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Item 8. Financial Statements and Supplementary Data

2026-07-29 compared with 2025-07-30 · 1140 added, 586 removed, 817 unchanged (68% of the section changed)

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Report of Independent Registered Public Accounting Firm (PCAOB ID # 199 )

Report of Independent Registered Public Accounting Firm (PCAOB ID # 688 )

R eport of Indepen dent Registered Public Acc ount ing Firm (PCAOB ID # 688 )

Consolidated Balance Sheets

6 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Applied Digital Corporation (the “Company”) as of May 31, 2025, the related consolidated statements of operations, changes in temporary equity and stockholders’ equity and cash flows for the year ended May 31, 2025, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2025, and the results of its operations and its cash flows for the year ended May 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of May 31, 2025, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our report dated July 30, 2025 , expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting because of the existence of a material weakness.

Retrospective Application of a Change in Accounting Principle

We also have audited the adjustments to the 2024 and 2023 financial statements to retrospectively apply the change in accounting due to the adoption of ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”) discussed in Note 2 and Note 16 and discontinued operations and held for sale presentation discussed in Note 2 and Note 5.

In our opinion, such adjustments are appropriate and have been properly applied.

We were not engaged to audit, review, or apply any procedures to the 2024 and 2023 financial statements of the Company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2024 and 2023 financial statements taken as a whole.

We have audited the accompanying consolidated balance sheets of Applied Digital Corporation (the “Company”) as of May 31, 2026 and 2025, the related consolidated statements of operations, changes in temporary equity and stockholders’ equity and cash flows for each of the two years in the period ended May 31, 2026, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2026 and 2025, and the results of its operations and its cash flows for each of the two years in the period ended May 31, 2026, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of May 31, 2026, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our report dated July 29, 2026 , expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Prior Period Financial Statements

The financial statements of the Company as of May 31, 2024 and for the years ended May 31, 2024 and 2023, were audited by Marcum LLP, whose report dated August 30, 2024, expressed an unmodified opinion on those statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Applied Digital Corporation

To the Stockholders and Board of Directors of Applied Digital Corporation

Opinion on the Financial Statements

We have audited, before the effects of the retrospective adjustments for the adoption of ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”) discussed in Note 2 and Note 16 and discontinued operations and held for sale presentation discussed in Note 2 and Note 5 to the consolidated financial statements, the accompanying consolidated balance sheet of Applied Digital Corporation (the “Company”) as of May 31, 2024, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended May 31, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the 2024 and 2023 financial statements, before the effects of the retrospective adjustment for the adoption of ASU 2023-07 discussed in Note 2 and Note 16 and discontinued operations and held for sale presentation discussed in Note 2 and Note 5, the financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2024, and the results of its operations and its cash flows for each of the two years in the period ended May 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to audit, review, or apply any procedures to the retrospective adjustments for the adoption of ASU 2023-07 discussed in Note 2 and Note 16 and discontinued operations and held for sale presentation discussed in Note 2 and Note 5 to the consolidated financial statements, and accordingly, we do not express an opinion or any other form of assurance about whether such retrospective adjustments are appropriate and have been properly applied.

Those retrospective adjustments were audited by CBIZ CPAs, P.C.

We have audited the consolidated statements of operations, changes in stockholders’ equity and cash flows of Applied Digital Corporation (the “Company”) for the year ended May 31, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the results of the Company’s operations and its cash flows for the year ended May 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Marcum LLP

We have served as the Company’s auditor since 2021 through June 18, 2025.

We have served as the Company’s auditor from 2021 to 2025.

August 30, 2024

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Restricted cash 2,381,027 72,368

Funds for construction

Letters of credit

31,342 21,349

Accounts receivable 56,309 6,830

Prepaid expenses and other current assets (1)

613,692 9,652

Current assets held for sale 19,841 —

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Current portion of debt 16,422 10,331

Current portion of debt, at fair value

Customer deposits 16,752 16,125

Related party customer deposits — 1,549

Deferred revenue 4,666 3,594

Related party deferred revenue — 1,692

Due to customer 4,807 13,002

Current liabilities held for sale 7,426 —

216,047 336,423

Due to customer 10,065 4,807

Other current liabilities 97,489 19,431

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4,959,516 677,825

Other long-term liabilities 5,454 —

Total liabilities 6,185,735 1,236,365

1 unchanged sentence

Temporary equity

Series E preferred stock, 0.001 par value, 2,000,000 shares authorized, 301,673 shares issued and outstanding at May 31, 2025, and no shares authorized, issued or outstanding at May 31, 2024

Series E-1 preferred stock, $ 0.001 par value, 62,500 shares authorized, 62,500 shares issued and 62,485 shares outstanding at May 31, 2025, and no shares authorized, issued or outstanding at May 31, 2024

Series G preferred stock, 0.001 par value, 156,000 shares authorized, 78,000 shares issued and outstanding at May 31, 2025, and no shares authorized, issued or outstanding at May 31, 2024

Series E preferred stock, $ 0.001 par value, 2,000,000 shares authorized, 301,673 shares issued and 276,673 outstanding at May 31, 2026, and 301,673 shares issued and outstanding at May 31, 2025

Series E-1 preferred stock, $ 0.001 par value, 62,500 shares authorized and issued and 61,909 shares outstanding at May 31, 2026, and 62,485 shares outstanding at May 31, 2025

56,460 57,011

Series G preferred stock, $ 0.001 par value, 1,030,000 shares authorized, no shares issued and outstanding at May 31, 2026, and 156,000 shares authorized, 78,000 shares issued and outstanding at May 31, 2025

Redeemable noncontrolling interest 1,956,303 —

Stockholders' equity:

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Total stockholders’ equity attributable to Applied Digital Corporation 1,717,476 497,688

Noncontrolling interest 7,032 —

Total stockholders' equity including noncontrolling interest 1,724,508 497,688

TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY $ 9,929,312 $ 1,870,090

(1) Includes a related party loan receivable of $ 58.6 million as of May 31, 2026.

See Note 7 - Related Party Transactions for further discussion.

See accompanying notes to the consolidated financial statements

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May 31, 2026 May 31, 2025 May 31, 2024

Revenue $ 142,267 $ 121,857 $ 40,984

Services revenue $ 496,609 $ 226,643 $ 150,814

Data center rental and other revenue 114,702 — —

Related party revenue — 1,926 14,761

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Costs and expenses:

Cost of revenues 101,451 106,653 44,388

Services cost of revenue 396,858 216,759 148,340

Data center rental and other cost of revenue 56,771 — —

Selling, general and administrative (1)

332,096 107,877 97,776

(Gain) loss on classification as held for sale (2)

Loss (gain) on classification as held for sale (2)

59,650 ( 24,616 ) 15,417

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29,516 32,139 27,517

Gain on change in fair value of derivatives ( 75,818 ) — —

Gain on change in fair value of investments ( 10,840 ) — —

Loss on conversion of debt — 33,612 —

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Net loss from continuing operations before income tax expenses ( 181,532 ) ( 230,963 ) ( 149,575 )

( 158,233 ) ( 74,280 ) ( 45,011 )

Income tax expense (benefit) 102 96 ( 523 )

Income tax expense 1,787 102 96

Net loss from continuing operations ( 183,319 ) ( 231,065 ) ( 149,671 )

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Net loss ( 184,339 ) ( 231,065 ) ( 149,671 )

Net loss attributable to noncontrolling interest — ( 397 ) ( 960 )

Net loss attributable to noncontrolling interest and redeemable noncontrolling interest ( 59,665 ) — ( 397 )

Preferred dividends ( 6,259 ) ( 2,615 ) —

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Discontinued operations ( 1,020 ) — —

$ ( 233,680 ) $ ( 149,274 ) $ ( 44,646 )

Net loss attributable to common stockholders $ ( 250,263 ) $ ( 233,680 ) $ ( 149,274 )

Basic and diluted net loss per share attributable to common stockholders

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Discontinued operations — — —

Basic and diluted net loss per share $ ( 1.16 ) $ ( 1.31 ) $ ( 0.47 )

Basic and diluted net loss per share attributable to common stockholders $ ( 0.91 ) $ ( 1.16 ) $ ( 1.31 )

Basic and diluted weighted average number of shares outstanding 275,194,755 201,194,451 114,061,414

(1) Includes related party selling, general and administrative expense of $ 0.3 million, $ 0.3 million, and $ 0.6 million for the fiscal years ended May 31, 2026, May 31, 2025, and May 31, 2024, respectively .

(2) Includes $ 25 million received in connection with the sale of our Garden City facility once conditional approval requirements were met and escrowed funds were released during the fiscal years ended May 31, 2025.

The fiscal year ended May 31, 2024 includes $ 15.4 million loss on classification of held for sale related to the sale of the Garden City facility.

(3) For the fiscal years ended May 31, 2024 and May 31, 2023, amount includes related party interest expense of $ 5.7 million and $ 0.1 million, respectively.

(2) For the fiscal year ended May 31, 2026, amount includes a loss on classification of held for sale of $ 59.7 million representing the write down of our cloud services business' (the “ Cloud Services Business ”) assets to their carrying value as of February 15, 2026 when it no longer qualified as held for sale.

For the fiscal year ended May 31, 2025, amount includes $ 25 million received in connection with the sale of our Garden City facility once conditional approval requirements were met and escrowed funds were released.

The fiscal year ended May 31, 2024 includes a $ 15.4 million loss on classification of held for sale related to the sale of the Garden City facility.

(3) For the fiscal year ended May 31, 2026, amount includes related party income of $ 0.1 million and for the fiscal year ended May 31, 2024, amount includes related party interest expense of $ 5.7 million.

See accompanying notes to the consolidated financial statements and, specifically, Note 7 - Related Party Transactions for further discussion of related party transactions.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Temporary Equity and Stockholders' Equity

For the Years Ended May 31, 2025, 2024, and 2023

Consolidated Statements of Changes in Stockholders' Equity

For the Year Ended May 31, 2024

(In thousands, except per share data)

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Balance, June 1, 2023 100,927,358 $ 101 ( 5,001,728 ) $ ( 62 ) $ 160,194 $ ( 100,716 ) $ 59,517 $ 10,162 $ 69,679

97,837,703 $ 98 ( 36,296 ) $ ( 62 ) $ 128,293 $ ( 56,070 ) $ 72,259 $ 6,976 $ 79,235

Issuance of common stock from stock plans 3,089,655 3 — — ( 3 ) — — — —

Tax payments for restricted stock upon vesting — — — — ( 168 ) — ( 168 ) — ( 168 )

Stock-based compensation — — — — 32,072 — 32,072 — 32,072

Capital contribution to noncontrolling interest — — — — — — — 4,146 4,146

Common stock forfeited — — ( 4,965,432 ) — — — — — —

Net loss — — — — — ( 44,646 ) ( 44,646 ) ( 960 ) ( 45,606 )

Balance, May 31, 2023 100,927,358 101 ( 5,001,728 ) ( 62 ) 160,194 ( 100,716 ) 59,517 10,162 69,679

Shares issued in offering, net of costs 21,600,722 23 — — 130,826 — 130,849 — 130,849

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Consolidated Statements of Changes in Temporary Equity and Stockholders' Equity (continued)

For the Years Ended May 31, 2025, 2024, and 2023

For the Year Ended May 31, 2025

(In thousands, except per share data)

Temporary Equity Permanent Equity

Preferred Stock Series F

Preferred Stock Series E-1

Preferred Stock Series G

Preferred Stock Common Stock Treasury Stock Additional

Temporary Equity (1)

Permanent Equity

Preferred Stock Common Stock Treasury Stock Additional Paid in Capital

Stockholders’

Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

Shares Amount Shares Amount Shares Amount

Balance, June 1, 2024

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442,158 $ 136,037 234,200,868 $ 230 ( 9,291,199 ) $ ( 31,400 ) $ 1,009,913 $ ( 481,055 ) $ 497,688

(1) See Note 16 - Temporary Equity for further discussion of preferred stock activity.

See accompanying notes to the consolidated financial statements

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Temporary Equity and Stockholders' Equity (continued)

For the Year Ended May 31, 2026

(In thousands, except per share data)

Temporary Equity (1)

Permanent Equity

Preferred Stock Redeemable Noncontrolling Interest Common Stock Treasury Stock Additional

Paid in Capital

Stockholders’

Noncontrolling Interest Total Equity

Shares Amount Shares Amount Shares Amount

Balance, June 1, 2025 442,158 $ 136,037 $ — 234,200,868 $ 230 ( 9,291,199 ) $ ( 31,400 ) $ 1,009,913 $ ( 481,055 ) $ 497,688 $ — $ 497,688

Issuance of common stock from stock compensation plans — — — 3,024,358 4 — — ( 4 ) — — — —

Tax payments for restricted stock upon vesting — — — — — — — ( 36,282 ) — ( 36,282 ) — ( 36,282 )

Issuance of Preferred Stock, net of costs 835,800 803,101 — — — — — — — — — —

Conversion of Preferred Stock ( 913,800 ) ( 875,185 ) — 50,994,315 50 — — 875,135 — 875,185 — 875,185

Redemption of Preferred Stock ( 25,576 ) ( 1,187 ) — — — — — — — — — —

Preferred Stock dividends — — — — — — — ( 6,260 ) — ( 6,260 ) — ( 6,260 )

Shares issued in offering, net of costs — — — 15,320,373 15 — — 190,402 — 190,417 — 190,417

Issuance of warrants, at fair value, net of costs — — — — — — — 155,421 — 155,421 — 155,421

Exercise of warrants — — — 800,188 1 — — 6,264 — 6,265 — 6,265

Treasury Stock repurchase — — — — — ( 7,165,300 ) ( 52,737 ) 52,737 — — — —

Treasury Stock retirement — — — ( 9,291,199 ) ( 4 ) 9,291,199 31,400 ( 31,396 ) — — — —

Contributions from redeemable noncontrolling interest, net of costs — — 1,896,244 — — — — — — — — —

Acquisition of Ekso Business — — — — — — — 52,269 — 52,269 4,604 56,873

Issuance of warrants by subsidiary, net of costs — — — — — — — 1,630 — 1,630 2,822 4,452

Redeemable noncontrolling interest preferred stock dividends — — 62,726 — — — — ( 62,726 ) — ( 62,726 ) — ( 62,726 )

Stock-based compensation — — — — — — — 225,147 — 225,147 — 225,147

Net loss — — ( 2,667 ) — — — — — ( 181,278 ) ( 181,278 ) ( 394 ) ( 181,672 )

Balance, May 31, 2026 338,582 $ 62,766 $ 1,956,303 295,048,903 $ 296 ( 7,165,300 ) $ ( 52,737 ) $ 2,432,250 $ ( 662,333 ) $ 1,717,476 $ 7,032 $ 1,724,508

(1) See Note 16 - Temporary Equity for further discussion of preferred stock and redeemable noncontrolling interest activity .

See accompanying notes to the consolidated financial statements

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows (in thousands)

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Net loss $ ( 184,339 ) $ ( 231,065 ) $ ( 149,671 )

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization 67,387 97,945 79,360

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Lease expense 10,106 31,661 13,944

Deferred income taxes — — ( 540 )

Gain on change in fair value of derivatives ( 75,818 ) — —

Gain on change in fair value of investments ( 10,840 ) — —

Loss on extinguishment of debt — 1,177 —

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Amortization of debt issuance costs 6,323 9,563 5,214

(Gain) loss on classification of held for sale

( 24,616 ) 15,417 —

Loss (gain) on classification of held for sale 59,650 ( 24,616 ) 15,417

Loss on conversion of debt — 33,612 —

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Lease assets and liabilities 17,513 ( 7,524 ) ( 47,479 )

CASH FLOW (USED IN) PROVIDED BY OPERATING ACTIVITIES ( 115,402 ) 13,794 58,735

CASH FLOW FROM INVESTING ACTIVITIES

CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES 89,685 ( 115,402 ) 13,794

CASH FLOW USED IN INVESTING ACTIVITIES

Purchases of property and equipment and other assets ( 2,865,765 ) ( 681,603 ) ( 141,809 )

Proceeds from sale of investments 5,000 — —

Proceeds from sale of assets — 25,000 19,852

Finance lease prepayments — ( 6,178 ) ( 50,089 )

Loans to related parties ( 58,632 ) — —

Purchases of investments ( 17,000 ) ( 4,873 ) ( 391 )

CASH FLOW USED IN INVESTING ACTIVITIES ( 2,936,397 ) ( 667,654 ) ( 172,437 )

CASH FLOW FROM FINANCING ACTIVITIES

CASH FLOW PROVIDED BY FINANCING ACTIVITIES

Repayment of finance leases ( 99,455 ) ( 125,073 ) ( 59,967 )

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Payment of deferred financing costs ( 171,885 ) ( 42,398 ) ( 320 )

Payment of related party deferred financing costs — — ( 1,548 )

Tax payments for restricted stock upon vesting ( 36,282 ) ( 4,116 ) ( 861 )

3 unchanged sentences

Preferred stock issuance costs ( 11,897 ) ( 13,812 ) —

Redemption of preferred stock ( 1,187 ) ( 2,615 ) —

Dividends issued on preferred stock ( 6,259 ) — —

Issuance of warrants, at fair value ( 8,250 ) — —

Exercise of warrants 6,265 — —

Issuance of warrants by subsidiary 4,451 — —

Proceeds from issuance of SAFE agreement included in long-term debt — 12,000 —

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Purchase of prepaid forward contract — ( 52,736 ) —

Noncontrolling interest contributions — — 4,146

Redeemable noncontrolling interest contributions 1,825,000 — —

Redeemable noncontrolling interest issuance costs ( 62,904 ) — —

CASH FLOW PROVIDED BY FINANCING ACTIVITIES $ 6,876,826 $ 874,686 $ 146,757

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CASH, CASH EQUIVALENTS, AND RESTRICTED CASH FROM DISCONTINUED OPERATIONS 2 — —

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH FROM CONTINUING OPERATIONS $ 120,920 $ 31,688 $ 43,574

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH FROM CONTINUED OPERATIONS $ 4,153,430 $ 123,318 $ 31,688

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

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Conversion of preferred stock to common stock $ 875,185 $ 48,350 $ —

Consideration for guarantee of an affiliate's obligations $ 2,000 $ — $ —

Loss on legal settlement $ — $ — $ 2,380

Issuance of warrants, at fair value $ 104,705 $ 136,292 $ 5,696

Conversion of warrants $ 5 $ — $ —

Cashless exercise of warrants $ 1 $ 5 $ —

Non-cash dividends paid in-kind $ 62,726 $ — $ —

Acquisition of ChronoScale $ 18,110 $ — $ —

See accompanying notes to the consolidated financial statements

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For the Fiscal Year Ended May 31, 2026

Business and Organization

Applied Digital Corporation (the “Company”), is a designer, builder, and operator of digital infrastructure providing cost-competitive solutions to customers.

Business and Basis of Presentation

Applied Digital Corporation (the “Company”) is a designer, builder, and operator of high-performance, sustainably engineered data centers and colocation services for artificial intelligence, cloud, networking, and blockchain workloads.

The Company has two reportable segments.

Financial information for each segment is contained in Note 19 - Business Segments .

Previously, the Company had three reportable segments as of the fiscal quarter ended February 28, 2026.

Following the May 2026 transaction as defined in Note 3 - Business Combination , ChronoScale no longer meets the criteria to be considered a reportable segment as its operating results are managed and evaluated by ChronoScale's Chief Operating Decision Maker ("CODM") rather than the Company's CODM (as described below).

All references to “Applied Digital Corporation,” “we,” “us,” “our” or the “Company” mean Applied Digital Corporation and its subsidiaries.

Basis of Presentation and Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements of the Company include the accounts of the Company and its wholly owned and controlled subsidiaries.

Intercompany investments, balances and transactions have been eliminated in the consolidated financial statements.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

The consolidated financial statements include the accounts of the Company, its subsidiaries and investment products that are consolidated.

The Company evaluates any variable interest entity ("VIE") in which the Company has a variable interest for consolidation.

A VIE is an entity in which either (i) the equity investment at risk is not sufficient to permit the entity to finance its own activities without additional financial support, or (ii) where, as a group, the holders of the equity investment at risk do not possess any one of the following:

(a) the power through voting or similar rights to direct the activities that most significantly impact the entity's economic performance, (b) the obligation to absorb expected losses or the right to receive expected residual returns of the entity, or (c) proportionate voting and economic interests and where substantially all of the entity's activities either involve or are conducted on behalf of an investor with disproportionately fewer voting rights.

If an entity has any of these characteristics, it is considered a VIE and is required to be consolidated by its primary beneficiary.

The primary beneficiary is the entity that has both the power to direct the activities that most significantly impact the VIE's economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE.

In evaluating whether the Company is the primary beneficiary, the Company evaluates its power to direct the most significant activities of the VIE by considering the purpose and design of the entity and the risks the entity was designed to create and pass through to its variable interest holders.

A voting interest entity ("VOE") is consolidated when the Company is considered to have a controlling financial interest, which is typically present when the Company owns a majority of the voting interest in an entity or otherwise has the power to govern the financial and operating policies of the entity.

See Note 11 - Variable Interest Entities for additional information related to the consolidation of investments.

Intercompany accounts and transactions have been eliminated.

Significant Accounting Policies

Significant Accounting Policies and Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenue and expenses during the reporting periods.

On an on-going basis, we evaluate our estimates, including those related to stock-based compensation, specifically the likelihood of timing and achievement of performance conditions to our performance stock units, and contingencies.

Although these estimates are based on historical facts and various other assumptions that we believe are reasonable, actual results could differ from those estimates.

On an on-going basis, the Company evaluates its estimates, including those related to stock-based compensation, specifically the likelihood of timing and achievement of performance conditions to its performance stock units, contingencies, and those related to the fair value of warrants and the fair value of the redeemable noncontrolling interest.

Although these estimates are based on historical facts and various other assumptions that the Company believes are reasonable, actual results could differ from those estimates.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers.

Data Center Hosting Revenue

The Company recognizes revenue associated with its data center hosting in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers ("ASC 606").

The Company provides energized space to customers who locate their hardware within the Company’s co-hosting facility.

Performance obligations are achieved over the term of the agreements by providing the hosting environment for the customer's operations.

Customers pay a fixed rate to the Company in exchange for a managed hosting environment supported by customer-provided equipment.

Performance obligations are achieved simultaneously by providing the hosting environment for the customers’ operations.

Customers pay a fixed rate to the

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

Company in exchange for a managed hosting environment supported by customer-provided equipment.

Revenue is recognized based on the contractual fixed rate, net of any credits for non-performance, over the term of the agreements.

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All advanced service payments are recorded as deferred revenue and are recognized as revenue once the related service is provided.

HPC Hosting Revenue

The Company generates HPC hosting revenue by leasing its properties to customers under operating lease agreements, which are accounted for under ASC 842, Leases (“ASC 842”).

The Company recognize the total minimum lease payments provided for under the leases on a straight-line basis over the lease term if the Company determines it is probable that substantially all of the lease payments will be collected over the lease term.

The Company commences recognition of revenue from rentals at the date the property is ready for its intended use by the tenant and the tenant takes possession or controls the physical use of the leased asset.

The excess of rents recognized as revenue over amounts contractually due pursuant to the underlying leases is included in Other assets on the consolidated balance sheets.

Rental payments received in excess of revenue recognized are classified as Deferred revenue on the consolidated balance sheets.

Generally, under the terms of the Company's leases, the majority of its rental expenses, including power costs, are recovered from its customers.

The Company records amounts reimbursable by customers (“tenant recoveries”) as revenue in the period the applicable expenses are incurred – which is generally on a ratable basis through the term of the lease.

The Company accounts for and presents rental revenue and tenant recoveries as a single component under Data center rental and other revenue on the consolidated statements of operations as the timing of recognition is the same, the pattern with which the Company transfers the right of use of the property and related services to the lessee are both on a straight-line basis and its leases qualify as operating leases.

Interconnection services include port and cross-connect services generally provided on terms that align with the respective lease term.

The Company bills for these services on a monthly basis and recognize the revenue over the period the service is provided.

Revenue for cross-connect installations is generally recognized in the period the cross-connect is installed.

The Company also generates HPC hosting revenue by providing tenant fit-out services including the procurement and installation of customer equipment provided in accordance with the terms of the agreement with the customer.

Under these arrangements, the Company is entitled to reimbursement of costs incurred plus a contractual markup.

In the course of providing its services, the Company routinely subcontracts for services and incurs other direct costs which are recognized, with margin, as revenue.

The Company recognizes tenant fit-out services revenue as the related procurement and installation services are performed and costs are incurred.

The Company utilizes the practical expedient in ASC 842 that allows it to account for lease and non-lease components associated with each lease as a single lease component recorded within revenue, instead of accounting for such items separately under ASC 606.

The Company began recognizing revenue associated with certain of its data center leases as accounted for under ASC 842 in the second quarter of the current fiscal year.

See Note 17 - Leases for further information.

ChronoScale Revenue

Revenue associated with ChronoScale is accounted for under ASC 606.

ChronoScale, a VOE consolidated by the Company in accordance with ASC 810, provides managed cloud infrastructure services to customers, such as artificial intelligence and machine learning developers, to help develop their advanced products.

Customers pay a fixed rate to ChronoScale in exchange for managed cloud services supported by provided equipment.

Revenues are recognized based on the fixed rate, net of any credits for non-performance, over the term of the agreements.

Fair Value Measurements

Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability.

As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

Assets and liabilities are classified using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value as follows:

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Unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2025

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities, customer deposits, amounts due to customer and other current liabilities are considered to be representative of their respective fair values principally due to their short-term maturities.

The carrying values of variable rate borrowings approximate fair value due to the variable nature of the interest rates and the frequency of interest rate resets.

The Company has identified two reportable segments:

data center hosting (“Data Center Hosting Business”) and high-performance compute hosting (“HPC Hosting Business”).

These segments represent management's view of the business for which separate financial information is available and evaluated regularly by the Chief Operating Decision Maker (CODM), which is the Company’s Chief Executive Officer.

These segments represent management's view of the business for which separate financial information is available and evaluated regularly by the CODM, which is the Company’s Chief Executive Officer.

Prior to the May 2026 transaction, the Company identified its Cloud Services Business as a reportable segment.

Following the May 2026 transaction, pursuant to which the Cloud Services Business was contributed to Ekso Bionics Holdings, Inc.

and became part of ChronoScale, ChronoScale is consolidated in the Company's financial statements;

however, it is not an operating or reportable segment because its activities are managed by a separate management team and its operating results are not regularly reviewed by the Company's CODM for purposes of resource allocation and performance assessment.

The Company's CODM evaluates performance and makes operating decisions primarily based on revenue and segment profit (loss), on a consolidated basis and for each of the Company's reportable segments.

Operating results by segment include costs or expenses directly attributable to each segment, which include selling, general, and administrative expenses, (gain) loss on classification of held for sale, (gain) loss on sale of assets, and (gain) loss from legal settlement.

The Company does not allocate loss on conversion of debt, loss on change in fair value of debt, loss on change in fair value of related party debt, loss on change in fair value of warrants, loss on change in fair value of related party warrants, loss on legal settlement, or income tax expense to these segments for internal reporting purposes, as the Company does not believe that allocating these expenses is beneficial in evaluating segment performance.

Operating results by segment include costs or expenses directly attributable to each segment, which include selling, general, and administrative expenses, loss (gain) on classification of held for sale, loss on abandonment of assets, and loss from legal settlement.

The Company does not allocate interest expense, net, gain on change in fair value of derivatives, gain on change in fair value of investments, loss on conversion of debt, loss on change in fair value of debt, loss on change in fair value of related party debt, loss on extinguishment of debt, loss on extinguishment of related party debt, loss on change in fair value of warrants, loss on change in fair value of related party warrants or income tax expense to these segments for internal reporting purposes, as the Company does not believe that allocating these expenses is beneficial in evaluating segment performance.

The Data Center Hosting Business operates data centers to provide energized space to crypto mining customers.

Customer-owned hardware is installed in the Company’s facilities and the Company provides operational and maintenance services for a fixed fee.

The HPC Hosting Business designs, builds, and operates data centers which are designed to support high-compute applications using advanced technologies and sophisticated infrastructures to provide services to customers.

The Company's HPC Hosting Business designs, constructs, and operates next-generation data centers, which are designed to provide massive computing power and support HPC applications within a cost-effective model.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

Investments in equity securities

The Company’s long-term investments include equity securities without readily determinable fair values and equity securities with readily determinable fair values.

These investments are presented within Other assets on the consolidated balance sheets.

Equity securities without readily determinable fair values

The Company invests in equity securities, which are accounted for in accordance with ASC 321, Investments - Equity Securities ("ASC 321").

Equity securities are measured at fair value, with changes in fair value recognized within gain (loss) on change in fair value of investments on the consolidated statement of operations.

For equity securities without readily determinable fair values, the Company has elected the measurement alternative, recording these investments at cost minus impairment, adjusted for observable price changes.

Quarterly, the Company performs a qualitative assessment for impairment of equity securities without readily determinable fair values.

If impairment is indicated, the investment is written down to fair value through earnings.

Equity investments with readily determinable fair values

The Company accounts for certain of its investments in equity securities of publicly traded companies in accordance with ASC 321.

The Company records all equity investments with readily determinable fair values at fair value calculated by the publicly traded stock price at the close of the reporting period within gain on change in fair value of investments on the consolidated statement of operations.

For further discussion of the Company’s investments in equity securities, see Note 7 - Related Party Transactions, Note 9 - Balance Sheet Components , and Note 10 - Derivative Assets .

Redeemable Noncontrolling Interest

The Company determined for the redeemable noncontrolling interest, the initial amount presented in temporary equity should be the initial carrying amount of the redeemable noncontrolling interest pursuant to ASC 805-20-30.

Under ASC 805-20-30, noncontrolling interests are initially measured at fair value at the acquisition date.

However, as the redeemable noncontrolling interest has embedded features that require bifurcation, the fair value at issuance must be allocated between the components.

The Company initially measured the redeemable noncontrolling interest by first allocating the proceeds from the offering to the derivatives and, with the residual net proceeds allocated to the temporary equity classified redeemable noncontrolling interest and the warrants based on their respective relative fair values.

The Company will not subsequently remeasure the temporary equity classified redeemable noncontrolling interest until it is probable that the redeemable noncontrolling interest will become redeemable.

However, the redeemable noncontrolling interest balance will be adjusted for the attribution of net income or loss of the Subsidiary to the redeemable noncontrolling interest holder as prescribed by ASC 810.

Noncontrolling Interest

The Company accounts for investments in entities where it has control over the entity by consolidating the entities’ assets, liabilities and results of operations and including them in the Company’s consolidated financial statements.

The share of the investment not owned by the Company is reflected in noncontrolling interest in the consolidated balance sheets.

The Company recognizes the share of net income (loss) not attributable to the Company in net income (loss) attributable to noncontrolling interest in the consolidated statements of operations.

Noncontrolling interest represents the portion of equity interests in ChronoScale that is not owned by the Company.

Reclassification

Income Statement

We have reclassified certain prior period amounts in our consolidated statements of operations to conform to our current period presentation.

Specifically, we have reclassified certain amounts of "Loss on change in fair value of related party debt" to "Loss on change in fair value of related party warrants." Additionally, we have reclassified certain amounts of “Selling, general and administrative” expenses to “Interest expense, net.”

This reclassification has no impact on reported net loss or cash flows.

Cash, Cash Equivalents, and Restricted Cash

The Company’s restricted cash balances consist of funds for construction and letters of credit.

The funds for construction are held in a construction reserve account to fund the construction of the Company’s 400 MW Ellendale, North Dakota data center campus ("Polaris Forge 1"), in accordance with the SMBC Credit Agreement (as defined below).

See further discussion in "Note 7 - Debt" .

Additionally, the Company has letters of credit totaling $ 38.3 million presented on our consolidated balance sheets within restricted cash and other assets.

The Company is required to keep these balances, which are held in money market funds, in separate accounts for the duration of the letter of credit agreements, which have terms of up to two years .

The letters of credit were issued in lieu of security deposits.

The Company considers the money market funds to be Level 1 which approximates fair value.

During the quarter ended February 28, 2026, the Company determined that the Cloud Services Business no longer qualified for held-for-sale and discontinued operations accounting after entering into the Contribution and Exchange Agreement with Ekso Bionics Holdings, Inc.

See Note 3 - Business Combination for further discussion.

As a result, the business was reclassified to continuing operations, with its assets and liabilities returned to their respective held-and-used balance sheet line items and prior-period financial statements retrospectively revised to reflect this presentation.

In accordance with ASC 360, the Company remeasured the long-lived assets and recorded a $ 59.7 million loss to adjust the assets to their carrying value as of February 15, 2026, when the held-for-sale criteria were no longer met.

The reclassification affected the

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

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For the Fiscal Year Ended May 31, 2026

presentation of revenues, earnings, cash flows, assets, and liabilities across all periods presented but did not materially impact previously reported net income, total assets, or equity.

Additionally, the Company reclassified certain prior period amounts in its consolidated balance sheets to conform to the current period presentation.

Specifically, certain amounts in “Property and equipment, net” have been classified to “Other assets”.

Additionally, amounts previously presented as "Restricted cash - funds for construction" and "restricted cash - letters of credit" have been presented as "Restricted cash".

These reclassifications have no impact on total assets or cash flows.

Also during the fiscal year 2026, the Company revised the presentation of revenue and cost of revenue within the consolidated statements of operations to separately present services revenue and cost of revenue and data center rental and other revenue and cost of revenue.

Prior period amounts have been reclassified to conform to the current period presentation.

These presentation changes had no impact on previously reported total revenue, total cost of revenue, or net loss.

Cash, Cash Equivalents, and Restricted Cash

The Company’s restricted cash balances consisted of debt service reserves and letters of credit secured by cash.

The debt service reserves are held in separate accounts and are to be used to fund interest and principal on the Senior Secured Notes (as defined below) during construction.

See further discussion in Note 8 - Debt.

Additionally, the Company has letters of credit secured by cash totaling $ 10.5 million and $ 38.3 million, as of May 31, 2026 and May 31, 2025, respectively, presented on its consolidated balance sheets within restricted cash.

The Company is required to keep these balances, which are held in money market funds, in separate accounts for the duration of the letter of credit agreements, which have terms of up to two years .

The letters of credit secured by cash were issued in lieu of security deposits.

The Company considers the money market funds to be Level 1 which the Company believes approximates fair value.

Cash, cash equivalents, and restricted cash within the consolidated balance sheets that are included in the consolidated statements of cash flows as of May 31, 2026 and May 31, 2025 were as follows (in thousands):

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Cash and cash equivalents $ 1,591,988 $ 43,950

Restricted cash - funds for construction

Restricted cash - letters of credit

Restricted cash (1)

2,381,027 72,368

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Total Cash, Cash Equivalents, and Restricted Cash $ 4,153,430 $ 123,318

(1) Presented as restricted cash - funds for construction and restricted cash - letters of credit on the balance sheet in the prior fiscal year.

Property and Equipment

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Once an asset is identified for retirement or disposition, the related cost and accumulated depreciation or amortization are removed, and a gain or loss is included in earnings.

Depreciation expense includes the amortization of assets recorded in association with our leases.

Leasehold improvements and assets recorded in association with our leases are amortized over the shorter of the expected lease term or the estimated useful life of the asset.

Construction in progress represents assets received but not placed into service as of May 31, 2025.

Depreciation expense includes the amortization of assets recorded in association with the Company's leases.

Leasehold improvements and assets recorded in association with the Company's leases are amortized over the shorter of the expected lease term or the estimated useful life of the asset.

Construction in progress represents assets received but not placed into service as of the fiscal years ended May 31, 2026 and May 31, 2025.

Impairment or Disposal of Long-Lived Assets

Our long-lived assets are reviewed for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

We also evaluate the period of depreciation and amortization of long-lived assets to determine whether events or circumstances warrant revised estimates of useful lives.

When indicators of impairment are present, we determine the recoverability of our long-lived assets by comparing the carrying value of our long-lived assets to future undiscounted net cash flows expected to result from the use of the assets and their eventual disposition.

If the estimated future undiscounted cash flows demonstrate the long-lived assets are not recoverable, an impairment loss would be calculated based on the excess of the carrying amounts of the long-lived assets over their fair value.

The Company's long-lived assets are reviewed for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

The Company also evaluates the period of depreciation and amortization of long-lived assets to determine whether events or circumstances warrant revised estimates of useful lives.

When indicators of impairment are present, the Company determines the recoverability of its long-lived assets by comparing the carrying value of its long-lived assets to future undiscounted net cash flows expected to result from the use of the assets and their eventual disposition.

If the estimated future undiscounted cash flows demonstrate the long-lived assets are not recoverable, an impairment loss would be calculated based on the excess of the carrying

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

amounts of the long-lived assets over their fair value.

The Company’s estimates of fair values are based on the best information available and require the use of estimates, judgments, and projections.

The Company recorded impairment expense on long-lived assets of $ 0.5 million and $ 0.2 million for the fiscal years ended May 31, 2024 and 2023, respectively.

The Company recorded impairment expense on long-lived assets of $ 0.5 million for the fiscal year ended May 31, 2024.

There was no impairment expense on long-lived assets for the fiscal years ended May 31, 2026 and May 31, 2025.

Assets Held For Sale

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Property classified as held for sale is no longer depreciated and is reported at the lower of its carrying value or its estimated fair value less estimated costs to sell in accordance with ASC 360, Property, Plant and Equipment - Impairment or Disposal of Long-Lived Assets .

As of May 31, 2025, the Company deemed its Cloud Services Business met the held for sale criteria and was classified as such on the consolidated balance sheet .

As of May 31, 2026, the Ekso business at ChronoScale met the held for sale criteria and was classified as such on the consolidated balance sheet (see Note 6 - Discontinued Operations ).

Discontinued Operations

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(i) the disposal group is a component of the Company, (ii) the component meets the held-for-sale criteria, and (iii) the disposal of the component represents a strategic shift that has a major effect on the Company's operations and financial results.

As of May 31, 2025, the Company deemed its Cloud Services Business to be discontinued operations due to the disposal group meeting all three criteria.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2025

Lease Accounting

As of May 31, 2026, the Ekso business at ChronoScale was deemed to be discontinued operations due to the disposal group meeting all three criteria (see Note 6 - Discontinued Operations ).

Accounts Receivable and Loans Receivable

Accounts receivable are primarily comprised of billed and unbilled receivables for which the Company has an unconditional right to consideration and the performance obligations have been satisfied.

Accounts receivable are recorded at the invoiced amount, net of an allowance for credit losses recognized in accordance with the current expected credit loss ("CECL") model under ASC 326, Financial Instruments - Credit Losses ("ASC 326") .

The Company periodically provides financing arrangements to strategic partners and related parties.

Loans receivable are recorded at amortized cost, net of an allowance for credit losses recognized in accordance with the CECL model under ASC 326.

The allowance for expected credit losses reflects management’s estimate of lifetime expected credit losses on accounts receivable and loans receivable.

The Company bases its estimate on multiple factors, including historical experience with bad debts, the Company's relationship with its counterparties and their credit quality, the aging of respective asset balances, current macroeconomic conditions, and management's reasonable and supportable forecasts of future economic conditions that may affect collectibility.

The allowance for credit losses is reassessed each reporting period, with changes in expected credit losses recognized in earnings.

The Company writes off accounts receivable and loans receivable in the period when the likelihood of collection of a balance is considered remote.

For the years ended May 31, 2026 and May 31, 2025 there was no allowance for credit losses recorded in the consolidated balance sheets.

The amount of current expected credit losses recorded in the consolidated statements of operations was $ 9.5 million for the year ended May 31, 2025.

There was no current expected credit losses recorded for the years ended May 31, 2026 and May 31, 2024.

The loss recorded in the year ended May 31, 2025 was due to a trade receivable write-off from a former customer of the Cloud Services Business.

Lessee Accounting

The Company determines whether an arrangement contains a lease at the inception of the arrangement.

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For leases with renewal periods or early terminations at the Company’s option, the Company determines the expected lease term based on whether the exercise of any renewal option or early termination is reasonably certain at the inception of the lease.

At the commencement date of a lease, we recognize a right-of-use asset representing our right to use the underlying asset during the lease term and a lease liability for the present value of the future lease payments.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

At the commencement date of a lease, the Company recognizes a right-of-use asset representing its right to use the underlying asset during the lease term and a lease liability for the present value of the future lease payments.

As most leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available on the commencement date in determining the present value of lease payments.

For operating leases, we recognize fixed lease expense on a straight-line basis over the lease term.

For finance leases, we recognize amortization expense on the right-of-use asset and interest expense on the lease liability over the lease term.

For operating leases, the Company recognizes fixed lease expense on a straight-line basis over the lease term.

For finance leases, the Company recognizes amortization expense on the right-of-use asset and interest expense on the lease liability over the lease term.

Variable lease costs are recognized as incurred.

Assets and liabilities related to finance leases are presented separately from those relating to operating leases on our consolidated balance sheets.

We do not record lease contracts with a term of 12 months or less on our consolidated balance sheets.

Assets and liabilities related to finance leases are presented separately from those relating to operating leases on the consolidated balance sheets.

The Company does not record lease contracts with a term of 12 months or less on the consolidated balance sheets.

Stock-based Compensation

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The Company has elected to recognize compensation cost for graded-vesting awards subject only to a service condition over the requisite service period of the entire award.

For performance awards, the Company begins recognizing expense in the period in which vesting becomes probable.

For performance awards without market conditions, the Company begins recognizing expense in the period in which vesting becomes probable.

The Company accounts for forfeitures as they occur.

For performance awards with market conditions based on the achievement of specified Company stock price targets, compensation expense is recognized over the requisite service period regardless of whether the market condition is ultimately achieved, provided the requisite service is rendered.

Earnings per Share

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ASC Topic 740, Income Taxes, (“ASC 740”), clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it

The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any.

Tax positions taken are not offset or aggregated with other positions.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

For the Fiscal Year Ended May 31, 2026

is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any.

Tax positions taken are not offset or aggregated with other positions.

ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure, and transition.

The Company's policy for recording interest and penalties associated with unrecognized tax benefits is to record such interest and penalties as components of income tax expense.

Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s consolidated financial statements.

Based on the Company’s evaluation, it has been concluded that, other than the uncertain tax position disclosed in the footnotes, there are no additional significant uncertain tax positions requiring recognition in the Company’s consolidated financial statements.

For further information on income taxes, see Note 12 - Income Taxes below.

Cash Flows Associated With Derivative Instruments

The Company's derivative instruments primarily consist of embedded derivative features and warrants.

Changes in the fair value of derivative instruments are noncash and are included as adjustments to reconcile net loss to net cash provided by (used in) operating activities, as applicable.

Cash receipts and payments associated with derivative instruments related to financing transactions are presented within financing activities.

See Note 10 - Derivative Assets for further information on the Company's derivative instruments.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Improvements to Reportable Segment Disclosures.

This new guidance is designed to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The Company adopted this ASU in the fourth quarter of fiscal year 2025 on a retrospective basis, effective for the Company’s fiscal year that began on June 1, 2024 and for interim periods in the fiscal year beginning June 1, 2025.

See "Note 16 - Business Segments" below.

Accounting Pronouncements Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

Improvements to Income Tax Disclosures ("ASU 2023-09").

This ASU is intended to enhance the transparency and decision usefulness of income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction.

The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and can be applied either prospectively or retrospectively.

The Company is currently evaluating the impact of adopting this ASU on its disclosures and plans to adopt this pronouncement beginning with its fiscal year beginning June 1, 2025.

The Company has adopted this ASU for the fiscal year beginning June 1, 2025, on a prospective basis.

The adoption resulted in additional disaggregated tax information.

Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

Disaggregation of Income Statement Expenses ("ASU 2024-03").

This ASU is intended to enhance transparency of income statement disclosures primarily through additional disaggregation of relevant expense captions.

The standard is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with prospective or retrospective application permitted.

In January 2025, the FASB issued ASU No.

2025-01, which revises the effective date of ASU 2024-03, to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted.

The ASU allows prospective or retrospective application.

The Company is currently evaluating the impact of this ASU on its financial statement presentation and disclosures and plans to adopt this pronouncement beginning with its fiscal year beginning June 1, 2027.

In November 2024, the FASB issued ASU 2024-04, Debt – Debt with Conversion and Other Options (Subtopic 470-20).

The amendments in this Update clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion.

The amendments in this Update are effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods.

Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06.

The amendments in this Update permit an entity to apply the new guidance on either a prospective or a retrospective basis.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software ("ASU 2025-06").

This ASU is intended to simplify the capitalization guidance by removing all references to software development project stages so that the guidance is neutral to different software development methods.

The amendments in ASU 2025-06 are effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods, with early adoption permitted.

The amendments in this update permit an entity to apply the new guidance using a prospective, retrospective or modified transition approach.

The Company is currently evaluating the impact of ASU 2025-06 on its financial statements and plans to adopt this pronouncement beginning with its fiscal year beginning June 1, 2028.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270):

Narrow-Scope Improvements ("ASU 2025-11"), which is intended to improve the navigability of the guidance in ASC 270, Interim Reporting, and clarify when it applies.

Under the amendments, an entity is subject to ASC 270 if it provides interim financial statements and notes in accordance with GAAP.

ASU 2025-11 also addresses the form and content of such financial statements, interim disclosures requirements, and establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity.

ASU 2025-11 is effective for interim reporting periods

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

within annual reporting periods beginning after December 15, 2027, and early adoption is permitted.

The Company is currently evaluating the impact of this ASU on its financial statements and plans to adopt this pronouncement beginning with its fiscal year beginning June 1, 2028.

In December 2025, the FASB issued ASU 2025-12, Codification Improvements ("ASU 2025-12").

The amendments in this update are to make other incremental improvements to GAAP and facilitate codification updates for a broad range of Topics arising from technical corrections, unintended application of the codification, clarifications, and other minor improvements.

The resulting amendments are collectively referred to as Codification improvements.

ASU 2025-12 is effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods.

The Company is currently evaluating the impact the adoption of ASU 2025-12 may have on the Company’s consolidated financial statements and plans to adopt this pronouncement beginning with its fiscal year beginning June 1, 2027.

In April 2026, the FASB issued ASU 2026‑01, Equity (Topic 505):

Initial Measurement of Paid‑in‑Kind Dividends on Equity‑Classified Preferred Stock.

The ASU provides guidance on the initial measurement of paid‑in‑kind (“PIK”) dividends on equity‑classified preferred stock and does not affect the timing of dividend recognition.

The amendment is effective for fiscal years beginning after December 15, 2026, and interim periods within those fiscal years.

Early adoption is permitted.

The Company is currently evaluating the impact the adoption this ASU may have on the Company's consolidated financial statements and plans to adopt this pronouncement beginning with its fiscal year beginning June 1, 2027.

Business Combination

On May 5, 2026, the Company, through APLD ChronoScale HoldCo LLC, a wholly owned subsidiary, (“Contributor”), completed a transaction pursuant to which Contributor contributed 100 % of the equity interests of Applied Digital Cloud (“Cloud”) to Ekso Bionics Holdings, Inc.

(“Ekso”), a publicly traded company, in exchange for shares of Ekso common stock (the "May 2026 transaction").

Although Ekso was the legal acquirer, Cloud was identified as the accounting acquirer and the transaction was accounted for as a reverse acquisition under ASC 805, Business Combinations .

Following the closing of the transaction, Ekso was renamed ChronoScale Corporation (“ChronoScale”).

As a result of the transaction, at closing, the Company owned approximately 97 % of ChronoScale’s outstanding common stock, and legacy Ekso shareholders retained approximately 3 % (before giving effect to any dilution from new investments) which represents a noncontrolling interest in ChronoScale.

As the transaction was accounted for as a reverse acquisition, the consideration transferred was measured based on the number of equity interests Cloud would have had to issue to provide legacy Ekso shareholders with the same percentage ownership interest in the combined company that resulted from the transaction.

The fair value of the consideration transferred was approximately $ 57.6 million, based on 4,357,026 equity interests valued at Ekso's closing share price of $ 13.22 per share on the acquisition date.

The consideration was entirely in the form of equity.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

For the Fiscal Year Ended May 31, 2026

The following table summarizes the fair values of the assets acquired and liabilities assumed as of the acquisition date:

Cash and cash equivalents $ 13,492

Accounts receivable, net of allowance for doubtful accounts 4,125

Inventory 4,562

Prepaid expenses 1,150

Property and equipment, net 1,086

Operating lease right-of-use assets, net 315

Intangible assets, net 10,950

Other assets 369

Total assets acquired $ 36,049

Accounts payable $ ( 281 )

Accrued expenses ( 5,055 )

Deferred revenues ( 1,400 )

Operating lease liabilities ( 321 )

Debt, current ( 3,346 )

Deferred revenues non-current ( 1,288 )

Debt, non-current ( 464 )

Operating lease liabilities, non-current ( 114 )

Other non-current liabilities ( 3,305 )

Total liabilities assumed $ ( 15,574 )

Total identifiable net assets $ 20,475

Cash acquired through PIPE (defined below) ( 15,000 )

Fair value of net assets acquired 5,475

Impairment for assets held for sale (see Note 6 - Discontinued Operations )

Fair value less costs to sell $ 3,110

Total consideration transferred $ 57,623

Fair value less costs to sell 3,110

Goodwill $ 54,513

The fair value of acquired accounts receivable was approximately $ 4.1 million as of the acquisition date.

ChronoScale expects to collect substantially all acquired receivables.

The fair value of acquired intangible assets consists of Ekso's developed technology and trade name.

The valuations of the developed technology and trade name were performed by a third-party valuation specialist using the relief-from-royalty method.

Acquired intangible assets are amortized over the estimated useful lives on a straight-line basis.

In connection with the transaction, ChronoScale arranged a private investment in public equity (“PIPE”), which refers to a private placement of ChronoScale’s equity to select investors concurrent with closing.

Pursuant to the PIPE Agreement, ChronoScale agreed to issue and sell 1,311,407 shares of its common stock to Contributor at a price of $ 12.01 per share, resulting in aggregate gross proceeds of approximately $ 15.7 million, net of $ 0.8 million in offering costs.

The business combination resulted in the recognition of goodwill of approximately $ 54.5 million, which is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired.

The goodwill is primarily attributed to the expected operational synergies, assembled workforce, public company platform benefits, and other intangible benefits that do not qualify for separate recognition.

The goodwill was assigned to ChronoScale, which was expected to benefit from the synergies of the acquisition.

As of May 31, 2026, ChronoScale was not a separate reportable

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

segment under ASC 280, although the Cloud Business had previously been presented as a reportable segment.

The assigned goodwill is included within the reporting unit used for goodwill impairment testing.

The Company expects that $ 0.5 million of goodwill will be deductible for tax purposes.

The acquisition-date fair value of the noncontrolling interest was approximately $ 4.6 million, based on the equity interests retained by legacy Ekso shareholders and Ekso's closing share price of $ 13.22 per share on the acquisition date.

The noncontrolling interest is presented as a separate component of permanent equity in the Company’s consolidated balance sheet.

Acquisition-related costs in connection with the transaction, including legal, accounting, valuation, and other professional fees of $ 5.3 million were expensed as incurred and are not included as a component of consideration transferred.

