution of the AI Bridge Loan.

The obligation of the Lender to advance the remaining $5.0 million shall be in the Lender’s sole discretion.

The AI Bridge Loan will mature on January 30, 2026 and bears interest at a rate of 12.5% per annum.

During the fiscal fourth quarter 2024, the principal balance of the AI Bridge Loan, $20.0 million as of May 1, 2024, was converted into common stock pursuant to the terms of the AI Bridge Loan resulting in the Company issuing 8,421,146 in shares of its common stock to the Lender.

Affiliates of the Lender are both an investor in B.

Riley Financial, Inc.

and also an investment management client of B.

Riley Asset Management.

As previously disclosed, the Company’s Chairman and Chief Executive Officer, served as the President of B.

Riley Asset Management, and effective February 5, 2024, resigned from that position.

Other Related Party Transactions

During the fiscal years ended May 31, 2024 and 2023, the Company received sublease income of $70,000 and $103,000, respectively, from B.

Riley Financial, Inc.

During the fiscal years ended May 31, 2024 and 2023, the Company paid construction and consulting costs of $0.3 million and $0.1 million, respectively, to a company owned by a family member of the Company’s Chief Financial Officer.

During the fiscal years ended May 31, 2024 and 2023, the Company paid software license fees of $0.2 million and $0.1 million, respectively, to a company whose chairman is also a member of the Board.

During the fiscal year ended May 31, 2024, the Company paid consulting fees of $43,000 to a member of the Board for sales consulting work.

No such payments were made during the fiscal year ended May 31, 2023.

Review, Approval, or Ratification of Transactions with Related Parties

In July 2021, we adopted a charter of the Audit Committee, pursuant to which all related party transactions including those between us, our directors, executive officers, majority stockholders and each of our respective affiliates or family members will be reviewed and approved by our Audit Committee, or if no Audit Committee exists, by a majority of the independent members of our Board.

Our existing policies are designed to comply with applicable rules and regulations of the SEC and the listing requirements and rules of Nasdaq.

In April 2024, we adopted a charter of the Audit Committee, pursuant to which all related party transactions including those between us, our directors, executive officers, majority stockholders and each of our respective affiliates or family members will be reviewed and approved by our Audit Committee, or if no Audit Committee exists, by a majority of the independent members of our Board.

Our existing policies are designed to comply with the Nasdaq Listing Rules and the rules and regulations of the SEC.

Director Independence

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Directors, Executive Officers and Corporate Governance starting on page 99 above.

Indemnification of Officers and Directors

We have entered into indemnification agreements with each of our current directors and executive officers.

These agreements require us to indemnify these individuals to the fullest extent permitted under Nevada law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified.

We also intend to enter into indemnification agreements with our future directors and executive officers.

Principal Accounting Fees and Services

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

The Audit Committee oversees the Company’s financial reporting process on behalf of the Board.

In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements in the Company’s Form 10-K, including a discussion of the acceptability of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.

The Audit Committee reviewed and discussed with the independent registered public accounting firm, which is responsible for expressing an opinion on the conformity of those audited financial statements with the standards of the Public Company Accounting Oversight Board, the matters required to be discussed by Statements on Auditing Standards (SAS 61), as may be modified or supplemented, and their judgments as to the acceptability of the Company’s accounting principles and such other matters as are required to be discussed with the Audit Committee under the standards of the Public Company Accounting Oversight Board.

In addition, the Audit Committee has discussed with the independent registered public accounting firm their independence from management and the Company, including receiving the written disclosures and letter from the independent registered public accounting firm as required by the Independence Standards Board Standard No.

1, as may be modified, or supplemented, and has considered the compatibility of any non-audit services with the auditors’ independence.

The Audit Committee discussed with the Company’s independent registered public accounting firm the overall scope and plans for their audit.

The Audit Committee met with the independent registered public accounting firm, with and without management present, to discuss the results of their examinations and the overall quality of the Company’s financial reporting.

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board, and the Board approved, that the audited financial statements be included in the Company’s Form 10-K for the year ended May 31, 2023 for filing with the SEC.

