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What changed in Applied Digital Corp.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Applied Digital Corp.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+578 added−585 removedSource: 10-K (2025-07-30) vs 10-K (2024-08-30)

Top changes in Applied Digital Corp.'s 2025 10-K

578 paragraphs added · 585 removed · 308 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

38 edited+12 added−38 removed11 unchanged
Biggest changeBy proactively managing our supplier relationships, securing necessary materials in advance, and closely monitoring market conditions, we aim to minimize the impact of supply chain fluctuations on our operations. This approach enables us to maintain a steady pace of hardware deployments and facility development, ultimately supporting our goal of expanding our HPC and cloud capabilities and maximizing shareholder value.
Biggest changeFurthermore, we continuously monitor market trends and maintain open lines of communication with our suppliers to anticipate and address potential supply chain challenges. By proactively managing our supplier relationships, securing necessary materials in advance and closely monitoring market conditions, we aim to minimize the impact of supply chain fluctuations on our operations.
Many of our competitors may have significant advantages over us, including greater name recognition, longer operating histories and higher operating margins, pre-existing relationships with current or potential customers, the capacity to provide the same or additional products and services at a lower cost, more significant marketing budgets and other financial and operational resources, more robust internal controls and systems, and better established, more extensive scale and lower cost suppliers and supplier relationships.
Many of our competitors may have significant advantages over us, including greater name recognition, longer operating histories, higher operating margins, pre-existing relationships with current or potential customers, the capacity to provide the same or additional products and services at a lower cost, more significant marketing budgets and other financial and operational resources, more robust internal controls and systems, and better established, more extensive scale and lower cost suppliers and supplier relationships.
Developing more advanced AI systems, such as large language models and generative AI, has raised concerns about potential misuse, bias, and the displacement of human workers. Companies operating in AI are under increasing pressure to address these issues and ensure the responsible development and deployment of their technologies.
Developing more advanced AI systems, such as large language models and generative AI, has raised concerns about potential misuse, bias, and the displacement of human workers. Companies operating in AI are under increasing pressure to address these issues and ensure responsible development and deployment of their technologies.
We make available free of charge through the Investor Relations link on our website access to press releases and investor presentations, as well as all materials that we file electronically with the SEC, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) as soon as reasonably practicable after electronically filing such materials with, or furnishing them to, the SEC.
We make available free of charge through the Investor Relations link on our website access to press releases and investor presentations, as well as all materials that we file electronically with the Securities and Exchange Commission ("SEC"), including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) as soon as reasonably practicable after electronically filing such materials with, or furnishing them to, the SEC.
We conduct rigorous evaluations, benchmarking salary and wages against quantitative metrics, and adjust monetary compensations to ensure competitive alignment with employee roles, skill levels, tenure, and geographic considerations. Our commitment to pay equity is reinforced by a robust process that facilitates merit-based increases in incentives and compensations tied to performance.
We conduct rigorous evaluations, benchmarking salary and wages against quantitative metrics, and adjust monetary compensations to ensure competitive alignment with employee roles, skill levels, tenure, and geographic considerations. Our commitment to pay equity is reinforced by a robust process that facilitates merit-based increases in incentives and compensation tied to performance.
It is unclear how the information collected will be used for future regulations, but it is expected that energy efficiency and sustainability will become more critical factors regulating this industry. Furthermore, using digital assets, including Bitcoin, in illicit financial activities has become a significant concern for regulators and lawmakers. Leaders in the U.S. House Financial Services Committee and U.S.
It is unclear how the information collected will be used for future regulations, but it is expected that energy efficiency and sustainability will be critical factors regulating this industry. Furthermore, using digital assets, including Bitcoin, in illicit financial activities has been a significant concern for regulators and lawmakers. Leaders in the U.S. House Financial Services Committee and U.S.
The amount of energy used for crypto mining and colocation services has recently received increased attention. In January 2024, the U.S. Energy Information Administration conducted an emergency survey of electricity consumption data from cryptocurrency mining companies in the U.S. This indicates that more focus is being placed on the energy usage of these activities.
The amount of energy used for crypto mining and colocation services has also received significant attention. In January 2024, the U.S. Energy Information Administration conducted an emergency survey of electricity consumption data from cryptocurrency mining companies in the U.S. This indicates that more focus is being placed on the energy usage of these activities.
Item 1. Business Overview Our Business We are a United States ("U.S.") designer, developer, and operator of next-generation digital infrastructure across North America. We provide digital infrastructure solutions and cloud services to the rapidly growing industries of High-Performance Computing ("HPC") and Artificial Intelligence ("AI").
Item 1. Business Overview Our Business We are a United States ("U.S.") designer, developer, and operator of next-generation data center infrastructure across North America. We provide data center infrastructure solutions to the rapidly growing industries of high-performance computing ("HPC") and artificial intelligence ("AI").
However, if we fail to comply with applicable laws and regulations, we may be subject to significant liabilities, including fines and penalties, and our business, financial condition, or results of operations could be adversely affected. Employees and Human Capital Resources During 2023 and 2024, we invested significantly in our workforce to retain and attract top-tier employees.
However, if we fail to comply with applicable laws and regulations, we may be subject to significant liabilities, including fines and penalties, and our business, financial condition, or results of operations could be adversely affected. Employees and Human Capital Resources During the fiscal year 2025, we invested significantly in our workforce to retain and attract top-tier employees.
We implemented a long-term performance incentive program, granting eligible employees service-based restricted stock awards that vest over three years and performance-based restricted stock awards that vest upon achieving specific performance milestones. This performance program is a key employee incentive, aligning their long-term interests with the Company’s objectives.
Our human capital strategy aligns employee interests with our long-term success drivers. We implemented a long-term incentive program, granting eligible employees service-based restricted stock awards that vest over three years and performance-based restricted stock awards that vest upon achieving specific performance milestones. This program is a key employee incentive, aligning their long-term interests with the Company’s objectives.
Furthermore, our benefits portfolio encompasses various offerings, including medical, dental, and vision insurance coverage for employees and their dependents, various paid and unpaid leave options, and life and disability/accident insurance coverage. Our Growth Strategies Continued expansion of businesses. We have started expansion into hosting for HPC applications.
Furthermore, our benefits portfolio encompasses various offerings, including medical, dental, and vision insurance coverage for employees and their dependents, various paid and unpaid leave options, and life and disability/accident insurance coverage. Our Growth Strategies Continued expansion of businesses We continue our expansion into hosting for AI workloads.
We have developed a pipeline of potential power sources across our sites in Jamestown and Ellendale, North Dakota. Through our build-out of our first North Dakota facility and the prior experience our leadership team brings to our initiatives, we believe that we have developed a repeatable power strategy to significantly scale our operations.
Through our build-out of our first North Dakota facility and the prior experience our leadership team brings to our initiatives, we believe that we have developed a repeatable power strategy to significantly scale our operations.
This business segment accounts for the majority of the revenue we generate from our operations (approximately 83% for the fiscal year ended May 31, 2024). We currently operate sites in Jamestown and Ellendale, North Dakota, with a total hosting capacity of approximately 286 MW: • Jamestown, North Dakota: 106 MW facility. • Ellendale, North Dakota: 180 MW facility.
This business segment accounts for all of the revenue we generated from our continuing operations for the fiscal year ended May 31, 2025. We currently operate sites in Jamestown and Ellendale, North Dakota, with a total hosting capacity of approximately 286 MW as follows: • Jamestown, North Dakota: 106 MW facility. • Ellendale, North Dakota: 180 MW facility.
In addition, we are currently focused on and will continue to target states that have favorable laws and regulations for HPC application industries, which we believe further minimizes the risks associated with the scaling of our operations. Vertically integrate power assets. We are increasingly looking at various types of power assets to support the growth of our hosting operations.
In addition, we are currently focused on and will continue to target states that have favorable laws and regulations for AI workloads and HPC application industries, which we believe further minimizes the risks associated with the scaling of our operations.
We expanded our employee base and promoted individuals internally to critical positions. As of May 31, 2024, we employed approximately 150 full-time employees across various departments, including engineering, IT, operations, construction, administration, finance, and communications. We also engage consultants and contractors as needed to supplement our permanent workforce. Our human capital strategy aligns employee interests with our long-term success drivers.
We expanded our employee base and promoted individuals internally to critical positions. As of May 31, 2025, we employed approximately 205 full-time employees across various departments, including design, engineering, IT, operations, construction, administration, finance, and marketing. We also engage consultants and contractors as needed to supplement our permanent workforce.
Companies require robust, reliable, and scalable solutions to process, analyze, and store vast amounts of data in real-time, and data centers play a crucial role in meeting these needs. Cloud adoption, particularly hybrid cloud solutions, drives data center demand significantly.
Companies require robust, reliable and scalable solutions to process, analyze and store vast amounts of data in real-time, and data centers play a crucial role in meeting these needs. Sustainability and energy efficiency are increasingly important considerations in the data center industry.
We closely monitor legislative and regulatory developments and engage in dialogue with relevant stakeholders to ensure our business practices align with the evolving legal and regulatory framework. Despite the uncertainties posed by the changing regulatory landscape, we remain committed to delivering innovative and responsible solutions in the data center, cloud and HPC hosting markets while prioritizing compliance and risk management.
