CHRN 10-K & 10-Q changes, risk factors and insider trading

We are providing the following summary of the risk factors contained in this Annual Report on Form 10-K to enhance the readability and accessibility of our risk factor disclosures. We encourage you to carefully review the full risk factors contained herein in their entirety for additional information regarding the material factors that make an investment in our securities speculative or risky. These risks and uncertainties include, but are not limited to, the following:

•Combining our Legacy Ekso Business and Cloud Business may be more difficult, costly and time-consuming than expected, which may adversely affect our results and negatively affect the value of our common stock.

•We expect to need to raise external funds to support our business plan. Such capital raises are expected to cause dilution to our stockholders.

•We are a “controlled company” under Nasdaq’s corporate governance rules and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements. As a result, investors in the Company do not have the same protections afforded to stockholders of companies that are subject to such requirements.

•Commencing November 30, 2026 (the end of our second fiscal quarter), we will no longer qualify as a smaller reporting company and will be subject to additional laws and regulations affecting public companies that will increase our costs and the demands on management and could harm our operating results.

•Our Cloud Business has had, and is expected to continue to have, significant customer concentration.

•Failure to attract, grow and retain a diverse and balanced customer base, including key magnet customers, could harm our business and operating results.

•Our Cloud Business’ customer has historically made advance deposits based on anticipated future usage, and may continue to do so.

•We may face pricing pressures as our industry evolves, and any significant or sustained reductions in pricing may reduce our margins and adversely affect our business, operating results, financial condition and future prospects.

•Technological developments in generative AI and inference, such as the development of AI models that require less computation power than earlier models, may result in decreased or differing demand for our offerings.

•Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate, which could result in our business failing to meet its growth targets, which could negatively affect our financial condition, results of operations and future prospects.

•We are currently dependent on a limited number of suppliers and our Cloud Business may be adversely affected if we are unable to source and acquire sophisticated hardware on acceptable terms and on time. Any supply chain disruptions, delays in delivery or increased costs could adversely affect our growth plans, financial condition and results of operations.

•Any disruption to colocation space or services from third-party providers, or our ineffective management of relationships with third parties could harm our business, financial condition, operating results, cash flows, and prospects

•Cybersecurity, physical security, and infrastructure disruptions could materially adversely affect our business.

•Certain natural disasters or other external events, including climate change or mechanical failures, could harm our business, financial condition, results of operations, cash flows, and prospects.

•Our level of debt in the future may negatively impact our liquidity, restrict our operations and ability to respond to business opportunities, and increase our vulnerability to adverse economic and industry conditions.

•Joint ventures, joint ownership arrangements and other projects pose unique challenges and we may not be able to fully implement or realize synergies, expected returns or other anticipated benefits associated with such projects.

•The loss of any of our management team, our inability to execute an effective succession plan, or our inability to attract and retain qualified personnel, could adversely affect our business.

•We may become involved in litigation arising in the ordinary course of our business that may materially adversely affect us.

•Employee disputes or litigation and related unfavorable publicity may negatively affect our future business, financial condition, and operating results.

•Unfavorable global economic conditions and adverse developments with respect to financial institutions and associated liquidity risk could adversely affect our business, financial condition and stock price.

•The development and use of AI tools is subject to intense political scrutiny and evolving, complex and potentially divergent regulatory frameworks across multiple jurisdictions, and the impact of such regulatory developments on our businesses remains uncertain. If we are unable to comply with such laws and regulations and related export controls and other regulations, or if such requirements limit our ability to implement our business model, we may be subject to litigation, investigation or penalties, and our businesses and results of operations could be negatively impacted.

•Our inability to market and close the sale of our Legacy Ekso Business that is currently held for sale and treated as discontinued operations may have a material adverse impact on our business and financial condition.

•Our stock price has been volatile and may continue to be volatile in the future; this volatility may affect your ability to, and the price at which you could, sell our common stock.

•Future issuances of our equity securities may result in dilution to existing stockholders and could adversely affect the market price of our common stock.

•We do not expect to declare or pay dividends in the foreseeable future, which may limit the return our shareholders realize on their investment.

•Provisions in our Articles (as defined below), our Bylaws (as defined below), and Nevada law may discourage a takeover attempt even if a takeover might be beneficial to our stockholders.

Combining our Legacy Ekso Business and Cloud Business may be more difficult, costly and time-consuming than expected, which may adversely affect our results and negatively affect the value of our common stock.

The Business Combination closed on May 5, 2026 and our management has been working on integrating the Legacy Ekso Business and Cloud Business. The combination of two independent businesses is a complex, costly and time-consuming process and our management may face significant challenges in implementing such integration, many of which may be beyond the control of management, including, without limitation:

•difficulties in achieving anticipated business opportunities and growth prospects;

•the possibility of faulty assumptions underlying expectations regarding the integration process, including with respect to the intended tax efficient transactions;

•unanticipated changes in applicable laws and regulations; and

•unforeseen expenses or delays associated with the Business Combination.

Some of these factors will be outside of our control and any one of them could result in increased costs and diversion of management’s time and energy, as well as decreases in the amount of expected revenue that could materially impact our business, financial condition and results of operations. The integration process and other disruptions resulting from the Business Combination may also adversely affect our relationships with employees, suppliers, customers, distributors, licensors and others with whom we have business or other dealings, and difficulties in integrating our Legacy Ekso Business and Cloud Business could harm our reputation.

If we are not able to successfully combine our Legacy Ekso Business and Cloud Business in an efficient, cost-effective and timely manner, the anticipated benefits of the Business Combination may not be realized fully, or at all, or may take longer to realize than expected, and the value of our common stock, revenues, levels of expenses and results of operations may be affected adversely. If we are not able to adequately address integration challenges, we may be unable to successfully integrate our Legacy Ekso operations and Cloud operations or realize the anticipated benefits of the Business Combination.

We expect to need to raise external funds to support our growth strategy. Such capital raises are expected to cause dilution to our stockholders.

We expect to need to raise substantial additional capital to expand our operations, pursue our growth strategies and respond to competitive pressures or unanticipated working capital requirements. We anticipate that our current and future strategic growth initiatives will be capital-intensive. We expect to raise capital through a combination of equity offerings, debt financings and potentially joint venture agreements. Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our business. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect stockholder rights. Debt financing or refinancing may result in the imposition of debt covenants, increased fixed payment obligations or other restrictions that may affect our business. If we engage in additional debt financing, the holders of debt likely would have priority over the holders of our common stock in order of payment preference. Furthermore, our ability to raise additional capital may be adversely impacted by global macroeconomic conditions and volatility in the credit and financial markets in the U.S. and worldwide, over which we may have no or little control. Our failure to raise capital as and when needed or on acceptable terms would have a negative impact on our financial condition and our ability to pursue our business strategy.

We operate our business through two wholly-owned subsidiaries: ChronoScale Corporation, a Nevada corporation (f/k/a Applied Digital Cloud Corporation, a Nevada corporation) (“Cloud”) and Ekso Bionics, Inc., a Delaware corporation (“Legacy Ekso”). Following the Holding Company Transaction (as defined and described below), Applied Digital Cloud Corporation changed its name to ChronoScale Corporation. All references to “Cloud” prior to the Holding Company Transaction are to Applied Digital Cloud Corporation and after the Holding Company Transaction, to ChronoScale Corporation. Through Cloud, we have been providing cloud services to customers at third-party colocation centers located in Colorado, Minnesota and Utah, such as artificial intelligence and machine learning developers, seeking to develop their advanced products (the “Cloud Business”). Customers pay a fixed rate in exchange for an energized space supported by Cloud-provided equipment. Through Legacy Ekso, we design, develop, and market exoskeleton and complementary products that augment human strength, endurance, and mobility (the “Legacy Ekso Business”). On June 4, 2026, we announced that our Board of Directors (the “Board”) committed to a plan to divest the Legacy Ekso Business and focus operations solely on our Cloud Business. We expect to complete the divestiture of the Legacy Ekso Business during fiscal year 2027. As such, our Legacy Ekso Business has been designated as “held for sale.”

On May 5, 2026, we consummated the previously announced business combination transaction (the “Business Combination”) contemplated by that certain Contribution and Exchange Agreement (the “Contribution and Exchange Agreement”), dated February 15, 2026, by and among Ekso Bionics Holdings, Inc., a Nevada corporation (“Ekso”), 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 (“Applied Parent”), and Cloud, a wholly-owned indirect subsidiary of Applied Parent and a direct subsidiary of Contributor as of immediately prior to the consummation of the Business Combination (the “Closing”). Upon the Closing, Ekso changed its name to “ChronoScale Corporation” and Cloud became a wholly-owned subsidiary of Ekso. Following the Closing, we operated in two distinct business segments: the Cloud Business, which operated through Cloud, and the Legacy Ekso Business, which operated through Legacy Ekso, which is a direct wholly-owned subsidiary of Ekso. On July 1, 2026, we completed a holding company formation transaction (the “Holding Company Transaction”), as further described below, 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 our individual operating businesses, allows for and can accommodate future growth from internal operations and generally provides for greater administrative and operational flexibility.