Respectfully submitted,

The Audit Committee of the Board of Directors

Douglas Miller, Chair

Chuck Hastings

Richard Nottenburg

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The following table presents fees billed to the Company for professional services rendered by our independent registered public accounting firm, Marcum LLP, for the fiscal years ended May 31, 2024 and 2023:

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Audit fees $ 484 $ 464

All other fees 376 92

Total fees $ 860 $ 556

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Exhibits, Financial Statement Schedules

Documents filed as part of this report

All financial statements:

Index to consolidated financial statements Page

Report of Registered Independent Public Accounting Firm

Consolidated Balance Sheets as of May 31, 2022 and 202 2

Consolidated Statements of Operations for the Annual Period Ended May 31, 202 3 , and 202 2

Consolidated Statements of Changes in Stockholders' Equity for the Annual Period ended May 31, 202 3 and 202 2

Consolidated Statements of Cash Flows for the Annual Period ended May 31, 202 3 and 202 2

Notes to Consolidated Financial Statements

Financial statement schedules:

All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and accompanying notes included in this Form 10-K.

Exhibits required by Item 601 of Regulation S-K:

3.1 Second Amended and Restated Articles of Incorporation, as amended from time to time.

3.2 Amended and Restated Bylaws, as amended from time to time (Incorporated by reference to Exhibit 3.2 to the Company’s Form S-1 (Registration No.

333-258818), filed with the SEC on August 13, 2021)

(Incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K, filed with the SEC on August 2, 2023).

3.1.1 Certificate of Amendment to the Certificate of Designations for the Series E Redeemable Preferred Stock.

(Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the SEC on May 16, 2024).

3.1.2 Certificate of Amendment, dated June 11, 2024, to Second Amended and Restated Articles of Incorporation, as amended.

(Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the SEC on June 11, 2024).

3.2 Third Amended and Restated Bylaws of the Company.

(Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 29, 2024).

4.1 Registration Rights Agreement, dated April 15, 2021, by and between the Company and B.

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and the Investors.

(Incorporated by reference to Exhibit 4.1 to the Company’s Form S-1 (Registration No.

333-258818), filed with the SEC on August 13, 2021).

(Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1, filed with the SEC on August 13, 2021).

4.1.1 Amendment, dated December 13, 2021, to Registration Rights Agreement, dated April 15, 2021, by and between the Company and B.

2 unchanged sentences

and the Investors (Incorporated by reference to Exhibit 3.2 to Amendment No.

6 the Company's form S-1 (Registration No.

333-258818), filed with the SEC on April 12, 2022).

6 the Company's Registration Statement on Form S-1, filed with the SEC on April 12, 2022).

4.1.2 Amendment No.

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Riley Securities, Inc.

and the Investors (Incorporated by reference to Exhibit 4.3 to the Company's Form S-1 (Registration No.

333-258818), filed with the SEC on February 28, 2022).

and the Investors (Incorporated by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-1, filed with the SEC on February 28, 2022).

4.2 Registration Rights Agreement, dated July 30, 2021, by and between the Company and B.

1 unchanged sentence

Riley Securities, Inc.

and the Investors (Incorporated by reference to Exhibit 4.2 to the Company’s Form S-1 (Registration No.

333-258818), filed with the SEC on August 13, 2021).

and the Investors (Incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-1, filed with the SEC on August 13, 2021).

4.2.1 Amendment, dated December 13, 2021, to Registration Rights Agreement, dated July 30, 2021, by and between the Company and B.

1 unchanged sentence

Riley Securities, Inc.

and the Investors (Incorporated by reference to Exhibit 3.2 to the Company's form S-1 (Registration No.

333-258818), filed with the SEC on April 12, 2022).

and the Investors (Incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-1, filed with the SEC on April 12, 2022).

4.2.2 Amendment No.

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Riley Securities, Inc.

and the Investors (Incorporated by reference to Exhibit 4.6 to the Company's Form S-1 (Registration No.

333-258818), filed with the SEC on February 28, 2022).

