apld-20231130

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 November 30, 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 Boulevard, Suite 2100, Dallas, Texas			75219
(Address of Principal Executive Offices)			(Zip Code)

(214) 556-2465

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 January 10, 2024, 122,044,737 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 November 30, 2023 and May 31, 2023 (unaudited)	1
	Condensed Consolidated Statements of Operations for the three and six months ended November 30 , 2023 and November 30 , 2022 (unaudited)	2
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended November 30, 2023 and November 30, 2022 (unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the six months ended November 30, 2023 and November 30, 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	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24

Part II - Other Information

Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	26
Signatures		27

Table of Conten ts

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)


	November 30, 2023		May 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	9,217	$	28,999
Restricted cash	25,416		14,575
Accounts receivable	307		82
Prepaid expenses and other current assets	1,517		2,012
Total current assets	36,457		45,668
Property and equipment, net	258,508		195,593
Operating lease right of use assets, net	73,373		1,290
Finance lease right of use assets, net	95,199		14,303
Other assets	17,117		7,103
TOTAL ASSETS	$	480,654	$	263,957

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	38,262	$	6,446
Accrued liabilities	10,538		8,330
Current portion of operating lease liability	8,887		320
Current portion of finance lease liability	42,805		5,722
Current portion of debt	9,279		7,950
Customer deposits	36,833		32,559
Related party customer deposits	3,811		3,811
Deferred revenue	50,051		47,168
Related party deferred revenue	1,953		1,524
Sales and use tax payable	4		1,630
Total current liabilities	202,423		115,460

Long-term portion of operating lease liability	52,324		1,005
Long-term portion of finance lease liability	36,748		8,334
Long-term debt	33,501		33,222
Long-term related party loan	—		35,257
Other long-term related party liabilities	—		1,000
Total liabilities	324,996		194,278
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value, 166,666,667 shares authorized, 122,734,060 shares issued and 117,732,332 shares outstanding at November 30, 2023, and 100,927,358 shares issued and 95,925,630 shares outstanding at May 31, 2023	123		101
Treasury stock, 5,001,728 shares at November 30, 2023 and 5,001,728 shares at May 31, 2023, at cost	(62)		(62)
Additional paid in capital	278,299		160,194
Accumulated deficit	(122,702)		(100,716)
Total stockholders’ equity attributable to Applied Digital Corporation	155,658		59,517
Noncontrolling interest	—		10,162
Total stockholders' equity including noncontrolling interest	155,658		69,679
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	480,654	$	263,957

See accompanying notes to the condensed consolidated financial statements

Table of Conten ts

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except share and per share data)


	Three Months Ended				Six Months Ended
	November 30, 2023		November 30, 2022		November 30, 2023		November 30, 2022
Revenue:
Datacenter hosting revenue	$	34,119	$	8,747	$	64,106	$	13,086
Cloud services revenue	4,450		—		6,602		—
Related party datacenter hosting revenue	3,634		3,593		7,819		6,178
Total revenue	42,203		12,340		78,527		19,264
Costs and expenses:
Cost of revenues	29,222		11,812		53,620		17,905
Selling, general and administrative	21,075		27,226		38,127		32,245
Loss from legal settlement	80		—		2,380		—
Total costs and expenses	50,377		39,038		94,127		50,150
Operating loss	(8,174)		(26,698)		(15,600)		(30,886)
Interest expense, net	2,355		364		4,430		709
Loss on extinguishment of debt	—		—		2,353		94
Net loss before income tax expenses	(10,529)		(27,062)		(22,383)		(31,689)
Income tax expense (benefit)	—		(312)		—		(280)
Net loss	(10,529)		(26,750)		(22,383)		(31,409)
Net loss attributable to noncontrolling interest	—		(133)		(397)		(261)
Net loss attributable to Applied Digital Corporation	$	(10,529)	$	(26,617)	$	(21,986)	$	(31,148)

Basic and diluted net loss per share attributable to Applied Digital Corporation	$	(0.10)	$	(0.28)	$	(0.21)	$	(0.33)
Basic and diluted weighted average number of shares outstanding	109,663,030		93,422,427		105,067,375		93,263,266

See accompanying notes to the condensed consolidated financial statements

Table of Conten ts

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the Three Months ended November 30, 2023 and November 30, 2022

(In thousands, except share data)

(Unaudited)


	Common Stock			Treasury Stock			Additional Paid in Capital		Accumulated Deficit		Stockholders’ Equity		Noncontrolling interest		Total Equity
	Shares	Amount		Shares	Amount






Balance, August 31, 2023	110,850,885	$	110	(5,001,728)	$	(62)	$	240,073	$	(112,173)	$	127,948	$	—	$	127,948
Shares issued in offering, net of costs	6,879,070	8		—	—		33,432		—		33,440		—		33,440
Shares issued from award vestings	5,004,105	5		—	—		(5)		—		—		—		—
Stock-based compensation	—	—		—	—		4,799		—		4,799		—		4,799
Net loss	—	—		—	—		—		(10,529)		(10,529)		—		(10,529)
Balance, November 30, 2023	122,734,060	$	123	(5,001,728)	$	(62)	$	278,299	$	(122,702)	$	155,658	$	—	$	155,658


	Common Stock			Treasury Stock			Additional Paid in Capital		Accumulated Deficit		Stockholders’ Equity		Noncontrolling interest		Total Equity
	Shares	Amount		Shares	Amount





Balance, August 31, 2022	97,837,703	$	98	(5,001,728)	$	(62)	$	128,872	$	(60,601)	$	68,307	$	8,594	$	76,901
Shares issued from award vestings	1,110,379	1		—	—		(1)		—		—		—		—
Stock-based compensation	—	—		—	—

SEC Form 10-Q filed by Applied Digital Corporation