Total transaction costs incurred were approximately $ 5.3 million.

The following unaudited pro forma financial information presents the combined results of operations as if the acquisition had occurred on June 1, 2024.

The unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had occurred as of that date, nor is it intended to project future results.

Fiscal Year Ended

May 31, 2026 May 31, 2025

Revenue $ 623,068 $ 243,220

Net loss $ ( 203,175 ) $ ( 245,278 )

The unaudited pro forma results include adjustments directly attributable to the acquisition, including amortization of acquired intangible assets and the related income tax effects.

No additional earnings per share impacts were identified other than the impact of amortization of acquired intangible assets.

Property and Equipment

4 unchanged sentences

$ 38,669 $ 33,611

Electric generation and transformers 15 years 9,914 9,933

Mechanical infrastructure 20 years 71,939 —

Electrical infrastructure 15 years 104,491 —

Electric generation and transformers 15 years - 30 years

188,110 9,914

Land and building

Building 39 years 279,308 109,672

Building improvements 15 years - 25 years

Land 59,713 20,047

3 unchanged sentences

Other equipment and fixtures 5 years - 10 years

68,128 12,447

Total cost of property and equipment 4,313,866 1,278,843

2 unchanged sentences

Depreciation expense totaled $ 48.5 million, $ 12.5 million, and $ 15.8 million for the fiscal years ended May 31, 2026, 2025, and 2024, respectively.

Revenue from Contracts with Customers

Below is a summary of the Company’s revenue concentration by major customer for the fiscal years ended May 31, 2025 and 2024:

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

Below is a summary of the Company’s total revenue concentration by major customer for the fiscal years ended May 31, 2026, 2025, and 2024:

May 31, 2026 May 31, 2025 May 31, 2024

2 unchanged sentences

Customer C 12 % 28 % — %

Customer D — % — % 12 %

Deferred Revenue

Changes in the Company's deferred revenue balances for the fiscal year ended May 31, 2025 and May 31, 2024, respectively, are shown in the following table (in thousands):

Changes in the Company's deferred revenue balances for the fiscal years ended May 31, 2026 and May 31, 2025, respectively, are shown in the following table (in thousands):

May 31, 2026 May 31, 2025

3 unchanged sentences

Other adjustments 822 7,914

Related party balances — ( 1,692 )

Balance, end of period $ 4,666 $ 3,594

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2025

Unbilled Receivables

Changes in the Company's unbilled receivables balances, which are captured in the consolidated balance sheets in accounts receivable for the fiscal years ended May 31, 2026 and May 31, 2025, respectively, are shown in the following table (in thousands):

May 31, 2026 May 31, 2025

Balance, beginning of period $ — $ —

Revenue recognized 124,491 —

Balance, end of period $ 43,149 $ —

Customer Deposits

3 unchanged sentences

Customer deposits received 627 5,698

Customer deposits refunded — ( 3,373 )

Customer deposits applied

( 1,567 ) ( 12,633 )

Customer deposit adjustments

( 3,373 ) ( 11,764 )

Related party balances — ( 1,549 )

Balance, end of period $ 16,752 $ 16,125

Discontinued Operations

During the year ended May 31, 2025, the Company determined that the Cloud Services Business met the criteria to be classified as “held for sale,” as the Board of Directors approved further plans for the sale of the segment.

The potential sale of the Cloud Services Business represents a strategic shift in the Company’s operations and financial results.

As such, the Company reported the Cloud Services Business as discontinued operations for the fiscal year ended May 31, 2025 in accordance with ASC 205-20, Discontinued Operations.

The Company expects the sale of the Cloud Services Business to occur within 12 months from the date it met the held for sale criteria.

The financial results of the Cloud Services Business are presented as net loss from discontinued operations on the consolidated statements of operations.

The following table presents the major components of the financial results of the Cloud Services Business for the periods presented (in thousands):

During the year ended May 31, 2026, the Board of Directors of ChronoScale committed to a plan to divest its wholly owned subsidiary, Ekso Bionics, Inc., a Delaware corporation (“Ekso”) which had not previously been announced as being held for sale, and to focus ChronoScale's operations solely on its cloud services business.

As such, legacy Ekso met the criteria to be classified as "held for sale" on the consolidated balance sheets.

Therefore, upon consolidation, the Company reported Ekso's operations as discontinued operations in its consolidated statements of operations for the fiscal year ended May 31, 2026 in accordance with ASC 205-20, Discontinued Operations.

ChronoScale expects to complete the divestiture of the Ekso business within 12 months from the date it met the held-for-sale criteria.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

The financial results of Ekso are presented as net loss from discontinued operations on the consolidated statements of operations.

The following table presents the major components of the financial results of Ekso for the periods presented (in thousands):

Fiscal Year Ended

May 31, 2025 May 31, 2024 May 31, 2023

Revenue $ 385

1 unchanged sentence

Selling, general and administrative 1,108

(Gain) on abandonment of assets

Operating loss from discontinued operations ( 1,025 )

( 55,331 ) ( 65,486 ) ( 1,091 )

Interest expense 17,399 9,809 27

Interest income 5

Net loss from discontinued operations before income tax expense ( 1,020 )

( 72,730 ) ( 75,295 ) ( 1,118 )

Income tax expense —

Net loss from discontinued operations $ ( 1,020 )

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2025

As of May 31, 2025, the assets and liabilities of the Cloud Services Business are classified as current in our consolidated balance sheets, as it is probable that the sale will occur within one year.

As of May 31, 2026, the assets and liabilities of Ekso are classified as current in the consolidated balance sheets, as it is probable that the sale will occur within one year.

The following table represents the aggregated carrying amounts of classes of assets and liabilities that are classified as held for sale on the consolidated balance sheets for the periods presented (in thousands):

Fiscal Year Ended

May 31, 2025 May 31, 2024

Cash and cash equivalents $ 2

3 unchanged sentences

Operating lease right of use asset, net 284

Finance lease right of use asset, net 195,495 209,933

Intangible assets 10,950

Other assets 368

Impairment on assets held for sale $ ( 2,365 )

Total current assets held for sale $ 19,841

304,200 374,215

Accounts payable 263

1 unchanged sentence

Current portion of operating lease liability 290

Current portion of finance lease liability 133,406 102,400

Current deferred revenue 1,334

Long-term deferred revenue 1,229

Long-term portion of operating lease liability 105

Long-term portion of finance lease liability — 59,907

Total current liabilities held for sale $ 7,426

$ 216,047 $ 336,423

The following table presents significant non-cash items and capital expenditures of discontinued operations for the periods presented (in thousands):

The following table summarizes the net cash flows from discontinued operations of Ekso for the year ended May 31, 2026 (in thousands):

Fiscal Year Ended

May 31, 2025 May 31, 2024 May 31, 2023

Depreciation and amortization $ 80,656 $ 57,883 $ 154

Stock-based compensation ( 1,463 ) 10,135 —

Purchases of property and equipment and other assets ( 190 ) ( 10,600 ) ( 260 )

Finance lease prepayments 1,190 ( 46,378 ) —

Operating right-of-use assets obtained by lease obligation 20,280 158,508 —

Finance right-of-use assets obtained by lease obligation 64,358 217,818 3,021

Property and equipment in AP and accrued liabilities 1,387 1,172 —

Net cash used in operating activities - discontinued operations $ ( 1,705 )

Net cash used in investing activities - discontinued operations $ —

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

3 unchanged sentences

Related Party Revenue

The following table illustrates related party revenue for the fiscal years ended May 31, 2025, May 31, 2024, and May 31, 2023 (in thousands):

Related party revenue consisted of revenue from two customers, Customer E and Customer F, neither of which is currently a customer of the Company.

The following table illustrates related party revenue for the fiscal years ended May 31, 2026, 2025, and 2024 (in thousands):

May 31, 2026 May 31, 2025 May 31, 2024

$ 1,244 $ 8,005 $ 8,007

$ 682 $ 6,756 $ 6,401

*Customer B is a subsidiary of an entity which, during the first quarter of fiscal year 2025, was deemed to beneficially own over 5 % of the Company's outstanding common stock.

Customer E $ — $ 1,244 $ 8,005

Customer F $ — $ 682 $ 6,756

Customer E is a subsidiary of an entity which, during the first quarter of fiscal year 2025, was deemed to beneficially own over 5 % of the Company's outstanding common stock.

As of July 25, 2024, the controlling individual of the entity filed a Schedule 13G to report the fact that as of the date thereof, the entity had ceased to be a beneficial owner of more than 5 % of such class of securities.

**Customer C is 60 % owned by an individual who, during the first quarter of fiscal year 2025, was deemed to beneficially own over 5 % of the Company's outstanding common stock.

Customer F is 60 % owned by an individual who, during the first quarter of fiscal year 2025, was deemed to beneficially own over 5 % of the Company's outstanding common stock.

As of July 25, 2024, the individual filed a Schedule 13G to report the fact that as of the date thereof, the individual had ceased to be a beneficial owner of more than 5 % of such class of securities.

The following table illustrates related party deferred revenue and deposits balances as of May 31, 2025 and May 31, 2024 (in thousands):

Customer B balances as of

Customer C balances as of

May 31, 2025 May 31, 2024 May 31, 2025 May 31, 2024

Deferred revenue $ — $ 993 $ — $ 699

Customer Deposits $ — $ 895 $ — $ 654

Base Electron

Base Electron Corp., a Nevada corporation, (“Base Electron”) is an independent power producer owned and managed by a combination of third parties, as well as certain officers and directors of the Company acting in their individual capacities, for the purpose of developing stabilized power generation and infrastructure to support the broader AI industry.

Base Electron is considered a VIE under ASC 810;

however, the Company does not consolidate Base Electron as the Company is not the primary beneficiary.

See Note 11 - Variable Interest Entities for further discussion.

On February 1, 2026 the Company and Base Electron entered into the Intercompany Administrative Services Agreement (the "Intercompany Agreement").

Under the Intercompany Agreement, the Company may provide, at Base Electron's request, certain administrative services in an advisory capacity, while all strategic, operational, investment, financing, and governance decisions remain exclusively with Base Electron.

The costs for services provided are calculated under the services cost method, as described in Treasury Regulation Section 1.482-9(b), in order to determine the applicable arm's length charges.

The amount of services provided during the fiscal year ended May 31, 2026 were immaterial.

The Company was party to a Guarantee (the “Guarantee”) in favor of The Babcock & Wilcox Company (“B&W”), pursuant to which it had agreed to unconditionally and irrevocably guarantee the full and timely performance by Base Electron, of its obligations under a Design-Build Agreement, dated February 26, 2026, by and between Base Electron and B&W (the “Design-Build Agreement”).

The Design-Build Agreement contemplates the engineering, procurement, construction and commissioning of a power generation facility with an expected nameplate capacity of approximately 1.2 GW anticipated to expand power and capacity supplied to the grid and utility customers in the Midcontinent Independent System Operator (“MISO”) region.

Following Base Electron's entry into the Design-Build Agreement and assuming all of the obligations thereunder in lieu of the Company, on March 18, 2026, the Company entered into the Partial Assignment and Assumption Agreement (the "Assignment Agreement") with Base Electron, B&W Enterprises, and B&W, pursuant to which the Company assigned to Base Electron its right to purchase an aggregate of 5,230,000 shares of common stock of B&W Enterprises.

In connection therewith, B&W Enterprises issued a common stock purchase warrant with respect to such shares directly to Base Electron (the "Base Warrant").

In connection with the Assignment Agreement, on March 18, 2026, the Company entered into the Amendment and Joinder to Registration Rights Agreement with Base Electron and B&W Enterprises, whereby the Company became a party to that certain Registration Rights Agreement, dated November 4, 2025, by and between the Company and B&W Enterprises.

Pursuant to the Amendment and Joinder, B&W Enterprises agreed to register the resale of the shares of its common stock issuable upon exercise of the Warrant.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

In connection with and as partial consideration for the Company’s entry into the Guarantee, Base Electron issued to the Company approximately 10 % of Base Electron’s outstanding equity.

The investment in Base Electron will be accounted for at cost under ASC 321 as it is an equity security without a readily determinable fair value and will be evaluated quarterly for impairment indicators.

There were no impairment indicators during the fiscal year ended May 31, 2026.

As of May 31, 2026, the Company determined the fair value of the investment was $ 2.0 million, which was recorded as an Other asset on the consolidated balance sheets and a Gain on change in fair value of investment on the consolidated statements of operations.

Base Electron Demand Grid Promissory Note

On April 16, 2026, Base Electron entered into a promissory note with the Company (the "Demand Grid Promissory Note") for a principal sum of $ 15.9 million.

The Demand Grid Promissory shall bear interest on the unpaid principal balance hereof at a rate equal to the Applicable Rate (defined below), compounded semi-annually as of the end of each six-calendar-month period (or portion thereof) ending June 30 or December 31, as the case may be (a “Semi-Annual Period”), and computed on the basis of the actual number of days elapsed in such Semi-Annual Period (or portion thereof), until the Lender shall, in its discretion, demand payment of the principal amount hereof and all accrued interest thereon.

The “Applicable Rate” with respect to any Semi-Annual Period (or portion thereof) during which this note is outstanding shall be the short-term Applicable Federal Rate (as defined in Section 1274(d) of the Internal Revenue Code of 1986, as amended) in effect for the first month of that Semi-Annual Period (i.e., January or July, as the case may be), compounded semiannually.

On May 27, 2026, the Demand Grid Promissory Note was amended (the "Amended and Restated Demand Grid Promissory Note") to increase the aggregate amount of future advances, not to exceed $ 50.0 million.

On May 29, 2026, the Demand Grid Promissory Note was further amended (the "Second Amended and Restated Demand Grid Promissory Note") to increase the aggregate amount of future advances, not to exceed $ 100.0 million.

On May 29, 2026, the Guarantee was terminated, effective upon payment of $ 37.0 million by the Company on behalf of Base Electron which was added to the Second Amended and Restated Demand Grid Promissory Note.

As such, the Company recorded a related party loan receivable which is included within Prepaid expenses and other current assets on the consolidated balance sheets.

As of May 31, 2026, the balance of the Demand Grid Promissory Note was $ 58.6 million, which was recorded as a related party loan receivable and presented within Prepaid expense and other current assets on the consolidated balance sheets.

During the fiscal year ended May 31, 2026, approximately $ 0.1 million of interest income was recognized.

Other Related Party Transactions

Related party transactions included within selling, general and administrative expense on the consolidated statement of operations include the following:

• consulting costs of $ 0.3 million and $ 0.1 million during the fiscal years ended May 31, 2024 and May 31, 2023, respectively, were incurred with a company owned by a family member of the Company’s former Chief Administrative Officer.

• consulting costs of $ 0.3 million during the fiscal year ended May 31, 2024, were incurred with a company owned by a family member of the Company’s former Chief Administrative Officer.

• software license fees of $ 0.3 million, $ 0.3 million, and $ 0.2 million during the fiscal years ended May 31, 2026, May 31, 2025, and May 31, 2024, respectively, were incurred with a company whose chairman is also a member of the Company’s Board of Directors.

5 unchanged sentences

Interest Rate Maturity Date May 31, 2026 May 31, 2025

2030 Senior Secured Notes 9.25 % December 2030 $ 2,350,000 $ —

2031 Senior Secured Notes 6.75 % March 2031 2,150,000 —

Convertible Notes, senior unsecured (1)

1 unchanged sentence

450,000 450,000

Bridge Facility See below April 2027 300,000 —

SMBC Loan (2)

2 unchanged sentences

7.48 % February 2028 8,108 12,283

Vantage Transformer Loan 6.50 % February 2029 — 3,609

Cornerstone Bank Loan (4)

8.59 % March 2029 9,910 12,866

Yorkville Convertible Debt

— % April and June 2025

Starion Term Loan (5)

6.50 % July 2027 3,900 7,061

Other long-term debt (5)

Other debt (6)

34,762 12,275

Deferred financing costs, net of amortization ( 330,742 ) ( 181,329 )

1 unchanged sentence

Long-term debt, net $ 4,959,516 $ 677,825

(1) The SMBC Loan is guaranteed by APLD HPC TopCo LLC, a wholly-owned subsidiary of the Company, and is secured by a continuing security interest in all of the membership interests of the borrower, APLD HPC Holdings LLC, including a mortgage on certain properties as defined in the collateral agency, security and depositary agreement.

(2) The Starion Ellendale Loan is guaranteed by APLD ELN-01 LLC, a wholly-owned subsidiary of the Company, and is secured by the first 100 MW HPC facility at Polaris Forge 1, a security interest in substantially all of the assets of APLD ELN-01 LLC, and a security interest in the form of a collateral assignment of the Company’s rights and interests in all master hosting agreements related to Polaris Forge 1.

(3) The Cornerstone Bank Loan is guaranteed by APLD GPU-01, LLC, a wholly-owned subsidiary of the Company, and is secured by a security interest in multiple Terms of Service Agreements for HPC based systems related to AI Cloud Computing Services, which are to be serviced at the Jamestown hosting facility.

(4) The Starion Term Loan is guaranteed by APLD Hosting, LLC, a wholly-owned subsidiary of the Company, and is secured by the Jamestown hosting facility, a security interest in substantially all of the assets of APLD Hosting LLC, and interests in all master hosting agreements related to the Jamestown hosting facility.

(5) Inclusive in this number is $ 12.0 million of proceeds from the issuance of two SAFE agreements which were accounted for as liabilities.

See further discussion below.

(1) The net carrying amount of the Convertible Notes was $ 276.0 million and $ 273.3 million and the remaining unamortized deferred financing costs related to the issuance was $ 174.0 million and $ 176.7 million, each as of May 31, 2026 and May 31, 2025, respectively.

(2) The SMBC Loan was guaranteed by APLD HPC TopCo LLC, a wholly-owned subsidiary of the Company, and was secured by a continuing security interest in all of the membership interests of the borrower, APLD HPC Holdings LLC, including a mortgage on certain properties as defined in the collateral agency, security and depositary agreement.

During the year ended May 31, 2026, concurrent with the closing of the 2030 Notes Offering (see below), the Company repaid in full the aggregate principal balance plus accrued interest.

As of May 31, 2025, there were $ 4.4 million of unamortized deferred financing costs.

The average SOFR plus the applicable margin for the fiscal year ended May 31, 2025 was 7.82 %.

(3) The Starion Ellendale Loan incurred by APLD ELN-01 LLC, a wholly-owned subsidiary of the Company, is guaranteed by the Company and is secured by substantially all of the assets of APLD ELN-01.

APLD ELN-01 LLC is subject to a debt service coverage ratio and is in compliance as of May 31, 2026

(4) The Cornerstone Bank Loan incurred by APLD GPU-01, LLC, a wholly owned subsidiary of the Company, is guaranteed by the Company, APLD Hosting, and Sai Computing, LLC and is secured by substantially all assets of APLD GPU-01 including, among other things, APLD GPU-01’s interest in electrical services agreements, and the Company’s interest in the various terms of service agreements for HPC based systems related to AI Cloud Computing Services, which are to be serviced at the Jamestown hosting facility.

(5) The Starion Term Loan incurred by APLD Hosting, LLC, a wholly-owned subsidiary of the Company, is guaranteed by the Company and is secured by substantially all of the assets of APLD Hosting, and its interests in the master hosting agreements and electric services agreements related to the Jamestown hosting facility.

APLD Hosting is subject to customary covenants, representations and warranties and events of default.

APLD Hosting is subject to a debt service coverage ratio and is in compliance as of May 31, 2026.

(6) Inclusive in this number are two promissory notes the Company entered into during the second fiscal quarter of 2026 for a total of approximately $ 18.5 million, as well as $ 12.0 million of proceeds from the issuance of two SAFE agreements which are classified as liabilities.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

Interest Expense

2 unchanged sentences

May 31, 2026 May 31, 2025 May 31, 2024

Long term debt obligations 45,233 10,803 1,132

Long term debt obligations - related party — 5,664 —

Amortization of debt issuance costs and discounts 26,577 117 87

Finance lease obligations 1,758 1,140 784

Interest expense $ 85,259 $ 35,261 $ 23,448

Interest expense - related party — — 5,000

Interest income (1)

Other interest and amortization

( 55,743 ) ( 3,122 ) ( 931 )

Total interest costs 71,910 17,708 2,006

Capitalized interest ( 57,171 ) — —

Total interest expense

14,739 17,708 2,006

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2025

Interest expense, net 29,516 32,139 27,517

Interest capitalized 39,574 57,171 —

Total interest charges incurred $ 69,090 $ 89,310 $ 27,517

(1) For the fiscal year ended May 31, 2026, amount includes related party interest income of $ 0.1 million.

Below is the weighted-average interest rate for the Company's term loans:

4 unchanged sentences

FY27 $ 16,591

FY31 4,194,954

Thereafter (1)

Total $ 5,306,680

(1) Includes $ 12.0 million of proceeds from the issuance of two SAFE agreements, which are classified as liabilities.

Debt Fair Value Measurements

The carrying value of the Company's variable rate borrowings, the Bridge Facility and SMBC Loan, approximate fair value at May 31, 2026 and May 31, 2025, as applicable, each balance sheet date due to the variable nature of the interest rates and the short period between interest rate resets.

The Company has determined the fair value of its 2030 Senior Secured Notes and the 2031 Senior Secured Notes to be approximately $ 2.5 billion and $ 2.2 billion, respectively, as of May 31, 2026 using level 1 inputs.

The Company has determined the fair value of its fixed rate term loans $ 22.4 million, in aggregate, and $ 31.9 million, in aggregate, as of May 31, 2026 and May 31, 2025, respectively, based on discounted cash flow analysis, which uses Level 3 inputs.

The Company has determined the fair value of its Convertible Notes, senior unsecured to be $ 392.9 million and $ 341.7 million as of May 31, 2026 and May 31, 2025, respectively, based on discounted cash flow analysis, which uses Level 3 inputs.

Letters of Credit

As of May 31, 2025, the Company had letters of credit totaling $ 38.3 million.

The Company has restricted cash related to its letters of credit and is required to keep these balances in separate accounts for the duration of the letter of credit agreements.

The Company presents all restricted cash amounts with letter of credit term of 12 months or less within the Restricted Cash caption within current assets and any amounts with a related letter of credit term of over 12 months in Other Assets.

Starion Term Loan

On July 25, 2022, APLD Hosting, LLC, a wholly-owned subsidiary of the Company, entered into a loan agreement with Starion Bank and the Company as Guarantor (the “Starion Term Loan Agreement”).

The Starion Term Loan Agreement provides for a term loan (the "Starion Term Loan") in the principal amount of $ 15.0 million with a maturity date of July 25, 2027.

The Starion Term Loan Agreement contains customary covenants, representations and warranties and events of default.

The Company is subject to a debt service coverage ratio.

Yorkville Convertible Debt

During the fiscal year ended May 31, 2024, the Company entered into two prepaid advance agreements with YA II PN, LTD.

(“YA Fund”) for promissory notes totaling $ 92.1 million (collectively the “YA Notes”), issued on March 27, 2024 (the “March Note”), April 24, 2024, and May 24, 2024 (the “May PPA”).

The YA Notes were convertible into shares of the Company’s common stock.

During the fiscal year ended May 31, 2025, the Company recognized a gain on fair value of debt of $ 4.1 million associated with the YA Notes which is included on the consolidated statements of operations.

Also during the fiscal year ended May 31, 2025, $ 71.3 million of the YA Notes were converted into approximately 19.1 million shares of common stock.

The Company recorded a loss on conversion of debt of $ 33.6 million during the fiscal year ended May 31, 2025, in its consolidated statements of operations.

The fair value of the YA Notes was calculated on an as-converted basis using quoted market prices of the Company's outstanding common stock;

however, YA Fund had converted the maximum amount of shares allowable under Nasdaq rules and regulations and as such, the remaining balance of $ 4.8 million under the March Note was payable in cash.

During the fiscal year ended May 31, 2025, the Company repaid the $ 4.8 million in full, including all outstanding and unpaid principal, accrued interest, fees, and expenses, as well as the $ 2.1 million Commitment Fee under SEPA (as defined below).

CIM Arrangement

On June 7, 2024, APLD Holdings 2 LLC (the “Borrower”), a subsidiary of the Company, entered into a promissory note (the “CIM Promissory Note”) with CIM APLD Lender Holdings, LLC, a Delaware limited liability company (the “Lender”).

The CIM Promissory Note provided for borrowings up to $ 125 million.

The total amount borrowed under the

As of May 31, 2026 and May 31, 2025, the Company had letters of credit secured by cash totaling $ 10.5 million and $ 38.3 million, respectively.

The Company is required to keep these balances in separate accounts for the duration of the letter of credit agreements.

The Company presents all restricted cash amounts with letter of credit terms of 12 months or less within

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CIM Promissory Note was $ 125 million.

Pursuant to the CIM Promissory Note, the Company issued warrants to purchase up to 9,265,366 shares of common stock (the “CIM Warrants”).

See further discussion of the CIM Warrants in "Note 11 - Warrants."

On November 27, 2024, in connection with the issuance of the Macquarie Promissory Note and receipt by the Company of the proceeds related thereto (as described below), the Company repaid the CIM Promissory Note in full, including all outstanding and unpaid principal, accrued interest, fees, and expenses.

The associated extinguishment costs were capitalized directly into Construction in Progress (CIP), as the CIM Promissory Note was tied to the ELN-02 Project and was therefore considered part of the construction cost.

As of May 31, 2025, the CIP balance includes $ 9.4 million related to the extinguishment of the CIM Promissory Note.

Yorkville Amendments

In connection with the CIM Promissory Note, the Company also entered into a Consent, Waiver and First Amendment to the Prepaid Advance Agreements (the “Consent”) with YA Fund.

