Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID #199) 69 Report of Independent Registered Public Accounting Firm (PCAOB ID #688) 70 Consolidated Balance Sheets 71 Consolidated Statements of Operations 72 Consolidated Statements of Changes in Temporary Equity and Stockholders’ Equity 74 Consolidated Statements of Cash Flows 77 Notes to Consolidated Financial Statements 79 68 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of Applied Digital Corporation Opinion on the Financial Statements 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 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 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 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 Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ CBIZ CPAs P.C. CBIZ CPAs P.C. We have served as the Company’s auditor since 2021 (such date takes into account the acquisition of the attest business of Marcum LLP by CBIZ CPAs P.C. effective November 1, 2024). New York, NY July 29, 2026 69 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of Applied Digital Corporation Opinion on the Financial Statements 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 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 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 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. 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. 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. /s/ Marcum LLP Marcum LLP We have served as the Company’s auditor from 2021 to 2025. New York, NY August 30, 2024 70 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (In thousands, except share and par value data) May 31, 2026 May 31, 2025 ASSETS Current assets: Cash and cash equivalents $ 1,591,988 $ 43,950 Restricted cash 2,381,027 72,368 Accounts receivable 56,309 6,830 Prepaid expenses and other current assets (1) 613,692 9,652 Current assets held for sale 19,841 — Total current assets 4,662,857 132,800 Property and equipment, net 4,236,300 1,252,287 Operating lease right of use assets, net 76,922 92,335 Finance lease right of use assets, net 122,523 213,315 Other assets 830,710 179,353 TOTAL ASSETS $ 9,929,312 $ 1,870,090 LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 395,474 $ 251,491 Accrued liabilities 548,493 30,121 Current portion of operating lease liability 18,484 16,785 Current portion of finance lease liability 47,585 147,040 Current portion of debt 16,422 10,331 Customer deposits 16,752 16,125 Deferred revenue 4,666 3,594 Current liabilities held for sale 7,426 — Due to customer 10,065 4,807 Other current liabilities 97,489 19,431 Total current liabilities 1,162,856 499,725 Long-term portion of operating lease liability 47,178 58,800 Long-term portion of finance lease liability 10,731 15 Long-term debt 4,959,516 677,825 Other long-term liabilities 5,454 — Total liabilities 6,185,735 1,236,365 Commitments and contingencies (Note 18) Temporary equity 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 6,306 6,932 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 — 72,094 Redeemable noncontrolling interest 1,956,303 — Stockholders' equity: Common stock, $0.001 par value, 600,000,000 shares authorized, 295,048,903 shares issued and 287,883,603 shares outstanding at May 31, 2026, and 234,200,868 shares issued and 224,909,669 shares outstanding at May 31, 2025 296 230 Treasury stock, 7,165,300 shares at May 31, 2026 and 9,291,199 shares at May 31, 2025, at cost (52,737) (31,400) Additional paid in capital 2,432,250 1,009,913 Accumulated deficit (662,333) (481,055) 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 71 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (In thousands, except share and per share data) Fiscal Year Ended May 31, 2026 May 31, 2025 May 31, 2024 Revenue: Services revenue $ 496,609 $ 226,643 $ 150,814 Data center rental and other revenue 114,702 — — Related party revenue — 1,926 14,761 Total revenue 611,311 228,569 165,575 Costs and expenses: 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 Loss (gain) on classification as held for sale (2) 59,650 (24,616) 15,417 Loss on abandonment of assets 2,398 724 — Loss from legal settlement — — 2,380 Total costs and expenses 847,773 300,744 263,913 Operating loss (236,462) (72,175) (98,338) Interest expense, net (3) 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 Loss on change in fair value of related party debt — — 8,116 Loss on extinguishment of debt — 1,177 — Loss on extinguishment of related party debt — — 2,507 Loss on change in fair value of warrants 2,212 6,421 — Loss on change in fair value of related party warrants — — 5,696 Net loss from continuing operations before income tax expenses (181,532) (230,963) (149,575) Income tax expense 1,787 102 96 Net loss from continuing operations (183,319) (231,065) (149,671) Net loss from discontinued operations (1,020) — — Net loss (184,339) (231,065) (149,671) Net loss attributable to noncontrolling interest and redeemable noncontrolling interest (59,665) — (397) Preferred dividends (6,259) (2,615) — Net loss attributable to common stockholders $ (250,263) $ (233,680) $ (149,274) Net loss attributable to common stockholders Continuing operations $ (249,243) $ (233,680) $ (149,274) Discontinued operations (1,020) — — Net loss attributable to common stockholders $ (250,263) $ (233,680) $ (149,274) Basic and diluted net loss per share attributable to common stockholders Continuing operations $ (0.91) $ (1.16) $ (1.31) Discontinued operations — — — 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. 72 (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. 