4.3 Right of First Refusal and Co-Sale Agreement, dated as of April 15, 2021, by and between the Company, the Key Holders and Investors (Incorporated by reference to Exhibit 4.3 to the Company’s Form S-1 (Registration No.

333-258818), filed with the SEC on August 13, 2021).

and the Investors (Incorporated by reference to Exhibit 4.6 to the Company's Registration Statement on Form S-1, filed with the SEC on February 28, 2022).

4.4 Right of First Refusal and Co-Sale Agreement, dated as of July 30, 2021, by and between the Company, the Key Holders and Investors.

(Incorporated by reference to Exhibit 4.4 to the Company’s Form S-1 (Registration No.

333-258818), filed with the SEC on August 13, 2021).

(Incorporated by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-1, filed with the SEC on August 13, 2021).

4.5 Form of Warrant.

(Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 30, 2024).

4.6 Form of Subscription Agreement.

(Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on May 16, 2024).

4.7 Form of Warrant.

(Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on August 14, 2024).

Description of Securities.

10.1 Services Agreement, dated March 19, 2021, by and among the Company, GMR Limited, Xsquared Holding Limited, and Valuefinder (Incorporated by reference to Exhibit 10.1 to the Company’s Form S-1 (Registration No.

333-258818), filed with the SEC on August 13, 2021).

10.2 Master Professional Services Agreement between Ulteig Engineers, Inc.

and APLD Hosting, LLC.

(Incorporated by reference to Exhibit 10.2 to the Company’s Form S-1 (Registration No.

333-258818), filed with the SEC on August 13, 2021).

10.3 Non-Fixed Price Sales and Purchase Agreement, dated April 13, 2021, between Bitmain Technologies Limited and the Company (Incorporated by reference to Exhibit 10.3 to the company's Form S-1 (Registration No.

333-2588818), filed with the SEC on August 13, 2021).

10.4 Coinmint Colocation Mining Services Agreement dated as of June 15, 2021 by and between Coinmint, LLC and the Company (Incorporated by reference to Exhibit 10.4 to the Company's Form S-1 (Registration No.

333-258818), filed with the SEC on August 13, 2021).

(Incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-1, filed with the SEC on August 13, 2021).

10.5# Service Framework Agreement, dated July 5, 2021, by and between APLD Hosting, LLC and JointHash Holding Limited (Incorporated by reference to Exhibit 10.5 to Amendment No.

1 to the Company’s registration statement on Form S-1 (Registration No.

333-258818), filed with the SEC on November 2, 2021).

1 to the Company’s Registration Statement on Form S-1, filed with the SEC on November 2, 2021).

10.6# Amended and Restated Electric Services Agreement, dated September 13, 2021, by and between APLD Hosting, LLC and [Redacted] (Incorporated by reference to Exhibit 10.6 to Amendment No.

1 to the Company’s registration statement on Form S-1 (Registration No.

333-258818), filed with the SEC on November 2, 2021).

1 to the Company’s Registration Statement on Form S-1, filed with the SEC on November 2, 2021).

10.7 Sublease Agreement, dated as of May 19, 2021, by and between the Company and Encap Investments L.P.

(Incorporated by reference to Exhibit 10.7 to the Company’s Form S-1 (Registration No.

333-258818), filed with the SEC on August 13, 2021).

Service Framework Agreement, dated July 5, 2021, by and between APLD Hosting, LLC and Bitmain Technologies Limited ( I ncoporated by reference to Exhibit 10.8 to the Company's Annual R ep ort on Form 10-K, fi led with the SEC on August 29, 2022.

(Incorporated by reference to Exhibit 10.7 to the Company’s Registration Statement on Form S-1, filed with the SEC on August 13, 2021).

10.8# Service Framework Agreement, dated July 5, 2021, by and between APLD Hosting, LLC and Bitmain Technologies Limited (Incorporated by reference to Exhibit 10.8 to the Company's Annual Report on Form 10-K, filed with the SEC on August 29, 2022).

10.9# Master Hosting Agreement, dated as of September 20, 2021, by and between APLD Hosting, LLC and F2Pool Mining, Inc.