Despite the uncertainties posed by the changing regulatory landscape, we remain committed to delivering innovative and responsible solutions in the data center and HPC hosting markets while prioritizing compliance and risk management.
We operate in three distinct business segments, 4 including, Blockchain data center hosting (the "Data Center Hosting Business"), cloud services through a wholly owned subsidiary (the "Cloud Services Business") and HPC data center hosting (the "HPC Hosting Business"), as further discussed below.
We operate in two distinct business segments, blockchain data center hosting (the "Data Center Hosting Business") and HPC data center hosting (the "HPC Hosting Business"), as further discussed below.
Specifically, within our Data Center Hosting Business, we compete against Core Scientific, 6 Bitdeer Technologies Group, and Riot Platforms, amongst other private operators. As we navigate this competitive landscape, we strive to innovate and differentiate our services to attract and retain customers. Many of our competitors offer more locations in more markets worldwide and have well-established international operations.
As we navigate this competitive landscape, we strive to innovate and differentiate our services to attract and retain customers. Many of our competitors offer more locations in more markets worldwide and have well-established international operations.
Further, because data centers like ours represent a unique power load, we believe our demand for renewable energy and entry into agreements with renewable energy providers will increase and accelerate the buildout of renewable energy infrastructures. There is no assurance that selection criteria will be met or that viable sites will be selected.
Further, because data centers like ours represent a unique power load, we believe our demand for renewable energy and entry into agreements with renewable energy providers will increase and accelerate the buildout of renewable energy infrastructures. Customers We have material customer concentration in our Data Center Hosting Business.
Providers offering comprehensive power, space, and connectivity solutions globally while prioritizing sustainability and energy efficiency will be best positioned to capitalize on the increasing demand for data center services.
We believe that providers offering comprehensive power, space and connectivity solutions globally while prioritizing sustainability and energy efficiency will be best positioned to capitalize on the increasing demand for data center services. Materials and Suppliers Developing Polaris Forge 1 demands significant electrical infrastructure components and construction raw materials, including some that may be impacted by tariffs.
We expect to choose locations in environments that are policy and regulation friendly, and find sites with less expensive stable energy. Environmental Impact We are doing our part to be as environmentally conscious as possible when choosing sites for development by targeting renewable energy assets to minimize our carbon footprint.
There is no assurance that selection criteria will be met or that viable sites will be selected. Environmental Impact We are doing our part to be as environmentally conscious as possible when choosing sites for development by targeting renewable energy assets to minimize our carbon footprint.
Efforts to mitigate delivery delays are ongoing to avoid materially impacting deployment schedules; however, there are no assurances that such mitigation efforts will continue to be successful. To help address global supply logistics and pricing concerns, we have implemented proactive measures such as procuring and holding required materials.
These constraints extend to procuring construction materials and specialized electricity distribution equipment required to develop HPC and AI facilities. Efforts to mitigate delivery delays are ongoing to avoid materially impacting deployment schedules; however, there are no assurances that such mitigation efforts will continue to be successful.
Our primary competitors in the cloud services market are cloud service providers, such as Coreweave, Crusoe Energy, and Lambda Labs. Additionally, we compete with several prominent data center providers, including Digital Realty, Equinix, Inc., NTT, and various private operators in the U.S. These competitors own or operate properties similar to our data centers.
We compete with several prominent data center providers in the US, including Digital Realty, Equinix, Inc., NTT, and various private operators. These competitors own or operate properties similar to our data centers. Specifically, within our Data Center Hosting Business, we compete against Bitdeer Technologies Group and Riot Platforms, amongst other private operators.
These developments may significantly impact our business and operations in ways that are difficult to predict. In the realm of cloud computing, there are growing concerns about the ethical implications and potential misuse of these technologies, particularly in association with AI and machine learning.
In the realm of cloud computing, there are growing concerns about the ethical implications and potential misuse of these technologies, particularly in association with AI and machine learning. Governments and regulatory bodies are considering measures to ensure the responsible development and deployment of AI systems, including transparency, accountability, and fairness guidelines.
In January 2024, the SEC approved a series of spot Bitcoin exchange-traded funds (ETFs), marking a significant milestone in the mainstream adoption of digital assets.
In January 2024, the SEC approved a series of spot Bitcoin exchange-traded funds ("ETFs"), marking a significant milestone in the mainstream adoption of digital assets. Later in 2024 the SEC also approved multiple spot Ethereum ETFs. However, the regulatory landscape for digital asset markets remains complex and uncertain, with various agencies and lawmakers proposing different approaches to oversight and regulation.
We continuously monitor developments in the global supply chain which is necessary to assess their potential impact on the Company’s expansion plans within the HPC and AI markets. Regulatory The regulatory landscape surrounding HPC, cloud, and blockchain hosting services is evolving rapidly, and we anticipate increased scrutiny and potential regulation in the near and long term.
Regulatory The regulatory landscape surrounding HPC and blockchain hosting services is evolving rapidly, and we anticipate increased scrutiny and potential regulation in the near and long term. Any such developments may significantly impact our business and operations in ways that are difficult to predict.
Our custom-designed data centers allow customers to rent space based on their power requirements. We currently serve seven crypto mining customers, all of which have entered into contracts with us ranging from three to five years.
Data Center Hosting Business Our Data Center Hosting Business provides energized infrastructure services to crypto mining customers. Our custom-designed data centers allow customers to rent space based on their power requirements. We currently serve one crypto mining customer with a remaining contractual term of two and a half years.
Site Selection Criteria To the extent we are building new facilities, our site selection criteria considers geographic diversity, attractive return on investment, and environmental impact. Geographic Diversity Geographic diversity minimizes the risk to us of any event in a particular region that may impact our facilities.
Our management team has experience not only in evaluating and acquiring power assets, but also in the conversion of power assets to crypto mining/hosting operations and the construction of data centers. Site Selection Criteria To the extent we are building new facilities, our site selection criteria considers geographic diversity, attractive return on investment, and environmental impact.
These arrangements give us greater certainty regarding the availability and pricing of essential components and materials. Furthermore, we continuously monitor market trends and maintain open lines of communication with our suppliers to anticipate and address potential supply chain challenges.
To mitigate potential supply chain disruptions and any impact of tariffs and to ensure the smooth operation of our facilities, we have established long-term contracts and agreements with key suppliers. These arrangements give us greater certainty regarding the availability and 6 pricing of essential components and materials.
However, we rely on a limited number of vendors for certain products and services for our data center facilities, and some of our contracts provide a single source of materials. If any of our key suppliers cannot perform under their contracts or satisfy our orders, it could significantly delay our data center development and operations.
If any of our key suppliers cannot perform under their contracts or satisfy our orders, it could significantly delay our data center development and operations. While we may be able to engage replacement suppliers, this would likely lead to operational delays and increased costs.
If we acquire rights to additional properties and build additional facilities, we intend to use a mix of third-party colocation centers and our HPC data centers to deliver AI Cloud services to customers. Corporate Information Our executive office is located at 3811 Turtle Creek Blvd., Suite 2100, Dallas, Texas 75219, and our phone number is (214) 427-1704.
Corporate Information Our executive office is located at 3811 Turtle Creek Blvd., Suite 2100, Dallas, Texas 75219, and our phone number is (214) 427-1704. Our principal website address is www.applieddigital.com .
However, the regulatory landscape for digital asset markets remains complex and uncertain, with various agencies and lawmakers proposing different approaches to oversight and regulation. 8 As a company operating at the intersection of data center, cloud and HPC hosting services, we are committed to maintaining a proactive and adaptive approach to regulatory compliance.
As a company operating at the intersection of data center and HPC hosting services, we are committed to maintaining a proactive and adaptive approach to regulatory compliance. We closely monitor legislative and regulatory developments and engage in dialogue with relevant stakeholders to ensure our business practices align with the evolving legal and regulatory 7 framework.
HPC Hosting Business Our HPC Hosting Business specializes in designing, constructing, and managing data centers tailored to support HPC applications, including AI. The Company is currently building two HPC focused data centers. The first facility, which is nearing completion, is a 7.5 MW facility in Jamestown, ND location adjacent to the Company's 106 MW Data center hosting facility.
HPC Hosting Business Our HPC Hosting Business specializes in designing, constructing, and operating data centers tailored to support high power density applications like HPC and AI. We are currently building a HPC focused campus comprised of three data centers, which are the first AI focused facilities in our Polaris Forge portfolio, in Ellendale, North Dakota.
This also includes power generation assets, which longer-term could be used to reduce our cost of power. Our management team has experience not only in evaluating and acquiring power assets, but also in the conversion of power assets to crypto mining/hosting operations and the construction of data centers with the specific purpose of mining cryptocurrency assets.
Vertically integrate power assets We are increasingly looking at various types of power assets to support the growth of our hosting operations. This also includes power generation assets, which longer-term could be used to reduce our cost of power.