73 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders' Equity For the Year Ended May 31, 2024 (In thousands, except per share data) Common Stock Treasury Stock Additional Paid in Capital Accumulated Deficit Stockholders’ Equity Noncontrolling interest Total Equity Shares Amount Shares Amount Balance, June 1, 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 Issuance of common stock from stock plans 6,894,166 6 — — (6) — — — — Tax payments for restricted stock upon vesting — — — — (861) — (861) — (861) Conversions of debt 13,213,727 13 — — 52,047 — 52,060 — 52,060 Issuance of warrants, at fair value — — — — 5,696 — 5,696 — 5,696 Share cancellations (36,296) — (31,074) — — — — — — Stock-based compensation — — — — 17,362 — 17,362 — 17,362 Common stock issuance costs — — — — (284) — (284) — (284) Net loss — — — — — (149,274) (149,274) (397) (149,671) Extinguishment of noncontrolling interest 1,484,267 1 — — 9,764 — 9,765 (9,765) — Balance, May 31, 2024 144,083,944 $ 144 (5,032,802) $ (62) $ 374,738 $ (249,990) $ 124,830 $ — $ 124,830 See accompanying notes to the consolidated financial statements 74 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Changes in Temporary Equity and Stockholders' Equity (continued) For the Year Ended May 31, 2025 (In thousands, except per share data) Temporary Equity (1) Permanent Equity Preferred Stock Common Stock Treasury Stock Additional Paid in Capital Accumulated Deficit Stockholders’ Equity Shares Amount Shares Amount Shares Amount Balance, June 1, 2024 — $ — 144,083,944 $ 144 (5,032,802) $ (62) $ 374,738 $ (249,990) $ 124,830 Shares issued in offering, net of costs — — 55,506,938 55 — — 180,711 — 180,766 Issuance of common stock from stock compensation plans — — 2,427,273 3 — — (3) — — Tax payments for restricted stock upon vesting — — — — — — (4,116) — (4,116) Conversions of debt — — 19,050,204 19 — — 104,926 — 104,945 Issuance of other common stock — — 628,541 1 — — 518 — 519 Issuance of warrants, at fair value — — — — — — 136,292 — 136,292 Exercise of warrants — — 4,905,256 5 — — (5) — — Issuance of Preferred Stock, net of costs 495,364 184,402 — — — — 6 — 6 Preferred Stock Dividends — — — — — — (2,615) — (2,615) Conversion of preferred stock (53,191) (48,350) 7,598,712 7 — — 48,343 — 48,350 Redemption of preferred stock (15) (15) — — — — — — — Stock-based compensation — — — — — — 22,704 — 22,704 Share repurchase — — — (4) (4,258,397) (31,338) — — (31,342) Purchase of capped call options — — — — — — (51,750) — (51,750) Purchase of prepaid forward contract — — — — — — (52,736) — (52,736) Reclass of debt conversion option — — — — — — 252,900 — 252,900 Net loss — — — — — — — (231,065) (231,065) Balance, May 31, 2025 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 75 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 Accumulated Deficit Stockholders’ Equity 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 76 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (in thousands) Fiscal Year Ended May 31, 2026 May 31, 2025 May 31, 2024 CASH FLOW FROM OPERATING ACTIVITIES Net loss $ (184,339) $ (231,065) $ (149,671) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 67,387 97,945 79,360 Stock-based compensation 220,135 22,704 17,362 Lease expense 10,106 31,661 13,944 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 — Loss on extinguishment of related party debt — — 2,507 Loss on legal settlement — — 2,380 Amortization of debt issuance costs 6,323 9,563 5,214 Loss (gain) on classification of held for sale 59,650 (24,616) 15,417 Loss on conversion of debt — 33,612 — Loss on change in fair value of debt — 85,439 7,401 Loss on change in fair value of related party debt — — 13,812 Loss on change in fair value of warrants issued 2,212 6,421 — Loss on abandonment of assets 2,398 1,138 — Changes in operating assets and liabilities: Accounts receivable (49,268) (2,934) (3,765) Prepaid expenses and other current assets (36,164) (8,309) 899 Other assets (51,483) 2,979 327 Customer deposits 627 2,306 (8,770) Related party customer deposits — (1,549) (2,261) Deferred revenue 947 (34,080) (9,494) Related party deferred revenue — (1,692) 168 Accounts payable (1,182) (78,256) 41,840 Accrued liabilities 106,223 (12,127) 21,601 Due to customer 5,258 (8,195) 13,002 Lease assets and liabilities 17,513 (7,524) (47,479) 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 PROVIDED BY FINANCING ACTIVITIES Repayment of finance leases (99,455) (125,073) (59,967) Borrowings of long-term debt 4,955,327 650,083 116,554 Borrowings of related party debt — — 28,000 Repayment of long-term debt (521,512) (293,045) (21,714) Repayment of related party debt — — (45,500) Payment of deferred financing costs (171,885) (42,398) (320) Tax payments for restricted stock upon vesting (36,282) (4,116) (861) Proceeds from issuance of common stock 196,366 191,590 130,849 Common stock issuance costs (5,950) (10,305) (284) 77 Proceeds from issuance of preferred stock 814,998 198,205 — 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 — Repurchase of shares — (31,342) — Proceeds from convertible notes — 450,000 — Purchase of capped call options — (51,750) — Purchase of prepaid forward contract — (52,736) — 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 NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH $ 4,030,114 $ 91,630 $ (11,886) CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD, INCLUDING CASH FROM DISCONTINUED OPERATIONS 123,318 31,688 43,574 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD, INCLUDING CASH FROM DISCONTINUED OPERATIONS 4,153,432 123,318 31,688 Less: CASH, CASH EQUIVALENTS, AND RESTRICTED CASH FROM DISCONTINUED OPERATIONS 2 — — CASH, CASH EQUIVALENTS, AND RESTRICTED CASH FROM CONTINUED OPERATIONS $ 4,153,430 $ 123,318 $ 31,688 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid $ 263,402 $ 62,712 $ 17,782 Income taxes paid $ 241 $ 105 $ 5 SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES Operating right-of-use assets obtained by lease obligation $ — $ 20,280 $ 159,153 Finance right-of-use assets obtained by lease obligation $ 25,214 $ 113,674 $ 227,047 Property and equipment in accounts payable and accrued liabilities $ 556,446 $ 246,472 $ 85,019 Extinguishment of non-controlling interest $ — $ — $ 9,765 Conversion of debt to common stock $ — $ 104,945 $ 52,060 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 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 78 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 1. 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. 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. 2. 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, 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 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 simultaneously by providing the hosting environment for the customers’ operations. Customers pay a fixed rate to the 79 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. Any ancillary revenue for other services is generally recognized at a point in time when the services are complete. Customer contracts include advance payment terms. 