(Incorporated by reference to Exhibit 10.9 to Amendment No.

1 to the Company’s registration statement on Form S-1 (Registration No.

333-258818), filed with the SEC on November 2, 2021).

1 to the Company’s Registration Statement on Form S-1, filed with the SEC on November 2, 2021).

10.10# Master Hosting Agreement, dated as of October 12, 2021, by and between APLD Hosting, LLC and Hashing LLC.

(Incorporated by reference to Exhibit 10.10 to Amendment No.

1 to the Company’s registration statement on Form S-1 (Registration No.

333-258818), filed with the SEC on November 2, 2021).

1 to the Company’s Registration Statement on Form S-1, filed with the SEC on November 2, 2021).

10.11 Services Agreement, effective as of October 12, 2021, by and among Applied Blockchain, LTD and Xsquared Holding Limited.

(Incorporated by reference to Exhibit 10.11 to Amendment No.

1 to the Company’s registration statement on Form S-1 (Registration No.

333-258818), filed with the SEC on November 2, 2021).

2022 Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Company's registration statement on Form S-8 (Registration No.

333-265698), filed with the SEC on June 17, 2022).

Form of Employee Restricted Stock Award Agreement (Incorporated by reference to Exhibit 10.2 to the Company's registration statement on Form S-8 (Registration No.

333-265698), filed with the SEC on June 17, 2022).

Form of Restricted Stock Unit Award Agreement (Employees) (Incorporated by reference to Exhibit 10.3 to the Company's registration statement on Form S-8 (Registration No.

333-265698), filed with the SEC on June 17, 2022).

Form of Restricted Stock Unit Award Agreement (Consultants) (Incorporated by reference to Exhibit 10.4 to the Company's registration statement on Form S-8 (Registration No.

333-265698), filed with the SEC on June 17, 2022).

2022 Non-Employee Director Stock Plan (Incorporated by reference to Exhibit 10.5 to the Company's registration statement on Form S-8 (Registration No.

333-265698), filed with the SEC on June 17, 2022).

1 to the Company’s Registration Statement on Form S-1, filed with the SEC on November 2, 2021).

10.12† 2022 Incentive Plan.

(Incorporated by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-8, filed with the SEC on June 17, 2022).

10.12.1† Form of Employee Restricted Stock Award Agreement.

(Incorporated by reference to Exhibit 10.2 to the Company's Registration Statement on Form S-8, filed with the SEC on June 17, 2022).

10.12.2† Form of Restricted Stock Unit Award Agreement (Employees).

(Incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on Form S-8, filed with the SEC on June 17, 2022).

10.12.3† Form of Restricted Stock Unit Award Agreement (Consultants).

(Incorporated by reference to Exhibit 10.4 to the Company's Registration Statement on Form S-8, filed with the SEC on June 17, 2022).

Amendment to 2022 Incentive Plan .

10.13† 2022 Non-Employee Director Stock Plan.

(Incorporated by reference to Exhibit 10.5 to the Company's Registration Statement on Form S-8, filed with the SEC on June 17, 2022).

10.13.1† First Amendment to the 2022 Non-Employee Director Stock Plan, dated April 4, 2023.

10.13.2 Form of Director Restricted Stock Award Agreement (Incorporated by reference to Exhibit 10.6 to the Company's registration statement on Form S-8 (Registration No.

333-265698), filed with the SEC on June 17, 2022).

(Incorporated by reference to Exhibit 10.13.1 to the Company’s Annual Report on Form 10-K, filed with the SEC on August 2, 2023).

10.13.2 Form of Director Restricted Stock Award Agreement.

(Incorporated by reference to Exhibit 10.6 to the Company's Registration Statement on Form S-8, filed with the SEC on June 17, 2022).

10.14# Limited Liability Company Agreement, dated as of January 6, 2022, by and between the Company and Antpool Capital Asset Investment L.P.

(Incorporated by reference to Exhibit 10.14 to Amendment No.

5 to the Company’s registration statement on Form S-1 (Registration No.

333-258818), filed with the SEC on January 24, 2022).

Employment Agreement, effective as of November 1, 2021, by and between the Company and Wes Cummins (Incorporated by reference to Exhibit 10.15 to Amendment No.

5 to the Company’s registration statement on Form S-1 (Registration No.

333-258818), filed with the SEC on January 24, 2022).

Employment Agreement, effective as of November 1, 2021, by and between the Company and David Rench (Incorporated by reference to Exhibit 10.16 to Amendment No.

5 to the Company’s registration statement on Form S-1 (Registration No.

333-258818), filed with the SEC on January 24, 2022).

5 to the Company’s Registration Statement on Form S-1, filed with the SEC on January 24, 2022).

10.15† Employment Agreement, effective as of November 1, 2021, by and between the Company and Wes Cummins.

(Incorporated by reference to Exhibit 10.15 to Amendment No.

5 to the Company’s Registration Statement on Form S-1, filed with the SEC on January 24, 2022).

10.15.1† Amendment No.

1 to Executive Employment Agreement, dated as of September 25, 2023, by and between the Company and Wes Cummins.

(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on September 28, 2023).

10.16† Employment Agreement, effective as of November 1, 2021, by and between the Company and David Rench.

(Incorporated by reference to Exhibit 10.16 to Amendment No.

5 to the Company’s Registration Statement on Form S-1, filed with the SEC on January 24, 2022).

10.16.1† Amendment No.

1 to Executive Employment Agreement, dated as of September 25, 2023, by and between the Company and David Rench.

(Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on September 28, 2023).

10.17 Ground Lease, effective as of April 13, 2022, by and between EDB, Ltd and APLD - Rattlesnake Den I LLC.

(Incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K, filed with the SEC on August 2, 2023).

10.18† Employment Agreement, effective as of November 1, 2021, by and between the Company and Regina Ingel (Incorporated by reference to Exhibit 10.17 to Amendment No.

5 to the Company’s registration statement on Form S-1 (Registration No.

333-258818), filed with the SEC on January 24, 2022).

5 to the Company’s Registration Statement on Form S-1, filed with the SEC on January 24, 2022).

10.18.1† Amendment dated August 1, 2022 to Employment Agreement between Applied Blockchain, Inc.

and Regina Ingel (Incorporated by reference to Exhibit 10.1 to the Company's current report on Form 8-K (Commission File No.

001-31968), filed with the SEC on August 5, 2022).

and Regina Ingel.

(Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the SEC on August 5, 2022).

10.19 Loan Agreement dated as of March 11, 2022 by and between APLD Hosting, LLC, Vantage Bank Texas and Applied Blockchain, Inc.

(Incorporated by reference to Exhibit 10.20 to Amendment No.

6 the Company's form S-1 (Registration No.

333-258818), filed with the SEC on April 12, 2022).

6 the Company's Registration Statement on Form S-1, filed with the SEC on April 12, 2022).

10.20 Continuing Guaranty Agreement dated as of March 11, 2022 by Applied Blockchain, Inc.

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(Incorporated by reference to Exhibit 10.21 to Amendment No.

6 the Company's form S-1 (Registration No.

333-258818), filed with the SEC on April 12, 2022).

6 the Company's Form S-1, filed with the SEC on April 12, 2022).

10.21 Letter between Applied Blockchain, Inc.

and Xsquared Holding Limited dated June 6, 2022 (Incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K (Commission File No.

001-31968), filed with the SEC on June 8, 2022).

and Xsquared Holding Limited dated June 6, 2022.

(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on June 8, 2022).

10.22 Hosting Agreement, dated as of July 12, 2022, by and between Marathon Digital Holdings, Inc.

and Applied Blockchain, Inc.

(Incorporated by reference to Exhibit 10.6 to the Company’s quarterly report on Form 10-Q (Commission File No.

001-31968), filed with the SEC on October 12, 2022).

(Incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on October 12, 2022).

10.23 Loan Agreement, dated as of July 25, 2022, by and among APLD Hosting, LLC, Starion Bank, and Applied Blockchain, Inc.

as Guarantor (Incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K (Commission File No.