On May 29, 2026, our Board determined that the Legacy Ekso Business met the criteria to be classified as “held for sale” on our consolidated balance sheets as the Board committed to a plan to divest Legacy Ekso and the Legacy Ekso Business to focus our operations solely on the Cloud Business. We deem it appropriate to classify a business as a discontinued operation if the business meets all of the following criteria: (i) it 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, we deemed our Legacy Ekso Business to be discontinued operations due to the disposal group meeting all three criteria. As such, we have excluded the results of this business segment from our continuing operations and presented them in discontinued operations on the consolidated statements of operations for all periods presented in our audited consolidated financial statements included in this Annual Report on Form 10-K. The comparative periods have been updated to present the Legacy Ekso Business as held for sale and discontinued operations as of May 31, 2026. We recognized $0.4 million in revenue from the Legacy Ekso Business during the fiscal year ended May 31, 2026 within discontinued operations.

Unless the context otherwise requires, references to “we,” “us,” “our,” and the “Company” refer to Ekso Bionics Holdings, Inc. prior to the Business Combination, ChronoScale Corporation following the Business Combination and ChronoScale Holdings following the Holding Company Transaction.

Reverse Stock Split

As previously disclosed, on December 12, 2024, Legacy Ekso received a written notice from the Nasdaq Listing Qualifications staff of the Nasdaq Stock Market LLC (“Nasdaq”) informing the Company that because the minimum bid price for the Legacy Ekso’s common stock listed on the Nasdaq Capital Market was below $1.00 per share over the previous 30 consecutive business days, the Company did not meet the minimum bid price requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the "Minimum Bid Price Requirement").

Before the opening of the stock market on June 2, 2025, Legacy Ekso effected a 1-for-15 reverse split of its common stock (the "Reverse Stock Split"). As a result, all common stock share amounts pertaining to Legacy Ekso instruments assumed by ChronoScale Holdings Corporation in the Business Combination included in this filing have been retroactively reduced by a factor of fifteen, rounded up to the nearest whole share, and all common stock per share amounts have been increased by a factor of fifteen, with the exception of the Company's common stock par value and the Company's authorized shares. Following the Reverse Stock Split, amounts affected included common stock outstanding, restricted stock units, common stock underlying stock options, and warrants.

The Reverse Stock Split was effected in order to raise the per share trading price of Legacy Ekso's common stock above $1.00 and regain compliance with the Minimum Bid Price Requirement. On June 13, 2025, Legacy Ekso regained compliance with the Minimum Bid Price Requirement.

Business Combination

On May 5, 2026, we completed the Business Combination contemplated by the Contribution and Exchange Agreement.

In connection with the Business Combination and immediately prior to the Closing, (i) we amended and restated our Articles of Incorporation and, in connection therewith, changed our name from "Ekso Bionics Holdings, Inc." to "ChronoScale Corporation" ("ChronoScale"), and (ii) Applied Parent consummated the Applied Parent PIPE Investment (as defined and further described below).

Upon the Closing of the Business Combination, (i) Contributor contributed to us all of its right, title and interest in and to 1.2 shares of common stock of Cloud, constituting 100% of the issued and outstanding equity of Cloud (the "Contributed Shares"), in exchange for 138,217 newly issued shares of our common stock (the "Exchanged Shares"); (ii) we entered into the Investor Rights Agreement with Contributor; (iii) we amended and restated our bylaws; and (iv) we adopted the ChronoScale 2026 Omnibus Equity Incentive Plan. In connection with the Business Combination, the CUSIP number for our common stock changed to 170924 104.

As a result of the Business Combination, Cloud became our wholly-owned subsidiary. Following the consummation of the Applied Parent PIPE Investment and the Closing, Applied Parent and Contributor beneficially owned approximately 97% of our outstanding common stock (resulting in Applied Parent obtaining a controlling interest in the Company) and legacy Ekso shareholders owned approximately 3% of our outstanding common stock.

Fiscal Year End

In connection with the Business Combination, as of the Closing Date, the Company changed its fiscal year end from December 31 to May 31.

