apld-20240831

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________

FORM 10-Q

________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 2024


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ and __________

Commission file number: 001-31968

________________________

APPLIED DIGITAL CORPORATION

(Exact name of registrant as specified in its charter)

________________________


Nevada			95-4863690
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

3811 Turtle Creek Boulevard, Suite 2100, Dallas, Texas			75219
(Address of Principal Executive Offices)			(Zip Code)

(214) 427-1704

Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	APLD	Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of October 8, 2024, 215,359,125 shares of Common Stock, $0.001 par value, were outstanding.

Table of Contents


		Page
Part I - Financial Information

Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of August 31, 2024 and May 31, 2024 (unaudited)	1
	Condensed Consolidated Statements of Operations for the three months ended August 31, 2024 and August 31, 2023 (unaudited)	2
	Condensed Consolidated Statements of Changes in Series E Redeemable an d Series F Converti ble P referred Stock and Stockholders’ Equity for the three months ended August 31, 2024 and August 31, 2023 (unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the three months ended August 31, 2024 and August 31, 2023 (unaudited)	4
	Notes to the Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36

Part II - Other Information

Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	40
Signatures		42

Table of Contents

Part I - Financial Information

Item 1. Financial Statements

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except share and par value data)


	August 31, 2024		May 31, 2024
ASSETS
Current assets:
Cash and cash equivalents	$	58,215	$	3,339
Restricted cash	21,342		21,349
Accounts receivable	2,298		3,847
Prepaid expenses and other current assets	2,063		1,343
Current assets held for sale	192		384
Total current assets	84,110		30,262
Property and equipment, net	478,249		340,381
Operating lease right of use assets, net	147,148		153,611
Finance lease right of use assets, net	200,649		218,683
Other assets	27,576		19,930
TOTAL ASSETS	$	937,732	$	762,867

LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	140,264	$	116,117
Accrued liabilities	26,723		26,282
Current portion of operating lease liability	22,393		21,705
Current portion of finance lease liability	112,079		107,683
Current portion of debt	6,892		10,082
Current portion of debt, at fair value	30,464		35,836
Customer deposits	13,676		13,819
Related party customer deposits	—		1,549
Deferred revenue	16,867		37,674
Related party deferred revenue	—		1,692

Due to customer	17,211		13,002
Other current liabilities	96		96
Total current liabilities	386,665		385,537
Long-term portion of operating lease liability	103,871		109,740
Long-term portion of finance lease liability	43,841		63,288
Long-term debt	106,227		79,472


Total liabilities	640,604		638,037
Commitments and contingencies (Note 11)
Temporary equity
Series E preferred stock, $0.001 par value, 2,000,000 shares authorized, 301,673 shares issued and outstanding at August 31, 2024, and no shares authorized, issued or outstanding at May 31, 2024	6,932		—
Series F preferred stock, 0.001 par value, 53,191 shares authorized, issued and outstanding at August 31, 2024, and no shares authorized, issued or outstanding at May 31, 2024	48,350		—
Stockholders' equity:
Common stock, $0.001 par value, 300,000,000 shares authorized, 162,471,048 shares issued and 157,438,246 shares outstanding at August 31, 2024, and 144,083,944 shares issued and 139,051,142 shares outstanding at May 31, 2024	162		144
Treasury stock, 5,032,802 shares at August 31, 2024 and 5,032,802 shares at May 31, 2024, at cost	(62)		(62)
Additional paid in capital	496,027		374,738
Accumulated deficit	(254,281)		(249,990)
Total stockholders’ equity attributable to Applied Digital Corporation	241,846		124,830


TOTAL LIABILITIES, TEMPORARY EQUITY AND SHAREHOLDERS' EQUITY	$	937,732	$	762,867

See accompanying notes to the unaudited condensed consolidated financial statements

Table of Contents

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except share and per share data)


	Three Months Ended
	August 31, 2024		August 31, 2023
Revenue:
Revenue	$	58,778	$	32,139
Related party revenue	1,926		4,184
Total revenue	60,704		36,323
Costs and expenses:
Cost of revenues	61,060		25,221
Selling, general and administrative (1)	14,341		16,170
Gain on classification of held for sale (2)	(24,808)		—
Loss on abandonment of assets	628		—
Loss from legal settlement	—		2,300
Total costs and expenses	51,221		43,691
Operating income (loss)	9,483		(7,368)
Interest expense, net (3)	7,308		2,133
Loss on change in fair value of debt	6,422		—

Loss on extinguishment of related party debt	—		2,353
Net loss before income tax expenses	(4,247)		(11,854)
Income tax expense (benefit)	—		—
Net loss	(4,247)		(11,854)
Net loss attributable to noncontrolling interest	—		(397)
Preferred dividends	(44)		—
Net loss attributable to Common Stockholders	$	(4,291)	$	(11,457)

Basic and diluted net loss per share attributable to Applied Digital Corporation	$	(0.03)	$	(0.11)
Basic and diluted weighted average number of shares outstanding	149,009,336		100,521,673

(1)Includes related party selling, general and administrative expense of $0.2 million and $0.3 million for the three months ended August 31, 2024 and August 31, 2023, respectively. See Note 5 - Related Party Transactions for further discussion of related party transactions.

(2)Includes $25 million received in connection with the sale of our Garden City facility. See Note 11 - Commitments and Contingencies for further discussion.

(3)Includes related party interest expense of $0.7 million for the three months ended August 31, 2023. There was no related party debt outstanding during the three months ended August 31, 2024 and as such, no interest expense was incurred related to related party debt. See Note 5 - Related Party Transactions for further discussion of related party transactions.

See accompanying notes to the unaudited condensed consolidated financial statements

Table of Contents

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders’ Equity (Unaudited)

For the Three Months ended August 31, 2024 and August 31, 2023

(In thousands, except share data)


	Temporary Equity						Permanent Equity
	Series E Redeemable Preferred Stock			Series F Convertible Preferred Stock			Common Stock			Treasury Stock			Additional Paid in Capital		Accumulated Deficit		Stockholders’ Equity
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance, May 31, 2024	—	$	—	—	$	—	144,083,944	$	144	(5,032,802)	$	(62)	$	374,738	$	(249,990)	$	124,830
Shares issued in offering, net of costs	—	—		—	—		6,124,218	6		—	—		31,065		—		31,071
Shares issued from awards vesting	—	—		—	—		769,908	1		—	—		(1)		—		—

Conversions of debt	—	—		—	—		11,392,978	11		—	—		56,190		—		56,201
Issuance of Yorkville amendment shares	—	—		—	—		100,000	—		—	—		519		—		519
Issuance of warrants to CIM, at fair value	—	—		—	—		—	—		—	—		36,479		—		36,479
Preferred Series E Stock	301,673	6,932		—	—		—	—		—	—		—		—		—
Preferred Series E Dividends	—	—		—	—		—	—		—	—		—		(44)		(44)
Preferred Series F Stock	—	—		53,191	48,350		—	—		—	—				—		—
Stock-based compensation

SEC Form 10-Q filed by Applied Digital Corporation