In exchange for giving its consent to the transaction with the CIM Lender, the Company agreed to issue an aggregate of 100,000 shares of common stock to YA Fund and to conditionally lower the floor price from $ 3.00 to $ 2.00 so long as the daily Volume Weighted Average Price (“VWAP”) is less than $ 3.00 per share of common stock for five out of seven trading days.

The Company further agreed to deliver a security agreement whereby its subsidiary, Applied Digital Cloud Corporation, would grant a springing lien on substantially all of its assets subject to customary carve-outs to secure the YA notes issued in favor of YA Fund.

Pursuant to the Consent, YA Fund also consented to future project-level financing at Polaris Forge 1.

In addition, pursuant to the terms of the Consent, certain provisions of the March PPA and the May PPA were amended.

Upon issuance of the 100,000 shares, the Company recorded the value of the shares at their grant date fair value as an increase of $ 0.5 million in the loss on change in fair value of debt caption on the consolidated statements of operations.

On October 16, 2024, the Company entered into a letter agreement with YA Fund, whereby the Company agreed to satisfy its obligations with respect to the Commitment Fee (as defined below) in cash by increasing the principal amount due under the March Note in an equivalent amount, instead of issuing the Commitment Shares (as defined below).

The Commitment Fee was paid in full during the fiscal year ended May 31, 2025 as part of the repayment by the Company of the March Note.

On October 29, 2024, the Company entered into certain amendments to the March prepaid advance agreement and the March Note.

The amendments (i) provided consent to the Convertible Notes (as defined below) offering and share repurchase transactions (as described below) and (ii) removed certain prior restrictions on redemption of the March Note before January 1, 2025.

In the first fiscal quarter of 2025, Applied Digital Cloud Corporation (“ADCC”), a wholly-owned subsidiary of the Company, entered into two SAFE agreements totaling $ 12.0 million with an investor (the “Investor”).

Under the terms of the SAFE agreements, the Investor has the right to certain shares of ADCC’s preferred stock.

If an equity financing transaction is completed by ADCC before the termination of the SAFE agreements, the SAFE agreements will automatically convert into the number of shares of preferred stock equal to the purchase amount divided by the discount price, which will be the lowest price per share of the preferred stock sold in the equity financing transaction multiplied by the discount rate ( 90 %).

If there is a liquidity event before the termination of the SAFE agreements, the Investor will automatically be entitled to receive a portion of proceeds, due and payable to the Investor immediately prior to, or concurrent with, the occurrence of such liquidity event, equal to the greater of (i) the purchase amount or (ii) the amount payable on the number of shares of common stock equal to the purchase amount divided by the liquidity price (the price per share equal to the fair market value of the common stock at the time of the liquidity event, as determined by reference to the purchase price payable in connection with such liquidity event, multiplied by the discount rate).

If there is a dissolution event before the termination of the SAFE agreements, the Investor will automatically be entitled to receive a portion of proceeds equal to the purchase amount, due and payable to the Investor immediately prior to the occurrence of the dissolution event.

In a liquidity or dissolution event, the SAFE agreements are intended to operate like standard non-participating preferred stock.

The Investor’s right to receive the purchase amount is junior to payments for outstanding indebtedness and creditor

the Restricted Cash caption within current assets and any amounts with related letter of credit terms of over 12 months in Other Assets.

MEC Promissory Note

On September 9, 2025, a subsidiary of the Company, APLD FAR-01 LLC ("APLD FAR-01"), entered into a promissory note (the “MEC Promissory Note”) with Macquarie Equipment Capital, Inc., a Delaware corporation (“MEC”).

The MEC Promissory Note provided for an initial principal sum of $ 50 million (the “MEC Loan”), which was drawn on the Closing Date.

The MEC Loan bore interest at 8.0 % per annum.

From the Closing Date and for the succeeding twelve months (the “PIK Period”), accrued interest was to be paid in kind, with such payment in kind being capitalized to principal monthly and at such other times as specified in the MEC Promissory Note.

After the PIK Period, accrued interest was to be paid in cash in certain circumstances.

The MEC Promissory Note was to mature on the earliest of (i) the date of acceleration of the MEC Loan, (ii) February 1, 2026, if the 200 MW Lease Execution (as defined therein) has not occurred on or before October 31, 2025, or (iii) September 9, 2027.

The MEC Loan could be accelerated and APLD FAR-01 required to prepay the full outstanding principal balance of the MEC Promissory Note, together with accrued interest to the date of prepayment on the principal amount prepaid and any other amounts then due and payable, upon the occurrence of any of the following conditions:

(a) a Change of Control (as defined therein), (b) within ninety ( 90 ) days following the occurrence of the 200 MW Lease Execution, and (c) within thirty ( 30 ) days following a Qualifying Preference Share Issuance (as defined therein).

APLD FAR-01 may voluntarily prepay all or part of the MEC Promissory Note at any time with no less than three ( 3 ) business days’ notice with accrued interest to the date of prepayment on the principal amount prepaid, so long as, with respect to the portion of the MEC Loan then being prepaid, in each case, such prepayment is accompanied by the payment of amounts sufficient to achieve a rate of return that equals or exceeds 1.10 to 1.00.

The same 1.10 x return hurdle applied to repayment at maturity.

Amounts repaid under the MEC Promissory Note are not available to be re-borrowed.

Proceeds of the MEC Loan under the MEC Promissory Note were used, in part, to (i) pay transaction costs, (ii) pay transaction expenses in connection with the Note Documents (as defined therein), (iii) fund the purchase of the financed properties located on the Company’s campus in Harwood, ND (“Polaris Forge 2”), including all associated closing costs, title fees, and legal expenses, (iv) finance improvements to the Polaris Forge 2 properties, (v) fund the purchase of the Transformers (as defined therein) and other equipment expected to be installed and used for the improvements of the Polaris Forge 2 properties, (v) to pay any other costs, fees, expenses, or amounts related to or in connection with the development and construction of Polaris Forge 2, and (vi) for general corporate working capital purposes.

In connection with the MEC Loan, (i) APLD FAR-01, APLD FAR Holdings LLC, a Delaware limited liability company ("APLD FAR Holdings"), as parent of APLD FAR-01, and APLD FAR-02 LLC, a Delaware limited liability company ("APLD FAR-02"), as a subsidiary of APLD FAR Holdings, entered into a guarantee and collateral agreement, as grantors thereunder, in favor of the Lender (the “Guarantee and Collateral Agreement”).

On November 28, 2025, APLD FAR-01 repaid MEC Promissory Note in full, including all outstanding and unpaid principal, accrued interest, and rate of return.

As a result, the accrued interest and rate of return on the MEC Promissory Note of $ 1.4 million was capitalized to CIP commensurate with the use of proceeds associated with construction.

2025 Revolving Credit Facility

On November 10, 2025, the Company entered into a loan and security agreement with First National Bank of Omaha, pursuant to which the lender agreed to make one or more revolving loans, and issue letters of credit, from time to time to the Company in an aggregate principal amount of $ 65 million (the “2025 Revolving Credit Facility”).

Amounts borrowed and repaid are available for future borrowing.

Interest accrues on the outstanding balance at a rate of SOFR plus 2.75 % per annum.

Additionally, there is an unused facility fee of 0.35 % per annum based on the daily average unused amount, payable quarterly in arrears at the end of each quarter.

The loan is secured by all of the Company’s (but none of its subsidiaries’) assets.

On May 29, 2026, the 2025 Revolving Credit Facility was modified and the standby letters of credit transferred when the Company and certain of its subsidiaries entered into the 2026 Revolving Credit Facility (as discussed below).

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claims, on par with payments for other SAFE agreements and preferred stock, and senior to payments for common stock.

The SAFE agreements will automatically terminate immediately following the earliest to occur of:

(i) the issuance of capital stock to the Investor pursuant to the automatic conversion of the SAFE agreements;

or (ii) the payment, or setting aside for payment, of amounts due the Investor.

The Investor shall have the right, but not the obligation, to purchase up to its Pro Rata Share (the ratio of (i) the purchase amount of the SAFE agreements to (ii) the aggregate purchase amounts of all SAFE agreements issued by ADCC prior to the equity financing transaction) of the securities issued in the equity financing transaction, on the same terms, conditions and pricing afforded to the other investors participating in the equity financing transaction.

The SAFE agreements were accounted in accordance with ASC 480:

Distinguishing Liabilities from Equity.

Per the SAFE agreements, as the underlying share class has not been issued yet and as such, equity classification cannot be determined based on redemption rights, these agreements were classified as liabilities and included in long-term debt at their face value on the Company’s consolidated balance sheets.

Convertible Notes, senior unsecured

On November 4, 2024, the Company issued $ 450.0 million aggregate principal amount of 2.75 % Convertible Senior Notes due 2030 (the “Convertible Notes”).

The net proceeds from the sale of the Convertible Notes was approximately $ 435.2 million after deducting the initial purchasers’ discounts and commissions and estimated offering expenses payable by the Company.

The Company used approximately $ 84 million of the net proceeds from the offering to fund share repurchases of common stock in connection with the offering including (i) $ 52.7 million to fund the cost of entering into a prepaid forward repurchase transaction (as described below) and (ii) $ 31.3 million to repurchase shares of common stock with which the Company repurchased approximately 4.3 million shares at $ 7.36 a share, the stock price on October 30, 2024, the trading day preceding the transaction close.

In addition, approximately $ 51.8 million of the net proceeds from the offering were used to pay the cost of the capped call transactions (as described below) and the remainder of the net proceeds were used for general corporate purposes.

Also on November 4, 2024, the Company entered into an indenture with respect to the Convertible Notes with Wilmington Trust, National Association, as trustee (the “Indenture”).

The Convertible Notes are senior unsecured obligations of the Company and bear interest at a rate of 2.75 % per year payable semiannually in arrears on June 1 and December 1 of each year, beginning on June 1, 2025.

The Convertible Notes will mature on June 1, 2030, unless earlier converted, redeemed or repurchased in accordance with terms described below.

Prior to March 1, 2030, the Convertible Notes are convertible only upon the occurrence of certain events.

On or after March 1, 2030 until the close of business on the second scheduled trading day immediately preceding the maturity date of the Convertible Notes, holders may convert the Convertible Notes at any time (the “Conversion Option”).

The Convertible Notes are convertible into cash, shares of the Company’s common stock or a combination of cash and shares of common stock, at the Company’s election, subject to certain restrictions.

The initial conversion rate is $102.54 shares per $1,000 principal amount of Convertible Notes (equivalent to an initial conversion price of approximately $ 9.75 per share of common stock).

The conversion rate is subject to customary anti-dilution adjustments.

In addition, following certain events that occur prior to the maturity date or if the Company delivers a notice of redemption, the Company will increase the conversion rate for a holder who elects to convert its Convertible Notes in connection with such corporate event or notice of redemption.

Prior to December 1, 2027, the Company may not redeem the Convertible Notes.

On or after December 1, 2027, the Company may redeem for cash all or any portion of the Convertible Notes, at its option, if the last reported sale price of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides a notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption.

The redemption price will be equal to 100 % of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

If the Company undergoes a “fundamental change,” as defined in the Indenture, prior to maturity, subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their Convertible Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the Convertible Notes to be repurchased,

9.250 % Senior Secured Notes due 2030

On November 20, 2025, the Company's subsidiary APLD ComputeCo LLC (“APLD ComputeCo”) closed a $ 2.35 billion offering (the "2030 9.250 % Notes Offering") of 9.25 % Senior Secured Notes due 2030 (the “2030 9.250 % Notes”).

The 2030 9.250 % Notes were sold pursuant to the terms of a purchase agreement, dated as of November 13, 2025 and as amended thereafter, entered into by and among APLD ComputeCo, the subsidiary guarantors party thereto (the “Subsidiary Guarantors”) and Morgan Stanley & Co.

LLC as the representative (the “Representative”) of the several initial purchasers (the “Initial Purchasers”) in a Rule 144A/Regulation S offering.

The 2030 9.250 % Notes were issued at a price equal to 97 % of their aggregate principal amount APLD ComputeCo intends to use the net proceeds from the offering to fund a portion of the construction and associated expenses of its 100 MW and 150 MW data centers, ELN-02 and ELN-03, respectively (the “Ellendale Facilities”), at the Company’s 400MW Ellendale, North Dakota campus (“Polaris Forge 1”), repay the aggregate principal balance plus any accrued and unpaid interest under the SMBC Loan, fund debt service reserves, and pay transaction expenses.

Also on November 20, 2025, APLD ComputeCo, APLD HPC Holdings 2 LLC (the direct parent of APLD ComputeCo) and the Subsidiary Guarantors entered into an indenture (the “2030 9.250 % Notes Indenture”) with respect to the 2030 9.250 % Notes with Wilmington Trust, National Association, as trustee (the “Trustee”) and collateral agent (the “Collateral Agent”).

The 2030 9.250 % Notes are senior secured obligations of APLD ComputeCo and bear interest at a rate of 9.25 % per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2026.

The 2030 9.250 % Notes will mature on December 15, 2030, unless earlier redeemed or repurchased in accordance with their terms.

The principal amount of the 2030 9.250 % Notes will amortize on a semi-annual basis on June 15 and December 15 of each year, beginning on December 15, 2027, in amounts set forth in the 2030 9.250 % Notes Indenture.

Required amortization shall be subject to adjustment in case of partial redemption or repurchase or, in certain circumstances, the issuance of additional notes.

On or after December 15, 2027, APLD ComputeCo may redeem the 2030 9.250 % Notes at its option, in whole at any time or in part from time to time, at the redemption prices set forth in the 2030 9.250 % Notes Indenture.

Prior to December 15, 2027, APLD ComputeCo may redeem the 2030 9.250 % Notes at its option, in whole at any time or in part from time to time, at a redemption price equal to 100 % of the principal amount of the 2030 9.250 % Notes redeemed, plus a “make-whole” premium and accrued and unpaid interest, if any.

In addition, prior to December 15, 2027, the APLD ComputeCo may redeem up to 40 % of the aggregate principal amount of the 2030 9.250 % Notes in an amount not to exceed the amount of the proceeds of certain equity offerings, at the redemption price set forth in the 2030 9.250 % Notes Indenture, plus accrued and unpaid interest.

The 2030 9.250 % Notes Indenture limits the ability of APLD ComputeCo and the Subsidiary Guarantors to, among other things:

(i) incur or guarantee additional indebtedness;

(ii) pay dividends or distributions on, or redeem or repurchase, capital stock and make other restricted payments;

(iii) make certain investments;

(iv) create or incur liens;

(v) consummate certain asset sales;

(vi) enter into sale and lease back transactions;

(vii) hold assets or conduct operations unrelated to the operation of the Ellendale Facilities and certain additional projects;

(viii) engage in certain transactions with its affiliates;

and (ix) merge, consolidate or transfer or sell all or substantially all of its assets.

These covenants are subject to a number of important qualifications and exceptions as set forth in the 2030 9.250 % Notes Indenture.

Additionally, upon the occurrence of specified change of control events, APLD ComputeCo must offer to repurchase the 2030 9.250 % Notes at 101 % of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the purchase date.

The 2030 9.250 % Notes Indenture also provides for customary events of default.

The Company will provide a customary completion guarantee with respect to each Project (as defined in the 2030 9.250 % Notes Indenture) related to the Ellendale Facilities, which will require the Company to provide APLD ComputeCo funds as necessary to ensure the achievement of the applicable Commencement Date (as defined in the 2030 9.250 % Notes Indenture) under the respective data center lease in the event that the proceeds of the 2030 9.250 % Notes and the available funds (including previous equity contributions from the Company) are insufficient to do so.

As of May 31, 2026, remaining unamortized deferred financing costs related to the issuance of the loan was $ 6.1 million.

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plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The Indenture contains customary terms and covenants, including certain events of default.

In accounting for the issuance of the Convertible Notes, the Conversion Option of the Convertible Notes was deemed an embedded derivative requiring bifurcation from the Convertible Notes (the “host contract”) and separate accounting as an embedded derivative liability, resulting from the Company not having the necessary number of authorized but unissued shares of its common stock available to settle the Conversion Option of the Convertible Notes in shares on the date of issuance.

The proceeds from the Convertible Notes were first allocated to the embedded derivative liability and the remaining proceeds were then allocated to the host contract.

On November 4, 2024, the issuance date, the fair value of the embedded derivative liability representing the Conversion Option was $ 149.9 million and the remaining $ 286.6 million was allocated to the host contract.

As such, the Company recognized a $ 13.5 million gain on change in fair value of debt at issuance.

Subsequently, on November 20, 2024, the stockholders of the Company approved an increase to the number of authorized shares of common stock to an amount sufficient to settle the Conversion Option of the Convertible Notes fully in shares.

As a result of the increase to the number of authorized shares of common stock, the Company revalued the Conversion Option to its fair value as of November 20, 2024 of $ 252.9 million and reclassified the embedded derivative to additional paid-in capital on its consolidated balance sheets.

In doing so, the Company recognized a $ 103.0 million loss on change in fair value of debt as of November 20, 2024.

This loss combined with the gain recognized at issuance resulted in a total loss on fair value of debt of $ 89.6 million which is included on the consolidated statements of operations.

As of May 31, 2025, the embedded Conversion Option derivative is included in additional paid-in capital in the consolidated balance sheets and is not required to be remeasured provided the requirements to qualify for the scope exception in ASC 815-10-15-74(a) continue to be met.

As of May 31, 2025, the net carrying amount for the Convertible Notes was $ 273.3 million and the remaining unamortized deferred financing costs related to the issuance of the Convertible Notes was $ 176.7 million.

Prepaid Forward Repurchase Transaction

In connection with the offering of the Convertible Notes, the Company entered into a privately negotiated prepaid forward repurchase transaction (the “Prepaid Forward”) with one of the initial purchasers (the “Forward Counterparty”).

Pursuant to the Prepaid Forward and the Indenture, the Company used approximately $ 52.7 million of the net proceeds from the offering of the Convertible Notes to fund the Prepaid Forward.

The initial aggregate number of shares of common stock underlying the Prepaid Forward was approximately 7.2 million shares of common stock based on a forward price of $ 7.36 .

The maturity date for the Prepaid Forward is November 3, 2025, although it may be settled earlier in whole or in part.

As of May 31, 2025, the purchase price of the Prepaid Forward is included in additional paid-in capital in the consolidated balance sheets and is not required to be remeasured provided the requirements to qualify for the scope exception in ASC 815-10-15-74(a) continue to be met.

Capped Call Transaction

In connection with the offering of the Convertible Notes, the Company entered into privately negotiated capped call transactions (the “Base Capped Call Transactions”) with certain financial institutions (the “Option Counterparties”).

In addition, in connection with the initial purchasers’ exercise of their option to purchase additional Convertible Notes, the Company entered into additional capped call transactions (the “Additional Capped Call Transactions,” and, together with the Base Capped Call Transactions, the “Capped Call Transactions”) with each of the Option Counterparties.

The Company used approximately $ 51.8 million of the net proceeds from the offering of the Convertible Notes to pay the cost of the Capped Call Transactions.

The Capped Call Transactions cover, subject to customary anti-dilution adjustments, the aggregate number of shares of common stock that initially underlie the Convertible Notes, and are expected generally to reduce potential dilution to the common stock upon any conversion of the Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap, based on the cap price of the Capped Call Transactions, which is defined as $ 14.72 .

The Capped Call Transactions are separate transactions entered into by the Company and are not part of the terms of the Convertible Notes.

DevCo Facility

On December 18, 2025, a subsidiary of the Company APLD DevCo LLC (the “Borrower”) entered into an ongoing credit arrangement with MEC (as defined above), for the purposes of funding the initial sourcing, planning, development and construction costs associated with a new data center project (the “DevCo Facility”) and other potential projects.

The DevCo Facility is evidenced by, among other documents, that certain Promissory Note (as amended, the “DevCo Promissory Note”) executed by APLD DevCo in favor of MEC.

The DevCo Promissory Note provides for a principal sum of (a) $ 45 million (the “First Draw”), which was drawn on the Initial Closing Date, plus (b) $ 40 million (the “Second Draw”) which was drawn on February 24, 2026, plus (c) $ 15 million (the “Third Draw,”, and, together with the First Draw and the Second Draw, collectively, the “Initial Loan” and each, individually, a “Draw”), with the Third Draw to be funded upon APLD DevCo’s request at any time after the Initial Closing Date subject to satisfaction of or waiver by MEC of certain conditions precedent on or prior to the Third Draw, plus (d) the principal sum of any Additional Loans (as defined below, and, together with the Initial Loan, the “DevCo Loan”), if applicable, made by MEC (at the mutual consent of the APLD DevCo and MEC).

In addition, the DevCo Promissory Note provides for, upon request of APLD DevCo occurring prior to the Maturity Date (as defined below), (a) rolling over of the outstanding principal balance of the DevCo Loan from time to time into one or more loans for one or more new projects (such rollovers, the “Rollover Loans”), or (b) increasing the size of the existing DevCo Loan by advancing new loans to APLD DevCo (such loans, the “Additional Loans”), in either case, for the purpose of financing development activities at new or existing data center projects at direct or indirect, wholly owned domestic subsidiaries of APLD DevCo, each of which shall become a guarantor with respect to such Additional Loans or Rollover Loans, as applicable, subject to the prior written approval of MEC (in its sole discretion) and the satisfaction of the conditions specified by MEC.

Each Draw is fully committed, but any Additional Loans or Rollover Loans made by MEC under the DevCo Promissory Note would be on an uncommitted, discretionary basis (with no specified maximum borrowing limit for any Additional Loans or Rollover Loans).

The DevCo Loan shall bear interest at 8.0 % per annum, unless an Event of Default (as defined therein) has occurred and is continuing, in which case, the Secured Obligations (as defined therein) shall bear interest at the sum of 8.0 % per annum plus an additional 1.50 % per month (the “Post-Default Rate”).

APLD DevCo may voluntarily prepay all or part of the DevCo Promissory Note at any time with no less than three ( 3 ) business days’ notice with accrued interest to the date of prepayment on the principal amount prepaid, so long as, (a) with respect to the amount outstanding under the First Draw, such prepayment is accompanied by the payment of amounts sufficient to achieve a rate of return that equals 1.25 to 1.00;

provided that, such rate of return shall be reduced to (i) on or prior to the date that is four (4) months after the date on which the First Draw is funded, 1.06 :1.00 or (ii) after the date that is four (4) months after the date on which the First Draw is funded but prior to the date that is twelve (12) months after the date on which the First Draw is funded, 1.10 :1.00;

(b) with respect to the amount outstanding under the Second Draw, such prepayment is accompanied by the payment of amounts sufficient to achieve a rate of return that equals 1.25 to 1.00;

provided that, (x) if the Second Draw is funded within six (6) months of the date on which the First Draw is funded, and the prepayment occurs at any time thereafter, such rate of return shall be reduced to (i) on or prior to the date that is four (4) months after the date on which the Second Draw is funded, 1.06 :1.00 or (ii) after the date that is four (4) months after the date on which the Second Draw is funded but prior to the date that is twelve (12) months after the date on which the Second Draw is funded, 1.10 :1.00 and (y) if the Second Draw is funded more than within six (6) months after the date on which the First Draw is funded, and such prepayment occurs at any time thereafter, such rate of return shall be reduced to, after the date that is six (6) months after the date on which the First Draw is funded but prior to the date that is twelve (12) months after the date on which the First Draw is funded, 1.10 :1.00;

and (c) with respect to the amount outstanding under the Rollover Loans (as defined below) or any Additional Loans, such prepayment is accompanied by the payment of amounts sufficient to achieve a rate of return on capital as determined by mutual agreement of MEC and APLD DevCo.

The same return hurdles apply to repayment at maturity.

The DevCo Loan matures on the earliest of (i) the date of acceleration of the DevCo Loan, (ii) July 18, 2026, if the Initial Lease Execution (as defined therein) has not occurred on or before April 18, 2026, or (iii) December 18, 2027 (the “Maturity Date”).

Proceeds from the Loan were used, in part, to (i) pay transaction expenses, and (ii) fund the purchase,

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As of May 31, 2025, the purchase price of the Capped Call Transaction is included in additional paid-in capital in the consolidated balance sheets and is not required to be remeasured provided the requirements to qualify for the scope exception in ASC 815-10-15-74(a) continue to be met.

Macquarie Promissory Note

On November 27, 2024, APLD ELN-02 Holdings LLC, a wholly-owned subsidiary of the Company, entered into a promissory note with Macquarie Equipment Capital, Inc.

(the “Macquarie Promissory Note”).

The Macquarie Promissory Note provided for a loan of $ 150 million and matures on the earlier of (i) the date of acceleration of the loan or (ii) May 27, 2026.

However, to the extent that the ELN-02 Project (as defined therein) was not completed by December 6, 2025, the Company must repay the full outstanding principal balance of the Macquarie Promissory Note together with accrued interest and any other amounts then due and payable.

Additionally, the Macquarie Promissory Note had a multiple on invested capital (“MOIC”) of (i) 1.11 to 1.00 if such prepayment occurred on or prior to the date that is four months after the closing date, (ii) 1.20 to 1.00 if such prepayment occurred after the date that is four months after the closing date but on or prior to the date that is seven months after the closing date, or (iii) 1.35 to 1.00 if such prepayment occurred after the date that is seven months after the closing date.

The same 1.35 x return hurdle applied to repayment at maturity.

The Company recorded a MOIC liability of $ 16.5 million, representing the value of the MOIC liability the day after the closing date.

Proceeds of the loan under the Macquarie Promissory Note were used, in part, to repay in full and terminate the CIM Promissory Note.

Commensurate with the use of proceeds associated with construction from the Macquarie Promissory Note, the Company will capitalize approximately 90 % of the interest expense recognized each period.

Additionally, proceeds were used to satisfy remaining obligations of the Company under the March Note.

As partial consideration for the Macquarie Promissory Note, the Company issued warrants (the “Macquarie Warrants”) to purchase up to 1,035,197 shares of the Company’s common stock.

See further discussion of the Macquarie Warrants in "Note 11 - Warrants."

On February 11, 2025, in connection with the Company’s entry into the SMBC Credit Agreement (as defined below) and receipt by the Company of the proceeds related thereto (as described below), the Company repaid the Macquarie Promissory Note in full, including all outstanding and unpaid principal, accrued interest, and multiple on invested capital.

As a result, there was a loss on the extinguishment of the Macquarie Promissory Note of $ 11.8 million.

Commensurate with the use of proceeds associated with construction from the Macquarie Promissory Note, the Company capitalized approximately 90 %, or $ 10.6 million, to CIP and the remainder, 10 %, or $ 1.2 million, was recorded to loss on extinguishment of debt in the consolidated statements of operations.

SMBC Credit Agreement

On February 11, 2025, APLD HPC Holdings LLC, a wholly-owned subsidiary of the Company, entered into a credit and guaranty agreement (the “SMBC Credit Agreement”) with Sumitomo Mitsui Banking Corporation (“SMBC”).

The SMBC Credit Agreement provides for an aggregate of $ 375 million of term loans, which includes base rate loans and SOFR loans, and matures 18 months after the closing date.

Base rate loans bear interest at the base rate plus (i) 2.50 % from the closing date until the six month anniversary of the closing date, (ii) 3.50 % after the six month anniversary of the closing date until the one year anniversary of the closing date, and (iii) 4.50 % after the one year anniversary of the closing date while SOFR loans bear interest at the daily simple SOFR plus (i) 3.50 % from the closing date until the six month anniversary of the closing date, (ii) 4.50 % after the six month anniversary of the closing date until the one year anniversary of the closing date, and (iii) 5.50 % after the one year anniversary of the closing date.

For the year ended May 31, 2025, the average SOFR was 7.82 %.

As of May 31, 2025, remaining unamortized deferred financing costs related to the issuance of the loan was $ 4.4 million.

The Company may voluntarily prepay all or any part of the loans at any time or from time to time without premium or penalty with no less than three business days’ notice.

Additionally, as more particularly described in the credit agreement and the certain collateral agency, security and depositary agreement, the Company is required to prepay all or a part of the loans under certain circumstances.

Amounts repaid under the Loans will not be available to be re-borrowed.

The Company used the proceeds of the loans to (i) prepay in full the Macquarie Promissory Note, (ii) pay for certain data center project development costs at Polaris Forge 1, and (iii) fund the Interest Reserve Account as defined in the SMBC Credit Agreement.

Remaining proceeds have been deposited into a separate bank account for future construction costs at

development and improvement of, and the purchase of equipment for, the Company’s latest new project under development.

In connection with the DevCo Loan, (i) APLD Intermediate HoldCo LLC, a Delaware limited liability company, as direct parent of APLD DevCo (“Intermediate Holdings”), APLD DevCo, and APLD DevCo’s subsidiaries have entered into a guarantee and collateral agreement, as grantors thereunder, in favor of MEC (the “Guarantee and Collateral Agreement”), and (ii) the Company has entered into a parent guarantee in favor of MEC to guarantee the obligations of the Note Parties under the DevCo Promissory Note.

On May 29, 2026, the Company repaid the DevCo Loan in full, including all outstanding and unpaid principal, accrued interest, and rate of return.

As a result, the accrued interest and rate of return on the Loan of $ 9.4 million was capitalized to CIP commensurate with the use of proceeds associated with construction.

6.750 % Senior Secured Notes due 2031

On March 10, 2026, the Company's subsidiary APLD ComputeCo 2 LLC ("APLD ComputeCo 2"), completed a private offering of 6.750 % Senior Secured Notes due 2031 (the “2031 6.750 % Notes”).

The 2031 6.750 % Notes were sold pursuant to the terms of a purchase agreement, dates as of March 3, 2026, entered into by and among APLD ComputeCo 2, the subsidiary guarantors thereto and Goldman Sachs & Co.

LLC, as representative (the "Representative") of the several initial purchasers (the "Initial Purchasers") in a Rule 144A/Regulation S offering.

The aggregate principal amount of Notes sold in the offering was $ 2.15 billion.

The 2031 6.750 % Notes were issued at a price equal to approximately 98 % of their aggregate principal amount.

The gross proceeds from the offering were deposited into escrow pursuant to an escrow agreement (the “Escrow Agreement”).

On June 18, 2026, the escrow release conditions were satisfied and the funds were released to the Issuer.

APLD ComputeCo 2 intends to use the net proceeds from the offering to fund a portion of the construction and associated expenses of its data center projects (the “Projects”), fund debt service reserves, and pay transaction expenses.

If the escrow release conditions are not satisfied by the specified outside date, APLD ComputeCo 2 will be required to redeem the 2031 6.750 % Notes pursuant to a special mandatory redemption provision.

Also on March 10, 2026, APLD ComputeCo 2, its direct parent and the subsidiary guarantors entered into an indenture for the 2031 6.750 % Notes (the “2031 6.750 % Notes Indenture”) with Wilmington Trust, National Association, as trustee (the “Trustee”) and collateral agent (the “Collateral Agent”), governing the 2031 6.750 % Notes.

The 2031 6.750 % Notes are senior secured obligations of APLD ComputeCo 2 and bear interest at a rate of 6.750 % per annum, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2026.

The 2031 6.750 % Notes will mature on March 15, 2031, unless earlier redeemed or repurchased in accordance with their terms.

The principal amount of the 2031 6.750 % Notes will amortize on a semi-annual basis beginning after the final commencement date of the Projects, in amounts set forth in the 2031 6.750 % Notes Indenture.

Required amortization shall be subject to adjustment in the case of partial redemption or repurchase or, in certain circumstances, the issuance of additional notes.

On or after March 15, 2028, APLD ComputeCo 2 may redeem the 2031 6.750 % Notes at its option, in whole at any time or in part from time to time, at the redemption prices set forth in the 2031 6.750 % Notes Indenture.

Prior to March 15, 2028, APLD ComputeCo 2 may redeem the 2031 6.750 % Notes at its option, in whole at any time or in part from time to time, at a redemption price equal to 100 % of the principal amount of the 2031 6.750 % Notes redeemed, plus a “make-whole” premium and accrued and unpaid interest, if any.

In addition, prior to March 15, 2028, APLD ComputeCo 2 may redeem up to 40 % of the aggregate principal amount of the 2031 6.750 % Notes with the proceeds of certain equity offerings, at the redemption price set forth in the 2031 6.750 % Notes Indenture, plus accrued and unpaid interest.

The 2031 6.750 % Notes Indenture limits the ability of APLD ComputeCo 2 and the subsidiary guarantors to, among other things:

(i) incur or guarantee additional indebtedness;

(ii) pay dividends or distributions on, or redeem or repurchase, capital stock and make other restricted payments;

(iii) make certain investments;

(iv) create or incur liens;

(v) consummate certain asset sales;

(vi) enter into sale and leaseback transactions;

(vii) hold assets or conduct operations unrelated to the Projects and certain additional permitted businesses;

(viii) engage in certain transactions with affiliates;

and (ix) merge, consolidate or transfer or sell all or substantially all of its assets.

These covenants are subject to a number of important

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

For the Fiscal Year Ended May 31, 2026

Polaris Forge 1.

Commensurate with the use of proceeds associated with construction, the Company will capitalize 100 % of the interest expense recognized each period.

qualifications and exceptions as set forth in the Indenture.

Additionally, upon the occurrence of specified change of control events, APLD ComputeCo 2 must offer to repurchase the 2031 6.750 % Notes at 101 % of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the purchase date.

The 2031 6.750 % Notes Indenture also provides for customary events of default.

In connection with the 2031 6.750 % Notes, the Company provides a customary completion guarantee with respect to each Project, which requires the Company to provide the Issuer with funds as necessary to ensure the achievement of the applicable commencement milestones under the related data center leases in the event that the proceeds of the 2031 Notes and other available funds are insufficient.

As of May 31, 2026, remaining unamortized deferred financing costs related to the issuance of the 2031 Notes were $ 38.7 million.

Bridge Facility

On May 1, 2026, the Company's subsidiary APLD ComputeCo 3 LLC ("APLD ComputeCo 3"), along with APLD ComputeCo 3's wholly owned subsidiaries as subsidiary guarantors, entered into a Credit and Guaranty Agreement with Goldman Sachs Bank USA, as administrative agent and as collateral agent (in such capacity, the “Bridge Facility Collateral Agent”), and the Lenders party thereto, providing for a bridge loan facility in an aggregate principal amount of $ 300 million (the “Bridge Facility”).

The Bridge Facility bears interest at a rate per annum equal to, depending on the type of loans under any Borrowing, either Daily Simple SOFR plus 2.75 % per annum or the Base Rate plus 1.75 % per annum, and matures on April 30, 2027.

Proceeds of the Bridge Facility were or will be used to (i) pay transaction expenses in connection with the Loan Documents (as defined therein), (ii) fund the construction and improvement of ELN-04, (iii) fund the purchase of equipment expected to be installed and used for the improvements of ELN-04, and (iv) pay other costs, fees, expenses or amounts related to or in connection with the development and construction of ELN-04.

In connection with the Bridge Facility, (i) APLD ComputeCo 3 and the subsidiary guarantors have entered into a Collateral Agency, Security and Depositary Agreement, as grantors thereunder, in favor of the Bridge Facility Collateral Agent, pursuant to which APLD ComputeCo 3 and the subsidiary guarantors pledged a continuing security interest in substantially all of their respective assets, (ii) APLD HPC Holdings 2 LLC, as parent of APLD ComputeCo 3, entered into a Pledge Agreement in favor of the Bridge Facility Collateral Agent, pursuant to which it pledged the equity interests in APLD ComputeCo 3, and (iii) the Company provided a full recourse parent guarantee (the “Parent Guarantee”) in favor of the Bridge Facility Collateral Agent.

In accordance with ASC 470-10-45-14(a), the Company reclassified the Bridge Facility on the consolidated balance sheets to long-term given the Company had the intent and ability to refinance the short-term obligation on a long-term basis.

2026 Revolving Credit Facility

On May 29, 2026, APLD Intermediate HoldCo LLC, a subsidiary of the Company ("Intermediate HoldCo"), and certain other subsidiaries of the Company entered into a Credit Agreement with First National Bank of Omaha, as administrative agent and collateral agent, and the lenders and issuing banks party thereto, providing for a revolving credit facility in an initial aggregate principal amount of $ 350 million with an additional accordion option of up to $ 200 million (the “2026 Revolving Credit Facility”).

The 2026 Revolving Credit Facility bears interest at a rate per annum equal to, at the borrower’s election, either Term SOFR plus 2.25 % or the Alternate Base Rate plus 1.25 %.

Additionally, there is an unused commitment fee of 0.25 % per annum based on the daily unused amount, payable quarterly in arrears at the end of each quarter.

The 2026 Revolving Credit Facility matures on the earlier of (i) May 29, 2029 and (ii) the date that is ninety-one ( 91 ) days prior to a specified date under the Preferred Equity Purchase Agreement.

The 2026 Revolving Credit Facility is guaranteed by the Company, the borrower, and certain of the Company's subsidiaries (collectively, the "2026 Revolving Credit Facility Loan Parties") and is secured by substantially all assets of the Loan Parties, subject to certain exclusions.

As of May 31, 2026, approximately $ 65.0 million of standby letters of credit were outstanding under the 2026 Revolving Credit Facility.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

Balance Sheet Components

1 unchanged sentence

May 31, 2026 May 31, 2025

Prepaid expenses and other current assets

Short term equipment deposit $ 500,290 $ —

Deferred issuance costs 3,397 5,469

Short term lease incentive 6,231 1,290

Related party loan receivable (1)

Prepaid expenses 24,471 1,421

Other current assets 20,671 1,472

Total Prepaid expenses and other current assets

$ 613,692 $ 9,652

(1) Balance as of May 31, 2026 consists of the promissory note with Base Electron.

See Note 7 - Related Party Transactions for further discussion.

May 31, 2026 May 31, 2025

Lease incentive $ 199,391 $ 84,416

Deferred construction costs 33,600 5,200

Restricted cash 180,415 7,000

letters of credit 7,000 7,000

Deposits on assets and construction 47,719 69,500

Deferred construction costs 84 45

Deferred lease costs 10,729 7,342

Derivative assets (2)

Investments in other companies (3)

123,329 6,073

Investments in related party (4)

Other 49,247 4,977

Total Other assets $ 830,710 $ 179,353

(1) Balance as of May 31, 2026 consists of goodwill held at ChronoScale.

(2) Balance as of May 31, 2026 consists of the fair value of derivative assets related to the preferred units and corresponding common units held by APLD HPC TopCo 2’s noncontrolling interest.

See Note 10 - Derivative Assets and Note 16 - Temporary Equity for further discussion.

(3) Includes $ 90.8 million of warrants and $ 19.2 million of common shares issued by B&W to the Company in association with the Company’s investment in B&W.

The $ 19.2 million common share value is the fair value of the Company's $ 2.0 million investment made during the quarter ended November 30, 2025 as well as the additional investment made during the quarter ended May 31, 2026 for $ 10.0 million of common shares.

See further discussion of the transaction in Note 10 - Derivative Assets.

The balance also includes an investment by the Company in Corintis SA ("Corintis") in exchange for Series A1 preferred shares.

During the quarter ended November 30, 2025, the Company invested $ 15.0 million in exchange for approximately 6 % of Corintis's outstanding equity.

The Series A1 preferred shares are convertible preferred shares with no redemption rights.

During the quarter ended May 31, 2026, the Company sold $ 5.0 million of Corintis's shares to a third party, bringing the Company's investment in Corintis to $ 10.0 million, or approximately 4 % of Corintis’s outstanding equity.

The investment in Corintis is accounted for at cost under ASC 321 as it is an equity security without a readily determinable fair value and is evaluated quarterly for impairment indicators.

There were no impairment indicators during the fiscal year ended May 31, 2026.

(4) Includes a $ 2.0 million investment in Base Electron.

See further discussion of the transaction in Note 7 - Related Party Transactions .

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

May 31, 2026 May 31, 2025

Accrued liabilities

Accrued construction payables $ 307,812 $ —

Accrued expenses 81,311 23,354

Accrued interest 151,215 2,694

Other accrued liabilities

Total Accrued liabilities

$ 548,493 $ 30,121

May 31, 2026 May 31, 2025

Other current liabilities

Construction retainer

$ 95,848 $ 19,338

Other 1,641 93

Total Other current liabilities $ 97,489 $ 19,431

Income tax expense for the fiscal years ended May 31, 2025, 2024, and 2023 consisted of the following (in thousands):

Derivative Assets

APLD HPC TopCo 2’s Noncontrolling Interest

The preferred units and corresponding common units associated with APLD HPC TopCo 2’s noncontrolling interest were determined to have embedded derivative features, the Redemption features and the Contingent Dividend Rate Increase feature, requiring bifurcation and remeasurement at fair value at each reporting date, with the changes in fair value recorded through earnings.

The Redemption features are inclusive of the Investor put option upon a sale, APLD Holdings call option, and the Distribution Redemptions (all as defined within the A&R UPA).

Due to these redemption rights, at each balance sheet date, the Company is required to adjust the carrying value of the derivatives to fair value and record any changes in fair value within earnings.

The Company engaged a third party valuation specialist in determining the value of the embedded derivatives using a binomial lattice model, which includes Level 3 unobservable inputs.

The key inputs used were the estimated credit spread of the associated preferred stock and corresponding common units, volatility, and risk-free rate of the derivative assets:

October 6, 2025 November 26, 2025 December 9, 2025 May 31, 2026

Tranche amount $ 112,500,000 $ 450,000,000 $ 337,500,000 $ 925,000,000

Expected maturity date October 6, 2032 October 6, 2032 October 6, 2032 October 6, 2032

Credit spread (annual) 9.00 % 9.66 % 9.50 % 9.00 %

Yield volatility 35.0 % 35.0 % 35.0 % 40.0 %

Put right/trigger event de minimis de minimis de minimis de minimis

Risk-free rate USD Yield Curve USD Yield Curve USD Yield Curve USD Yield Curve

Number of time-steps 100 100 100 100

As of May 31, 2026, the APLD HPC TopCo 2 derivative assets were fair valued at $ 163.3 million.

During the fiscal year ended May 31, 2026, the Company recorded a loss of $ 13.3 million which is included within the gain on change in fair value of derivatives assets within the consolidated statement of operations.

On November 4, 2025, the Company and B&W entered into an agreement under which the Company contributed $ 2.0 million to B&W in exchange for 500,000 shares of B&W’s common stock and a warrant to purchase 2.6 million shares of B&W’s common stock with an exercise price of $ 4.11 (the “Initial Warrant”).

Additionally, under the agreement, to incentivize the Company to execute a definitive agreement with B&W related to B&W designing and installing natural gas technology that will provide one gigawatt of efficient energy for an APLD AI data center, B&W agreed to issue an additional warrant to purchase 7,860,000 shares of common stock for $ 4.11 per share (the “Additional Warrant”) to the Company upon execution of such a definitive agreement.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

The warrants were determined to be derivative assets and were required to be measured at fair value at issuance under ASC 815.

They will be remeasured at fair value at each reporting date with changes in fair value reported on the consolidated statement of operations.

To allocate the initial contribution between the common stock and the warrants, the Company determined the fair value of each and utilized the relative fair value allocation method.

The B&W warrants are measured at fair value using the Black-Scholes Option Pricing model.

Inherent in pricing models are assumptions related to expected share-price volatility, contractual term, risk-free interest rate and dividend yield, which are considered Level 3 inputs.

The estimated fair value of the B&W Warrants are based on the following significant inputs:

Initial Warrants Additional Warrants As of

November 4, 2025 March 18, 2026 May 31, 2026

Time to expiry 7 years 6.63 years 6.43 years

Stock price $ 3.74 $ 14.17 $ 18.45

Volatility 115.0 % 110.0 % 110.0 %

Risk-free rate 3.84 % 3.98 % 4.19 %

Dividend yield — % — % — %

On February 26, 2026 a definitive agreement was executed between Base Electron and B&W, with the Company as the guarantor.

On March 18, 2026, the Company entered into an Assignment and Assumption Agreement, by and among the Company, Base Electron, B&W, and B&W Enterprises ("BWE"), pursuant to which the Company partially assigned its rights with respect to the Additional Warrants (such partial assignment representing the right to purchase up to 5,230,000 shares of BWE common stock) to Base Electron.

The warrants were assigned by the Company to Base Electron in connection with Base Electron’s entry into a Design-Build Agreement with B&W for no consideration from Base Electron.

On March 18, 2026, the Company received the remaining Additional Warrants (representing the right to purchase up to 2,630,000 shares of BWE common stock).

Base Electron is an independent power producer owned and managed by a combination of third parties, as well as certain officers and directors of the Company acting in their individual capacities, for the purpose of developing stabilized power generation and infrastructure to support the broader AI industry.

During the fiscal year ended May 31, 2026, the Company recorded a gain of $ 89.2 million, which is included within the gain on change in fair value of derivatives assets within the consolidated statement of operations.

Variable Interest Entities

Based upon the criteria set forth in ASC 810, Consolidation , the Company consolidates VIEs in which it has a controlling financial interest and is therefore deemed the primary beneficiary.

A controlling financial interest will have both of the following characteristics:

(a) the power to direct the VIE activities that most significantly impact economic performance;

and (b) the obligation to absorb the VIE losses and the right to receive benefits that are significant to the VIE.

Consolidated VIE

As of November 30, 2025, the Company has determined that it was the primary beneficiary of one VIE, APLD HPC TopCo 2 LLC (“TopCo 2”), as it has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

Additionally, under the A&R UPA (as defined below), the Company is required to fund its portion of the equity to TopCo 2 for the applicable project at the rate of $ 750,000 per MW of capacity (less any equity capital previously invested in the project by the Company or any of its subsidiaries).

As previously disclosed, on January 13, 2025, APLD HPC Holdings LLC (formerly, APLD ELN-02 Holdings LLC), an indirect wholly owned subsidiary of the Company, entered into a Unit Purchase Agreement (the “UPA”) for its HPC Hosting Business with MIP VI HPC Holdings, LLC, an affiliate of Macquarie Asset Management (“MAM”).

On February 11, 2025, APLD HPC Holdings LLC novated and assigned its rights, title and interests and duties, liabilities and obligations under the UPA to APLD HPC TopCo LLC, an indirect wholly-owned subsidiary of the Company (“TopCo 1”).

On October 3, 2025, the Company, TopCo 1, APLD HPC TopCo 2 LLC, an indirect wholly-owned subsidiary of the

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

Company, and MIP HPC Holdings, LLC (formerly, MIP VI HPC Holdings, LLC) entered into an Amended and Restated Unit Purchase Agreement (the “A&R UPA”).

On October 6, 2025, TopCo 2 completed the initial closing under its A&R UPA, selling 112,500 preferred units for $ 112.5 million and issuing 75,000 common units representing 7.5 % of its fully diluted common equity.

In addition, pursuant to the A&R UPA, on October 6, 2025, the Company issued warrants to purchase an aggregate of 2.4 million shares of the Company’s common stock as described in Note 14 - Warrants .

On November 25, 2025, TopCo 2 completed a second closing under its A&R UPA, selling 450,000 preferred units for $ 450.0 million, no common units were issued.

On December 9, 2025, TopCo 2 completed a third closing under its A&R UPA, selling 337,500 preferred units for $ 337.5 million and issuing an additional 27,778 common units.

On May 29, 2026, TopCo 2 completed a fourth closing under its A&R UPA, selling 925,000 preferred units for $ 925.0 million and issuing an additional 41,815 common units.

This brought the total amount funded to date under the A&R UPA to $ 1.8 billion as of May 31, 2026 and MIP HPC Holdings, LLC holdings to 13.5 % of TopCo 2’s fully diluted common equity.

The issuance of the preferred units at closing resulted in a redeemable noncontrolling interest - see Note 16 - Temporary Equity for further discussion.

The purpose of TopCo 2 is to design, build and operate high-performance, sustainably engineered data centers and colocation services for artificial intelligence, cloud, and networking workloads in North Dakota.

TopCo 2 is a bankruptcy-remote legal entity with separate assets and liabilities.

The creditors of TopCo 2 have recourse to the Company’s assets and general credits.

The following table presents the assets and liabilities held by TopCo 2 as of May 31, 2026, which are included in the consolidated balance sheets (in thousands):

Cash and cash equivalents $ 3,505,509

Restricted cash

Accounts receivable 24,546

Prepaid expenses and other current assets 538,428

Property and equipment, net 4,012,167

Other assets 597,949

Accounts payable $ 361,209

Accrued liabilities 523,816

Current portion of debt

Current deferred revenue 4,697

Due to customer 7,407

Other current liabilities

Long-term debt

Total liabilities

Third-party equity ownership interests in TopCo 2 represents a noncontrolling interest and is presented as temporary equity in the consolidated balance sheets separate from the Company’s stockholders’ equity.

The amount of net income (loss) attributable to noncontrolling interests is disclosed in the consolidated statement of operations.

Unconsolidated VIE

As discussed in Note 7 - Related Party Transactions , Base Electron is a related party formed to develop power generation and infrastructure projects supporting the broader AI industry.

The Company has determined that Base Electron is a VIE

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

because it does not have sufficient equity at risk to finance its activities without additional subordinated financial support.

The Company's variable interests in Base Electron consist of its equity investment and related party promissory note.

Additionally, the Company has determined that it is not the primary beneficiary of Base Electron because it does not have the power to direct the activities that most significantly impact Base Electron's economic performance.

Accordingly, the Company does not consolidate Base Electron because ASC 810 requires both power and economics for consolidation.

As of May 31, 2026, the carrying value of the Company's investment in Base Electron was $ 2.0 million and the outstanding balance of the related party promissory note was $ 58.6 million, which together reflect the Company's maximum exposure to loss.

The Company is not contractually required to provide financial support to Base Electron and did not provide material non-contractual financial support during the fiscal year ended May 31, 2026.

The components of consolidated income before taxes from continuing operations were as follows (in thousands):

May 31, 2026 May 31, 2025 May 31, 2024

Current expense (benefit)

United States $ ( 181,532 ) $ ( 230,963 ) $ ( 149,575 )

Foreign — — —

Consolidated income before taxes from continuing operations $ ( 181,532 ) $ ( 230,963 ) $ ( 149,575 )

Income tax expense from continuing operations for the fiscal years ended May 31, 2026, 2025, and 2024 consisted of the following (in thousands):

May 31, 2026 May 31, 2025 May 31, 2024

Current expense

Federal $ 1,419 $ — $ —

Total current expense

Deferred expense (benefit)

Total deferred (benefit) expense

Total income tax (benefit) expense

$ 102 $ 96 $ ( 523 )

Total deferred expense — — —

Total income tax expense $ 1,787 $ 102 $ 96

Beginning in the fiscal year ending May 31, 2026, the Company adopted ASU 2023-09 prospectively as described in Note 2 - Significant Accounting Policies .

A reconciliation of the statutory income tax rate from continuing operations to the Company's effective tax rate pursuant to the disclosure requirements of ASU 2023-09 for the fiscal year ended May 31, 2026 is as follows:

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

For the Fiscal Year Ended May 31, 2026

The following table reconciles the statutory rate to our effective tax rate for the fiscal years ended May 31, 2025, 2024, and 2023:

May 31, 2025 May 31, 2024 May 31, 2023

federal statutory income tax rate $ ( 38,122 ) 21.0 %

Tax credits — — %

Non-taxable or non-deductible items

Stock-based compensation ( 6,593 ) 3.6 %

Excess officer's compensation 37,952 ( 20.8 ) %

Other 2,173 ( 1.1 ) %

Cross-border tax laws — — %

Other reconciling items — — %

Changes in tax laws — — %

Changes in valuation allowances 6,086 ( 3.5 ) %

State and local income taxes, net of federal income tax (1)

291 ( 0.2 ) %

Foreign tax effects — — %

Changes in unrecognized tax benefits — — %

Totals $ 1,787 ( 1.0 ) %

(1) The state that contributes to majority of the tax effects in this category is North Dakota.

