18. Subsequent Events

On January 12, 2026, the Company entered into an irrevocable standby letter of credit (the "letter of credit"), established by its primary operating bank, in favor of the Company's third-party contract manufacturer, as the beneficiary, in the aggregate amount of $250, effective January 12, 2026 and expiring on January 12, 2027, unless otherwise extended or terminated. The purpose of the letter of credit is to provide financial security to the third-party contract manufacturer for inventory procurement and manufacturing obligations. As the letter of credit requires the Company to maintain a corresponding cash deposit with its bank, as long as the letter of credit is still in effect, the full amount will be classified as Restricted cash in the Company's consolidated balance sheets beginning with the fiscal quarter ending March 31, 2026.

On January 22, 2026, the Company issued and sold (i) an aggregate of 6 shares of Series B Preferred Stock convertible into an aggregate of 712 shares of common stock issuable upon conversion of the Series B Preferred Stock at an initial conversion price of $8.22 per share and (ii) warrants, which are exercisable to purchase up to an aggregate of 356 shares of the Company's common stock at an exercise price of $8.22 per share of common stock (the "Private Placement"). The net proceeds of the Private Placement are expected to be approximately $5,265, after deducting placement agent fees and expenses and other estimated offering expenses payable by the Company. The Company intends to use the net proceeds from the Private Placement for working capital and general corporate purposes.

On February 15, 2026, the Company entered into a Contribution and Exchange Agreement (the “Contribution Agreement”) with APLD Intermediate HoldCo LLC, a Delaware limited liability company (“APLD Intermediate”), APLD ChronoScale HoldCo LLC, a Delaware limited liability company and a wholly owned subsidiary of APLD Intermediate (“Contributor”), each a wholly owned direct or indirect subsidiary of Applied Digital Corporation, a Nevada corporation, and Applied Digital Cloud Corporation, a Nevada corporation, which at the time of the Closing (as defined below), will be a wholly owned subsidiary of Contributor (“Cloud”), for purposes of consummating a business combination (the “Business Combination”), as a result of which (i) Cloud will become a wholly owned subsidiary of the Company, (ii) the Company will, immediately after the consummation of the Business Combination (the  “Closing”), continue as the parent of the combined company, and (iii) the Company will change its name to ChronoScale Corporation.

Subject to the satisfaction or waiver of the conditions set forth in the Contribution Agreement, Contributor will contribute all of its right, title and interest in and to 1.2 shares of the common stock of Cloud, constituting 100% of the issued and outstanding equity of Cloud, to the Company in exchange for 138,217 newly issued shares of the Company’s common stock.

As a result of and upon the consummation of the Business Combination, Contributor is expected to own approximately 97% of the combined company’s outstanding equity before giving effect to the other transactions contemplated by the Contribution Agreement.

The Closing is subject to certain customary mutual conditions, including, but not limited to, stockholder approval of the Business Combination as set forth in the Contribution Agreement and related proposals, which approval was obtained on February 20, 2026.