CHRN — FY2026 (Annual) Financial Report Analysis

Overview

ChronoScale Holdings (CHRN) is not the company that used to trade under this listing. Until May 2026 the listing belonged to Ekso Bionics, a maker of robotic exoskeletons for rehabilitation. On May 5, 2026, Applied Digital (APLD) put its GPU cloud business, Applied Digital Cloud, into the listed Ekso shell in exchange for new shares. After the deal Applied Digital and its subsidiary owned about 97% of the stock and the old Ekso shareholders about 3%. The accounting treats the cloud business as the buyer: this 10-K covers the cloud business's history for the fiscal year that ended May 31, 2026. Ekso appears only for its last 26 days, as a discontinued operation (a business being sold, reported below the main results). The sale of Ekso was completed on September 30, 2026.

The cloud business rents out NVIDIA GPU computing capacity, the specialised chips used to train and run AI models. As of May 31, 2026 that meant 6,144 GPUs (H100s) across about 14 megawatts of rented space at data centres in Colorado, Minnesota and Utah, all serving a single customer, Together AI. For the year, revenue fell 15% to $71.6 million because a second customer (23% of revenue the year before) left in December 2024. The net loss narrowed from $72.7 million to $50.3 million. Most of that improvement came from renegotiating the leases on the computing equipment, not from the business earning more.

At a glance

• Revenue: $71.6M, down 15%. All of it came from one customer, Together AI, under a contract renewed on March 1, 2026 for 12 months. After that it rolls over in 60-day blocks unless either side gives notice.
• Gross margin: -23.9% (from -36.7%). It still cost the company $88.7M to deliver $71.6M of service. Each dollar of revenue carried about 24 cents of loss before any head-office cost.
• Cash: $9.7M against a $42.6M working-capital deficit. In plain terms, bills due within a year exceed cash and receivables by $42.6M. The company is funded by its parent: $75.4M of capital contributions during the year, plus a $100M demand loan from Applied Digital signed in June 2026.

Results

Operating margin is the share of revenue left after running the business, before interest and tax. Here it is negative: for every $1 of revenue the company spent about $1.52 on operations. Gross margin is the same idea measured only on the direct cost of delivering the service: equipment depreciation, data-centre leases, power and operations staff.

On a rough measure, $71.6M of revenue over 6,144 GPUs works out to about $1.33 per GPU per hour. This assumes every GPU was billed around the clock all year. The filing gives a period-end count, not an average, and describes the pricing only as "a fixed, per-GPU per-hour rate", so treat this as an estimate.

Takeaway: The narrower loss is mostly an accounting-and-financing story, not an operating one. The filing attributes about $32M of lower costs to renegotiated leases, more than the entire $17.8M improvement in operating loss, while revenue shrank. What ChronoScale has today is a sub-scale, single-customer GPU business that its parent funds. The investment case rests on a planned expansion (a Microsoft deployment and new contracts) that has not been financed or built yet.

What drove the year

Revenue fell because a customer left. The 10-K says the $12.8M decline was "primarily due to the loss of a customer in December 2024." In FY2025 one customer provided 77% of revenue and a second 23%. In FY2026 one customer provided 100%. Revenue went down even though the remaining customer's contract was renewed.

Costs fell more than revenue, mainly because of leases. Most of the GPU servers are held under finance leases, which work like buying equipment on instalments. The company renegotiated most of those leases to stretch the payments out (now running through fiscal 2028), and in an earlier round it stretched the period over which the equipment is written off to five years. According to the MD&A, this produced:

• $19.7M less depreciation and amortization in cost of revenues (the equipment's cost is now spread over more years);
• $6.4M less lease expense in cost of revenues and $5.3M less in SG&A;
• $0.7M less depreciation in SG&A;
• lower finance-lease interest, the main reason net interest expense fell $7.8M to $9.6M.

Together, the four lease-related cost items come to about $32.1M. Energy and other direct costs rose $1.3M.

SG&A fell 20%, but only because last year included a write-off. FY2025 included about $8.7M of bad-debt expense on an uncollectible balance from one counterparty, with nothing comparable this year. Partly offsetting it, professional fees rose about $6.2M (legal work on "discrete transactions", i.e. the merger), stock-based compensation rose $2.8M, and the notes record $5.4M of acquisition-related costs inside SG&A.

Below the operating line. Warrants taken over from Ekso are revalued to market each quarter. The higher share price after the deal produced a $2.2M non-cash loss. Ekso's 26 days in the group added a $1.0M loss from discontinued operations.