Investor Rights Agreement

At the Closing, we entered into an investor rights agreement (the “Investor Rights Agreement”) with the Contributor, pursuant to which, the APLD Designator (as defined therein) has the right to designate four (4) of the seven (7) directors on our Board, including the Chairman (each such director, an “APLD Designee”). The initial APLD Designees are Wes Cummins (Chairman), Ella Benson, Douglas Miller and Richard Nottenburg. The remaining Board members are Ying Cenly Chen, our Chief Executive Officer, William M. Clancy, and Scott G. Davis, the Chief Executive Officer of Legacy Ekso.

The Investor Rights Agreement provides that, (i) for so long as the APLD Investors (as defined therein) beneficially own at least 50% of our aggregate outstanding voting securities, the APLD Designator may designate four (4) directors, (ii) if the APLD Investors beneficially own at least 25% of our aggregate outstanding voting securities, the APLD Designator may designate three (3) directors; (iii) if the APLD Investors beneficially own at least 10% (but less than 25%) of our aggregate outstanding voting securities, the APLD Designator may designate two (2) directors; and (iv) if the APLD Investors beneficially own less than 10% of our aggregate outstanding voting securities, the APLD Designator may designate one (1) director. In addition, the Investor Rights Agreement provides that the APLD Designator has the right, but not the obligation, to consent to any individual nominated for election to the Board seat initially occupied by the Chief Executive Officer of the Company, for so long as the APLD Investors collectively beneficially own at least 25% of the aggregate outstanding voting securities of the Company. Additionally, for so long as the APLD Investors continue to beneficially own at least thirty percent (30%) of the aggregate outstanding voting securities of the Company, the Board is prohibited from increasing the total number of directors on the Board to greater than seven (7) and, in no event shall any decrease in the number of directors on the Board, in any instance, eliminate, abridge, or otherwise modify the APLD Designator’s designation rights, in each case, without the consent of the APLD Designator.

The Investor Rights Agreement also provides that, for so long as the APLD Investors continue to beneficially own at least 30% of the aggregate outstanding voting securities of the Company, we must obtain the prior written consent of the APLD Designator for certain corporate actions, including, but not limited to, commencing or approving any dissolution, liquidation or winding up of the Company, making any fundamental change in the nature of our business, amending our governing documents, incurring, creating, assuming or guaranteeing any indebtedness (subject to certain exceptions) and making or committing to make any acquisition, joint venture, partnership, strategic alliance or formation of any subsidiary.

Pursuant to the Investor Rights Agreement, the Contributor is entitled to preemptive rights for so long as it beneficially owns at least 10% of the Company’s aggregate outstanding voting securities, subject to certain exemptions. When we propose to issue new equity securities, we must provide the Contributor with written notice specifying the securities to be offered, the price, and other material terms. Within 10 days of receiving this notice, the Contributor may elect to purchase up to the lesser of (i) 150% of its pro rata share of outstanding equity securities or (ii) 75% of the new securities being offered, with an oversubscription right for any unsubscribed securities.

In addition, we are required to file a registration statement with the SEC covering the resale of all registrable securities held by the APLD Investors by the date that is sixty (60) days after Closing.

Services Agreement

At the Closing, we entered into a Management Advisory and Corporate Services Agreement (the “Services Agreement”) with Applied Parent. Under the Services Agreement, Applied Parent has agreed to provide us with (i) management advisory services, including financial, managerial, and operational advice regarding day-to-day operations and strategic transactions and (ii) certain corporate services to us, including administrative and software services, and various personnel services. Under the Services Agreement, we will pay Applied Parent (i) an amount equal to one percent (1%) of our and our subsidiaries’ gross revenue per quarter and (ii) fees for other corporate services provided by Applied Parent to us and our subsidiaries as they are incurred on a monthly basis. The Services Agreement has an initial term of twelve (12) months, with automatic successive one (1)-month renewals unless either party provides at least sixty (60) days’ prior written notice of non-renewal prior to the expiration of the initial term or at least twenty (20) days prior to the expiration of the renewal term, and may be terminated by Applied Parent upon thirty (30) days written notice to us or by either party upon an uncured material breach or upon a party’s bankruptcy or insolvency.