001-31968), filed with the SEC on August 12, 2022).

10.24 Security Agreement, dated of July 25, 2022, by and between APLD Hosting, LLC and Starion Bank (Incorporated by reference to Exhibit 10.2 to the Company’s current report on Form 8-K (Commission File No.

001-31968), filed with the SEC on August 12, 2022).

10.25 Security Agreement, dated of July 25, 2022, by and among APLD Hosting, LLC, Applied Blockchain, Inc., as Grantor, and Starion Bank(Incorporated by reference to Exhibit 10.3 to the Company’s current report on Form 8-K (Commission File No.

001-31968), filed with the SEC on August 12, 2022).

as Guarantor.

(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on August 12, 2022).

10.24 Security Agreement, dated of July 25, 2022, by and between APLD Hosting, LLC and Starion Bank.

(Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on August 12, 2022).

10.25 Security Agreement, dated of July 25, 2022, by and among APLD Hosting, LLC, Applied Blockchain, Inc., as Grantor, and Starion Bank.

(Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on August 12, 2022).

10.26 Unlimited Commercial Corporate Guaranty of Applied Blockchain, Inc.

dated as of July 25, 2022 (Incorporated by reference to Exhibit 10.4 to the Company’s current report on Form 8-K (Commission File No.

001-31968), filed with the SEC on August 12, 2022).

10.27 Loan Agreement by and among APLD – Rattlesnake Den I, LLC, as borrower, Vantage Bank Texas, as lender, and the Company, as guarantor, entered into as of November 7, 2022 (Incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K (Commission File No.

001-31968), filed with the SEC on November 14, 2022).

10.28# Loan Agreement, dated as of February 16, 2023 by and among APLD ELN-01 LLC, Starion Bank, and Applied Digital Corporation as Guarantor (Incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K (Commission File No.

001-31968), filed with the SEC on February 21, 2023).

10.29# Security Agreement, dated as of February 16, 2023 by and between APLD ELN-01 LLC and Starion Bank (Incorporated by referenced to Exhibit 10.2 to the Company’s current report on Form 8-K (Commission File No.

001-31968), filed with the SEC on February 21, 2023).

10.30 Security Agreement, dated as of February 16, 2023 by and among APLD ELN-01 LLC, Applied Digital Corporation and Starion Bank (Incorporated by referenced to Exhibit 10.3 to the Company’s current report on Form 8-K (Commission File No.

001-31968), filed with the SEC on February 21, 2023).

10.31 Unlimited Commercial Corporate Guaranty of Applied Digital Corporation dated as of February 16, 2023 (Incorporated by referenced to Exhibit 10.4 to the Company’s current report on Form 8-K (Commission File No.

001-31968), filed with the SEC on February 21, 2023).

dated as of July 25, 2022.

(Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the SEC on August 12, 2022).

10.27 Loan Agreement by and among APLD - Rattlesnake Den I, LLC, as borrower, Vantage Bank Texas, as lender, and the Company, as guarantor, entered into as of November 7, 2022.

(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on November 14, 2022).

10.28# Loan Agreement, dated as of February 16, 2023 by and among APLD ELN-01 LLC, Starion Bank, and Applied Digital Corporation as Guarantor.

(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on February 21, 2023).

10.29# Security Agreement, dated as of February 16, 2023 by and between APLD ELN-01 LLC and Starion Bank.

(Incorporated by referenced to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on February 21, 2023).

10.30 Security Agreement, dated as of February 16, 2023 by and among APLD ELN-01 LLC, Applied Digital Corporation and Starion Bank.

(Incorporated by referenced to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on February 21, 2023).

10.31 Unlimited Commercial Corporate Guaranty of Applied Digital Corporation dated as of February 16, 2023.

(Incorporated by referenced to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the SEC on February 21, 2023).

10.32# Loan and Security Agreement, dated as of May 23, 2023, by and among SAI Computing, LLC as Borrower, B.

1 unchanged sentence

Riley Securities, Inc., as Lenders, B.