What the headline numbers hide

• The operating improvement came from lease changes, not from the business. About $32M of cost savings tied to lease renegotiations, plus the $8.7M bad-debt charge that did not recur, add up to more than the $17.8M reduction in operating loss. Excluding those effects, the operating result would have been worse than last year, which fits revenue falling 15%. Stretching an asset's write-off period lowers the yearly expense; the company still owes the same equipment payments, just over more years.
• Positive operating cash flow does not mean the business funds itself. Operating cash flow of +$39.1M is much better than the -$50.3M net loss, because $60.3M of depreciation and $21.0M of lease expense are non-cash charges added back. But repaying the principal on the equipment leases is counted under financing, and that took $89.5M of cash. Equipment purchases added $26.9M. Operating cash flow minus equipment purchases minus lease principal comes to roughly -$77.3M, and Applied Digital's $75.4M of capital contributions covered almost all of it. The company says it has "relied on Applied Parent to provide financing for our operations".
• Receivables more than tripled while revenue fell. Accounts receivable (money billed but not yet collected) grew from $3.8M to $12.5M (+231%), about 64 days of revenue. The contract bills monthly, so that is roughly two months' billing, all owed by the one customer. The filing gives no reason. Worth watching in the next 10-Q.
• Prepayments have run out. Deferred revenue (cash received before the service is delivered) fell from $3.6M to zero. It also fell $27.6M the year before. In earlier years part of the revenue reported was cash already received in advance. That support is now gone.
• Much of the balance sheet is goodwill from the deal. The deal created $54.5M of goodwill, about 17% of total assets. The notes say it is "entirely attributable to the expected synergies and economic benefits associated with the access to public markets". It is not tied to Ekso's products, because Ekso was sold. Equity rose to $180.0M mainly because of parent contributions and the deal accounting, not because the business earned money.
• The improvement in loss per share is not inflated by share changes. The 32% narrower loss per share almost exactly matches the 32% smaller continuing loss. Prior-year shares are the 138.2M issued to Applied Digital, restated backwards, and the weighted average barely moved (138.7M). Buybacks and tax played no part; income tax was zero in both years.
• No guidance to compare against. This is the first annual report in this form, and the 10-K gives no revenue or margin outlook.

Funding and obligations

At May 31, 2026 the company had $9.7M of cash. Over the next 12 months (fiscal 2027) it owes $51.1M on finance leases, $21.8M on operating leases and $3.7M of debt inherited from Ekso. That debt includes a $2.0M B. Riley loan, whose maturity was extended in September 2026 to November 12, 2026.

The bridge is Applied Digital. In June 2026 ChronoScale signed a demand loan (the "Grid Note") with its parent for up to $100M, drew $7.0M on July 1, and had $93.0M undrawn. The parent agreed not to demand repayment before August 20, 2027. On that basis management forecasts that available liquidity will exceed its cash commitments by about $61.0M through August 31, 2027, and the auditors raised no going-concern doubt. The parent's backing is also its control: under an investor rights agreement, Applied Digital names four of seven directors, and while it owns 30% or more it must consent to new debt and acquisitions. It also charges a services fee of 1% of gross revenue per quarter.

Outlook

Management gives no formal guidance, but the filings after the year-end describe a very different scale from the $71.6M just reported:

• Microsoft: On August 6, 2026 ChronoScale signed a partnership to deploy about 50 megawatts of AI capacity on NVIDIA GB300 systems. The term was extended from two to three years on August 27. Projected completion is the first calendar quarter of 2027. For scale, the company's entire current footprint is about 14 MW. The 10-K says the deployment is "subject to our ability to obtain financing on favorable terms". Late delivery triggers daily penalty credits, and Microsoft can cancel a tranche and recover upfront payments.
• New contracts: An October 1, 2026 press release says an expanded agreement with an existing customer and a contract with a new customer, together with existing contracts and the deployment schedule, provide for $1 billion of annualized run-rate revenue by calendar Q3 2027. Run-rate is the company's own non-GAAP measure of what the contracts would bring in over a full year. It is not a forecast of reported revenue, and the release itself makes it conditional on deployment, power and equipment, and on raising capital.

Our read: A business that can't cover its own costs at about 6,000 GPUs now plans to grow roughly fourteen-fold in about a year, mostly with capital it doesn't have yet. If the Microsoft and new-customer deployments are financed and delivered on time, revenue would no longer depend on a single customer and the current loss rate would matter much less. If financing is slow, penalty clauses and a lapsing Together AI contract (its initial term ends around February 2027) could hit at the same time. The three things to check in the coming quarters: whether a funding package for the GB300 build is announced and on what terms (debt versus new shares, which would dilute existing holders); whether Together AI renews beyond the current term; and whether receivables return to about one month of billing.

Source: ChronoScale Holdings Corporation Form 10-K for the fiscal year ended May 31, 2026 (filed August 19, 2026); post-period events from the company's Forms 8-K filed August 27, September 16, October 2 and October 6, 2026.