2026 Plan

Effective upon the Closing, we adopted the 2026 Omnibus Equity Incentive Plan as amended and as adopted by ChronoScale Holdings following the Holding Company Transaction (the “2026 Plan”). The 2026 Plan was approved by the Board on February 14, 2026, and by the Principal Stockholders on February 20, 2026. An aggregate of 22,500,000 shares of our common stock is authorized for issuance under the 2026 Plan. On July 8, 2026, the Company filed a registration statement on Form S-8 (File No. 333-297323), to register the shares available for grant under the 2026 Plan.

In connection with the Closing of the Business Combination, the Ekso Bionics Holdings, Inc. 2017 Employee Stock Purchase Plan and the Ekso Bionics Holdings, Inc. Amended and Restated 2014 Equity Incentive Plan were terminated immediately prior to the Closing, provided that all outstanding awards under the 2014 Equity Incentive Plan will remain outstanding and will continue to be governed by their existing terms.

Equity Offerings & Changes in Equity

October 2025 Private Placement

On October 28, 2025, Ekso Bionics Holdings, Inc. entered into a securities purchase agreement pursuant to which it issued and sold to certain investors in a private placement 769,490 shares of its common stock (the “2025 Private Placement”). The 2025 Private Placement closed on October 30, 2025. In connection with the 2025 Private Placement, placement agent warrants to purchase up to 15,389 shares of the Company’s common stock (the “2025 Placement Agent Warrants”) were issued to Lake Street Capital Markets, LLC (“Lake Street”). The 2025 Placement Agent Warrants were assumed by the Company in connection with the Business Combination.

January 2026 Private Placement

On January 20, 2026, Ekso Bionics Holdings, Inc. entered into a securities purchase agreement with certain investors pursuant to which it issued and sold in a private placement (the “2026 Private Placement”): (i) an aggregate of 5,852 shares of Series B Convertible Preferred Stock with a stated value of $1,000 per share (“Series B Preferred Stock”), convertible into an aggregate of 711,922 shares of the Company’s common stock, and (ii) warrants to purchase up to an aggregate of 355,960 shares of common stock at an exercise price of $8.22 per share (the “Investor Warrants”). The 2026 Private Placement closed on January 22, 2026. In connection with the 2026 Private Placement, a placement agent warrant to purchase up to 14,238 shares of common stock at an exercise price of $8.22 per share (the “2026 Placement Agent Warrants”) was issued to Lake Street. The Investor Warrants and 2026 Placement Agent Warrants were assumed by the Company in connection with the Business Combination.

In connection with the 2026 Private Placement, the investors therein entered into a Registration Rights Agreement, which obligated the Company to file a registration statement for the resale of the Conversion Shares and the shares underlying the Investor Warrants and the 2026 Placement Agent Warrants. The Company filed the registration statement on Form S-3, as amended (File No. 333-297176) with the Securities and Exchange Commission (the “SEC”) on June 30, 2026, which registration statement was declared effective by the SEC on July 15, 2026.

Business Combination

Upon the Closing of the Business Combination, (i) Contributor contributed to us all the Contributed Shares, in exchange for the Exchanged Shares; (ii) we entered into the Investor Rights Agreement with Contributor; (iii) we amended and restated our bylaws; and (iv) we adopted the ChronoScale 2026 Omnibus Equity Incentive Plan. As a result of the Business Combination, Cloud became our wholly-owned subsidiary. Following the consummation of the Applied Parent PIPE Investment (as defined below) and the Closing, Applied Parent and Contributor beneficially owned approximately 97% of our outstanding common stock (resulting in Applied Parent obtaining a controlling interest in the Company) and legacy Ekso shareholders beneficially owned approximately 3% of our outstanding common stock.

Applied Parent PIPE Investment

In connection with, and as a condition to the Closing of the Business Combination, on May 1, 2026, we entered into that certain securities purchase agreement (the “Applied Parent SPA”) with Applied Parent (the “Applied Parent PIPE Investment”), pursuant to which we issued to Applied Parent 1,311,407 shares of our common stock (the “Private Placement Shares”). The Private Placement Shares were sold at an offering price of $12.01 per share, the closing price of our common stock on April 30, 2026, the date immediately preceding the date of execution of the Applied Parent SPA, for gross proceeds to us of approximately $15.75 million. The closing of the transaction pursuant to the Applied Parent SPA took place on May 5, 2026, immediately prior to the Closing.

Armistice Warrant Exercises

On May 11, 2026, we issued a total of 700,000 shares of common stock upon the exercise of 700,000 common stock warrants held by Armistice Capital, LLC, with an exercise price of $6.36 per common stock warrant, resulting in net proceeds to us of approximately $4.5 million.

Series B Preferred Stock Conversions

On May 13, 2026, we issued a total of 355,961 shares of our common stock upon the conversion of 2,926 shares of Series B Preferred Stock held by one of the holders.

Debt Financings

B. Riley Promissory Note

On May 5, 2026, in connection with the Business Combination, ChronoScale Holdings Corporation assumed a Secured Promissory Note and Security Agreement (the “B. Riley Promissory Note”) by and between Legacy Ekso and B. Riley Commercial Capital, LLC (“B. Riley”) as lender. The B. Riley Promissory Note provides for a secured term loan in an aggregate principal amount of up to $2.0 million. The B. Riley Promissory Note was measured at its estimated fair value as of the Business Combination acquisition date. The loan matures on the earlier of the receipt of at least $2.4 million in net proceeds from the sale of the equity interests from new equity investors (a “Qualified Financing”), or September 14, 2026 (the “Maturity Date”).

Borrowings under the B. Riley Promissory Note bear interest at the rate of 10% per annum, which shall be payable in full on the Maturity Date. On the Maturity Date, we shall pay to B. Riley an exit fee in the amount of 10% of the original principal amount of the loan, which shall in the aggregate be $0.2 million (the “Exit Fee”). We may prepay the obligations under the B. Riley Promissory Note at any time in whole or in part. In connection with such prepayment, we must pay all accrued but unpaid interest on such portion of the principal prepaid, all interest that would have accrued through the Maturity Date on such principal amount prepaid and the portion of the Exit Fee applicable to such principal amount prepaid. B. Riley may elect to convert the obligations under the B. Riley Promissory Note, including the principal, interest, and Exit Fee, into equity securities in connection with a Qualified Financing at the purchase price per share paid by the lead investor thereunder.

In connection with the Closing, we obtained a written consent from B. Riley waiving any notice, consent, approval, acceleration, default-rate, penalty and other remedies under the B. Riley Promissory Note arising from the Business Combination and any related cross-defaults.

As of the date of this report, the aggregate principal amount outstanding under the B. Riley Promissory Note is $2.0 million.

Parker Hannifin Promissory Note

On May 5, 2026, in connection with the Business Combination, ChronoScale Holdings Corporation assumed an unsecured, subordinated promissory note (the “Parker Hannifin Promissory Note”) by and between Legacy Ekso and Parker Hannifin Corporation (“Parker”). The Parker Hannifin Promissory Note was measured at its estimated fair value as of the Business Combination acquisition date. The Parker Hannifin Promissory Note, which is subordinate to the B. Riley Promissory Note, bears no interest with principal payable in sixteen equal installments due on the last day of each quarter, which commenced on December 31, 2023 and matures on September 30, 2027.

As of the date of this report, the aggregate principal amount outstanding under the Parker Hannifin Note is $1.6 million.

Our proposed business combination with Applied Digital Corporation’s cloud computing business, Applied Digital Cloud, may not be completed on the terms or timeline currently contemplated or at all, which could have a material adverse effect on our business, financial condition and results of operations.

On February 15, 2026, we entered into the Contribution Agreement. 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 1,200 shares of the common stock of Cloud, constituting 100% of the issued and outstanding equity of Cloud, to us in exchange for 138,216,820 newly issued shares of our common stock (the “Exchanged Shares”). 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 Contribution Agreement provides that the Closing is subject to certain conditions, including, among other things: (i) no order or law shall have been entered, adopted, enacted, issued, promulgated or enforced, in each case, by a governmental entity that prevents, enjoins, prohibits, restrains or makes illegal the consummation of the Business Combination or the other transactions contemplated by the Contribution Agreement; (ii) all requisite approvals or waivers as required by the terms of the Contribution Agreement shall have been obtained; (iii) we shall have cash and cash equivalents equal to at least $15,000,000; and (iv) our Second Amended and Restated Articles of Incorporation (the “Second Restated Articles”) shall have been duly adopted by all necessary corporate action on our part, filed with the Secretary of State of the State of Nevada, and shall be in full force and effect as of immediately prior to the Closing.