The following table reconciles the statutory rate to the Company's effective tax rate for the fiscal years ended May 31, 2025 and 2024:

May 31, 2025 May 31, 2024

Expected income tax rate at the U.S.

5 unchanged sentences

Other, net ( 0.5 ) % ( 1.1 ) %

Effective income tax rate — % ( 0.1 ) % 1.2 %

Income tax expense (benefit) — % ( 0.1 ) %

Cash paid for income taxes, net of refunds received, by jurisdiction pursuant to disclosure requirements of ASU 2023-09 for the year ending May 31, 2026 is as follows:

Massachusetts 64

Cash paid for income taxes, net of refunds received $ 241

Cash paid for income taxes, net of amounts refunded, for years ending May 31, 2025 and May 31, 2024 were immaterial .

Deferred income taxes reflect the temporary differences between the amounts at which assets and liabilities are recorded for financial reporting purposes and the amounts utilized for tax purposes.

The primary components of the temporary differences that gave rise to the Company's deferred tax assets and liabilities for the fiscal years ended May 31, 2025 and 2024 are as follows (in thousands):

The primary components of the temporary

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

differences that gave rise to the Company's deferred tax assets and liabilities for the fiscal years ended May 31, 2026 and 2025 are as follows (in thousands):

May 31, 2026 May 31, 2025

4 unchanged sentences

Interest expense 19,008 12,759

Convertible debt instruments — 3,101

Lease liability 15,762 17,587

Investment in partnership 23,517 —

Other 202 824

3 unchanged sentences

Deferred tax liabilities

Investments ( 23,212 ) —

Property and equipment ( 8,436 ) ( 18,887 )

2 unchanged sentences

Net deferred tax asset $ — $ —

The Company had $ 399.6 million, $ 284.8 million, and $ 114.8 million of federal and state tax net operating losses as of May 31, 2025, 2024, and 2023, respectively.

As of May 31, 2026, the deferred tax assets, deferred tax liabilities and valuation allowance depicted in the table above, include $ 63.1 million of deferred tax assets, $ 1.5 million of deferred tax liabilities and $ 61.6 million of related valuation allowances associated with discontinued operations balance sheet.

The Company had $ 1.0 billion and $ 399.6 million of federal and state tax net operating losses at May 31, 2026 and 2025, respectively.

At May 31, 2026, $ 440.7 million is available indefinitely to offset future income.

1 unchanged sentence

A valuation allowance is provided when it is more likely than not that some portion or the entire net deferred tax asset will not be realized.

The Company has recorded an increase in the valuation allowance of $ 18.9 million and $ 31.3 million as of May 31, 2025 and 2024, respectively.

The Company has recorded an increase in the valuation allowance of $ 110.4 million as of May 31, 2026.

Of the valuation allowance increase, $ 8.6 million was through current year activity and $ 101.8 million is equity related from Purchase Accounting.

The Company has provided a valuation allowance for the portion of the deferred tax assets that it has determined are not more likely than not to be recognized.

The valuation allowance is primarily attributable to deferred tax assets for net operating losses that management believes are more likely than not to expire prior to being realized.

1 unchanged sentence

Management considers, among other things, the scheduled reversals of deferred tax liabilities and the history of positive taxable income in evaluating the realizability of the deferred tax assets.

Management believes that it is not likely that the results of future operations will generate sufficient taxable income to

Management believes that it is not likely that the results of future operations will generate sufficient taxable income to realize its deferred tax assets.

Under the provisions of the Internal Revenue Code, certain substantial changes in the Company’s ownership, including a sale of the Company or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of net operating loss carryforwards that could be used annually to offset future taxable income.

Any potential limitations would not have a material impact on the financial statements due to the full valuation allowance maintained against the deferred taxes for net operating loss carryforwards.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

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For the Fiscal Year Ended May 31, 2026

realize its deferred tax assets.

The following table presents the beginning and ending balance of the Company's unrecognized tax benefits for the year ended May 31, 2026 (in thousands):

Balance, June 1, 2026 $ —

Additions based on tax positions in the current year —

Additions based on tax positions related to prior years (1)

Reductions for tax positions of prior years —

Settlements with taxing authorities —

Expiration of statue of limitations —

Balance, May 31, 2026 $ 1,800

(1) The Company recognized $ 1.8 million of unrecognized tax benefits for the year ended May 31, 2026, all of which relate to discontinued operations from the Ekso business at ChronoScale.

The Company did not have any unrecognized tax benefits for the year ended May 31, 2025.

The Company recognizes interest expense related to unrecognized tax benefits in income tax expense.

The Company did not have any interest expense or expense for penalties related to unrecognized tax benefits for the reported periods.

The Company is subject to U.S.

federal and various state and local income tax.

federal and state income tax examinations.

Tax years ending May 31, 2023 through May 31, 2026 are open to examination by the major taxing jurisdictions to which the Company is subject, as carryforward attributes generated in these years may still be adjusted upon examination by the Internal Revenue Service (IRS) or other authorities if they have or will be used in a future period.

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Stockholders' Equity

Increases In Authorized Shares

On June 11, 2024, the Company filed a Certificate of Amendment (the “Certificate of Amendment”) to its Second Amended and Restated Articles of Incorporation, as amended (the “Articles of Incorporation”).

Pursuant to the Certificate of Amendment, the number of authorized shares of common stock was increased to 300,000,000 .

The Certificate of Amendment became effective upon filing on June 11, 2024.

Additionally, on November 20, 2024, the Company filed an amendment to its Articles of Incorporation, increasing the number of shares of common stock authorized for issuance to 400,000,000 shares and the number of shares of preferred stock authorized for issuance to 10,000,000 shares.

Roth Capital Partners LLC

On May 6, 2024, the Company began sales of common stock under an "at the market" sale agreement with Roth Capital Partners, LLC pursuant to which the Company could sell up to $ 25 million in aggregate proceeds of common stock.

During the quarter ended August 31, 2024, the Company sold approximately 3.1 million shares for net proceeds of approximately $ 14.6 million with commission and legal fees related to the issuance of approximately $ 0.5 million.

As of August 31, 2024, this offering was completed.

At-the-Market Sales Agreement

On July 9, 2024, the Company entered into a Sales Agreement (the “Sales Agreement”) with B.

Riley Securities, Inc., BTIG, LLC, Lake Street Capital Markets, LLC, Northland Securities, Inc.

and Roth Capital Partners, LLC (collectively, the “Agents”), pursuant to which the Company could offer and sell, from time to time, through the Agents, up to $ 125.0 million in shares of the Company’s common stock.

During the fiscal quarter ended August 31, 2024, approximately 3.0 million shares of the Company’s common stock were issued and sold under the Sales Agreement for proceeds of $ 16.4 million net of issuance costs of $ 0.5 million.

On October 30, 2024, the Company terminated its Sales Agreement with the Agents.

Standby Equity Purchase Agreement ("SEPA")

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 had the option, but not the obligation, to sell to YA Fund, and YA Fund was obligated to purchase, 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, and terminating on October 1, 2027.

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, (the Commitment Fee”), in the form 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 the date of the SEPA.

On October 16, 2024, the Company entered into a letter agreement with YA Fund, whereby the Company agreed to satisfy its obligations with respect to the Commitment Fee in cash by increasing the principal amount due under the March Note in an equivalent amount, instead of issuing the Commitment Shares.

The Commitment Fee was

June 2025 At-the-Market Sales Agreement

On June 2, 2025, the Company entered into a Sales Agreement with Northland Securities, Inc.

and Wells Fargo Securities, LLC (the “June 2025 Sales Agreement”), pursuant to which, up to $ 200,000,000 of shares of the Company's common stock may be issued if and when sold.

As of the date of this report, the Company has issued and sold approximately 15.3 million shares under the June 2025 Sales Agreement for gross proceeds of approximately $ 196.4 million.

Increase In Authorized Shares

On November 5, 2025, at the Annual Stockholders’ Meeting, the Company’s stockholders approved an amendment to the Second Amended and Restated Articles of Incorporation, increasing the number of shares of common stock authorized for issuance thereunder to 600,000,000 shares, which became effective upon filing on November 6, 2025.

Treasury Stock

On October 7, 2025, the Board of Directors authorized and approved 9,291,199 shares of the Company’s capital stock that was currently held in treasury stock to be retired and returned to the authorized but unissued capital stock.

Settlement of Prepaid Forward Transaction

On November 3, 2025, the Company’s Prepaid Forward Transaction associated with the Convertible Notes matured and the Company received 7,165,300 shares of common stock which are now held in treasury stock as of May 31, 2026.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

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For the Fiscal Year Ended May 31, 2026

paid in full during the quarter ended May 31, 2025 as part of the repayment by the Company of the March Note.

The SEPA was terminated on April 30, 2025.

Private Placement

On September 5, 2024, the Company entered into a securities purchase agreement with a group of institutional and accredited investors, NVIDIA and Related Companies, for the private placement (the “Private Placement”) of 49,382,720 shares of the Company’s common stock, par value $ 0.001 per share, at a purchase price of $ 3.24 per share, representing the last closing price of the common stock on the Nasdaq Global Select Market on September 4, 2024.

The Private Placement closed during the three months ended November 30, 2024, with aggregate gross proceeds to the Company of approximately $ 160 million, before deducting offering expenses.

A summary of warrant activity for the year ended May 31, 2026 is presented below:

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As of May 31, 2026, all of the AI Warrants were outstanding.

Pursuant to the CIM Promissory Note discussed above, the Company issued warrants to purchase up to 9,265,366 shares of common stock.

The CIM Warrants were issued in two tranches:

for the purchase of up to 6,300,449 Common Shares (the “Initial Warrants”), issued on June 17, 2024, and 2,964,917 Common Shares (the “Additional Warrants”), issued on August 11, 2024.

The CIM Warrants were exercisable upon issuance and had a five-year term and an exercise price of $ 4.8005 per share.

The CIM Warrants were measured at fair value using the Black-Scholes Option Pricing model.

Inherent in pricing models are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield, which are considered Level 3 inputs.

The estimated fair value of the CIM Warrants was based on the following significant inputs:

Initial Warrants

Additional Warrants

Warrant issue date

June 17, 2024 August 11, 2024

Contractual term

Volatility 105 % 110 %

Risk-free rate 4.25 % 3.76 %

Dividend yield — % — %

The fair value of the Initial Warrants and Additional Warrants was $ 4.36 and $ 3.04 per warrant, respectively.

The total fair value of the CIM Warrants was $ 36.5 million and was recorded in the consolidated statements of changes in temporary equity and stockholders’ equity.

The Company deferred the recognition of the fair value of the Initial and Additional Warrants as a reduction in the net carrying amount of the CIM Promissory Note.

After the repayment of the CIM

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2025

Promissory Note, the remaining value of the CIM Warrants recorded as a reduction of the CIM Promissory Note was capitalized to CIP.

During the fiscal year ended May 31, 2025, all 9,265,366 of the CIM Warrants were exercised on a cashless basis for approximately 4.9 million shares of the Company’s common stock in a net settlement transaction.

Macquarie Warrants

On November 27, 2024, as partial consideration for the Macquarie Promissory Note, the Company issued warrants to purchase up to 1,035,197 shares of the Company’s common stock.

On November 27, 2024, as partial consideration for the Macquarie Promissory Note, the Company issued warrants to purchase up to 1,035,197 shares of the Company’s common stock (the "Macquarie Warrants") to Macquarie Equipment Capital, Inc.

The Macquarie Warrants are exercisable from and after the date that is six months following the date of issuance thereof and will have a five and one-half-year term and an exercise price of $ 9.66 per share, which exercise price must be paid in cash.

The Macquarie Warrants were measured at fair value using the Black-Scholes Option Pricing model.

Inherent in pricing models are assumptions related to expected share-price volatility, contractual term, risk-free interest rate and dividend yield, which are considered Level 3 inputs.

The estimated fair value of the Macquarie Warrants was based on the following significant inputs:

Macquarie Warrants

Contractual term

Volatility 95 %

Risk-free rate 4.08 %

Dividend yield — %

The fair value of the Macquarie Warrants was $ 7.38 per warrant, totaling $ 7.6 million which was recorded as additional paid-in capital on the Company’s consolidated balance sheets.

The Company deferred the recognition of the fair value of the Macquarie Warrants as a reduction in the net carrying amount of the Macquarie Promissory Note and subsequently amortized this balance into interest expense or CIP, as noted above, using the effective interest rate method.

The Macquarie Warrants survived the termination of the Macquarie Promissory Note and remain outstanding as of May 31, 2026.

STB Warrant Issuance

On October 31, 2025, MEC assigned the Macquarie Warrants and its rights under the Registration Rights Agreement in connection therewith to Jane Street Global Trading, LLC (“Jane Street”) and on or around May 15, 2026, Jane Street assigned all of its right, title and interest in and to Macquarie Warrants to Wells Fargo Bank, National Association ("WFBNA").

On February 27, 2025, the Company issued a warrant to STB Applied Holdings LLC to purchase 1,000,000 shares of the Company’s common stock at the exercise price of $ 7.83 per share (the “STB Warrant”) for consideration of $ 50,000 .

The warrant is exercisable beginning on February 27, 2027 (the “Initial Exercise Date”), upon payment of the applicable exercise price in cash or through cashless exercise for a period of five years from the Initial Exercise Date.

The STB Warrant was measured at fair value using the Black-Scholes Option Pricing model.

The warrant is exercisable upon payment of the applicable exercise price in cash or through cashless exercise for a period of five years from the Initial Exercise Date.

As of May 31, 2026, 800,000 of the STB Warrants have been exercised for $ 6.3 million.

CoreWeave Warrants

On May 28, 2025, in connection with the entry into the data center leases with CoreWeave for Building 2 and Building 3 (the "CoreWeave Leases"), the Company issued to CoreWeave a warrant (the “CoreWeave Warrant”) to acquire up to 13,062,521 shares of the Company's common stock at an exercise price of $ 7.19 per share, subject to adjustment in accordance with the terms and conditions set forth in the CoreWeave Warrant.

The CoreWeave Warrant is exercisable upon issuance, upon payment of the applicable exercise price in cash or through cashless exercise for a period of 10 years.

On June 9, 2025, CoreWeave assigned a portion of the CoreWeave Warrant to acquire up to 6,531,261 shares of the Company's common stock to PEAK6 Capital Management, LLC (the “PEAK6 Warrant”).

CoreWeave concurrently assigned the remaining portion of the CoreWeave Warrant to acquire up to 6,531,260 shares of the Company's common stock to Jane Street (the “Jane Street CW Warrant”), and on or around May 15, 2026, Jane Street assigned all of its right, title and interest in and to the Jane Street CW Warrant to WFBNA.

As of May 31, 2026, 300 warrant shares have been exercised through cashless exercise.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

Additionally, on August 28, 2025, in connection with the entry into the Building 4 Lease, the Company issued to CoreWeave a warrant (the “Building 4 Warrant”) to acquire up to 8,393,611 shares of the Company’s common stock at an exercise price of $ 10.75 per share, subject to adjustment in accordance with the terms and conditions set forth in the Building 4 Warrant.

The Building 4 Warrant is on the same Form of Warrant as the initial CoreWeave Warrant.

On October 31, 2025, CoreWeave assigned the Building 4 Warrant and its rights under the CoreWeave Registration Rights Agreement to Jane Street and on or around May 15, 2026, Jane Street assigned all of its right, title and interest in and to the Building 4 Warrant to WFBNA.

The Building 4 Warrant was measured at fair value using the Black-Scholes Option Pricing model.

Inherent in pricing models are assumptions related to expected share-price volatility, contractual term, risk-free interest rate and dividend yield, which are considered Level 3 inputs.

The estimated fair value of the STB Warrant was based on the following significant inputs:

Contractual term

The estimated fair value of the Building 4 Warrant was based on the following significant inputs:

Building 4 Warrant

Contractual term 10 years

Volatility 80 %

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Dividend yield — %

The resulting fair value of the STB Warrant was $ 6.42 per warrant, totaling $ 6.4 million and was recorded in the consolidated statements of changes in temporary equity and stockholders’ equity with a commensurate loss of $ 6.4 million on change in fair value of warrants on the consolidated statements of operations.

CoreWeave Warrant

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2025

On May 28, 2025, in connection with the entry into the data center leases with CoreWeave (the "CoreWeave Leases"), the Company issued to CoreWeave a warrant (the “CoreWeave Warrant”) to acquire up to 13,062,521 shares of the Company's common stock at an exercise price of $ 7.19 per share, subject to adjustment in accordance with the terms and conditions set forth in the CoreWeave Warrant.

The CoreWeave Warrant is exercisable upon issuance, upon payment of the applicable exercise price in cash or through cashless exercise.

The CoreWeave Warrant was measured at fair value using the Black-Scholes Option Pricing model.

The resulting fair value of the Building 4 Warrant was $ 14.44 per share, totaling $ 121.2 million, which was recorded to lease incentive asset and additional paid in capital on the Company's consolidated balance sheets, and will be amortized over the life of the Building 4 Lease once it commences.

On October 6, 2025, in connection with the Amended and Restated Unit Purchase Agreement dated October 3, 2025 (the “Purchase Agreement”), the Company issued MIP VI REIT AIV, L.P.

and MIP VI DC REIT AIV, L.P.

two warrants (the “MAM Warrants”) to acquire up to 2,400,000 shares of the Company’s common stock at an exercise price of $ 8.29 per share, subject to adjustment in accordance with the terms and conditions set forth in the warrants.

The MAM Warrants were measured at fair value using the Black-Scholes Option Pricing model.

Inherent in pricing models are assumptions related to expected share-price volatility, contractual term, risk-free interest rate and dividend yield, which are considered Level 3 inputs.

The estimated fair value of the CoreWeave Warrant was based on the following significant inputs:

CoreWeave Warrant

The estimated fair value of the MAM Warrants are based on the following significant inputs:

Contractual term 5.5 years

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Dividend yield — %

The resulting fair value of the CoreWeave Warrant was $ 6.56 per warrant, totaling $ 85.7 million which was recorded to lease incentive asset and additional paid in capital on the Company's consolidated balance sheets, and will be amortized over the life of the respective CoreWeave Lease once such lease commences.

The resulting fair value of the MAM Warrants was $ 24.47 per share, totaling $ 58.7 million.

The Company elected a relative fair value approach to record the warrants as part of the overall MAM transaction and as such, $ 34.2 million, net of issuance costs, was recorded as additional paid in capital on the Company's consolidated balance sheets.

Stock-Based Compensation Plans

Management Incentive Plan

On May 5, 2026, the Company completed the separation of its cloud business in a series of transactions that resulted in the Company owning approximately 97 % of the issued and outstanding equity of ChronoScale Corporation.

On July 1, ChronoScale Corporation completed a holding company transaction, as a result of which the holding company became the public parent, ChronoScale Holdings Corporation ("ChronoScale").

Prior to the transaction close, the Company established a management incentive plan (the "MIP") designed to align the interests of key management personnel of the Company with the long-term performance of ChronoScale.

The MIP was established through newly formed entities within the ChronoScale holding structure, including APLD ChronoScale HoldCo

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

LLC (“HoldCo”) and APLD ChronoScale Management LLC (“Management LLC”).

Management LLC was formed solely to hold Class B units of HoldCo and to issue corresponding MIP units to participants.

Each MIP unit issued by Management LLC corresponds on a one -for-one basis to a Class B unit held by Management LLC in HoldCo.

The MIP units granted during the year ended May 31, 2026 were fully vested on the grant date of April 9, 2026 and did not contain substantive service, performance, or market conditions.

Accordingly, the Company recognized the grant-date fair value of the MIP units as stock-based compensation expense on the grant date.

Because the awards are equity-classified, the grant-date fair value is not subsequently remeasured unless the awards are modified.

Any future distributions on vested MIP units will be recorded as reductions to retained earnings.

During the year ended May 31, 2026, the Company granted approximately 9,266,082 MIP units with a weighted-average grant-date fair value of $ 5.17 per unit.

The Company recognized stock-based compensation expense of $ 47.9 million related to the MIP units during the year ended May 31, 2026 .

As of May 31, 2026 , there was no remaining unrecognized compensation cost related to the MIP units as the awards were fully vested on the grant date.

On October 8, 2024, the Company’s Board of Directors approved the Applied Digital Corporation 2024 Omnibus Equity Incentive Plan (the “2024 Plan”), which the Company’s stockholders approved on November 20, 2024.

The 2024 Plan provides for grants of various equity awards for eligible employees, officers, non-employee directors and other service providers.

The 2024 Plan provides for grants of various equity awards to eligible employees, officers, non-employee directors and other service providers.

Upon stockholder approval of the 2024 Plan, the 2022 Plans (as defined below) were terminated;

provided that all awards (as defined in the 2022 Plans) outstanding under the 2022 Incentive Plan and the 2022 Non-Employee Director Stock Plan shall continue in effect in accordance with their terms.

provided that all awards (as defined in the 2022 Plans) outstanding under the 2022 Plans continued in effect in accordance with their terms.

On November 5, 2025, at the Annual Stockholders’ Meeting, the Company’s stockholders approved an amendment to the 2024 Plan to increase the number of shares of common stock authorized for issuance thereunder by 15 million shares.

On October 9, 2021, the Company’s Board of Directors (the “Board”) approved two equity incentive plans, which the Company’s stockholders approved on January 20, 2022.

The two plans consist of the 2022 Incentive Plan, previously referred to in the Company’s SEC filings as the 2021 Incentive Plan (the “Incentive Plan”), which provides for grants of various equity awards to the Company’s employees and consultants, and the 2022 Non-Employee Director Stock Plan previously referred to in the Company’s SEC filings as the 2021 Non-Employee Director Stock Plan (the “Director Plan” and, together with the Incentive Plan, the “2022 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 two plans consist of the 2022 Incentive Plan, previously referred to in the Company’s SEC filings as the 2021 Incentive Plan (the “Incentive Plan”), which provided for grants of various equity awards to the Company’s employees and consultants, and the 2022 Non-Employee Director Stock Plan previously referred to in the Company’s SEC filings as the 2021 Non-Employee Director Stock Plan (the “Director Plan” and, together with the Incentive Plan, the “2022 Plans”), which provides for grants of restricted stock to non-employee directors and for potential deferral of cash and stock compensation.

As of May 31, 2026, the Company had issued awards of approximately 23.2 million shares of common stock of the Company under the 2022 Plans, 19.7 million shares of common stock under the 2024 Plan, and 600,000 shares of common stock outside of either plan, related to an employment inducement award.

As of May 31, 2026, there are approximately 6.0 million shares of common stock available for issuance under the 2024 Plan.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2025

During the third fiscal quarter of the year ended May 31, 2026, under the 2024 Plan, the Company issued 100,000 shares to certain consultants in settlement of outstanding awards.

The Company capitalizes a portion of stock-based compensation costs for employees who work directly on construction and development of the Company's data centers.

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May 31, 2026 May 31, 2025 May 31, 2024

Cost of revenue

$ 2,504 $ 1,465 $ —

Services cost of revenue $ 3,202 $ 2,936 $ 1,955

Data center rental and other cost of revenue 519 $ — $ —

Selling, general, and administrative

1 unchanged sentence

Capitalized (1)

5,012 1,465 207

Total stock-based compensation

1 unchanged sentence

(1) Capitalized to CIP in the consolidated balance sheets.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

Restricted Stock Awards

The following is a summary of the activity and balances for unvested restricted stock awards outstanding for the fiscal year ended May 31, 2025:

The following is a summary of the activity and balances for unvested restricted stock awards outstanding:

Number of Shares Weighted Average Grant Date Fair Value Per Share

Outstanding as of May 31, 2024

Outstanding as of June 1, 2025

271,444 $ 3.55

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Restricted Stock Units

The following is a summary of the activity and balances for unvested restricted stock units outstanding for the fiscal year ended May 31, 2025:

The following is a summary of the activity and balances for unvested restricted stock units outstanding:

Number of Shares Weighted Average Grant Date Fair Value Per Share

Outstanding as of May 31, 2024

Outstanding as of June 1, 2025

6,659,830 $ 6.56

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Performance Stock Units

Performance stock units (“PSUs”) represent a right to receive a certain number of shares of common stock based on the achievement of company performance goals, individual performance measures, and continued employment during the vesting period.

Performance stock units cliff-vest at the end of a service period of three years depending on the achievement of Company and individual performance measures at the end of each vesting period.

Such performance measures are based on the Company entering into data center leases with a hyperscaler, the consummation of project financing, receipt of sustainable revenue with respect to the data center leases that implies positive net operating income, and data center buildings achieving "ready for service" dates.

The fair value of PSUs is based on the closing price on the date of grant.

The compensation expense related to these PSUs is recognized over the vesting period when the achievement

Performance stock units (“PSUs”) represent a right to receive a certain number of shares of common stock based on the achievement of performance goals and continued employment during the vesting period (provided that the PSUs may remain outstanding and eligible to vest following certain terminations).

PSUs granted by the Company vest depending on the achievement of certain Company and individual performance financial, operational and/or market-price driven measures, which must occur on or prior to the deadline set forth in each applicable PSU award.

The fair value of PSUs, except PSUs for which vesting is based on the market price, is based on the closing price on the date of grant.

The compensation expense related to these PSUs is recognized over the vesting period when the achievement of the performance conditions becomes probable.