We anticipate that this business segment will begin generating meaningful revenues once the HPC Ellendale Facility becomes operational, which is expected in calendar year 2025. Competition As a company operating data centers, we face significant competition from various cloud competitors and data center providers in the U.S.
On May 28, 2025, the Company entered into two lease agreements for the first two buildings, totaling 250 MWs. We anticipate that this business segment will begin generating meaningful revenues once the first building within Polaris Forge 1 becomes operational, which is expected in calendar year 2025.
We have current plans to expand our HPC hosting capacity up to 400 MW through build outs at existing and future locations. Further, we launched our Cloud Services Business 9 through Applied Digital Cloud and are currently serving customers through our colocations. The Cloud Services Business accounted for approximately 17% of our revenue in fiscal year 2024.
As such, we have plans to expand our HPC hosting capacity through build outs at existing and future locations.
Delivery schedules for specialized equipment, such as high-performance computing systems, AI hardware, and necessary infrastructure components, have been affected due to constraints on globalized supply chains. These constraints extend to procuring construction materials and specialized electricity distribution equipment required to develop HPC and AI facilities.
Global Logistics Global supply logistics have caused delays across all distribution channels, impacting the markets we serve. Delivery schedules for specialized equipment, such as power and cooling systems for HPC data centers, including AI focused data centers, have been affected due to constraints on globalized supply chains and have and may be further impacted by tariffs.
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We completed our initial public offering in April 2022 and our common stock began trading on the Nasdaq Global Select Market (“Nasdaq”) on April 13, 2022. In November 2022, we changed our name from Applied Blockchain, Inc. to Applied Digital Corporation. Data Center Hosting Business Our Data Center Hosting Business provides energized infrastructure services to crypto mining customers.
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During the fiscal year 2025, we determined that the Cloud Services Business met the criteria to be classified as “held for sale” on our consolidated balance sheets as the Board of Directors approved plans for the sale of the segment.
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In March 2021, we executed a strategy planning and portfolio advisory services agreement (the "Services Agreement") with GMR Limited, a British Virgin Island limited liability company ("GMR"), Xsquared Holding Limited, a British Virgin Island limited liability company ("SparkPool") and Valuefinder, a British Virgin Islands limited liability company ("Valuefinder" and, together with GMR and SparkPool, the "Service Provider(s)").
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The potential sale of the Cloud Services Business, which was previously included as a reportable segment, represents a strategic shift in our operations and financial results and as such, we have excluded the results of this business from both continuing operations and segment results and presented them in discontinued operations on the consolidated statements of operations for all periods presented.
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Under the Services Agreement, the Service Providers agreed to provide crypto asset mining management and analysis and assist us in securing difficult-to-obtain mining equipment. Under the terms of the Services Agreement, we issued 7,440,148 shares of our common stock to each of GMR and SparkPool and 3,156,426 shares of our common stock to Valuefinder.
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We are under construction on the first two buildings: a 100 MW and a 150 MW data center, respectively. These facilities are purpose built for high power density GPUs and along with a third 150 MW data center, will comprise our Polaris Forge 1 campus.
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In June 2022, SparkPool ceased all operations and forfeited 4,965,432 shares of our common stock back to us. In March 2022, we decided to terminate our crypto mining operations, shifting our focus and our business strategy to developing the HPC Hosting Business and our other two business segments (including the Data Center Hosting Business).
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Discontinued Operations Cloud Services Business The Cloud Services Business, which is operated through our wholly owned subsidiary, Applied Digital Cloud Corporation ("Applied Digital Cloud"), has locations in three states: Colorado, Minnesota and Utah.
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Each Service Provider advised us concerning the design and buildout of our hosting operations. We continue to partner with GMR, and other providers as they remain our strategic equity investors. Our partners have strong relationships across the cryptocurrency ecosystem, which we may leverage to identify leads for the expansion of our operations and business segments.
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This business provides cloud 5 services to customers, such as AI and machine learning developers by renting space at third party co-location centers and providing the customers with access to its cloud computing equipment. Competition As a company designing, constructing, and operating data centers, we face significant competition from various data center providers in the U.S.
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Compared to our previous mining operations, co-hosting revenues are less subject to volatility related to the underlying crypto-asset markets. We have a contractual ceiling for our energy costs through our Amended and Restated Electric Service Agreement, entered into in September 2023 with a utility in the upper Midwest (the "Electric Service Agreement").
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We believe substantial growth in the data center industry will be driven by AI which requires high power density, changing the power and cooling requirements of the data center design.
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One of the main benefits of the Electric Service Agreement is the low cost of power for mining. Even before the recently imposed crypto mining restrictions in China, power capacity available for Bitcoin mining was scarce, especially at scalable sites with over 100 MW of potential capacity.
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The explosive growth of generative AI combined with the demand for a different type of data center infrastructure has led us to pursue a core specialization in AI focused data centers.
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This scarcity of mining power allows us to realize attractive hosting rates in the current market. The Electric Service Agreement has also enabled us to launch our hosting business with long-term customer contracts.
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While we proactively procure these materials from our suppliers in sufficient quantities to facilitate hardware deployment at scale and on accelerated construction timelines, we cannot yet predict the effect of the recently imposed U.S. tariffs on imports, or the extent to which other countries will impose quotas, duties, tariffs, taxes or other similar restrictions upon the import or export of construction materials and specialized electricity distribution equipment in the future, as discussed under "Risk Factors" below.
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In March 2024, we announced that we entered into a definitive agreement to sell our 200 MW campus in Garden City, TX, to Mara Garden City LLC, a Delaware limited liability company and subsidiary of Marathon Digital Holdings (Nasdaq: MARA). We completed the sale transaction on April 1, 2024.
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This approach enables us to maintain a steady pace of hardware deployments and facility development, ultimately supporting our goal of expanding our HPC capabilities and maximizing shareholder value. However, we rely on a limited number of vendors for certain products and services for our data center facilities, and some of our contracts provide a single source of materials.
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Cloud Services Business We officially launched our Cloud Services Business in May 2023. We operate our Cloud Services Business through our wholly owned subsidiary, Applied Digital Cloud Corporation ("Applied Digital Cloud"), which provides cloud services to customers, such as AI and machine learning developers.
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To help address global supply logistics and pricing concerns, we have implemented proactive measures such as procuring and holding required materials. We continuously monitor developments in the global supply chain which is necessary to assess their potential impact on the Company’s expansion plans within the HPC market.
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Our Cloud Services Business specializes in providing GPU computing solutions to empower customers in executing critical workloads related to AI, machine learning ("ML"), 5 rendering, and other HPC tasks. Our managed hosting cloud service allows customers to sign service contracts, utilizing our Company-provided equipment for seamless and cost-effective operations.
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The locations have been strategically selected for their power, fiber and land capabilities along with a specialized design for high density compute. 8 Secure scalable power sites We have developed a pipeline of potential power sources across our sites in Jamestown and Ellendale, North Dakota.
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We are rolling out multiple GPU clusters, each comprising 1,024 GPUs, which are available for lease by our customers. Additionally, we have secured contracts with colocation service providers to ensure secure space and energy for our hosting services.
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We currently serve one crypto mining customer with a remaining contract term of two and a half years. We also have material customer concentration in our HPC Hosting Business. We currently have one customer in this business segment, which is a party to two fifteen-year term leases with us.
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Our strategy is to utilize a blend of third-party colocation and our own HPC data centers to deliver cloud services to our customers. We currently rely on a few major suppliers for our products in this business segment: NVIDIA Corp. ("NVIDIA"), Super Micro Computer Inc. ("Super Micro"), Hewlett Packard Enterprise ("HPE") and Dell Technologies Inc. ("Dell").
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In May 2023, we partnered with Super Micro, a renowned provider of Application-Optimized Total IT Solutions. Together, we aim to deliver the Company’s cloud services to our customers. Super Micro’s high-performance server and storage solutions are designed to address a wide range of computational-intensive workloads.
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Their next-generation GPU servers are incredibly power-efficient, which is vital for data centers as the power requirements for large-scale AI models continue to increase. Optimizing the Total Cost of Ownership ("TCO") and Total Cost to Environment ("TCE") is critical for data center operators to ensure sustainable operations.
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In June 2023, we announced a partnership with HPE, a global company specializing in edge-to-cloud technology. As part of this collaboration, HPE will provide its powerful and energy-efficient supercomputers to support large-scale AI through our cloud service. HPE has been supportive in core design considerations and engineering of Company-owned facilities which will support Applied Digital Cloud’s infrastructure.
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In addition, we have supply agreements with Dell for delivery of AI and GPU servers. By May 31, 2024, the Company had received and deployed a total of 6,144 GPUs; 4,096 GPUs were actively recognizing revenue and 2,048 GPUs were pending customer acceptance to start revenue recognition.
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The Cloud Services Business currently serves two customers and accounted for approximately 17% of our revenue in fiscal year 2024. As we ramp up operations in this business segment, we expect to acquire and deploy additional GPUs, increase revenue from the Cloud Services Business and increase the percentage of our revenue produced by our Cloud Services Business.
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The Company also broke ground on a 100 MW HPC data center in project in Ellendale, ND, on land located adjacent to its existing 180 MW Data center hosting facility.