Riley Commercial Capital, LLC as Collateral Agent, and Applied Digital Corporation as Guarantor (Incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K (Commission File No.

001-31968), filed with the SEC on May 24, 2023).

Riley Commercial Capital, LLC as Collateral Agent, and Applied Digital Corporation as Guarantor.

(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K,filed with the SEC on May 24, 2023).

10.32.1 Termination of Loan and Security letter, dated February 5, 2024, between the Company and B.

Riley Commercial Capital, LLC and B.

Riley Securities, Inc.

(Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed with the SEC on February 5, 2024).

10.33† Form of Amendment No.

1 to Restricted Stock Unit Award.

(Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on September 28, 2023).

10.34† Form of Amendment No.

1 to Performance Stock Unit Award.

(Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the SEC on September 28, 2023).

10.35 Form of Indemnification Agreement by and between Applied Digital Corporation and individual directors or officers.

(Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q, filed with the SEC on January 16, 2024).

10.36 Unsecured Promissory Note, dated January 30, 2024, issued by the Company and payable to AI Bridge Funding LLC.

(Incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K, filed with the SEC on February 5, 2024).

10.36.1 Waiver, Consent and Amendment by and between the Company and AI Bridge Funding LLC, dated March 27, 2024.

(Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the SEC on April 1, 2024).

10.36.2 Amendment No.

2 to Unsecured Promissory Note, dated April 26, 2024, by and between Applied Digital Corporation and AI Bridge Funding LLC.

(Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed with the SEC on April 30, 2024).

Loan Agreement, dated as of February 28, 2024, by and between APLD GPU-01, LLC and Cornerstone Bank.

(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on March 5, 2024).

10.38 Security Agreement, dated as of February 28, 2024, by and between APLD GPU-01, LLC and Cornerstone Bank.

(Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on March 5, 2024).

10.39 Form of Guaranty Agreement, dated as of February 28, 2024, made by each of Applied Digital Corporation, SAI Computing, LLC and APLD Hosting, LLC in favor of Cornerstone Bank.

(Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on March 5, 2024).

10.40 Consent to Transfer Interest in Real Property Subject to Mortgage and Subordination Agreement, dated as of February 28, 2024, made by Starion Bank, in favor of APLD Hosting, LLC.

(Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the SEC on March 5, 2024).

Collateral Assignment of Customer GPU Contracts and Consent, dated as of February 28, 2024, by Applied Digital Corporation, in favor of Cornerstone Bank.

(Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed with the SEC on March 5, 2024).

10.42% Purchase and Sale Agreement, dated March 14, 2024, by and between APLD - Rattlesnake Den I LLC and Mara Garden City LLC.

(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on March 15, 2024).

10.43 Prepaid Advance Agreement by and between Applied Digital Corporation and YA II PN, LTD., dated March 27, 2024.

(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 1, 2024).

10.44 Convertible Promissory Note issued by Applied Digital Corporation and payable to YA II PN, LTD., dated March 27, 2024.

(Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on April 1, 2024).

10.45 Guaranty made by APLD-ELN-02 LLC in favor of YA II PN, LTD., dated March 27, 2024.

(Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on April 1, 2024).

10.46 Convertible Promissory Note issued by Applied Digital Corporation and payable to YA II PN, LTD., dated April 24, 2024.

(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 30, 2024).

10.47 Cooperation and Standstill Agreement, dated as of April 30, 2024, by and between Applied Digital Corporation, a Nevada Corporation, and Oasis Management Co., Ltd.

(Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed with the SEC on May 1, 2024).

10.48 Services Agreement, dated as of May 16, 2024, by and between Applied Digital Corporation and Preferred Shareholder Services, LLC.

(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on May 16, 2024).

10.49 Prepaid Advance Agreement by and between Applied Digital Corporation and YA II PN, LTD., dated May 24, 2024.

(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on May 24, 2024).

10.50 Convertible Promissory Note issued by Applied Digital Corporation and payable to YA II PN, LTD., dated May 24, 2024.

(Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on May 24, 2024).