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 80 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 liability. Assets and liabilities are classified using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value as follows: •Level 1: Quoted prices in active markets for identical assets or liabilities. •Level 2: Observable inputs other than Level 1 prices, for similar assets or liabilities that are directly or indirectly observable in the marketplace. •Level 3: 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. 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. Segments 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 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, 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 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. 81 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 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. ("Ekso"). 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 82 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements 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): May 31, 2026 May 31, 2025 Cash and cash equivalents $ 1,591,988 $ 43,950 Restricted cash (1) 2,381,027 72,368 Restricted cash included in other assets 180,415 7,000 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 Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets (see Note 4 - Property and Equipment). 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 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 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 83 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 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 The Company generally considers assets to be held for sale when the following criteria are met: (i) management commits to a plan to sell the property, (ii) the property is available for sale immediately, (iii) management has initiated an active program to locate a buyer or buyers and other actions required to complete the plan to sell the disposal group, (iv) the sale of the property within one year is considered probable, (v) the property is actively being marketed for sale at a price that is reasonable in relation to its current fair value and (vi) significant changes to the plan to sell are not expected. 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, 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 The Company deems it appropriate to classify a business as a discontinued operation if the related disposal group meets all the following criteria: (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, 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. The Company leases office space under operating leases and equipment under finance leases. If a lease is determined to exist, the term of such lease is assessed based on the commencement date, which is the date on which the underlying asset is made available for the Company’s use by the lessor. 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. 84 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, 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 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 The Company measures stock-based compensation cost at fair value on the date of grant for all share-based awards and recognizes compensation expense over the service period that the awards are expected to vest. 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 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 Basic earnings per share is computed by dividing income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if securities convertible into, or other contracts to issue, common stock were exercised or converted into common stock. For the calculation of diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of the exercise of stock warrants, the conversion of existing debt agreements, and service-based and performance-based restricted stock units, respectively, determined using the treasury stock method. Any anti-dilutive effect of equity awards outstanding is not included in the computation of diluted net income (loss) per share. Income Taxes Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on the future tax consequences attributable to differences that exist between the financial statement carrying amounts of assets and liabilities and their respective tax bases, as well as tax attributes such as net operating loss, capital loss and tax credits carryforwards on a taxing jurisdiction basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are expected, more likely than not, to be realized in the future. A tax benefit from an uncertain income tax position may be recognized in the financial statements only if it is more likely than not that the position is sustainable, based solely on its technical merits and consideration of the relevant taxing authority's widely understood administrative practices and precedents. Recognized income tax positions are measured at the largest amount that has a greater than 50% likelihood of being realized. Any subsequent changes in recognition or measurement are reflected in the period in which the change in judgment occurs. 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 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. 85 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 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, 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 Accounting Pronouncements Adopted In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): 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 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 ("ASU 2024-03"). This ASU is intended to enhance transparency of income statement disclosures primarily through additional disaggregation of relevant expense captions. 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 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 86 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. 3. 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. 87 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements 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 Less: Cash acquired through PIPE (defined below) (15,000) Fair value of net assets acquired 5,475 Less: Impairment for assets held for sale (see Note 6 - Discontinued Operations) 2,365 Fair value less costs to sell $ 3,110 Total consideration transferred $ 57,623 Less: 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 88 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. 4. Property and Equipment Property and equipment, net consisted of the following as of May 31, 2026 and 2025 (in thousands): Estimated Useful Life May 31, 2026 May 31, 2025 Networking equipment, electrical equipment, and software 3 years - 5 years $ 38,669 $ 33,611 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 682,348 — Land 59,713 20,047 Land improvements 15 years 43,786 1,423 Leasehold improvements 3 years - 7 years 1,142 1,142 Construction in progress 2,776,232 1,090,587 Other equipment and fixtures 5 years - 10 years 68,128 12,447 Total cost of property and equipment 4,313,866 1,278,843 Accumulated depreciation (77,566) (26,556) Property and equipment, net $ 4,236,300 $ 1,252,287 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. 89 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 5. Revenue 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 Customer A 59 % — % — % Customer B 25 % 59 % 62 % Customer C 12 % 28 % — % Customer D — % — % 12 % Deferred Revenue 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 Balance, beginning of period $ 3,594 $ 39,366 Advance billings 487,454 184,685 Revenue recognized (487,204) (228,371) Other adjustments 822 7,914 Balance, end of period $ 4,666 $ 3,594 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 $ — $ — Billings (81,342) — Revenue recognized 124,491 — Balance, end of period $ 43,149 $ — Customer Deposits Changes in the Company's customer deposits balances for the years ended May 31, 2026 and 2025, respectively, are shown in the following table (in thousands): May 31, 2026 May 31, 2025 Balance, beginning of period $ 16,125 $ 15,367 Customer deposits received 627 5,698 Customer deposits refunded — (3,373) Customer deposits applied — (1,567) Balance, end of period $ 16,752 $ 16,125 6. Discontinued Operations 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. 90 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, 2026 Revenue $ 385 Cost of revenues 302 Selling, general and administrative 1,108 Operating loss from discontinued operations (1,025) Interest income 5 Net loss from discontinued operations before income tax expense (1,020) Income tax expense — Net loss from discontinued operations $ (1,020) 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, 2026 Assets: Cash and cash equivalents $ 2 Accounts receivable 3,914 Prepaid expenses and other current assets 5,604 Property and equipment, net 1,084 Operating lease right of use asset, net 284 Intangible assets 10,950 Other assets 368 Less: Impairment on assets held for sale $ (2,365) Total current assets held for sale $ 19,841 Liabilities: Accounts payable 263 Accrued liabilities 4,205 Current portion of operating lease liability 290 Current deferred revenue 1,334 Long-term deferred revenue 1,229 Long-term portion of operating lease liability 105 Total current liabilities held for sale $ 7,426 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, 2026 Net cash used in operating activities - discontinued operations $ (1,705) Net cash used in investing activities - discontinued operations $ — 91 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 7. Related Party Transactions Related Party Revenue 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 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 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. 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. 92 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 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. •consulting fees of $43.3 thousand during the fiscal year ended May 31, 2024 were incurred with a former member of the Company's Board of Directors for sales consulting work. 93 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 8. Debt Long-term debt consisted of the following components (in thousands): 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) 2.75% June 2030 450,000 450,000 Bridge Facility See below April 2027 300,000 — SMBC Loan (2) See below August 2026 — 375,000 Starion Ellendale Loan (3) 7.48% February 2028 8,108 12,283 Cornerstone Bank Loan (4) 8.59% March 2029 9,910 12,866 Starion Term Loan (5) 6.50% July 2027 3,900 7,061 Other debt (6) 34,762 12,275 Deferred financing costs, net of amortization (330,742) (181,329) Less: Current portion of debt (16,422) (10,331) Long-term debt, net $ 4,959,516 $ 677,825 (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. 94 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 Interest Expense Interest and related amortization of debt issuance costs and discounts recognized during construction projects are capitalized and included in the cost of project. Interest expense, net of amounts capitalized, recognized for the years ended May 31, 2026, May 31, 2025, and May 31, 2024 consisted of the following (in thousands): May 31, 2026 May 31, 2025 May 31, 2024 Interest expense $ 85,259 $ 35,261 $ 23,448 Interest expense - related party — — 5,000 Interest income (1) (55,743) (3,122) (931) 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: May 31, 2026 May 31, 2025 Weighted-average interest rate 7.1 % 1.7 % Remaining Principal Payments Below is a summary of the remaining principal payments due over the life of the term loans as of May 31, 2026 (in thousands): FY27 $ 16,591 FY28 196,648 FY29 290,798 FY30 295,689 FY31 4,194,954 Thereafter (1) 312,000 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, 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 95 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 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 1.10x 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). 96 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 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. 97 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 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, 98 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 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 99 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 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. 100 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 9. Balance Sheet Components Certain balance sheet components are as follows (in thousands): 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) 58,632 — 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 Other assets Lease incentive $ 199,391 $ 84,416 Restricted cash 180,415 7,000 Deposits on assets and construction 47,719 69,500 Deferred construction costs 84 45 Goodwill (1) 54,513 — Deferred lease costs 10,729 7,342 Derivative assets (2) 163,283 — Investments in other companies (3) 123,329 6,073 Investments in related party (4) 2,000 — 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. 101 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 8,155 4,073 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 10. 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: Tranche 1 Tranche 2 Tranche 3 Tranche 4 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. B&W Warrants 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. 102 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. 11. 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 103 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): May 31, 2026 Assets: Cash and cash equivalents $ 3,505,509 Restricted cash 200,717 Accounts receivable 24,546 Prepaid expenses and other current assets 538,428 Property and equipment, net 4,012,167 Other assets 597,949 Total assets $ 8,879,316 Liabilities: Accounts payable $ 361,209 Accrued liabilities 523,816 Current portion of debt 293,743 Current deferred revenue 4,697 Due to customer 7,407 Other current liabilities 97,571 Long-term debt 4,349,907 Total liabilities $ 5,638,350 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 104 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. 12. Income Taxes The components of consolidated income before taxes from continuing operations were as follows (in thousands): May 31, 2026 May 31, 2025 May 31, 2024 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 $ — $ — Foreign — — — State 368 102 96 Total current expense 1,787 102 96 Deferred expense (benefit) Federal — — — Foreign — — — State — — — 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: 105 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 Amount % U.S. 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. statutory rate 21.0 % 21.0 % Stock-based compensation (0.9) % 2.0 % State income taxes, net of federal tax benefit — % (0.1) % Convertible debt instruments (12.1) % (2.1) % Change in valuation allowance (7.5) % (19.8) % Other, net (0.5) % (1.1) % 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: May 31, 2026 U.S. Federal $ — U.S. States Texas $ 148 Massachusetts 64 Tennessee 25 Other 4 Foreign — 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 106 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 Deferred tax assets Net operating loss $ 159,266 $ 59,963 Stock-based compensation 3,831 2,006 Capitalized research and development 4,728 13,088 Interest expense 19,008 12,759 Lease liability 15,762 17,587 Investment in partnership 23,517 — Other 202 824 Deferred tax assets, gross 226,314 106,227 Less: valuation allowance (176,210) (65,856) Total deferred tax assets, net 50,104 40,371 Deferred tax liabilities Investments (23,212) — Property and equipment (8,436) (18,887) Right of use assets (18,456) (21,484) Other — — Total deferred tax liability, net (50,104) (40,371) Net deferred tax asset $ — $ — 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. The remaining carryforward amounts expire at varying dates beginning in 2028. 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 $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. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income of the appropriate character (i.e., capital or ordinary) during the period in which the temporary differences become deductible. 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 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. 107 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 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) $ 1,800 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 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. The Company is not currently under examination by the IRS or any other taxing jurisdictions for any tax years. 13. Stockholders' Equity Common Stock 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 Retirement 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. 108 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 14. Warrants A summary of warrant activity for the year ended May 31, 2026 is presented below: Warrants Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life (Years) Outstanding at June 1, 2025 18,097,718 $ 7.63 8.52 Granted 10,793,611 10.20 8.27 Forfeited — — — Exercised (800,300) 7.83 — Outstanding at May 31, 2026 28,091,029 $ 8.61 7.86 AI Warrants The Company issued warrants to purchase up to 3,000,000 shares of Common Stock related to the AI Bridge Loan during the fiscal year ended May 31, 2024 (the “AI Warrants”). The AI Warrants are exercisable upon payment of the applicable exercise price in cash or through cashless exercise for a period of five years. 1,500,000 AI Warrants have an exercise price of $10.00 per share of Common Stock and 1,500,000 AI Warrants have an exercise price of $7.50 per share of Common Stock. As of May 31, 2026, all of the AI Warrants were outstanding. 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 (the "Macquarie Warrants") to Macquarie Equipment Capital, Inc. ("MEC"). 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 survived the termination of the Macquarie Promissory Note and remain outstanding as of May 31, 2026. 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"). STB Warrant 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 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. 109 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 Building 4 Warrant was based on the following significant inputs: Building 4 Warrant Contractual term 10 years Volatility 80 % Risk-free rate 4.18 % Dividend yield — % 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. MAM Warrants 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 MAM Warrants are based on the following significant inputs: MAM Warrants Contractual term 5.5 years Volatility 95 % Risk-free rate 3.76 % Dividend yield — % 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. 15. 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 110 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. 2024 Plan 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 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 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. 2022 Plans 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 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. 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. The Company recognized stock-based compensation associated with the 2022 and 2024 Plans as follows (in thousands): May 31, 2026 May 31, 2025 May 31, 2024 Services cost of revenue $ 3,202 $ 2,936 $ 1,955 Data center rental and other cost of revenue 519 $ — $ — Selling, general, and administrative 216,402 18,094 15,153 Capitalized (1) 5,012 1,465 207 Total stock-based compensation $ 225,135 $ 22,495 $ 17,315 (1)Capitalized to CIP in the consolidated balance sheets. 111 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: Number of Shares Weighted Average Grant Date Fair Value Per Share Outstanding as of June 1, 2025 271,444 $ 3.55 Granted — — Vested (235,722) 3.52 Forfeited — — Outstanding as of May 31, 2026 35,722 $ 3.73 As of May 31, 2026, total remaining expense to be recognized related to these awards was $0.1 million and the weighted average remaining recognition period for the unvested awards was 0.8 years. Restricted Stock Units 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 June 1, 2025 6,659,830 $ 6.56 Granted 6,301,840 26.41 Vested (4,464,156) 8.85 Forfeited (531,681) 8.42 Outstanding as of May 31, 2026 7,965,833 $ 20.87 As of May 31, 2026, total remaining expense to be recognized related to these awards was $144.0 million and the weighted average remaining recognition period for the unvested awards was 2.6 years. 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 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. 112 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 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 Vested — — 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. 16. 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 — $ — Series E Redeemable Preferred Stock During the fiscal year ended May 31, 2025, the Company closed on four offerings of the Series E Redeemable Preferred Stock (the “Series E Preferred Stock”). The Company sold total shares of 301,673 for proceeds of $6.9 million net of issuance costs of $0.6 million. The Series E Preferred Stock offering was terminated on August 9, 2024. 113 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. Holders of the Series E Preferred Stock are entitled to receive cumulative dividends at a fixed rate of 9.0% per annum. Dividends are calculated based on a 360-day year, declared and accrued monthly, 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 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. Additionally, it is on parity with 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 Preferred Stock. In the event of liquidation, holders are entitled to receive $25.00 per share (the “Series E Stated Value”) plus any accrued but unpaid dividends before any distributions are made to common stockholders. The Series E Preferred Stock has no stated maturity and remains outstanding indefinitely unless redeemed or repurchased by the Company. Holders may require the Company to redeem any portion of their Series E Preferred Stock at any time for a "Settlement Amount" calculated as the Series E Stated Value plus any unpaid dividends, less a Holder Optional Redemption Fee, equal to a percentage of the Series E Stated Value based on the year when the redemption occurs as follows: 9.00% prior to the first anniversary of the respective tranche closing date (the "Original Issuance Date"); 7.00% on or after the first anniversary but prior to the second anniversary of the Original Issuance Date; 5.00% on or after the second anniversary but prior to the third anniversary of the Original Issuance Date: and 0.00% on or after the third anniversary of the Original Issuance Date. 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 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. 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 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. Holders of the Series E-1 Preferred Stock are entitled to receive cumulative dividends at a fixed rate of 9.0% per annum of the Series E-1 Stated Value. Dividends are calculated based on a 360-day year, declared and accrued monthly, and payable at the discretion of the Board of Directors out of legally available funds. 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 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 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 114 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. Holders may require the Company to redeem any portion of their Series E-1 Preferred Stock at any time for a "Settlement Amount" calculated as the Series E-1 Stated Value plus any unpaid dividends, less a Holder Optional Redemption Fee equal to a percentage of the Series E-1 Stated Value based on the year when the redemption occurs as follows: 9.00% prior to the first anniversary of the respective tranche closing date (the "Original Issuance Date"); 7.00% on or after the first anniversary but prior to the second anniversary of the Original Issuance Date; 5.00% on or after the second anniversary but prior to the third anniversary of the Original Issuance Date: and 0.00% on or after the third anniversary of the Original Issuance Date. The Settlement Amount can be settled in cash or shares of common stock at the sole option of the Company, subject to a share cap (if required by Nasdaq rules and regulations), which limits the total shares deliverable upon redemption to 19.99% of the common stock outstanding immediately prior to the Series E-1 Preferred Stock offering (25,889,470 shares, the “Share Cap”), unless approval by the Company’s stockholders is obtained to exceed the Share Cap. Any portion of the Settlement Amount exceeding this cap will be settled in cash. Holders may not redeem any shares of Series E-1 Preferred Stock for common stock prior to the first anniversary of the Original Issuance Date. The Company may also redeem shares of the Series E-1 Preferred Stock after the second anniversary of the Original Issuance Date, with a minimum notice of 10 days, at a redemption price equal to the Series E-1 Stated Value plus any accrued but unpaid 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 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, 2026, 576 shares of Series E-1 Preferred Stock were redeemed. Series G Convertible Preferred Stock On April 30, 2025, the Company entered into the Preferred Equity Purchase Agreement (the “PEPA”) with certain investors for the issuance and sale of up to 156,000 shares of Series G Convertible Preferred Stock (the “Series G Preferred Stock”) in a transaction (the “Private Placement”) pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). 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 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 the Company's 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 115 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. 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 110% of the stated value of such Series G Preferred Stock. 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. 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 116 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 1.80x 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 2.00x 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 117 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. 17. Leases 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, 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. 118 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 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): Minimum Contracted Payments FY27 $ 451,065 FY28 1,453,748 FY29 2,251,769 FY30 2,280,829 FY31 2,299,574 Thereafter 27,107,897 Total $ 35,844,882 119 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 Lessee Accounting The Company enters into leases for equipment and office space. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company presents operating and finance right of use assets and liabilities separately on the balance sheet as their own captions, with the liabilities split between current and long-term, respectively. Components of lease expense were as follows (in thousands): May 31, 2026 May 31, 2025 May 31, 2024 Operating lease cost: Operating lease expense $ 7,709 $ 36,764 $ 16,700 Short-term lease expense 1,175 769 57 Total operating lease cost 8,884 37,533 16,757 Finance lease expense: Amortization of right-of-use assets(1) 27,405 85,653 63,930 Interest on lease liabilities 3,612 18,583 10,597 Total finance lease cost 31,017 104,236 74,527 Variable lease cost 2,580 2,612 169 Sublease Income — — (70) Total net lease cost $ 42,481 $ 144,381 $ 91,383 (1) Amortization of right-of-use assets is included within cost of revenues and selling, general and administrative expense in the consolidated statements of operations. The following table represents the Company’s future minimum lease payments as of May 31, 2026 (in thousands): Operating Leases Finance Leases Total FY27 $ 22,218 $ 51,069 $ 73,287 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 Total lease payments 75,142 62,037 137,179 Less: imputed interest (9,480) (3,721) (13,201) Total lease liabilities 65,662 58,316 123,978 Less: Current portion of lease liability (18,484) (47,585) (66,069) Long-term portion of lease liability $ 47,178 $ 10,731 $ 57,909 Supplemental cash flow and other information related to leases is as follows: Fiscal Year Ended May 31, 2026 May 31, 2025 Weighted-average years remaining (in years): Finance leases 1.0 years 0.7 years Operating leases 3.4 years 3.0 years Weighted-average discount rate: Finance leases 9.9 % 9.9 % Operating leases 7.7 % 7.6 % 120 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 18. Commitments and Contingencies Commitments Energy Contracts As of May 31, 2026, the Company had a minimum commitment of approximately $19.2 million related to the energy services agreement for its Jamestown, North Dakota co-hosting facility payable over, approximately, the next 0.7 years. Construction Contracts 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. In the event of termination of any of these contracts by the Company, the Company would be liable for all work that has been completed or in process, plus any applicable fees. 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”). 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 MISO region. 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 From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. Securities Lawsuit The Company, Wes Cummins, the Company's Chief Executive Officer, and David Rench, the Company's then Chief Financial Officer, have been named as defendants in a putative securities class action lawsuit in the matter styled, McConnell v. Applied Digital Corporation, et al., Case No. 3:23-cv-1805, filed in August 2023 in the U.S. District Court for the Northern District of Texas (the “Securities Lawsuit”). Specifically, the complaint asserts claims pursuant to Section 10(b) and 20(a) of the Securities and Exchange Act of 1934 based on allegedly false or misleading statements regarding the company’s business, operations, and compliance policies, including claims that the Company overstated the profitability of its Data Center Hosting Business and its ability to successfully transition into a low-cost cloud services provider and that the Company’s board of directors was not “independent” within the meaning of Nasdaq listing rules. On May 22, 2024, the court appointed lead plaintiff and approved lead counsel, and on July 22, 2024, lead plaintiff filed an amended complaint which asserts the same claims based on similar allegations in the original complaint. On September 20, 2024, the defendants filed a motion to dismiss the amended complaint. On November 20, 2024, lead plaintiff filed his opposition to the Motion to Dismiss. 