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These separate and unique buildings, designed and purpose-built for GPUs, will sit separate from the Company's current buildings and host more traditional HPC applications, such as natural language processing, machine learning, and additional HPC developments.
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The Company has entered into exclusivity and executed a letter of intent with a US-based hyperscaler for a 400 MW capacity lease, inclusive of our current 100 MW facility and two forthcoming buildings in Ellendale, North Dakota.
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On July 26, 2024, the Company extended the initial exclusivity period under the previously announced letter of intent with the U.S. based hyperscaler for leasing the HPC Ellendale Facility. The Company is in advanced discussions with traditional financing counterparties for this investment-grade tenant.
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We face significant competition from our competitors, and we expect such competition to continue to increase, which could significantly harm our business, financial condition, and results of operations. If we cannot compete successfully against our current and future competitors, we may not be able to retain and grow our customer base, and our business and prospects may be harmed.
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Hybrid cloud infrastructure offers businesses the flexibility to scale their IT resources while maintaining the security and privacy of sensitive data. As more companies migrate their applications and data to the cloud, data center capacity requirements will continue to grow. Edge computing is another key trend shaping the data center industry.
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The proliferation of internet devices and the need for real-time data processing are driving the deployment of data centers closer to the network edge. This approach reduces latency, improves application performance, and optimizes IT infrastructure costs and complexity. Sustainability and energy efficiency are increasingly important considerations in the data center industry.
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Materials and Suppliers Maintaining key supplier relationships is crucial to our business operations, as we rely on these relationships, such as with Dell, HPE, NVIDIA, and Super Micro, to secure essential computing hardware, infrastructure components, and other materials. The complexity of developing HPC and cloud hardware at scale limits the number of suppliers capable of meeting our requirements.
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Consequently, we have established purchase orders with leading hardware manufacturers, which include extended delivery schedules spanning several months before the hardware is delivered to our facilities. These fluctuations in delivery timelines necessitate careful planning and advanced purchasing strategies to ensure we can acquire hardware well before their anticipated deployment.
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Developing the HPC Ellendale Facility demands significant electrical infrastructure components and construction raw materials. We proactively procure these materials from our suppliers in sufficient quantities to facilitate hardware 7 deployment at scale and on accelerated timelines. To mitigate potential supply chain disruptions and ensure the smooth operation of our facilities, we have established long-term contracts and agreements with key suppliers.
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While we may be able to engage replacement suppliers, this would likely lead to operational delays and increased costs. Global Logistics Global supply logistics have caused delays across all distribution channels, impacting the HPC and AI markets.
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Governments and regulatory bodies are considering measures to ensure the responsible development and deployment of AI systems, including transparency, accountability, and fairness guidelines. As a company operating in this space, we closely monitor these developments and attempt to adhere to any forthcoming regulations or industry best practices.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese risks and uncertainties include, but are not limited to, the following: Risks Related to Our Business and Operations • We are at an early stage of development of our business, currently have limited sources of revenue, and may not become profitable in the future. • We may be unable to access sufficient additional capital needed to grow our business. • Upon the occurrence of an Amortization Event (as defined in the Promissory Notes (as defined below)), we may be required to make payments that could cause us financial hardship. • We may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness. • We previously identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, any of which may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations. • We are subject to a highly evolving regulatory landscape and any adverse changes to or our or our co-hosting customers’ failure to comply with any laws or regulations could adversely affect our business, prospects or operations. 11 • Our business depends upon the demand for data centers. • If our co-hosting customers determine not to use our co-hosting facility, our co-hosting operations may suffer from significant losses. • If we are not able to secure additional financing to continue our construction efforts with respect to the HPC Ellendale Facility, the completion of this project may be delayed. • Our HPC Hosting Business is expected to have significant customer concentration. • Failure to attract, grow and retain a diverse and balanced customer base, including key magnet customers, could harm our business and operating results. • We depend upon third-party suppliers for power, and we are vulnerable to service failures and price increases by such suppliers and to volatility in the supply and price of power in the open market. • Our operations could be materially adversely affected by prolonged power outages at any of our facilities. • We rely on a limited number of suppliers to support our operations. • Any failure of our physical or information technology or operational technology infrastructure or services could lead to significant costs and disruptions. • If we incorrectly estimate our hosting capacity requirements and related capital expenditures, our results of operations could be adversely affected. • Certain natural disasters or other external events, including climate change or mechanical failures, could harm our business, financial condition, results of operations, cash flows, and prospects. • We have an evolving business model which is subject to various uncertainties. • Various actual and potential conflicts of interest may be detrimental to our stockholders. • The loss of any of our management team, our inability to execute an effective succession plan, or our inability to attract and retain qualified personnel, could adversely affect our business. • We may become involved in litigation arising in the ordinary course of our business that may materially adversely affect us. • Employee disputes or litigation and related unfavorable publicity may negatively affect our future business, financial condition, and operating results. • We could incur significant costs related to environmental matters, including from government regulation, private litigation, and existing conditions at some of our properties. • We may not be able to compete with other companies, some of which have greater resources and experience. • If the award of Ether/Bitcoin reward for solving blocks and transaction fees, is not sufficiently high, our customers may not have an adequate incentive to continue mining and may cease mining operations, which could lead to our failure to achieve profitability. • Intellectual property rights claims may adversely affect the operation of some or all cryptoasset networks. • We face risks related to public health epidemics and pandemics, including COVID-19, which could significantly disrupt our business. • We have concentrated our operations and, thus, are particularly exposed to changes in the regulatory environment, market conditions and natural disasters in the state of North Dakota where our data centers are located. • We are establishing data centers in remote areas, which may adversely affect our ability to retain staff and increase our compensation costs.
Biggest changeThese risks and uncertainties include, but are not limited to, the following: Risks Related to Our Business and Operations • We are at an early stage of development of our business, currently have limited sources of revenue, and may not be profitable in the future. • We may be unable to access sufficient additional capital needed to grow our business. • We may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness. • We have identified a material weakness in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, any of which may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations. • Our business has and is expected to continue to have significant customer concentration. • Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, may have a material adverse impact on our business, operating results, and financial condition. • We are subject to a highly evolving regulatory landscape and any adverse changes to certain laws or regulations could adversely affect our customers and our business, prospects or operations. • Our business depends upon the demand for data centers. • Any delays or unexpected costs developing our existing space, developable land and newly acquired properties may delay and harm our growth prospects, future operating results and financial condition. • Our inability to close the sale of our Cloud Services Business that is currently held for sale and treated as discontinued operations may have a material adverse impact on our business and financial condition. • We have concentrated our operations in the state of North Dakota and, thus, are particularly exposed to the regulatory framework and changes in the regulatory environment, market conditions and natural disasters in that state. • Failure to attract, grow and retain a diverse and balanced customer base, including key anchor customers, could harm our business and operating results. • We are continuing to invest in our expansion efforts but may not have sufficient customer demand in the future to realize expected returns on these investments. • We depend upon third-party suppliers for power, and we are vulnerable to service failures and price increases by such suppliers and to volatility in the supply and price of power in the open market. • Our operations could be materially adversely affected by prolonged power outages at any of our facilities. • Any failure of our physical or information technology or operational technology infrastructure or services could lead to significant costs and disruptions. • If we incorrectly estimate our hosting capacity requirements and related capital expenditures, our results of operations could be adversely affected. • Certain natural disasters or other external events, including climate change or mechanical failures, could harm our business, financial condition, results of operations, cash flows, and prospects. • We have an evolving business model which is subject to various uncertainties. • Various actual and potential conflicts of interest may be detrimental to our stockholders. • We may become subject to regulatory inquiry relating to trading activity and/or short selling strategies in our common stock. • The loss of any of our management team, our inability to execute an effective succession plan, or our inability to attract and retain qualified personnel, could adversely affect our business. • We may become involved in litigation arising in the ordinary course of our business that may materially adversely affect us. 10 • Employee disputes or litigation and related unfavorable publicity may negatively affect our future business, financial condition, and operating results. • We could incur significant costs related to environmental matters, including from government regulation, private litigation, and existing conditions at some of our properties. • We may not be able to compete with other companies, some of which have greater resources and experience. • If the award of Bitcoin reward for solving blocks and transaction fees is not sufficiently high, our customers may not have an adequate incentive to continue mining and may cease mining operations, which would have an adverse effect on our business and results of operations. • Intellectual property rights claims may adversely affect the operation of some or all cryptoasset networks. • We are establishing data centers in remote areas, which may adversely affect our ability to retain staff and increase our compensation costs.
We may not always be in complete alignment with our joint venture or joint owner counterparties; we may have differing strategic or commercial objectives and may be outvoted by our joint venture partners or we may disagree on governance matters with respect to the joint venture entity or the jointly owned assets.
We may not always be in complete alignment with our joint venture or joint owner counterparties or partners; we may have differing strategic or commercial objectives and may be outvoted by our joint venture partners or we may disagree on governance matters with respect to the joint venture entity or the jointly owned assets.
