The preferred units and corresponding common units associated with APLD HPC TopCo 2’s redeemable 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:

As of

August 31, 2026

May 31, 2026

Expected maturity date

October 6, 2032

Credit spread (annual)

8.29

9.00

Yield volatility

42.5

40.0

Put right/trigger event

de minimis

Risk-free rate

USD Yield Curve

Number of time-steps

100

During the three months ended August 31, 2026, the Company recorded a gain on change in fair value of derivatives of $6.6 million, which is included within the loss on change in fair value of derivatives assets within the unaudited condensed consolidated statement of operations.

During the fiscal year ended May 31, 2026, the Company entered into agreements which resulted in the Company acquiring 500,000 shares of Babcock & Wilcox (“B&W”) common stock as well as two warrants to purchase 2,600,000 shares and 2,630,000 shares, respectively, of B&W common stock with an exercise price of $4.11 for a period of seven years.

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 unaudited condensed 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 as of August 31, 2026 and May 31, 2026: