apld-20230228

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 February 28, 2023


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, Blvd., Suite 2100, Dallas, TX			75219
(Address of Principal Executive Offices)			(Zip Code)

(214) 556-2465

Registrant's telephone number, including area code

(Former name, former address and former fiscal year, if changed since last report)

________________________

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of April 6, 2023, 94,901,529 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 February 28, 2023 and May 31, 2022 (unaudited)	1
	Condensed Consolidated Statements of Operations for the three and nine month s ended F ebruary 28, 2023 and February 28, 2022 (unaudited)	2
	Condensed Consolidated Statements of Consolidated Statements of Changes in Stockholders’ Equity (Deficit ) for the three month s ended February 28, 2023 and February 28, 2022 (unaudited)	3
	Condensed Consolidated Statements of Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the nine month s ended February 28, 2023 and February 28, 2022 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the nine month s ended February 28, 2023 and February 28, 2022 (unaudited)	5
	Notes to the Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25

Part II - Other Information

Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	29
Signatures		30

Part I - Financial Information

Item 1. Financial Statements

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except number of shares and par value data)


	February 28, 2023		May 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	22,921	$	46,299
Accounts receivable	82		227
Prepaid expenses and other current assets	1,387		1,336
Total current assets	24,390		47,862
Property and equipment, net	167,276		64,260
Right of use asset, net	12,911		6,408


Other Assets	3,030		1,450
TOTAL ASSETS	$	207,607	$	119,980

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities	$	14,000	$	13,260
Current portion of lease liability	4,193		1,004

Current portion of term loan	4,855		1,333
Customer deposits	36,370		9,524
Current deferred revenue	47,619		3,877
Sales and use tax payable	1,563		—
Total current liabilities	108,600		28,998
Deferred tax liability	260		540

Long-term portion of lease liability	8,490		5,310
Long-term term loan	18,862		5,897
Total liabilities	$	136,212	$	40,745
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value, 166,666,667 shares authorized, 99,471,127 shares issued and 94,469,399 shares outstanding at February 28, 2023, and 97,837,702 shares issued and 97,801,406 shares outstanding at May 31, 2022	$	100	$	98
Treasury stock, 5,001,728 shares at February 28, 2023 and 36,296 shares at May 31, 2022, at cost	(62)		(62)
Additional paid in capital	155,055		128,293
Accumulated deficit	(94,243)		(56,070)
Total stockholders’ equity attributable to Applied Digital Corporation	60,850		72,259
Noncontrolling interest	10,545		6,976
Total Stockholders' equity including noncontrolling interest	$	71,395	$	79,235
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$	207,607	$	119,980

See Accompanying Notes to the Financial Statements

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share data)


	Three Months Ended				Nine Months Ended
	February 28, 2023		February 28, 2022		February 28, 2023		February 28, 2022
Revenues:
Hosting revenue	$	14,090	$	1,026	$	33,354	$	1,026

Cost of revenues	$	10,533	$	2,073	$	28,438	$	2,073
Gross profit	3,557		(1,047)		4,916		(1,047)

Costs and expenses:
Selling, general and administrative	$	10,514	$	1,370	$	42,727	$	15,585


Total costs and expenses	$	10,514	$	1,370	$	42,727	$	15,585
Operating loss	$	(6,957)	$	(2,417)	$	(37,811)	$	(16,632)

Other income (expense):
Interest Expense	$	(384)	$	—	$	(1,125)	$	—
Gain on extinguishment of accounts payable	—		80		—		405
Loss on extinguishment of debt	—		—		(94)		(1,342)
Total other expense, net	(384)		80		(1,219)		(937)
Net loss from continuing operations before income tax expenses	(7,341)		(2,337)		(39,030)		(17,569)
Income tax benefit (expense)	—		(60)		280		(274)
Net loss from continuing operations	(7,341)		(2,397)		(38,750)		(17,843)
Net gain from discontinued operations, net of income taxes	—		(4,048)		—		(2,870)
Net loss including noncontrolling interests	(7,341)		(6,445)		(38,750)		(20,713)
Net loss attributable to noncontrolling interest	(316)		—		(577)		—
Net loss attributable to Applied Digital Corporation	$	(7,025)	$	(6,445)	$	(38,173)	$	(20,713)

Basic and diluted net (loss) gain per share:
Continuing Operations	$	(0.08)	$	(0.04)	$	(0.41)	$	(0.35)
Discontinued Operations	$	—	$	(0.08)	$	—	$	(0.06)
Basic and diluted net loss per share	$	(0.08)	$	(0.12)	$	(0.41)	$	(0.41)
Basic and diluted weighted average number of shares outstanding	94,119,944		53,396,920		93,545,687		50,546,048

See Accompanying Notes to the Financial Statements

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

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

(In thousands, except share data)


Three Months Ended February 28, 2023
	Common Stock			Treasury Stock			Additional Paid in Capital		Accumulated deficit		Total Stockholders Equity		Noncontrolling Interest		Total Equity
	Shares	Amount		Shares	Amount
Balance, November 30, 2022	98,948,081	$	99	(5,001,728)	$	(62)	$	150,690	$	(87,218)	$	63,509	$	8,461	$	71,970
Issuance of common stock - vesting of restricted stock units	523,046	1		—	—		(115)		—		(114)		—		(114)
Stock-based compensation	—	—		—	—		4,480		—		4,480		—		4,480

Capital contribution to noncontrolling interest	—	—		—	—		—		—		—		2,400		2,400

Net Loss	—	—		—	—		—		(7,025)		(7,025)		(316)		(7,341)
Balance, February 28, 2023	99,471,127	$	100	(5,001,728)	$	(62)	$	155,055	$	(94,243)	$	60,850	$	10,545

SEC Form 10-Q filed by Applied Digital Corporation