Such events could have a material adverse effect on our ability to continue as a going concern or to pursue our strategy at all, which could have a material adverse effect on our business, prospects or operations and potentially the value of any Ether/Bitcoin we mined prior to cessation of our mining The lack of regulation of digital asset exchanges which Bitcoin, and other cryptocurrencies, are traded on may expose us to the effects of negative publicity resulting from fraudulent actors in the cryptocurrency space and can adversely affect an investment in the Company.
Such events could have a material adverse effect on our ability to continue as a going concern or to pursue our strategy at all, which could have a material adverse effect on our business, prospects or operations and potentially the value of any Bitcoin we mined prior to cessation of our mining The lack of regulation of digital asset exchanges which Bitcoin, and other cryptocurrencies, are traded on may expose us to the effects of negative publicity resulting from fraudulent actors in the cryptocurrency space and can adversely affect an investment in the Company.
Our successful development of this and future projects is subject to many risks, including those associated with: • delays in construction, or changes to the plans or specifications; • budget overruns, increased prices for raw materials or building supplies, or lack of availability and/or increased costs for specialized data center components, including long lead time items such as generators; • construction site accidents and other casualties; • financing availability, including our ability to obtain construction financing and permanent financing, or increases in interest rates or credit spreads; • labor availability, costs, disputes and work stoppages with contractors, subcontractors or others that are constructing the project; • failure of contractors to perform on a timely basis or at all, or other misconduct on the part of contractors; • access to sufficient power and related costs of providing such power to our customers; • environmental issues; • supply chain constraints; • fire, flooding, earthquakes and other natural disasters; • pandemics; • geological, construction, excavation and equipment problems; and • delays or denials of entitlements or permits, including zoning and related permits, or other delays resulting from requirements of public agencies and utility companies.
Our successful development of this and future projects is subject to many risks, including those associated with: • delays in construction, or changes to the plans or specifications; • financing availability, including our ability to obtain construction financing and permanent financing, or increases in interest rates or credit spreads; • delays or denials of entitlements or permits, including zoning, siting, utility and other permits, or other delays resulting from requirements of public agencies and utility companies; • budget overruns, increased prices for raw materials or building supplies, or lack of availability and/or increased costs for specialized data center components, including long lead time items such as generators; • construction site accidents and other casualties; • labor availability, costs, disputes and work stoppages with contractors, subcontractors or others that are constructing the project; • failure of contractors to perform on a timely basis or at all, or other misconduct on the part of contractors; • access to sufficient power and related costs of providing such power to our customers; • environmental issues; • supply chain constraints; 16 • fire, flooding, earthquakes and other natural disasters; • pandemics; and • geological, construction, excavation and equipment problems.
If we do not have sufficient funds available to repay indebtedness when due, whether at maturity, by acceleration or upon conversion, we may be required to sell important strategic assets; refinance our existing 14 debt; incur additional debt or issue common stock or other equity securities, which we may not be able to do on terms acceptable to us, in amounts sufficient to meet our needs or at all.
If we do not have sufficient funds available to repay indebtedness when due, whether at maturity, by acceleration or upon conversion, we may be required to sell important strategic assets; refinance our existing debt; incur additional debt or issue common stock or other equity securities, which we may not be able to do on terms acceptable to us, in amounts sufficient to meet our needs or at all.
Actions were taken in March 2021 by the governmental authorities for the Chinese province of Inner Mongolia, which represents roughly 8% of the world’s total mining power, to ban cryptoasset mining in the province due in part to the industry’s intense electrical power demands and its negative environmental impacts (both in terms of the waste produced by mining the rare earth metals used to manufacture miners and the production of electrical power used in cryptoasset mining).
Actions were taken in March 2021 by the governmental authorities for the Chinese province of Inner Mongolia, which represents roughly 8% of the world’s total mining power, to ban cryptoasset mining in the province due in part to the industry’s intense electrical power 32 demands and its negative environmental impacts (both in terms of the waste produced by mining the rare earth metals used to manufacture miners and the production of electrical power used in cryptoasset mining).
Any of the factors listed below could have a material adverse effect on an investment in our securities: • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market’s expectations about our operating results; • relative success of our competitors; • our operating results failing to meet the expectations of securities analysts or investors in a particular period; • changes in financial estimates and recommendations by securities analysts concerning us and the market for our co-hosting facilities; • operating and stock price performance of other companies that investors deem comparable to us; • our ability to continue to expand our operations; • changes in laws and regulations affecting our business or our industry; • commencement of, or involvement in, litigation involving us; • changes in our capital structure, such as future issuances of securities or the borrowing of additional debt; • the volume of shares of our common stock available for public sale pursuant to an effective registration statement or exemption from registration requirements; • any major change in our Board or management; • sales of substantial amounts of our common stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; • general economic and political conditions such as recessions, interest rates, international currency and crypto currency fluctuations and acts of war or terrorism; • securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our common stock; and • failure to meet certain Nasdaq conditions to maintain our listing status.
Any of the factors listed below could have a material adverse effect on an investment in our securities: • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market’s expectations about our operating results; • relative success of our competitors; • our operating results failing to meet the expectations of securities analysts or investors in a particular period; • changes in financial estimates and recommendations by securities analysts concerning us and the market for our co-hosting facilities; • operating and stock price performance of other companies that investors deem comparable to us; • our ability to continue to expand our operations; • changes in laws and regulations affecting our business or our industry; • commencement of, or involvement in, litigation; • changes in our capital structure, such as future issuances of securities or the borrowing of additional debt; • the volume of shares of our common stock available for public sale pursuant to an effective registration statement or exemption from registration requirements; • any major change in our Board or management; • sales of substantial amounts of our common stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; • general economic and political conditions such as recessions, interest rates, international currency and crypto currency fluctuations and acts of war or terrorism; • if securities or industry analysts were to not publish research or reports about our business, or if they downgrade their recommendations regarding our common stock; and • failure to meet certain Nasdaq conditions to maintain our listing status.
Any failure to meet these or other commitments or any equipment damage in our data centers due to any reason could subject us to contractual liability, including service level credits against customer rent payments, legal liability and monetary damages, regulatory sanctions, or, in certain cases of repeated failures, the right by the customer to terminate the agreement.
Any failure to meet these or other commitments or any equipment damage in our data centers due to any reason could subject us to contractual 20 liability, including service level credits against customer rent payments, legal liability and monetary damages, regulatory sanctions, or, in certain cases of repeated failures, the right by the customer to terminate the agreement.
Such circumstances could have a material adverse effect on our ability to continue as a going concern or to pursue our strategy at all, which could have a material adverse effect on our business, prospects or operations. The development and acceptance of competing blockchain platforms or technologies may cause consumers to use alternative distributed ledgers or other alternatives.
Such circumstances could have a material adverse effect on our ability to continue as a going concern or to pursue our strategy at all, which could have a material adverse effect on our business, prospects or operations. 27 The development and acceptance of competing blockchain platforms or technologies may cause consumers to use alternative distributed ledgers or other alternatives.
Similarly, a number of companies and individuals or businesses associated with cryptocurrencies may have had and may continue to have their existing bank accounts closed or services discontinued with financial institutions in response to government action, 33 including in China where regulatory response to cryptocurrencies has been to exclude their use for ordinary consumer transactions within China.
Similarly, a number of companies and individuals or businesses associated with cryptocurrencies may have had and may continue to have their existing bank accounts closed or services discontinued with financial institutions in response to government action, including in China where regulatory response to cryptocurrencies has been to exclude their use for ordinary consumer transactions within China.
The crypto mining industry is subject to various risks which could adversely affect our current customers’ ability to continue to operate their businesses, including, but not limited to: • ongoing and future government or regulatory actions that could effectively prevent our customers’ mining operations, with little to no access to policymakers and lobbying organizations in many jurisdictions; • a high degree of uncertainty about cryptoassets’ status as a “security,” a “commodity” or a financial instrument in any relevant jurisdiction which may subject our customers to regulatory scrutiny, investigations, fines, and other penalties; • banks or financial institutions may close the accounts of businesses engaging in cryptoasset-related activities as a result of compliance risk, cost, government regulation or public pressure; • use of cryptoassets in the retail and commercial marketplace is limited; • extreme volatility in the market price of cryptoassets that may harm our customers financial resources, ability to meet their contractual obligations to us or cause them to reduce or cease mining operations; • use of a ledger-based platform may not necessarily benefit from viable trading markets or the rigors of listing requirements for securities creating higher potential risk for fraud or the manipulation of the ledger due to a control event; • concentrated ownership, large sales of cryptoassets, or distributions or redemptions by vehicles invested in cryptoassets could have an adverse effect on the demand for, and market price of, such cryptoasset; • our customers could face difficulty adapting to emergent digital ledgers, blockchains, or alternatives thereto, rapidly changing technology or methods of, rules of, or access to, platforms; • the number of cryptoassets awarded for solving a block in a blockchain could decrease, which may adversely affect our customers’ incentive to expend processing power to solve blocks and/or continue mining and our customers may not have access to resources to invest in increasing processing power, when necessary, in order to maintain the continuing revenue production of their mining operations; 18 • our customers may face third parties’ intellectual property claims or claims relating to the holding and transfer of cryptoassets and their source code, which, regardless of the merit of any such action, could reduce confidence in some or all cryptoasset networks’ long-term viability or the ability of end-users to hold and transfer cryptoassets; • contributors to the open-source structure of the cryptoasset network protocols are generally not directly compensated for their contributions in maintaining and developing the protocol and may lack incentive to properly monitor and upgrade the protocols; • a disruption of the Internet on which our customers’ business of mining cryptoassets is dependent; • decentralized nature of the governance of cryptoasset systems, generally by voluntary consensus and open competition with no clear leadership structure or authority, may lead to ineffective decision making that slows development or prevents a network from overcoming emergent obstacles; and • security breaches, hacking, or other malicious activities or loss of private keys relating to, or hack or other compromise of, digital wallets used to store our customers’ cryptoassets could adversely affect their ability to access or sell their cryptoassets or effectively utilize impacted platforms.
The crypto mining industry is subject to various risks which could adversely affect our current customer's ability to continue to operate their business, including, but not limited to: • ongoing and future government or regulatory actions that could effectively prevent our customer's mining operations, with little to no access to policymakers and lobbying organizations in many jurisdictions; 17 • a high degree of uncertainty about cryptoassets’ status as a “security,” a “commodity” or a financial instrument in any relevant jurisdiction which may subject our customer to regulatory scrutiny, investigations, fines, and other penalties; • banks or financial institutions may close the accounts of businesses engaging in cryptoasset-related activities as a result of compliance risk, cost, government regulation or public pressure; • use of cryptoassets in the retail and commercial marketplace is limited; • extreme volatility in the market price of cryptoassets that may harm our customer's financial resources, their ability to meet their contractual obligations to us or cause them to reduce or cease mining operations; • use of a ledger-based platform may not necessarily benefit from viable trading markets or the rigors of listing requirements for securities creating higher potential risk for fraud or the manipulation of the ledger due to a control event; • concentrated ownership, large sales of cryptoassets, or distributions or redemptions by vehicles invested in cryptoassets could have an adverse effect on the demand for, and market price of, such cryptoasset; • our customer could face difficulty adapting to emergent digital ledgers, blockchains, or alternatives thereto, rapidly changing technology or methods of, rules of, or access to, platforms; • the number of cryptoassets awarded for solving a block in a blockchain could decrease, which may adversely affect our customer's incentive to expend processing power to solve blocks and/or continue mining and our customer may not have access to resources to invest in increasing processing power, when necessary, in order to maintain the continuing revenue production of their mining operations; • our customer may face third parties’ intellectual property claims or claims relating to the holding and transfer of cryptoassets and their source code, which, regardless of the merit of any such action, could reduce confidence in some or all cryptoasset networks’ long-term viability or the ability of end-users to hold and transfer cryptoassets; • contributors to the open-source structure of the cryptoasset network protocols are generally not directly compensated for their contributions in maintaining and developing the protocol and may lack incentive to properly monitor and upgrade the protocols; • a disruption of the Internet on which our customer's business of mining cryptoassets is dependent; • decentralized nature of the governance of cryptoasset systems, generally by voluntary consensus and open competition with no clear leadership structure or authority, may lead to ineffective decision making that slows development or prevents a network from overcoming emergent obstacles; and • security breaches, hacking, or other malicious activities or loss of private keys relating to, a hack or other compromise of, digital wallets used to store our customer's cryptoassets could adversely affect their ability to access or sell their cryptoassets or effectively utilize impacted platforms.
If we are unsuccessful in identifying or finding highly qualified third-party service providers or employees, if we fail to negotiate cost-effective 21 relationships with them or if we are ineffective in managing and maintaining these relationships, it could materially and adversely affect our business and our financial condition, operating results, cash flows, and prospects.
If we are unsuccessful in identifying or finding highly qualified third-party service providers or employees, if we fail to negotiate cost-effective relationships with them or if we are ineffective in managing and maintaining these relationships, it could materially and adversely affect our business and our financial condition, operating results, cash flows, and prospects.
If environmental laws or regulations or industry standards are either changed or adopted and impose significant operational restrictions and compliance requirements on our operations, 26 or if our operations are disrupted due to the physical impacts of climate change, our business, capital expenditures, results of operations, financial condition and competitive position could be negatively impacted.
If environmental laws or regulations or industry standards are either changed or adopted and impose significant operational restrictions and compliance requirements on our operations, or if our operations are disrupted due to the physical impacts of climate change, our business, capital expenditures, results of operations, financial condition and competitive position could be negatively impacted.
As an alternative to fiat currencies that are backed by central governments, Bitcoin, Ether and other cryptoassets, which are relatively new, are subject to supply and demand forces. How such supply and demand will be impacted by geopolitical events is largely uncertain but could be harmful to us and investors in our common stock.
As an alternative to fiat currencies that are backed by central governments, Bitcoin and other cryptoassets, which are relatively new, are subject to supply and demand forces. How such supply and demand will be impacted by geopolitical events is largely uncertain but could be harmful to us and investors in our common stock.
As a result, some carriers 22 may be forced to downsize or terminate connectivity within our data centers, which could have an adverse effect on the business of our customers and, in turn, our own operating results. Our data centers may require construction and operation of a sophisticated redundant fiber network.
As a result, some carriers may be forced to downsize or terminate connectivity within our data centers, which could have an adverse effect on the business of our customers and, in turn, our own operating results. Our data centers may require construction and operation of a sophisticated redundant fiber network.
This could negatively affect our ability to attract new customers or retain existing customers, which could have an adverse effect on our business, financial condition and results of operations. Certain natural disasters or other external events, including climate change or mechanical failures, could harm our business, financial condition, results of operations, cash flows, and prospects.
This could negatively affect our ability to attract new customers or retain existing customers, which could have an adverse effect on our business, financial condition and results of operations. 21 Certain natural disasters or other external events, including climate change or mechanical failures, could harm our business, financial condition, results of operations, cash flows, and prospects.
Because of the potential risks, expenses and uncertainties of litigation, we may, from time to time, settle disputes, even where we believe that we have meritorious claims or defenses and we cannot assure you that the results of any of these actions will not have a material adverse effect on our business.
Because of the potential risks, expenses and uncertainties of litigation, we may, from time to time, settle disputes, even where we believe that we have meritorious claims or defenses and we cannot assure you that the results of any of these actions will not have a material adverse effect 24 on our business.
Increases in the cost of power at any of our data centers could put those locations at a competitive disadvantage relative to data centers that are supplied power at a lower price. 20 We have also entered into power purchase agreements with contract terms ranging from 4 to 5 years.
Increases in the cost of power at any of our data centers could put those locations at a competitive disadvantage relative to data centers that are supplied power at a lower price. We have also entered into power purchase agreements with contract terms ranging from 4 to 5 years.
To the extent that other vehicles investing in Ether/Bitcoin or tracking Ether/Bitcoin markets form and come to represent a significant proportion of the demand for Ether/Bitcoin, large redemptions of the securities of those vehicles and the subsequent sale of Ether/Bitcoin by such vehicles could negatively affect Ether/Bitcoin prices and therefore affect the value of the Ether/Bitcoin inventory our customers hold.
To the extent that other vehicles investing in Bitcoin or tracking Bitcoin markets form and come to represent a significant proportion of the demand for Bitcoin, large redemptions of the securities of those vehicles and the subsequent sale of Bitcoin by such vehicles could negatively affect Bitcoin prices and therefore affect the value of the Bitcoin inventory our customers hold.
To supplement the business experience of our officers and directors, we may be required to employ technical experts, appraisers, attorneys, or other consultants or advisors. Our management, with approval of our Board of Directors (the “Board”) in certain cases, without any input from stockholders, will make the selection of any such advisors.
To supplement the business experience of our officers and directors, we may be required to employ technical experts, appraisers, attorneys, or other consultants or advisors. Our management, with approval of our Board of Directors in certain cases, without any input from stockholders, will make the selection of any such advisors.
On September 24, 2021, China imposed a ban on all crypto transactions and mining. Other governments around the world are also reviewing their rules and regulations concerning the cryptoasset industry, including the U.S. Acceptance and/or widespread use of Bitcoin, Ether and other cryptoassets is uncertain.
On September 24, 2021, China imposed a ban on all crypto transactions and mining. Other governments around the world are also reviewing their rules and regulations concerning the cryptoasset industry, including the U.S. Acceptance and/or widespread use of Bitcoin and other cryptoassets is uncertain.
Bitcoin is subject to halving, which may adversely affect our customers’ ability to continue mining at our facilities. Halving is when the number of new Bitcoin awarded for solving a block is cut in half – hence, “halving” – at mathematically predetermined intervals. The recent halving for the Bitcoin blockchain occurred in April of 2024.
Bitcoin is subject to halving, which may adversely affect our customers’ ability to continue mining at our facilities. Halving is when the number of new Bitcoin awarded for solving a block is cut in half – hence, “halving” – at mathematically predetermined intervals. The most recent halving for the Bitcoin blockchain occurred in April of 2024.
Although we may opt to redeem our Series E Preferred Stock with shares of our common stock in our sole and absolute discretion, the rights of the holders of shares of Series E Preferred Stock while such shares remain outstanding rank senior to the rights of the holders of shares of our common stock as to dividends and payments upon liquidation, dissolution or winding up of our affairs.
Although we may opt to redeem our Series E and E-1 Preferred Stock with shares of our common stock in our sole and absolute discretion, the rights of the holders of shares of Series E and E-1 Preferred Stock while such shares remain outstanding rank senior to the rights of the holders of shares of our common stock as to dividends and payments upon liquidation, dissolution or winding up of our affairs.
We are in the business of owning, acquiring, developing and operating data centers. A reduction in the demand for data center space, power or connectivity would have a greater adverse effect on our business and financial condition than if we owned a portfolio with a less specialized use.
We are in the business of developing, owning and operating data centers. A reduction in the demand for data center space, power or connectivity would have a greater adverse effect on our business and financial condition than if we owned a portfolio with a less specialized use.
Geopolitical crises may motivate large-scale purchases of cryptoassets, which could increase the price of Bitcoin, Ether and other cryptoassets rapidly. This may increase the likelihood of a subsequent price decrease as crisis-driven purchasing behavior dissipates, adversely affecting the value of our inventory following such downward adjustment.
Geopolitical crises may motivate large-scale purchases of cryptoassets, which could increase the price of Bitcoin and other cryptoassets rapidly. This may increase the likelihood of a subsequent price decrease as crisis-driven purchasing behavior dissipates, adversely affecting the value of our inventory following such downward adjustment.
Alternatively, as an emerging asset class with limited acceptance as a payment system or commodity, global crises and general economic downturn may discourage investment in Bitcoin, Ether and other cryptoassets as investors focus their investment on less volatile asset classes as a means of hedging their investment risk.
Alternatively, as an emerging asset class with limited acceptance as a payment system or commodity, global crises and general economic downturn may discourage investment in Bitcoin and other cryptoassets as investors focus their investment on less volatile asset classes as a means of hedging their investment risk.
Our efforts to raise capital is for the 39 purpose of executing on development plans and strategic growth opportunities as they arise; however, holders of our common stock may experience dilution as a result of our sales of newly issued shares of our common stock in such offerings.
Our efforts to raise capital is for the purpose of executing on development plans and strategic growth opportunities as they arise; however, holders of our common stock may experience dilution as a result of our sales of newly issued shares of our common stock in such offerings.
Many businesses that provide cryptocurrency-related activities may continue to have difficulties in finding banks and financial institutions willing to provide them services which may decrease the usefulness of cryptocurrencies as a payment system and harm public perception of cryptocurrencies, and could decrease their usefulness.
Many businesses that 31 provide cryptocurrency-related activities may continue to have difficulties in finding banks and financial institutions willing to provide them services which may decrease the usefulness of cryptocurrencies as a payment system and harm public perception of cryptocurrencies, and could decrease their usefulness.
It may be illegal now, or in the future, to acquire, own, hold, sell or use Bitcoin, Ether, or other cryptocurrencies, participate in blockchains or utilize similar Bitcoin assets in one or more countries, the ruling of which would adversely affect our and our customers’ business.
It may be illegal now, or in the future, to acquire, own, hold, sell or use Bitcoin or other cryptocurrencies, participate in blockchains or utilize similar Bitcoin assets in one or more countries, the ruling of which would adversely affect our and our customers’ business.
We began generating revenue from our hosting operations when our first co-hosting facility came online in February 2022. Accordingly, we have only a limited history upon which an evaluation of our prospects and future performance can be made.
We began generating revenue 11 from our hosting operations when our first co-hosting facility came online in February 2022. Accordingly, we have only a limited history upon which an evaluation of our prospects and future performance can be made.
Further, if prevailing interest rates or other factors at the time of refinancing, such as the reluctance of lenders to make commercial real estate loans, result in higher interest rates upon refinancing, then the interest expense relating to that refinanced indebtedness would increase.
Further, if prevailing interest rates or other factors at the time of refinancing, such as the reluctance of lenders to make commercial real estate loans, 13 result in higher interest rates upon refinancing, then the interest expense relating to that refinanced indebtedness would increase.
These assessments, however, do not generally include soil samplings, subsurface investigations or an asbestos survey and the assessments may fail to reveal all environmental conditions, liabilities or compliance concerns. In addition, material environmental conditions, liabilities or compliance concerns may arise after these reviews are completed.
These assessments, however, do not generally include soil samplings, subsurface investigations or 25 an asbestos survey and the assessments may fail to reveal all environmental conditions, liabilities or compliance concerns. In addition, material environmental conditions, liabilities or compliance concerns may arise after these reviews are completed.
If transaction fees paid for transactions become too high, the marketplace may be reluctant to accept Bitcoin, Ether or other cryptoassets as a means of payment and existing users may be motivated to switch from Bitcoin, Ether and other cryptoassets to another cryptoasset or to fiat currency.
If transaction fees paid for transactions become too high, the marketplace may be reluctant to accept Bitcoin or other cryptoassets as a means of payment and existing users may be motivated to switch from Bitcoin and other cryptoassets to another cryptoasset or to fiat currency.
Accordingly, we generally may not make a distribution on the Series E Preferred Stock or redeem shares of Series E Preferred Stock if, after giving effect to the distribution or redemption, we would not be able to pay our debts as they become due in the usual course of business or our total assets would be less than the sum of our total liabilities plus, unless the terms of such class or series provide otherwise, the amount that would be needed to satisfy the preferential rights upon dissolution of the holders of shares of any class or series of preferred stock then outstanding, if any, with preferences senior to those of the Series E Preferred Stock.
Accordingly, we generally may not make a distribution on the Series E and E-1 Preferred Stock or redeem shares of Series E and E-1 Preferred Stock if, after giving effect to the distribution or redemption, we would not be able to pay our debts as they become due in the usual course of business or our total assets would be less than the sum of our total liabilities plus, unless the terms of such class or series provide otherwise, the amount that would be needed to satisfy the preferential rights upon dissolution of the holders of shares of any class or series of preferred stock then outstanding, if any, with preferences senior to those of the Series E and E-1 Preferred Stock.
If one of our customers were to obtain exclusive rights to the technologies we employ across our businesses, we could be limited in obtaining essential supplies at competitive costs and share research and development costs across our businesses.
If one of our customers were to obtain exclusive rights to the hardware technologies we employ across our businesses, we could be limited in obtaining essential supplies at competitive costs and share research and development costs across our businesses.
Market and financial conditions, and other conditions beyond our or their control, may make it more attractive to invest in other financial vehicles, or to invest in Bitcoin, Ether or other cryptoassets directly, which could materially affect our revenue or ability to expand our operations.
Market and financial conditions, and other conditions beyond our or their control, may make it more attractive to invest in other financial vehicles, or to invest in Bitcoin or other cryptoassets directly, which could materially affect our revenue or ability to expand our operations.
Currently, there is a relatively limited use of any cryptoasset in the retail and commercial marketplace, thus contributing to price volatility that could adversely affect an investment in our common stock.
Currently, there is still a relatively limited use of any cryptoasset in the retail and commercial marketplace, thus contributing to price volatility that could adversely affect an investment in our common stock.
A disruption of the Internet may affect the use of Bitcoin, Ether and other cryptoassets, our ability to provide co-hosting services and subsequently the value of our common stock. Generally, Bitcoin, Ether and our customers’ business of mining cryptoassets is dependent upon the Internet.
A disruption of the Internet may affect the use of Bitcoin and other cryptoassets, our ability to provide co-hosting services and subsequently the value of our common stock. Generally, Bitcoin and our customers’ business of mining cryptoassets is dependent upon the Internet.
If the number of Ether/Bitcoin token rewards awarded for solving a block in a blockchain decreases, the incentive for miners to continue to contribute to the network may transition from a set reward to transaction fees.
If the number of Bitcoin token rewards awarded for solving a block in a blockchain decreases, the incentive for miners to continue to contribute to the network may transition from a set reward to transaction fees.
Our customers’ mining operations can only be successful and ultimately profitable if the costs, including hardware and electricity costs, associated with mining Bitcoin, Ether and other cryptoassets are lower than the price of the Bitcoin, Ether and/or other cryptoassets.
Our customers’ mining operations can only be successful and ultimately profitable if the costs, including hardware and electricity costs, associated with mining Bitcoin and other cryptoassets are lower than the price of the Bitcoin and/or other cryptoassets.
If we are not able to complete development in a timely manner or successfully lease the space that we develop, if development costs are higher than we currently estimate, or if rental rates are lower than expected when we began the project or are otherwise undesirable, our financial condition, results 19 of operations, cash flow, cash available for distribution and ability to satisfy our debt service obligations could be materially adversely affected.
If we are not able to complete development in a timely manner or successfully lease the space that we develop, if development costs are higher than we currently estimate, or if rental rates are lower than expected when we began the project or are otherwise undesirable, our financial condition, results 18 of operations, cash flow, cash available for distribution and ability to satisfy our debt service obligations could be materially adversely affected.