10.51 Guaranty made by APLD-ELN-02 LLC in favor of YA II PN, LTD., dated May 24, 2024.

(Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on May 24, 2024).

10.52 Amendment by and between the Company and YA II PN, LTD., dated May 24, 2024.

(Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the SEC on May 24, 2024).

Promissory Note, dated June 7, 2024, issued by APLD Holdings 2 LLC and payable to CIM APLD Lender Holdings, LLC.

(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on June 10, 2024).

10.54 Parent Guaranty, dated June 7, 2024, issued by Applied Digital Corporation in favor of CIM APLD Lender Holdings, LLC.

(Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on June 10, 2024).

10.55% Guarantee and Collateral Agreement, dated June 7, 2024, by and among APLD Hosting, LLC, APLD ELN-01 LLC, APLD ELN-02 LLC, APLD Holdings 1 LLC, APLD Holdings 2 LLC, APLD ELN-02 Holdings LLC and CIM APLD Lender Holdings, LLC (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on June 10, 2024).

10.56 Consent, Waiver and First Amendment to Prepaid Advance Agreements, dated June 7, 2024, by and between Applied Digital Corporation and YA II PN, LTD.

(Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the SEC on June 10, 2024).

Registration Rights Agreement, dated June 7, 2024, by and between Applied Digital Corporation and CIM APLD Lender Holdings, LLC.

Security Agreement, dated June 21, 2024, by and between Applied Digital Cloud Corporation and YA II PN, LTD.

10.59 Waiver Agreement, dated August 11, 2024, by and between APLD Holdings 2 LLC and CIM APLD Lender Holdings, LLC.

(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on August 14, 2024).

Standby Equity Purchase Agreement, dated August 28, 2024, by and between Applied Digital Corporation and YA II PN, LTD.

First Amendment to the Standby Equity Purchase Agreement, dated August 29, 2024, by and between Applied Digital Corporation and YA II PN, LTD.

21.1* List of Subsidiaries.

1 unchanged sentence

24.1* Power of Attorney (contained on signature page).

Certification of Chief Executive Officer Pursuant to 18 U.S.C.

Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Financial Officer Pursuant to 18 U.S.C.

Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Executive Officer Pursuant to 18 U.S.C.

Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Financial Officer Pursuant to 18 U.S.C.

Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS* Inline XBRL Instance Document.

101.SCH* Inline XBRL Taxonomy Extension Schema Document.

101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).

31.2* Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).

32.1** Certification of Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b).

32.2** Certification of Chief Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b).

97.1*† Compensation Recovery Policy.

* Filed herewith.

** Furnished, not filed.

† Management compensatory agreement.

1 unchanged sentence

The omitted information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

% The schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5) and Item 1.01, Instruction 4 of Form 8-K.

The Registrant agrees to furnish supplementally a copy of all omitted schedules to the Securities and Exchange Commission upon its request.

Form 10-K Summary

8 unchanged sentences

Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Person Capacity Date

/s/ Wes Cummins

Chairperson of the Board and Director (Principal Executive Officer) August 2, 2023

/s/ David Rench Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) August 2, 2023

/s/ Chuck Hastings Director August 2, 2023

Chief Executive Officer and Chairman

August 30, 2024

Wes Cummins (Principal Executive Officer)

/s/ David Rench

Chief Financial Officer

August 30, 2024

David Rench (Principal Financial Officer and Principal Accounting Officer)

/s/ Chuck Hastings

Director August 30, 2024

Chuck Hastings

/s/ Kelli McDonald Director August 2, 2023

Kelli McDonald

/s/ Douglas Miller Director August 2, 2023

/s/ Douglas Miller

Director August 30, 2024

Douglas Miller

/s/ Virginia Moore Director August 2, 2023

Virginia Moore

/s/ Richard Nottenburg Director August 2, 2023

/s/ Richard Nottenburg

Director August 30, 2024

Richard Nottenburg

/s/ Rachel Lee

Director August 30, 2024

/s/ Kate Reed

Director August 30, 2024

/s/ Ella Benson

Director August 30, 2024

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures