ChronoScale Holdings Corp

Current report

We will require substantial additional financing to meet our obligations under customer agreements and fund our growth, and we may be unable to obtain such financing when needed or on acceptable terms.

Current report

Our customer agreements and growth plans require substantial capital expenditures to acquire GPUs and related equipment, secure and develop data center capacity, and deploy infrastructure on specified schedules. We expect to seek funding through multiple transactions, which may include registered or unregistered equity or debt financings, equipment financing and joint venture arrangements. Customer upfront payments and our existing cash resources may be insufficient to fund these commitments, and we may need to obtain financing before we receive the revenue expected from the related deployments. For example, our agreement with Microsoft requires us to procure large-scale GPU capacity and complete a dedicated data center facility on a fixed delivery schedule, obligations that will require financing beyond our existing cash resources.

Current report

There can be no assurance that any contemplated financing will be completed, that it will provide sufficient proceeds, or that funds will be available when required under our customer agreements. Our ability to obtain financing may depend on market conditions, the availability and value of collateral, prospective lenders’ and investors’ assessment of our business and customer arrangements, and our ability to satisfy financing conditions. If financing is delayed or unavailable, we may be unable to place equipment orders, complete construction or deliver capacity on schedule. This could result in customer credits or penalties, termination of customer agreements, repayment of upfront payments, and the loss of anticipated revenue. We may also need to reduce or delay other planned investments or seek alternative financing on less favorable terms.

Current report

Additionally, any equity securities offerings could substantially dilute our existing stockholders and may, in certain cases, carry rights senior to those of our common stock. Debt financing could increase our fixed payment obligations, require us to pledge assets, and impose covenants that limit our operating and financing flexibility. Joint venture or other alternative arrangements may require us to share the economics of projects or relinquish some control over them. Any of these outcomes could materially adversely affect our business, financial condition, results of operations and liquidity.

Current report

Our current and prospective international business relationships expose us to risks under U.S. economic sanctions and export control laws, and a failure to comply could materially harm our business.

Current report

We are subject to economic sanctions administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) and other applicable authorities. We are engaged in business discussions with companies outside the United States, including in China and Singapore, and may pursue additional international relationships. Although those jurisdictions are not themselves subject to comprehensive U.S. sanctions, a prospective counterparty, its owners, affiliates, intermediaries, financial institutions or end users could be subject to sanctions or have dealings involving sanctioned persons or jurisdictions. Complex ownership structures and indirect transactions may make these risks difficult to identify, and sanctions designations and restrictions can change during an ongoing relationship.

Current report

We are also subject to export control laws, including the Export Administration Regulations administered by the U.S. Department of Commerce’s Bureau of Industry and Security. These laws may restrict the export, re-export or transfer of advanced computing equipment, software and technology based on the destination, end user or intended use, and may require licenses or other authorizations that could be delayed or denied. Our international business discussions may require us to assess whether equipment or technology could be transferred to, or used for the benefit of, a restricted party or end user, including through an intermediary.

Current report

We have implemented procedures intended to support compliance with applicable sanctions and export control laws. However, those procedures may not identify every prohibited party or transaction or prevent conduct by employees, agents or counterparties that exposes us to liability. Compliance concerns or changes in applicable restrictions could require us to delay, abandon or terminate a transaction or relationship. An actual or alleged violation could result in government investigations, substantial civil or criminal penalties, restrictions on our business and reputational harm. Any of these outcomes could materially adversely affect our business, financial condition and results of operations.

Previous report

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.

Previous report

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.

Previous report

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.

Previous report

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.

Previous report

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.

Previous report

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:

Previous report

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.

Previous report

Our stockholders will be significantly diluted from the issuance of the Exchanged Shares and any other issuances in connection with the Business Combination, and such issuances, or perception that such issuances may occur, could depress the market price of our common stock.

Previous report

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.