The obligation of each party to consummate the Business Combination is also conditioned upon (i) performance and compliance by the other party in all material respects with its pre-Closing obligations and covenants under the Contribution Agreement; (ii) the accuracy of the representations and warranties of the other party as of the Closing (subject to customary materiality qualifiers); (iii) in both Cloud’s and our case, the absence of a continuing material adverse effect with respect to the other party; (iv) in Cloud’s case, that (a) a private placement transaction for gross proceeds of an amount to be determined by APLD Intermediate and on terms acceptable to APLD Intermediate, shall have been consummated concurrently with the Closing, (b) certain third-party consents as required by the terms of the Contribution Agreement shall have been obtained, (c) the Nasdaq listing application shall have been submitted and approved, (d) the Investor Rights Agreement shall be in full force and effect at Closing, and (e) certain tail insurance policies as described in the Contribution Agreement have been bound, paid for and in effect.

While it is currently anticipated that the Business Combination will be consummated in the second quarter of 2026, there can be no assurance that the foregoing conditions will be satisfied in a timely manner or at all, or that an event, development or change will not transpire that could delay or prevent these conditions from being satisfied. If the Business Combination is consummated, the combined company will be subject to risks related to, among other things, ChronoScale’s ability to successfully integrate our market opportunities, technology, personnel and operations and to achieve expected benefits, including the possibility that the expected strategic benefits from the transaction will not be realized or will not be realized within the expected time period or that general economic conditions or updated accounting or regulatory requirements could have a material adverse effect on the combined business after the Closing.

If the Business Combination is not consummated for any reason, the trading price of our common stock may decline, and we may also be subject to additional risks if the Business Combination is not completed, including:

Absent the Business Combination, we do not believe there is a reasonable prospect for our business to achieve or sustain profitability or positive cash flow in the near term without significant additional capital fundraising. Any such financing, if available at all, would likely be on terms that are difficult and highly dilutive to existing stockholders and could include the issuance of substantial amounts of equity, convertible securities, or other instruments with preferential rights. There can be no assurance that we would be able to obtain additional financing on acceptable terms, or at all. If we are unable to secure sufficient funding, we may be forced to liquidate assets, restructure, seek bankruptcy protection, or otherwise wind down our operations, which could result in a complete loss of stockholders’ investment.

The consummation of the Business Combination will cause significant dilution to our stockholders. 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 and our legacy stockholders will own approximately 3% of the combined company’s outstanding equity before giving effect to the other transactions contemplated by the Contribution Agreement, assuming full conversion of the Series B Preferred Stock, full vesting of outstanding director restricted stock units that are expected to vest upon the Closing in accordance with their terms and the issuance of $15.0 million shares of our common stock in an offering exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), at an assumed price per share of $11.81, the closing price of the common stock on March 12, 2026 (which is subject to change). The issuance of the Exchanged Shares or such other securities, or the perception that such issuances could occur, could depress the market price of our common stock.

Starting in late 2025, we began marketing the MediTouch BalanceTutor to our Enterprise Health customers under an exclusive distribution agreement with MediTouch. The BalanceTutor rehabilitation system includes a patented multidirectional perturbation treadmill and multiple force and movement sensors that allow patients impacted by impaired balance to react to unanticipated disturbances while standing or walking. We believe that the BalanceTutor offers treatment options that are complementary to our rehabilitation exoskeletons and that the two can be used in combination for many patients. We expect to begin the sales and distribution of the BalanceTutor in the second quarter of 2026.

Business Combination

On February 15, 2026, we 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 our wholly owned subsidiary, (ii) we will, immediately after the consummation of the Business Combination (the “Closing”), continue as the parent of the combined company, (iii) we will change our name to ChronoScale Corporation, and (iv) we intend to change our fiscal year end to May 31 st.

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 1,200 shares of the common stock of Cloud, constituting 100% of the issued and outstanding equity of Cloud, to us in exchange for 138,216,820 newly issued shares of our common stock (the “Exchanged Shares”). 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 Contribution Agreement provides that the Closing is subject to certain conditions, including, among other things: (i) no order or law shall have been entered, adopted, enacted, issued, promulgated or enforced, in each case, by a governmental entity that prevents, enjoins, prohibits, restrains or makes illegal the consummation of the Business Combination or the other transactions contemplated by the Contribution Agreement; (ii) all requisite approvals or waivers as required by the terms of the Contribution Agreement shall have been obtained; (iii) we shall have cash and cash equivalents equal to at least $15,000,000; and (iv) our Second Amended and Restated Articles of Incorporation (the “Second Restated Articles”) shall have been duly adopted by all necessary corporate action on our part, filed with the Secretary of State of the State of Nevada, and shall be in full force and effect as of immediately prior to the Closing.