The total compensation cost for the PSUs is determined based on the most likely outcome of the performance conditions and the number of awards expected to vest.

PSUs that Vest Based on Market Price

On January 6, 2026, the Company granted the CEO 4.5 million PSUs with market-price based and service-based vesting conditions.

The awards vest based on the achievement of certain stock price targets, subject to his continued full-time employment with the Company through the applicable vesting date (except that continued employment is not required if his employment is terminated by the Company without “cause,” he resigns for “good reason,” he dies or incurs a “disability,” or the Company elects not to renew his employment term).

The total grant date fair value of the awards was determined to be $ 122.1 million, with each tranche of the awards representing approximately $ 42.7 million, $ 40.6 million, and $ 38.8 million of the total expense, respectively.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

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For the Fiscal Year Ended May 31, 2026

of the performance conditions becomes probable.

The total compensation cost for the PSUs is determined based on the most likely outcome of the performance condition and the number of awards expected to vest.

During the three months ended August 31, 2024, the Board determined that the performance criteria associated with certain performance stock units granted to certain executives in the third fiscal quarter of 2024 were not met.

As such, 2.8 million performance stock unit awards were cancelled and the Company recognized a reversal of the expense previously recognized for the awards of approximately $ 6.0 million during the fiscal year ended May 31, 2025.

The following is a summary of the activity and balances for unvested performance stock units outstanding for the fiscal year ended May 31, 2025:

Number of Shares

Weighted Average Grant Date Fair Value Per Share

Outstanding as of May 31, 2024

The fair value of the PSUs was calculated on the grant date using a Monte Carlo simulation model.

The estimated fair value at grant date was based on the following significant inputs:

January 6, 2026

Valuation date stock price $ 30.26

Simulation term 5.0 years

Expected volatility 100.62 %

Risk-free rate 3.69 %

Dividend yield — %

The following is a summary of the activity and balances for unvested performance stock units outstanding:

Number of Shares Weighted Average Grant Date Fair Value Per Share

Outstanding as of June 1, 2025

7,207,500 $ 6.59

Awarded 7,485,000 29.42

Forfeited ( 306,250 ) 7.23

Outstanding as of May 31, 2026

14,386,250 $ 18.45

As of May 31, 2026, total remaining expense to be recognized related to these awards was $ 135.1 million and the weighted average remaining recognition period for the unvested awards was 2.5 years.

Temporary Equity

Preferred Stock

The following is a summary of the activity and balances for preferred stock during the fiscal years ended May 31, 2025 and May 31, 2026 (in thousands, other than share data):

Series E Redeemable Preferred Stock Series F Convertible Preferred Stock Series E-1 Redeemable Preferred Stock Series G Convertible Preferred Stock

Shares Amount Shares Amount Shares Amount Shares Amount

Outstanding as of June 1, 2024

— $ — — $ — — $ — — $ —

Issuances, net of costs 301,673 6,932 53,191 48,350 62,500 57,026 78,000 72,094

Conversions — — ( 53,191 ) ( 48,350 ) — — — —

Redemptions — — — — ( 15 ) ( 15 ) — —

Outstanding as of May 31, 2025

301,673 $ 6,932 — $ — 62,485 $ 57,011 78,000 $ 72,094

Issuances, net of costs — — — — — 10 835,800 803,091

Conversions — — — — — — ( 913,800 ) ( 875,185 )

Redemptions ( 25,000 ) ( 626 ) — — ( 576 ) ( 561 ) — —

Outstanding as of May 31, 2026

276,673 $ 6,306 — $ — 61,909 $ 56,460 — $ —

As of May 31, 2025, total remaining expense to be recognized related to these awards was $ 41.5 million and the weighted average remaining recognition period for the unvested awards was 2.3 years.

Temporary Equity

Series E Redeemable Preferred Stock

2 unchanged sentences

The Series E Preferred Stock offering was terminated on August 9, 2024.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

The shares of Series E Preferred Stock have no voting or conversion rights.

2 unchanged sentences

Dividends must be fully paid for all past periods before any distributions can be made to common stockholders or any junior series of equity securities.

During the fiscal year ended May 31, 2025, the Company declared and paid approximately $ 0.6 million of dividends related to Series E Preferred Stock as presented on the consolidated statements of operations.

During the fiscal years ended May 31, 2026 and May 31, 2025, the Company declared and paid approximately $ 655,000 and $ 610,000 , respectively, of dividends related to Series E Preferred Stock as presented on the consolidated statement of operations.

The Series E Preferred Stock ranks senior to all classes of common stock and junior to all existing and future debt of the Company.

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The Settlement Amount can be settled in cash or shares of common stock, subject to a share cap, which limits the total shares deliverable upon redemption to 19.99 % of the common stock outstanding prior to the Series E Preferred Stock offering ( 25,475,751 shares, the “Share Cap”).

Any portion of the Settlement Amount exceeding this cap will be settled in cash.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2025

Any portion of the Settlement Amount exceeding the Share Cap will be settled in cash.

The Company may also redeem shares of Series E Preferred Stock after the second anniversary of the original issuance date, with a minimum notice of 10 days, at the Company Optional Redemption Settlement Amount, which is equal to the Series E Stated Value per share plus any unpaid and accrued dividends.

If the Company elects to pay the redemption amount in shares, then the number of shares to be delivered will be calculated as the Company Optional Redemption Settlement Amount divided by the closing price per share of the common stock on the date of the Company Optional Redemption exercise, subject to the Share Cap.

Series F Convertible Preferred Stock

On August 29, 2024, the Company entered into a securities purchase agreement for the private placement of 53,191 shares of Series F Convertible Preferred Stock, par value $ 0.001 per share (the “Series F Convertible Preferred Stock”), including 3,191 shares representing an original issue discount of 6 %.

The transaction closed on August 30, 2024, for total proceeds of $ 50.0 million, prior to fees paid to Northland Securities, Inc.

for their role as placement agent in an amount equal to 3.5 % of the total proceeds.

The shares of Series F Convertible Preferred Stock were convertible into shares of common stock only upon the receipt of shareholder approval, which was received on November 20, 2024.

Holders of the Series F Convertible Preferred Stock were entitled to cumulative dividends at an annual rate of 8.0 % of the stated value of $ 1,000 per share (the “Series F Stated Value”), payable quarterly in arrears.

Dividends were calculated based on a 360-day year, declared and accrued quarterly, and payable at the discretion of the Board of Directors out of legally available funds.

Dividends must be fully paid for all past periods before any distributions can be made to common stockholders or any junior series of equity securities.

During the fiscal year ended May 31, 2025, the Company declared and paid approximately $ 0.4 million of dividends related to the Series F Convertible Preferred Stock as presented on the consolidated statements of operations.

The Series F Convertible Preferred Stock ranked senior to all classes of common stock and junior to all existing and future debt of the Company.

In the event of liquidation, holders were entitled to receive the Series F Stated Value plus any accrued but unpaid dividends before any distributions were made to common stockholders.

Series F Convertible Preferred Stock was on parity with the Series E Preferred Stock, Series E-1 Preferred Stock and any future series of preferred stock with substantially identical terms.

Upon the receipt of shareholder approval on November 20, 2024, the Series F Convertible Preferred Stock voted on an as-converted basis, subject to a cap equal to the greater of (x) the conversion price then in effect or (y) $ 4.0638 .

Holders had the right to require the Company to redeem the Series F Convertible Preferred Stock under certain conditions, including a Change of Control or Trading Failure, each as defined in the Series F Convertible Preferred Stock certificate of designation.

If there were a Change of Control, the redemption price was the greater of the Series F Stated Value or the amount that would have been received if the Series F Convertible Preferred Stock had been converted into common stock immediately prior to the redemption event.

If there was a Trading Failure, the redemption price was the greater of the Series F Stated Value or the product of the lowest conversion price during the period beginning on the date immediately preceding the Trading Failure and ending on the date the holder delivers a Redemption Notice, multiplied by the number of shares of common stock into which the preferred stock is convertible at the then-effective conversion price.

Additionally, holders had a one-time right to require the Company to redeem their shares between December 31, 2024, and January 10, 2025, in which case the redemption price was the Series F Stated Value.

Further, upon receipt of shareholder approval of the conversion feature of the Series F Convertible Preferred Stock, which approval was received on November 20, 2024, if the VWAP for any 20 Trading Days during any 30 consecutive trading day period, beginning with the original issuance date of the applicable preferred stock, exceeded two hundred percent ( 200 %) of the conversion price then in effect, the Company may, at any time cause the holder to convert all or part of the holder’s preferred stock.

During the fiscal year ended May 31, 2025, all 53,191 shares of Series F Convertible Preferred Stock were converted into approximately 7.6 million shares of the Company’s common stock.

During the fiscal year ended May 31, 2026, 25,000 shares of Series E Preferred Stock were redeemed.

Series E-1 Redeemable Preferred Stock

On September 23, 2024, the Company entered into a dealer manager agreement for the offering of up to 62,500 shares of Series E-1 Redeemable Preferred Stock, par value $ 0.001 per share (“Series E-1 Preferred Stock”), at a price per share of $ 1,000 (the “Series E-1 Stated Value”).

During the fiscal year ended May 31, 2025, the Company closed on eight offerings

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2025

of the Series E-1 Preferred Stock, in which the Company issued and sold 62,500 shares for gross proceeds of $ 62.5 million.

As of the date of this report, the offering of Series E-1 Preferred Stock has been completed.

During the fiscal year ended May 31, 2025, the Company closed on eight offerings in which the Company issued 62,500 shares for gross proceeds of $ 62.5 million.

The Series E-1 Preferred Stock offering was completed as of May 31, 2025.

The shares of Series E-1 Preferred Stock have no voting or conversion rights.

2 unchanged sentences

Dividends on the shares of Series E-1 Preferred Stock must be fully paid for all past periods before any distributions can be made to common stockholders or any junior series of equity securities.

During the fiscal year ended May 31, 2025, the Company declared and paid approximately $ 1.7 million of dividends related to the Series E-1 Preferred Stock as presented on the consolidated statements of operations.

During the fiscal years ended May 31, 2026 and May 31, 2025, the Company declared and paid approximately $ 5.6 million and $ 1.7 million, respectively, of dividends related to Series E-1 Preferred Stock as presented on the consolidated statement of operations.

The Series E-1 Preferred Stock ranks senior to all classes or series of common stock and junior to all existing and future debt of the Company.

Additionally, the Series E-1 Preferred Stock is on parity with the Series E Preferred Stock, the Series F Convertible Preferred Stock and any future series of preferred stock with substantially identical terms but may rank junior to any future series of preferred stock if the holders of such series are entitled to rights and preferences with priority over the holders of the Series E-1 Preferred Stock.

In the event of liquidation, holders of the Series E-1 Preferred Stock and holders of shares of any other class or series of capital stock ranking senior to or on a parity with the Series E-1 Preferred Stock, are entitled to receive an amount per share equal to the Series E-1 Stated Value plus an amount per share that is issuable as a result of any accrued but unpaid dividends before any distributions are made to common stockholders.

Additionally, the Series E-1 Preferred Stock is on parity with the Series E Preferred Stock and any future series of preferred stock with substantially identical terms but may rank junior to any future series of preferred stock if the holders of such series are entitled to rights and preferences with priority over the holders of the Series E-1 Preferred Stock.

In the event of liquidation, holders of the Series E-1 Preferred Stock and holders of shares of any other class or

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

series of capital stock ranking senior to or on a parity with the Series E-1 Preferred Stock, are entitled to receive an amount per share equal to the Series E-1 Stated Value plus an amount per share that is issuable as a result of any accrued but unpaid dividends before any distributions are made to common stockholders.

The Series E-1 Preferred Stock has no stated maturity and remains outstanding indefinitely unless redeemed or repurchased by the Company.

9 unchanged sentences

If the Company elects to pay the redemption amount in shares, then the number of shares to be delivered will be calculated as the Settlement Amount divided by the closing price per share of the common stock on the last trading day prior to the date upon which notice was provided to the holder, subject to the Share Cap, if applicable.

During the fiscal year ended May 31, 2025, 15 of the shares were redeemed.

During the fiscal year ended May 31, 2026, 576 shares of Series E-1 Preferred Stock were redeemed.

Series G Convertible Preferred Stock

1 unchanged sentence

The shares of the Series G Preferred Stock may be put to the investors from time to time at the Company’s discretion during the period commencing on April 30, 2025 (the “Commitment Date”) and terminating on the earlier of (i) the 36-month anniversary of the Commitment Date or (ii) such date as there ceases to be a sufficient number of authorized but unissued shares of common stock remaining under the Exchange Cap (as defined in the PEPA).

The Series G Preferred Stock becomes convertible upon the earlier of (i) 45 days after the first issuance date of the Series G Preferred Stock and (ii) the Registration Effective Date (as defined in the PEPA).

Pursuant to the PEPA, the Company agreed to prepare and file with the SEC a registration statement, registering the resale of the shares of common stock

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2025

issuable upon the conversion of the shares of Series G Preferred Stock as soon as practicable after June 2, 2025, but in any case, no later than June 9, 2025 (subject to certain exceptions), which was filed with the SEC on June 3, 2025 and was automatically effective upon filing.

The Series G Preferred Stock became convertible on June 3, 2025, the Registration Effective Date (as defined in the PEPA).

Pursuant to the PEPA, the Company filed a registration statement with the SEC, registering the resale of the shares of common stock issuable upon the conversion of the shares of Series G Preferred Stock, on June 3, 2025, as amended by the post-effective amendments filed with the SEC on September 23, 2025 and November 12, 2025, each of which was automatically effective upon filing.

Conversion of the Series G Preferred Stock is subject to a customary 4.99 % beneficial ownership limitation, as well as a 19.99 % conversion limitation pursuant to the applicable Nasdaq Listing Rules (the “Exchange Cap”).

The Series G Preferred Stock ranks senior to all classes of common stock and junior to all existing and future debt of the Company.

Upon any dissolution, liquidation or winding up, whether voluntary or involuntary, holders of the Series G Preferred Stock will be entitled to receive distributions out of the assets of the Company in an amount per share equal to the then-current Series G Preferred Stock stated value, whether capital or surplus, before any distributions are made on any shares of our common stock.

The Series G Preferred Stock is on parity with the Series E Preferred Stock, Series E-1 Preferred Stock and any future series of preferred stock with substantially identical terms.

Holders have the right to require the Company to redeem the Series G Preferred Stock under certain conditions, such as a Trading Failure, as defined in the Series G Preferred Stock certificate of designation.

If there is a Trading Failure, the redemption price is the greater of the Series G Preferred Stock stated value or the product of the lowest conversion price during the period beginning on the date immediately preceding the Trading Failure and ending on the date the holder delivers a Redemption Notice, multiplied by the number of shares of common stock into which the preferred stock is convertible at the then-effective conversion price.

If any Investor is prevented from converting any portion of its Series G Preferred Stock because of the Exchange Cap, and such limitation continues for 18 months following the date that is 18 months following the issuance of such Series G Preferred Stock, or, if earlier, the date that is 36 months following the Commitment Date, then the portion of the Series G Preferred Stock held by such Investor at such time shall be redeemed by the Company, within 10 trading days after such earlier date, at a price equal to the greater of (A) the product of (x) the Conversion Price in effect on the first (1st) date this limitation prohibited conversion thereof and (y) the number of shares of our common stock into which such Series G Preferred Stock that was not converted is convertible at such Conversion Price (without regard to any limitations on conversion), and (B) 110 % of the stated value of such Series G Preferred Stock.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

delivers a Redemption Notice, multiplied by the number of shares of common stock into which the preferred stock is convertible at the then-effective conversion price.

On each conversion date, the conversion price for the Series G Preferred Stock being converted (the “Conversion Price”) will equal the greater of (i) 95 % of the lowest daily Volume Weighted Average Price for each of the five trading days immediately preceding the conversion date and (ii) the initial floor price of $ 4.25 , which may be reduced by the Company at any time in its sole discretion, but in no event below $ 1.34 (as may be adjusted from time to time, the “Floor Price”).

Based on its initial stated value of $ 1,000 per share and the $ 4.25 initial Floor Price, each share of Series G Preferred Stock would be convertible into an aggregate of 236 shares of common stock.

No right of conversion may be exercised by the Investors in excess of $ 30 million of stated value, in the aggregate, per month, unless otherwise mutually agreed in writing by the Company and the holders holding a majority of the voting power of the Series G Preferred Stock outstanding at the time.

During the fiscal year ended May 31, 2025, we issued and sold 78,000 shares of Series G Preferred Stock for aggregate gross proceeds of $ 75.0 million.

On August 14, 2025, the Company entered into the first amendment (the “First Amendment”) to the PEPA to, among other things, (i) increase the aggregate commitment amount of the shares of Series G Preferred Stock from $ 150 million to $ 300 million, and (ii) increase its access to capital by removing the Put Limitation (as defined in the PEPA) that had previously limited the aggregate purchase price for any Put Issuance (as defined in the PEPA) to no more than $ 75 million.

In connection with the First Amendment, on August 14, 2025, the Company filed an amendment (the “First CoD Amendment”) to the Series G Certificate of Designation, originally filed with the Secretary of State of the State of Nevada on April 30, 2025.

The First CoD Amendment amends the Series G Certificate of Designation to, among other things, (i) increase the initial Floor Price (as set forth in Section 1.5(c)(i) of the Series G Certificate of Designation) to $ 12.50 from $ 4.25 , (ii) change the limit below which the Floor Price may not be reduced (as set forth in Section 1.5(c)(ii) of the Series G Certificate of Designation) to $ 4.33 from $ 1.34 and (iii) removed the limitation on conversion in excess of $ 30.0 million of stated value, in the aggregate, per month.

The Floor Price sets the minimum floor for the conversion price of the Series G Preferred Stock, which price may not be reduced unless the Company determines to do so in its discretion.

The First CoD Amendment further amended the status of converted or repurchased preferred stock such that any shares of Series G Preferred Stock that have been or will be converted will be retired and resume the status of authorized but unissued shares.

On September 11, 2025, the Company entered into the second amendment (the “Second Amendment”) to the PEPA, as amended by the First Amendment, dated August 14, 2025 to, among other things, increase the aggregate commitment amount of the shares of Series G Convertible Preferred Stock from $ 300 million to $ 450 million.

In connection with the Second Amendment, on September 11, 2025, the Company filed an amendment (the “Second CoD Amendment”) to the Series G Certificate of Designation, originally filed with the Secretary of State of the State of Nevada on April 30, 2025, as amended.

The Second CoD Amendment amended the Series G Certificate of Designation, as amended, to increase the number of shares authorized for issuance as Series G Preferred Stock from 156,000 to 204,000 shares.

On September 25, 2025, the Company filed an amendment (the “Third CoD Amendment”) to the Series G Certificate of Designation, originally filed with the Secretary of State of the State of Nevada on April 30, 2025, as amended.

The Third CoD Amendment amended the Series G Certificate of Designation, as amended, to increase the Floor Price (as set forth in Section 1.5(c)(i) of the Certificate of Designation) to $ 22.00 from $ 12.50 .

On October 7, 2025, the Company entered into the third amendment (the “Third Amendment”) to the PEPA to, among other things, increase the aggregate commitment amount of the shares of the Series G Preferred Stock from $ 450.0 million to $ 590.0 million.

In addition, on October 14, 2025, the Company filed a fourth amendment (the “Fourth CoD Amendment”) to the Series G Certificate of Designation, as amended.

The Fourth CoD Amendment amended the Series G Certificate of Designation, as amended, to increase the Floor Price (as set forth in Section 1.5(c)(i) of the Certificate of Designation) to $ 34.00 from $ 22.00 .

On October 21, 2025, the Company entered into the fourth amendment (the “Fourth Amendment”) to the PEPA to, among other things:

(i) increase the aggregate commitment amount of the shares of Series G Preferred Stock, from $ 590.0 million to $ 1.59 billion;

(ii) subject to waiver by a majority-in-interest of the investors, (a) set the maximum put issuance amount to $ 75.0 million per issuance, (b) set the limit to one put issuance per seven (7) business day period, and (c) set the maximum aggregate stated value of Series G Preferred Stock outstanding at any one time to $ 75.0 million;

(iii) increase the

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

original discount from 2 % to 3 %;

(iv) eliminate the placement agent fee;

and (v) eliminate the prohibition on Variable Rate Transactions (as defined in the PEPA).

On October 21, 2025, in connection with the entry into the Fourth Amendment, the Company filed an amendment (the “Fifth CoD Amendment”) to the Series G Certificate of Designation, originally filed with the Secretary of State of the State of Nevada on April 30, 2025, as amended on each of August 14, 2025, September 11, 2025, September 25, 2025 and October 14, 2025 (as amended, the “Certificate of Designations”).

The Fifth CoD Amendment amended the Certificate of Designations to, among other things, (i) increase the authorized shares of Series G Preferred Stock from 204,000 shares to 1,030,000 shares, and (ii) increase the limit below which the Floor Price (as defined in Section 1.5(c)(ii) of the Certificate of Designations) may not be reduced from $ 4.33 to $ 4.48 .

In addition, under the Fifth CoD Amendment, the Company’s Board of Directors may increase or decrease the applicable Floor Price with respect to any put, at its sole discretion.

On May 29, 2026, the Company entered into the fifth amendment (the “Fifth Amendment”) to the PEPA.

The Fifth Amendment amended the PEPA to, among other things:

(i) set the maximum put issuance amount to $ 150,000,000 per issuance, (ii) set the limit to one put issuance per seven (7) calendar day period, (iii) set the maximum aggregate stated value of Series G Preferred Stock outstanding at any one time to $ 150,000,000 , (iv) create a controlled account for which proceeds from the put issuance will be funded, (v) extend the term of the PEPA to August 29, 2029, and (vi) provide a cure period for the investors to pay the purchase price for any put issuance.

As Series G Preferred Stock may be reissued, during the fiscal years ended May 31, 2026 and May 31, 2025, the Company issued and sold 835,800 and 78,000 shares of Series G Preferred Stock, respectively, for gross proceeds of $ 815.0 million and $ 75.0 million, respectively.

During the fiscal year ended May 31, 2026, 913,800 shares of Series G Preferred Stock were converted into 51.0 million shares of the Company’s common stock.

As of May 31, 2026, no shares of Series G Preferred Stock were issued and outstanding.

Redeemable Noncontrolling Interest

APLD HPC TopCo 2 LLC

As discussed within Note 11 - Variable Interest Entities above, APLD HPC TopCo 2 LLC (“TopCo 2”) completed four closings under its A&R UPA as of May 31, 2026, issuing 1,825,000 preferred units and 144,593 corresponding common units for $ 1.8 billion to MIP HPC Holdings, LLC, which resulted in a redeemable noncontrolling interest.

The preferred units accrue dividends at a rate of 12.75 % per annum, which accrue daily and compound semi-annually, and which, if not redeemed by then, will increase by 87.5 basis points on each of October 7, 2030 and October 7, 2031, and by 200 basis points on October 7, 2035 and each one-year anniversary thereof, up to a maximum rate of 16.75 %.

The dividend rate will be further increased (i) by the amount that the weighted average all-in annual interest rate on certain indebtedness exceeds 8.75 % per annum for so long as such indebtedness is outstanding and (ii) for so long as certain significant events of default or other “trigger events” under the A&R LLCA remain uncured, by 200 basis points per annum.

Subject to limited exceptions, the dividends are payable (i) from the initial closing through October 6, 2035, at TopCo 2’s election, either in cash or in kind, and (ii) after October 6, 2035, in cash only.

Additionally, the preferred units carry a minimum 1.80 x multiple of invested capital liquidation preference, inclusive of the value of the common units;

provided, that (x) in connection with an initial public offering or a drag-along sale in which the sellers receive highly liquid securities, the minimum multiple of invested capital increases to 2.00 x and (y) with respect to any additional equity contributions with respect to the Polaris Forge 1 (other than pursuant to the additional closings under the A&R UPA), the then applicable minimum multiple of invested capital will be reduced by an amount that reflects the time between when MIP HPC Holdings, LLC first committed to make the investment and when the actual contribution is made, calculated as interest at a fixed annual rate of 12.75 %, accruing daily, on the amount of such additional equity contribution for such period.

The preferred units and the common units are redeemable after April 6, 2028, in exchange for:

(i) from April 6, 2028 up to October 6, 2029, the sum of (x) the applicable minimum multiple of invested capital, plus (y) 120 % of the fair market value of such common unit(s);

(ii) from October 6, 2029 up to October 6, 2030, the sum of (x) the applicable minimum multiple of invested capital, plus (y) 112.5 % of the fair market value of such common unit(s);

and (iii) from and after October 6, 2030, the greater of (x) the accreted amount, plus any accrued and unpaid dividend, plus the fair market value of such common units, plus certain indemnity payments by TopCo 2 for breaches of business representations of the TopCo 2 under the A&R UPA, if any, and (y) the applicable multiple of invested capital minus certain indemnity payments by the

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

Company for breaches of fundamental representations of the Company under the A&R UPA (such greater amount, the “Liquidation Preference Amount”).

If the preferred units and common units are outstanding on October 6, 2032, or if certain trigger events occurs and are not cured within specified time periods, MIP HPC Holdings, LLC may require TopCo 2 to commence a customary marketed sale process managed by an independent investment bank, where the proceeds of any such sale are to be used to redeem the preferred units and the common units on the terms set forth above.

Distributions of available excess cash will be made in accordance with a multi-tiered waterfall, generally as follows:

(i) first, to MIP HPC Holdings, LLC, to pay certain specified losses under the A&R UPA, if any;

(ii) second, to MIP HPC Holdings, LLC, to pay any accrued but unpaid dividends on its preferred units;

(iii) third, to the MIP HPC Holdings, LLC, until it has received its Liquidation Preference Amount;

and (iv) fourth, to the holders of common units, pro rata in accordance with the number of common units held by them.