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. Derivative Lawsuit On November 15, 2023, a derivative action was filed in the matter styled, Weich v. Cummins, et al., Case No. A-23-881629-C in the District Court of Clark County, Nevada (the “Derivative Lawsuit”). The Weich complaint named as 121 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. Specifically, the complaint alleged that the Company overstated the profitability of the Data Center Hosting Business and its ability to successfully transition into a low-cost cloud services provider and that the Board was not “independent” within the meaning of Nasdaq listing rules. On February 27, 2024, the derivative plaintiff filed an amended complaint asserting the same claims as the original complaint. On June 5, 2024, following briefing and argument on the defendants’ motion to dismiss the Derivative Lawsuit, the Court entered an order granting the defendants’ motion without prejudice and dismissing all claims against all defendants, including the Company, on the grounds that the plaintiff failed to plead (1) demand futility as to each of plaintiff’s claims or (2) a claim for breach of fiduciary duty. The order dismissed all claims against all defendants, including the Company. The plaintiff can seek leave to file an amended complaint but to date has not done so. The Company is unable to estimate a range of loss, if any, that could result were there to be an adverse final decision in this action. 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. As of May 31, 2026, there were no other pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s consolidated operations. There are also no legal proceedings in which any of the Company’s management or affiliates is an adverse party or has a material interest adverse to the Company’s interest. 19. Business 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 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, loss (gain) on classification of held for sale, loss on abandonment of assets, and loss from legal settlement. The Company derives the segment results from its internal management reporting system. The accounting policies the Company uses to derive reportable segment results are the same as those used for external reporting purposes. 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 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. 122 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 The following tables present segment information, including revenue by segment and segment profit (loss) for the fiscal years ended May 31, 2026, 2025, and 2024 (in thousands): Fiscal Year Ended May 31, 2026 Data Center Hosting Business HPC Hosting Business Revenue: Services revenue $ 154,403 $ 270,602 Data center rental and other revenue $ — $ 114,702 Total segment revenue 154,403 385,304 Costs and expenses: 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 Loss on abandonment of assets 570 1,240 Total costs and expenses 106,066 346,177 Segment profit $ 48,337 $ 39,127 Fiscal Year Ended May 31, 2025 Data Center Hosting Business HPC Hosting Business Revenue: Services revenue $ 142,267 $ — Data center rental and other revenue $ — $ — Related party revenue 1,926 — Total segment revenue 144,193 — Costs and expenses: 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 Segment profit (loss) $ 63,927 $ (12,086) Fiscal Year Ended May 31, 2024 Data Center Hosting Business HPC Hosting Business Revenue: Services revenue $ 121,857 $ — Data center rental and other revenue $ — $ — Related party revenue 14,761 — Total segment revenue 136,618 — Costs and expenses: 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 Segment profit (loss) $ 4,812 $ (4,811) 123 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 The following table presents a reconciliation to net loss from continuing operations before income tax expense (in thousands): Fiscal Year Ended May 31, 2026 May 31, 2025 May 31, 2024 Segment profit (loss) Data Center Hosting Business $ 48,337 $ 63,927 $ 4,812 HPC Hosting Business 39,127 (12,086) (4,811) Total segment profit 87,464 51,841 1 Other (1) (323,926) (124,016) (98,339) Operating loss (236,462) (72,175) (98,338) 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 Loss on change in fair value of related party debt — — 8,116 Loss on extinguishment of debt — 1,177 — Loss on extinguishment of related party debt — — 2,507 Loss on change in fair value of warrants 2,212 6,421 — Loss on change in fair value of related party warrants — — 5,696 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 May 31, 2026 May 31, 2025 May 31, 2024 Depreciation and amortization: Data Center Hosting Business $ 12,888 $ 13,312 $ 19,948 HPC Hosting Business 34,414 3,733 1,233 Other (1) 20,087 117,664 58,179 Total depreciation and amortization (2) $ 67,389 $ 134,709 $ 79,360 Capital expenditures: Data Center Hosting Business $ (1,234) $ 9,320 $ 38,266 HPC Hosting Business 2,988,712 976,506 207,299 Other (1) 54,678 995 84,373 Total capital expenditures $ 3,042,156 $ 986,821 $ 329,938 (1)Other includes corporate related items not allocated to reportable segments. (2)Includes amortization of the finance lease right-of-use assets. 124 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 Information on segment assets and a reconciliation to consolidated assets are as follows (in thousands): Fiscal Year Ended May 31, 2026 May 31, 2025 Data Center Hosting Business $ 113,788 $ 141,764 HPC Hosting Business 8,999,081 1,363,341 Total segment assets 9,112,869 1,505,105 Other (1) 816,443 364,985 Total assets $ 9,929,312 $ 1,870,090 (1) Other includes corporate related items not allocated to reportable segments. 20. Loss Per Share 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 May 31, 2026 May 31, 2025 May 31, 2024 Net loss $ (184,339) $ (231,065) $ (149,671) Net loss attributable to noncontrolling interest and redeemable noncontrolling interest (59,665) — (397) Preferred dividends (6,259) (2,615) — Net loss attributable to common stockholders $ (250,263) $ (233,680) $ (149,274) Net loss attributable to common stockholders: Continuing operations $ (249,243) $ (233,680) $ (149,274) Discontinued operations (1,020) — — Net loss $ (250,263) $ (233,680) $ (149,274) Basic and diluted net loss per share attributable to common stockholders: Continuing operations $ (0.91) $ (1.16) $ (1.31) Discontinued operations — — — Basic and diluted net loss per share $ (0.91) $ (1.16) $ (1.31) Basic and diluted weighted average number of shares outstanding 275,194,755 201,194,451 114,061,414 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, 125 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the Fiscal Year Ended May 31, 2026 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. 21. Subsequent Events 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. Series G 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 126 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. 127