The obligation of each party to consummate the Business Combination is also conditioned upon (i) performance and compliance by the other party in all material respects with its pre-Closing obligations and covenants under the Contribution Agreement; (ii) the accuracy of the representations and warranties of the other party as of the Closing (subject to customary materiality qualifiers); (iii) in both Cloud’s and our case, the absence of a continuing material adverse effect with respect to the other party; (iv) in Cloud’s case, that (a) a private placement transaction for gross proceeds of an amount to be determined by APLD Intermediate and on terms acceptable to APLD Intermediate, shall have been consummated concurrently with the Closing (the securities to be issued in such private placement transaction, the “PIPE Securities”), (b) certain third-party consents as required by the terms of the Contribution Agreement shall have been obtained, (c) the Nasdaq listing application shall have been submitted and approved, (d) the Investor Rights Agreement (the “Investor Rights Agreement”) between us and Contributor shall be in full force and effect at Closing, and (e) certain tail insurance policies as described in the Contribution Agreement have been bound, paid for and in effect. See “Part I—Item 1A. Risk Factors,” specifically the risks under the heading “Risks Related to the Proposed Business Combination,” for more information.

We are continuing to explore one or more strategic transactions with certain third parties with respect to our medical device business. There can be no assurances that any such transaction will occur.

Convertible Preferred Stock and Warrants Valuation

In connection with equity financings, we generally account for convertible preferred stock as temporary equity and warrants as a component of equity (for additional information see Note 11. Capitalization and Equity Structure in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report). The fair values of these financial instruments have been determined using the Binomial Lattice model (the "Lattice Model"). The Lattice Model provides for assumptions regarding expected volatility, expected term, exercise price, risk-free interest rates, the value of the underlying security, and the probability of and likely timing of a specific event within the period to redemption or maturity. These values are subject to a significant degree of judgment. In addition to the aforementioned inputs, the Company’s common stock price represents a significant input that affects the valuation of such convertible preferred stock and warrants.

(*) Not meaningful

Revenue

Finance cost associated with warrant issuance was $0.1 million for the three months ended March 31, 2026 was related to the issuance costs of the January 2026 Private Placement Warrants in connection with the January 2026 Private Placement. There was no comparable amount for the three months ended March 31, 2025.

As of March 31, 2026, $4.0 million of cash was held domestically and by our foreign subsidiaries. Cash consisted of bank deposits with third-party financial institutions. On January 12, 2026, we entered into an irrevocable standby letter of credit (the "letter of credit"), established by our primary operating bank, in favor of our third-party contract manufacturer, as the beneficiary, in the aggregate amount of $250 thousand, 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 us to maintain a corresponding cash deposit with our bank, as of March 31, 2026, $0.3 million of cash must remain as restricted. After considering cash restrictions, effective unrestricted cash as of March 31, 2026 was approximately $3.7 million.

On January 22, 2026, we issued and sold (i) an aggregate of 5,852 shares of Series B Preferred Stock convertible into an aggregate of 711,922 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) the January 2026 Private Placement Warrants, which are exercisable to purchase up to an aggregate of 355,960 shares of our common stock at an exercise price of $8.22 per share of common stock. We received net proceeds of approximately $5.3 million, after deducting placement agent fees and offering expenses paid by us. We are using the net proceeds from the January 2026 Private Placement for working capital and general corporate purposes. On January 22, 2026, in connection with the January 2026 Private Placement, we issued to Lake Street Capital Markets, LLC a warrant (the “January 2026 Placement Agent Warrant”) to purchase up to 14,238 shares of our common stock, at an exercise price equal to $8.22 per share.

On October 30, 2025, we issued and sold an aggregate of 769,490 shares of our common stock in a registered direct offering (the “October 2025 Offering”) at an offering price of $4.81 per share. We received net proceeds of approximately $3.2 million in the October 2025 Offering, after deducting the placement agent fees and offering expenses paid by us. We used the net proceeds from the October 2025 Offering for general corporate purposes, which included research and development activities, selling, general and administrative costs, pursuing strategic initiatives, and meeting our other working capital needs. On October 30, 2025, in connection with the October 2025 Offering, we issued to Lake Street Capital Markets, LLC, a warrant (the “October 2025 Placement Agent Warrant”) to purchase up to 15,389 shares of our common stock, at an exercise price equal to $4.81 per share.

Net cash used in investing activities was de minimis for the three months ended March 31, 2026 and 2025.