The preferred units and corresponding common units were determined to have embedded derivative features, the Redemption features and the Contingent Dividend Rate Increase feature, requiring bifurcation and remeasurement at fair value at each reporting date, with the changes in fair value recorded through earnings.

The Redemption features are inclusive of the Investor put option upon a Sale, APLD Holdings call option, and the Distribution Redemptions (all as defined within the A&R UPA).

The Company engaged a third party valuation specialist in determining the value of the embedded derivatives using a binomial lattice model, which includes Level 3 unobservable inputs.

See Note 10 - Derivative Assets for further details.

As the noncontrolling interest has embedded features that require bifurcation, the fair value at issuance was allocated between the components.

As such, the net proceeds were first allocated to the derivatives at their fair value.

The remainder of the proceeds were then allocated to the warrants and noncontrolling interests based on their relative fair values.

The balance sheets and operating activities of TopCo 2 are included in the Company's consolidated financial statements.

The Company adjusts net income in the consolidated statements of operations to exclude the proportionate share of results that is attributable to the noncontrolling interest.

Additionally, the Company presents the proportionate share that is attributable to the noncontrolling interest as temporary equity within the consolidated balance sheets.

This temporary equity presentation is the result of the noncontrolling interest being subject to certain redemption rights that are not entirely within the Company's control.

Due to these redemption rights, at each balance sheet date, the Company is required to adjust the carrying value of the derivatives to fair value and record any changes in fair value within earnings.

The Company will adjust noncontrolling interest for the attribution of net income (loss) and preferred dividends of TopCo 2 to the noncontrolling interest holder.

Net loss attributable to MIP HPC Holdings, LLC was $ 65.4 million for the fiscal year ended May 31, 2026.

The proportionate share of net income was accounted for as a reduction in deriving net income attributable to common stock in the Company's consolidated statements of operations.

The carrying value of the noncontrolling interest was $ 2.0 billion as of May 31, 2026.

There was no noncontrolling interest at May 31, 2025.

The change in noncontrolling interest consists of $ 1.9 billion of contributions from the noncontrolling interest, net of costs, $ 62.7 million of preferred stock dividends paid in-kind, and $ 2.7 million in current year net loss attributable to the non-controlling interest.

Lessor Accounting

CoreWeave Leases

On May 28, 2025, APLD ELN-02 LLC and APLD ELN-03 LLC, the Company's subsidiaries, each entered into a data center lease with CoreWeave, Inc.

(together, the "CoreWeave Leases") to deliver up to an aggregate of 250 MW of infrastructure to host CoreWeave’s HPC operations at Polaris Forge 1.

The first lease is for the full capacity of Building 2, our 100 MW data center that is currently under construction and expected to become operational during the calendar year 2025.

The first lease is for the full capacity of Building 2, the Company's 100 MW data center, which was completed and became operational in November 2025.

The second lease is for the full capacity of Building 3, a 150 MW data center that is also under construction and is expected to become operational during the calendar year 2026.

A summary of minimum lease payments due from these leases is shown below.

These amounts do not reflect future rental revenues from renewal or replacement of existing leases unless the Company is reasonably certain it will exercise the

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

For the Fiscal Year Ended May 31, 2026

option or the lessee has the sole ability to exercise the option.

On August 28, 2025, APLD ELN-02 C LLC, a subsidiary of the Company, entered into a third data center lease with CoreWeave to deliver an additional 150MW at Polaris Forge 1, bringing the total capacity under contract at Polaris Forge 1 to 400 MW.

The Company has guaranteed the obligations of APLD ELN-02 C LLC under the data center lease.

The third lease is for the full capacity of Building 4, which is currently in the design phase and is expected to be service-ready in middle of calendar year 2027.

On March 30, 2026, the Company and CoreWeave amended the lease for Building 2 (the “ELN-02 Parent Lease”) to suspend the term for two of the four data halls covered by the lease (the “ELN-02 Parent Lease Amendment”) and the Company entered into a new data center lease with CoreWeave Compute Acquisition Co.

VIII, LLC (“CoreWeave SPV”), a wholly owned subsidiary of CoreWeave, for those same two data halls on substantially the same terms as the ELN-02 Parent Lease (the “ELN-02 SPV Lease”).

The ELN-02 SPV Lease is conterminous with the initial term of the ELN-02 Parent Lease.

Upon the expiration or earlier termination of the ELN-02 SPV Lease, the suspended term under the ELN-02 Parent Lease will resume and all four data halls of Building 2 will once again be governed by the ELN-02 Parent Lease.

As further credit enhancement, CoreWeave delivered to APLD ELN-02 LLC an Unconditional Springing Guaranty of Payment and Performance (the “ELN-02 Guaranty”) in connection with CoreWeave SPV’s obligations under the ELN-02 SPV Lease.

CoreWeave is obligated to provide a letter of credit in the amount of $ 50 million to secure obligations under the ELN-02 Parent Lease within 30 days of March 30, 2026.

In addition, on March 30, 2026, CoreWeave entered into an Assignment, Assumption and Consent Agreement with CoreWeave SPV and APLD ELN-03 LLC (the “Assignment Agreement”), assigning all of CoreWeave’s rights and obligations under its lease with the Company for Building 3 (the “ELN-03 Parent Lease”) to CoreWeave SPV for the remaining term of the ELN-03 Parent Lease and releasing CoreWeave from the ELN-03 Parent Lease.

In addition, CoreWeave also provided an Unconditional Springing Guaranty of Payment and Performance in connection with CoreWeave SPV’s obligations under the ELN-03 Parent Lease (the “ELN-03 Guaranty”), similar to the ELN-02 Guaranty.

Hyperscaler Leases

On October 20, 2025, APLD FAR-01 LLC and APLD FAR-02 LLC, the Company’s subsidiaries, entered into a data center lease with a U.S.

based investment grade hyperscaler to deliver 200MW of critical IT load to support the hyperscaler’s AI and HPC infrastructure at Polaris Forge 2, which is currently under construction.

The initial 200 MW are phased within two buildings expected to begin to come online during the calendar year 2026.

On April 20, 2026 and April 22, 2026, APLD AEX-01 LLC and APLD AEX-02 LLC, respectively, each a subsidiary of the Company, entered into separate data center leases with a second U.S.

based investment grade hyperscaler to deliver a combined 300MW of critical IT load to support the hyperscaler’s AI and HPC infrastructure at Delta Forge 1.

Initial operations at Delta Forge 1 are anticipated to commence during the calendar year 2027.

On May 20, 2026, the Company entered into a data center lease with the second U.S.

based investment grade hyperscaler to deliver a combined 300MW of critical IT load to support the second hyperscaler’s AI and HPC infrastructure at Polaris Forge 3.

Initial operations at Polaris Forge 3 are anticipated to commence during the calendar year 2027.

A summary of minimum lease payments due from these leases is shown below.

These amounts do not reflect future data center rental revenues from renewal or replacement of existing leases unless the Company is reasonably certain it will exercise the option or the lessee has the sole ability to exercise the option.

Reimbursements of operating expenses and variable rent increases are excluded from the table below (in thousands):

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FY27 $ 451,065

FY28 1,453,748

FY29 2,251,769

FY30 2,280,829

FY31 2,299,574

Thereafter 27,107,897

Total $ 35,844,882

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

Lessee Accounting

21 unchanged sentences

FY28 23,853 10,968 34,821

FY29 18,391 — 18,391

FY30 4,812 — 4,812

FY31 1,315 — 1,315

Thereafter 4,553 — 4,553

4 unchanged sentences

Long-term portion of lease liability $ 47,178 $ 10,731 $ 57,909

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2025

Supplemental cash flow and other information related to leases is as follows:

7 unchanged sentences

Operating leases 7.7 % 7.6 %

The Company has entered into leases which are executed but not yet commenced with total minimum payments of approximately $ 16.6 million.

The payments are for various leases with terms of 2 years.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

Commitments and Contingencies

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Construction Contracts

The Company routinely engages with construction vendors for the construction of our facilities.

The Company routinely engages with construction vendors for the construction of its facilities.

These engagements are governed by contracts containing standard terms and conditions, including certain milestones that obligate the Company to pay as work is completed.

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The Company generally has the right to cancel these open purchase orders prior to delivery or terminate the contracts without cause.

B&W Guarantee

The Company was party to a guarantee (the “Guarantee”) in favor of The Babcock & Wilcox Company (“B&W”), pursuant to which it had agreed to unconditionally and irrevocably guarantee the full and timely performance by Base Electron, Inc., a Nevada corporation (“Base Electron”), of its obligations under a Design-Build Agreement, dated February 26, 2026, by and between Base Electron and B&W (the “Design-Build Agreement”).

On May 29, 2026, the Guarantee was terminated, effective upon payment of $ 37.0 million by or on behalf of Base Electron, as discussed in Note 7 - Related Party Transactions.

Claims and Litigation

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On January 3, 2025, the defendants filed their reply in further support of the Motion to Dismiss.

On September 8, 2025, the Court issued an order staying the Securities Lawsuit and administratively closing it pending resolution of the Motion to Dismiss.

The Company is unable to estimate a range of loss, if any, that could result were there to be an adverse final decision in the Securities Lawsuit.

If an unfavorable action were to occur, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2025

Derivative Lawsuit

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A-23-881629-C in the District Court of Clark County, Nevada (the “Derivative Lawsuit”).

The Weich complaint named as defendants certain members of the Company’s Board of Directors and its Chief Executive Officer Wesley Cummins and purports to name the Company’s then Chief Financial Officer David Rench as a defendant.

The Weich complaint named as

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

defendants certain members of the Company’s Board of Directors and its Chief Executive Officer Wesley Cummins and purports to name the Company’s then Chief Financial Officer David Rench as a defendant.

The complaint asserted claims for breach of fiduciary duties, corporate waste and unjust enrichment based upon allegations that the defendants caused or allowed the Company to make materially false and misleading statements regarding the Company’s business, operations, and compliance policies.

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Business Segments

The Company's business is made up of two operating segments:

As discussed above, prior to the May 2026 transaction, the Cloud Services Business was identified as a reportable segment.

Following the May 2026 transaction and formation of ChronoScale, the Cloud Services Business is no longer a reportable segment because its activities are not regularly reviewed by the Chief Operating Decision Maker ("CODM"), which is the Company’s Chief Executive Officer, for purposes of resource allocation and performance assessment.

As such, the results of ChronoScale, inclusive of the Cloud Services Business, which is now part of ChronoScale, are included in Other and are not separately presented as a segment for all periods presented.

As of May 31, 2026, the Company's business is made up of two operating segments:

the Data Center Hosting Business and the HPC Hosting Business.

These segments represent management's view of the business for which separate financial information is available and evaluated regularly by the Chief Operating Decision Maker ("CODM"), which is the Company’s Chief Executive Officer.

These segments represent management's view of the business for which separate financial information is available and evaluated regularly by the Company's CODM.

The Company's CODM evaluates performance and makes operating decisions primarily based on revenue and segment profit (loss) on a consolidated basis and for each of the Company's reportable segments.

Operating results by segment include costs or expenses directly attributable to each segment, which include selling, general, and administrative expenses, (gain)/loss on classification of held for sale, (gain)/loss on sale of assets, and (gain)/loss from legal settlement.

The Company derives the segment results from its internal management reporting system.

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Segment revenues and segment profit are regularly reviewed by the CODM and compared against historical results, forecast and budget information in order to make decisions about how to allocate capital and other resources to each segment.

The "Other" includes corporate related items not allocated to reportable segments for purposes of making operating decisions or assessing financial performance.

In accordance with applicable accounting guidance, the results of the Cloud Services Business are presented as discontinued operations in the consolidated statements of operations and, as such, have been excluded from both continuing operations and segment results for all periods presented.

See "Note 5 - Discontinued Operations " for operations and segment results for the Cloud Services Business.

The Company does not allocate interest (income) expense, net, gain on change in fair value of derivatives, gain on change in fair value of investments, loss on conversion of debt, loss on change in fair value of debt, loss on change in fair value of related party debt, loss on extinguishment of debt, loss on extinguishment of related party debt, loss on change in fair value of warrants, loss on change in fair value of related party warrants or income tax expense to these segments for internal reporting purposes, as the Company does not believe that allocating these expenses is beneficial in evaluating segment performance.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

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HPC Hosting Business

Revenue $ 142,267 $ —

Related party revenue 1,926 —

Services revenue $ 154,403 $ 270,602

Data center rental and other revenue $ — $ 114,702

Total segment revenue

154,403 385,304

Costs and expenses:

Cost of revenues 100,744 143

Services cost of revenue 102,980 258,147

Data center rental and other cost of revenue — 56,773

Selling, general and administrative 2,516 30,017

(Gain) on classification of held for sale

Loss on sale of assets 1,132 —

Loss on abandonment of assets 570 1,240

Total costs and expenses 106,066 346,177

Segment profit (loss)

$ 63,927 $ ( 12,086 )

Segment profit $ 48,337 $ 39,127

Fiscal Year Ended May 31, 2025

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HPC Hosting Business

Revenue $ 121,858 $ —

Services revenue $ 142,267 $ —

Data center rental and other revenue $ — $ —

Related party revenue 1,926 —

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Costs and expenses:

Cost of revenues 106,023 50

Services cost of revenue 100,744 143

Data center rental and other cost of revenue — —

Selling, general and administrative 3,006 11,943

Loss on classification of held for sale ( 24,616 ) —

Loss on abandonment of assets 1,132 —

Total costs and expenses 80,266 12,086

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HPC Hosting Business

Revenue $ 40,984 $ —

Services revenue $ 121,857 $ —

Data center rental and other revenue $ — $ —

Related party revenue 14,761 —

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Costs and expenses:

Cost of revenues 44,374 —

Services cost of revenue 106,022 50

Data center rental and other cost of revenue — —

Selling, general and administrative 10,367 4,761

Loss on classification of held for sale 15,417 —

Total costs and expenses 131,806 4,811

$ ( 18,182 ) $ ( 246 )

Segment profit (loss) $ 4,812 $ ( 4,811 )

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

6 unchanged sentences

Data Center Hosting Business $ 48,337 $ 63,927 $ 4,812

$ 63,927 $ 4,812 $ ( 18,182 )

HPC Hosting Business 39,127 ( 12,086 ) ( 4,811 )

Total segment profit (loss)

51,841 1 ( 18,428 )

Total segment profit 87,464 51,841 1

( 323,926 ) ( 124,016 ) ( 98,339 )

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Interest expense, net 29,516 32,139 27,517

Gain on change in fair value of derivatives ( 75,818 ) — —

Gain on change in fair value of investments ( 10,840 ) — —

Loss on conversion of debt — 33,612 —

Loss on change in fair value of debt — 85,439 7,401

85,439 7,401 —

Loss on change in fair value of related party debt — — 8,116

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Loss on change in fair value of related party warrants — — 5,696

Net loss from continuing operations before income tax expense

$ ( 158,233 ) $ ( 74,280 ) $ ( 45,011 )

(1) Other includes corporate related items not allocated to reportable segments.

We also provide the following additional segment disclosures (in thousands):

Net loss from continuing operations before income tax expenses $ ( 181,532 ) $ ( 230,963 ) $ ( 149,575 )

(1) Other includes corporate related items not allocated to reportable segments and ChronoScale.

The Company also provides the following additional segment disclosures (in thousands):

Fiscal Year Ended

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Data Center Hosting Business $ 12,888 $ 13,312 $ 19,948

$ 13,312 $ 19,948 $ 7,025

HPC Hosting Business 34,414 3,733 1,233

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Data Center Hosting Business $ ( 1,234 ) $ 9,320 $ 38,266

$ 9,320 $ 38,266 $ 135,946

HPC Hosting Business 2,988,712 976,506 207,299

54,678 995 84,373

— 4,291 ( 1,164 )

Total capital expenditures $ 3,042,156 $ 986,821 $ 329,938

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Total segment assets 9,112,869 1,505,105

Cloud Services Business (Discontinued operations)

816,443 364,985

60,519 22,781

Total assets $ 9,929,312 $ 1,870,090

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Loss Per Share

The following is a reconciliation of the denominator of the basic and diluted net loss per share computations for the periods presented:

Basic net income (loss) per share (“EPS”) of common stock is computed by dividing a company’s net earnings (loss) by the weighted average number of shares of common stock outstanding during the period.

Diluted EPS reflects the potential dilution that could occur if the securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.

Potentially dilutive securities are excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive.

The table below shows the calculation for earnings per share:

Fiscal Year Ended

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$ ( 184,339 ) $ ( 231,065 ) $ ( 149,671 )

Net loss attributable to noncontrolling interest — ( 397 ) ( 960 )

Net loss attributable to noncontrolling interest and redeemable noncontrolling interest ( 59,665 ) — ( 397 )

Preferred dividends

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Discontinued operations ( 1,020 ) — —

$ ( 233,680 ) $ ( 149,274 ) $ ( 44,646 )

Net loss $ ( 250,263 ) $ ( 233,680 ) $ ( 149,274 )

Basic and diluted net loss per share attributable to common stockholders:

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Basic and diluted net loss per share $ ( 0.91 ) $ ( 1.16 ) $ ( 1.31 )

$ ( 1.16 ) $ ( 1.31 ) $ ( 0.47 )

Basic and diluted weighted average number of shares outstanding 275,194,755 201,194,451 114,061,414

As of May 31, 2025 and 2024, the Company had approximately 14.1 million and 12.1 million shares, respectively, of granted but unvested restricted stock, performance stock, and restricted stock units that would have a potentially dilutive effect on earnings per share.

As of May 31, 2025, the Company had approximately 21.7 million shares associated with the Company’s preferred stock which have been excluded from the calculation of earnings per share because the effect of those shares would be antidilutive while as of May 31, 2024, the Company had approximately 19.0 million shares associated with the Yorkville Convertible Debt which have been excluded from the calculation of earnings per share because the effect of those shares would be antidilutive.

Additionally, the Company had approximately 17.1 million and 12.3 million warrants outstanding as of May 31, 2025 and May 31, 2024, respectively, which have been excluded from the calculations of earnings per share because the effect of those shares would be antidilutive.

As of May 31, 2026, 2025, and 2024, the Company had approximately 22,352,083 , 14,138,774 , and 12,103,986 shares, respectively, of granted but unvested performance stock and restricted stock units that would have a potentially dilutive effect on earnings per share.

As of May 31, 2026, 2025, and 2024 the Company had approximately 1.5 million, 21.7 million, and 19.0 million respectively, shares associated with the Company’s preferred stock which have been excluded from the calculation of earnings per share because the effect of those shares would be antidilutive.

Additionally, the Company had approximately 28.1 million, 17.1 million, and 12.3 million warrants outstanding as of May 31, 2026, May 31, 2025, and May 31, 2024,

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

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For the Fiscal Year Ended May 31, 2026

Lastly, if the Company's Convertible Notes were converted into shares of the Company's common stock as of May 31, 2025, approximately 46.1 million shares were excluded from the calculations of earnings per share because the effect of those shares would be antidilutive.

respectively, which have been excluded from the calculations of earnings per share because the effect of those shares would be antidilutive.

Lastly, if the Company's Convertible Notes were converted into shares of the Company's common stock as of May 31, 2026, 2025, and 2024, approximately 46.1 million shares were excluded from the calculations of earnings per share because the effect of those shares would be antidilutive.

Subsequent Events

June 2025 At-the-Market Sales Agreement

On June 2, 2025, the Company entered into a Sales Agreement with Northland Securities, Inc.

and Wells Fargo Securities, LLC (the “June 2025 Sales Agreement”), pursuant to which, up to $ 200,000,000 of shares of the Company's common stock may be issued if and when sold.

As of the date of this report, the Company has issued and sold approximately 15.1 million shares under the June 2025 Sales Agreement for gross proceeds of approximately $ 193.9 million .

Issuance of Series G Preferred Stock

On July 16, 2025, the Company issued 78,000 shares of Series G Preferred Stock for aggregate gross proceeds of $ 75.0 million.

Conversion of Series G Preferred Stock

As of the date of this report, a total of 156,000 shares of Series G Preferred Stock have been converted into approximately 21.0 million shares of the Company's common stock.

CoreWeave Data Center Lease

On July 24, 2025, CoreWeave exercised its lease option for an additional 150 MW in a third building at Polaris Forge 1, which is currently in planning stages with an anticipated ready for service date in 2027.

Under the option terms, the parties are expected to enter into a new, third lease agreement on substantially the same terms, including the same rent and escalators, as the existing two Data Center Leases, within 60 days.

Cloud SAFE Payoff

During the fiscal year ended May 31, 2025, the Company entered into two Simple Agreements for Future Equity (“SAFEs”) with an investor for equity in Cloud, which was, at that time, a wholly-owned subsidiary, for aggregate proceeds of $ 12.0 million.

On June 2, 2026, following an agreement reached with the investor, the Company paid off all amounts outstanding under the SAFEs, totaling $ 13.3 million.

Delta Forge 2 Lease

On June 5, 2026, the Company entered into an approximately 15-year lease (with three five-year renewal options) with a high investment-grade hyperscaler at its Delta Forge 2 210 MW critical IT load campus located in its southern region, comprising a single building under construction.

The lease is for the full 210 MW of critical IT load, representing approximately $ 5.2 billion of contracted revenue over the base term, with expected delivery in the first half of calendar year 2028.

$ 1.59 billion Senior Secured Notes

On June 16, 2026, APLD ComputeCo 3 LLC refinanced the Bridge Facility with the closing of a $ 1.59 billion offering (the “2031 7.000 % Notes Offering”) of 7.000 % senior secured notes due 2031 (the “2031 7.000 % Notes”) at an issue price of 100.000 % of par.

The 2031 7.000 % Notes are senior secured obligations of APLD ComputeCo 3 and bear interest at a rate of 7.000 % per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2026.

The principal amount of the 2031 7.000 % Notes will amortize on a semi-annual basis on June 15 and December 15 of each year, in amounts set forth in the Indenture.

The 2031 7.000 % Notes will mature on June 15, 2031, unless earlier redeemed or repurchased in accordance with their terms.

The 2031 7.000 % Notes are fully and unconditionally guaranteed by the subsidiary guarantors, all of which are wholly owned subsidiaries of APLD ComputeCo 3.

The Company provided a customary completion guarantee for the 2031 7.000 % Notes Offering.

On June 17, 2026 and June 22, 2026, the Company issued an aggregate of 154,500 shares of Series G Preferred Stock for total gross proceeds of $ 150.0 million.

Of the 154,500 shares of Series G Preferred Stock issued, 81,346 shares have been converted into an aggregate of 1,787,825 shares of the Company's common stock and 73,154 shares remain outstanding.

On June 26, 2026, the Company entered into the sixth amendment to the PEPA to increase the aggregate commitment amount under the PEPA for the issuance of shares of Series G Preferred Stock from $ 1,590,000,000 to $ 2,000,000,000 .

Satisfaction of Escrow Release Condition for 6.750 % Senior Secured Notes due 2031

On June 18, 2026, APLD ComputeCo 2 satisfied the escrow release condition under the escrow agreement for the 2031 6.750 % Notes and executed and delivered to the escrow agent an escrow release certificate directing the escrow agent to release the funds in the escrow account to APLD ComputeCo 2 and apply such funds in accordance with the escrow agreement and the Indenture for the 2031 6.750 % Notes.

Upsize of 2026 Revolving Credit Facility

On June 26, 2026, in connection with the 2026 Revolving Credit Facility, the Company, APLD Intermediate HoldCo, and the subsidiary guarantors party to the Revolving Credit Agreement entered into an Incremental Assumption Agreement No.

1 (the “Assumption Agreement”), with the Revolving Credit Collateral Agent and the lenders and issuing banks party thereto, providing for an Incremental Revolving Facility Commitment in an aggregate principal amount of up to $ 80,000,000 (the “Incremental Revolving Financing”).

After giving effect to the Assumption Agreement, the aggregate revolving commitments under the 2026 Revolving Credit Facility increased to $ 430.0 million, with an additional

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the Fiscal Year Ended May 31, 2026

$ 120 million accordion option remaining.

The Incremental Revolving Financing constitutes a part of the 2026 Revolving Credit Facility and is subject to the terms and conditions of the Revolving Credit Agreement and the other loan documents entered into in connection therewith.

Loan and Security Agreement

On June 30, 2026, the Company entered into a Loan and Security Agreement (the "Texas Capital Loan Agreement") with Texas Capital Bank ("Texas Capital") and a related Promissory Note in favor of Texas Capital in the stated principal amount of $ 58.5 million (the "Texas Capital Note").

The Texas Capital Loan Agreement contains standard terms, conditions and covenants.

Interest is payable on the Texas Capital Note at the sum of an adjusted term SOFR plus an applicable margin.

The Texas Capital Note matures on June 30, 2031.

ChronoScale Holding Company Transaction

On July 1, 2026, ChronoScale, the Company's majority owned public subsidiary, completed a holding company formation transaction (the “Holding Company Transaction”) that created a new parent holding company as the public company, called ChronoScale Holdings Corporation, a Nevada corporation (“ChronoScale Holdings”), with its operating companies as wholly-owned subsidiaries.

The holding company structure better reflects ChronoScale’s individual operating businesses, allows for and can accommodate future growth from internal operations and generally provides for greater administrative and operational flexibility.

ChronoScale Holdings has the exact same classes and number of shares outstanding after the Holding Company Transaction as ChronoScale had outstanding immediately before the Holding Company Transaction, and as such, the shareholders of ChronoScale were not be diluted as a result of the Holding Company Transaction.

Following the Holding Company Transaction, ChronoScale Holdings became the successor issuer to ChronoScale and continues to trade on Nasdaq under the ticker symbol “CHRN” with the same CUSIP.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data