If the award of Ether/Bitcoin rewards for solving blocks and transaction fees are not sufficiently high, they may not have an adequate incentive to continue mining and may cease mining operations.
If the award of Bitcoin rewards for solving blocks and transaction fees are not sufficiently high, they may not have an adequate incentive to continue mining and may cease mining operations.
Our ability to redeem shares of Series E Preferred Stock may be limited by our available funds, ability to issue the full amount of shares of common stock and applicable federal and Nevada law.
Our ability to redeem shares of Series E and E-1 Preferred Stock may be limited by our available funds, ability to issue the full amount of shares of common stock and applicable federal and Nevada law.
In the event the holders exercise their option to redeem Series E Preferred Stock, our ability to redeem such shares of Series E Preferred Stock may be subject to certain restrictions and limits.
In the event the holders exercise their option to redeem Series E and E-1 Preferred Stock, our ability to redeem such shares of Series E and E-1 Preferred Stock may be subject to certain restrictions and limits.
If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtains a majority of the processing power dedicated to mining on any cryptoasset network, including the Ethereum network, it may be able to alter the blockchain by constructing alternate blocks if it is able to solve for such blocks faster than the remainder of the miners on the blockchain can add valid blocks.
If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtains a majority of the processing power dedicated to mining on any cryptoasset network, it may be able to alter the blockchain by constructing alternate blocks if it is able to solve for such blocks faster than the remainder of the miners on the blockchain can add valid blocks.
We are not a telecommunications carrier. Although our customers generally are responsible for providing their own network connectivity, we still depend upon the presence of telecommunications carriers’ fiber networks serving our data centers in order to attract and retain customers. We believe that the availability of carrier capacity will directly affect our ability to achieve our projected results.
Although our customers generally are responsible for providing their own network connectivity, we still depend upon the presence of telecommunications carriers’ fiber networks serving our data centers in order to attract and retain customers. We believe that the availability of carrier capacity will directly affect our ability to achieve our projected results.
Also, the developers of the Bitcoin network or other programmers could propose amendments to the network’s protocols and software that, if accepted, might require our customers to modify their Bitcoin operations, and increase their investment in Bitcoin, in order to maintain revenue production. There can be no assurance, however, that they will be able to do so.
Also, the developers of the Bitcoin network or other programmers could propose amendments to the network’s protocols and software that, if accepted, might require our customer to modify their Bitcoin operations, and increase their investment in Bitcoin, in order to maintain revenue production. There can be no assurance, however, that they will be able to do so.
Regardless of the merit of any intellectual property or other legal action, any threatened action that reduces confidence in some or all cryptoasset networks’ long-term viability or the ability of end-users to hold and transfer cryptoassets may adversely affect the business of our customers, our co-hosting operations and an investment in us.
Regardless of the merit of any intellectual property or other legal action, any threatened action that reduces confidence in some or all cryptoasset networks’ long-term viability or the ability of end-users to hold and transfer cryptoassets may adversely affect the business of our customer, our co-hosting operations and an investment in us.
Mr. Cummins holds over 14% of our common stock and has a financial interest in the success of our operations. We also have more than a majority of independent directors on our Board in order to ensure that there are limitations on the risks of conflicts of interest impacting Board level decisions.
Mr. Cummins holds over 9% of our common stock and has a financial interest in the success of our operations. We also have more than a majority of independent directors on our Board in order to ensure that there are limitations on the risks of conflicts of interest impacting Board level decisions.
Changes to a cryptoasset network which our customers are mining on may adversely affect our customers’ business our co-hosting operations and an investment in us. We may face risks of Internet disruptions, which could have an adverse effect on the price of Bitcoin, Ether and other cryptoassets.
Changes to a cryptoasset network which our customers are mining on may adversely affect our customers’ business our co-hosting operations and an investment in us. 33 We may face risks of Internet disruptions, which could have an adverse effect on the price of Bitcoin and other cryptoassets.
The definition of the term “business combination” is sufficiently broad to cover virtually any kind of 40 transaction that would allow a potential acquirer to use the corporation’s assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders.
The definition of the term “business combination” is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquirer to use the corporation’s assets to finance the acquisition or otherwise to 37 benefit its own interests rather than the interests of the corporation and its other stockholders.
Increased scrutiny and changing expectations from stakeholders with respect to our environmental, social, and governance (“ESG”) practices and the impacts of climate change may result in additional costs or risks. Companies across many industries are facing increasing scrutiny related to their ESG practices.
Scrutiny and changing expectations from stakeholders with respect to our environmental, social, and governance (“ESG”) practices and the impacts of climate change may result in additional costs or risks. Companies across many industries are facing scrutiny related to their ESG practices.
Political or economic crises may motivate large-scale acquisitions or sales of Bitcoin, Ether and other cryptoasset either globally or locally.
Political or economic crises may motivate large-scale acquisitions or sales of Bitcoin and other cryptoasset either globally or locally.
We may fail to provide such services because our operations are vulnerable to, among other things, mechanical or telecommunications failure, power outage, human error, physical or electronic security breaches, cyberattacks, war, terrorism, fire, earthquake, pandemics, hurricane, flood and other natural disasters, sabotage and vandalism. Substantially all of our customer agreements include terms requiring us to meet certain service level commitments.
We may fail to provide such services because our operations are vulnerable to, among other things, mechanical or telecommunications failure, power outage, human error, physical or electronic security breaches, cyberattacks, war, terrorism, fire, earthquake, pandemics, hurricane, flood and other natural disasters, sabotage and vandalism. Our customer agreements include terms requiring us to meet certain service level commitments.
Additionally, a meritorious intellectual property claim could prevent us, our customers and other end-users from accessing some or all cryptoasset networks or holding or transferring cryptoassets. As a result, an intellectual property claim against us or other cryptoasset network participants could adversely affect an investment in us.
Additionally, a meritorious intellectual property claim could prevent us, our customer and other end-users from accessing some or all cryptoasset networks or holding or transferring cryptoassets. As a result, an intellectual property claim against us or other cryptoasset network participants could adversely affect an investment in us.
Such redemption may, at the option of the Board, be in cash or in common stock, provided that the number of shares of common stock issuable to holders of Series E Preferred Stock for redemption shall not exceed 19.99% of the outstanding shares of common stock without stockholder approval.
Such redemption may, at the option of the Board, be in cash or in common stock, provided that the number of shares of common stock issuable to holders of Series E and E-1 Preferred Stock for redemption shall not exceed 19.99% of the outstanding shares of common stock without stockholder approval.
In the event that any of our customers experience a decline in their equipment usage for any reason, or decide to discontinue the use of our facilities, we may be compelled to lower our lease prices or risk losing a significant customer.
In the event that any of our customers experience a decline in their equipment usage for any reason, or decide to discontinue the use of our facilities, we may be compelled to lower our lease prices in some instances or risk losing a significant customer.
Because the number of Bitcoin awarded for solving a block in the Bitcoin network blockchain continually decreases, miners must invest in increasing processing power to maintain their yield of Bitcoins, which might make Bitcoin mining uneconomical for our customers.
Because the number of Bitcoin awarded for solving a block in the Bitcoin network blockchain continually decreases, miners must invest in increasing processing power to maintain their yield of Bitcoins, which might make Bitcoin mining uneconomical for our customer.
If the pricing of Bitcoin were to decline significantly, there can be no assurance that our customers will have the resources to upgrade their processing power in order to maintain the continuing revenue production of their mining operations.
If the pricing of Bitcoin were to decline significantly, there can be no assurance that our customer will have the resources to upgrade their processing power in order to maintain the continuing revenue production of their mining operations.
Investor advocacy groups, certain institutional investors, investment funds and other influential investors are also increasingly focused on ESG practices and in recent years have placed increasing importance on the non-financial impacts of their investments.
Investor advocacy groups, certain institutional investors, investment funds and other influential investors are also focused on ESG practices and in recent years have placed importance on the non-financial impacts of their investments.
To the extent we or our customers have not complied with such laws, rules and regulations, we could be subject to significant fines and other regulatory consequences, which could adversely affect our business, prospects or operations. As cryptoasset has grown in popularity and in market size, the Federal Reserve Board, U.S.
To the extent we or our customers have not complied with such laws, rules and regulations, we could be subject to significant fines and other regulatory consequences, which could adversely affect our business, prospects or operations. As cryptoassets have grown in popularity and in market size, the Federal Reserve Board, U.S.
Our customers may not be successful, generally or relative to our competitors in the cryptoasset industry, in timely implementing new technology into their systems, or doing so in a cost-effective manner.
Our customer may not be successful, generally or relative to their competitors in the cryptoasset industry, in timely implementing new technology into their systems, or doing so in a cost-effective manner.
Risks Related to Our Business and Operations We are at an early stage of development of our business, currently have limited sources of revenue, and may not become profitable in the future.
Risks Related to Our Business and Operations We are at an early stage of development of our business, currently have limited sources of revenue, and may not be profitable in the future.
We have primarily financed our strategic growth through our at-the-market (“ATM”) offerings and issuances of our common stock. Our ATM offerings allow us to raise capital as needed by tapping into the existing trading market for our shares by selling newly issued shares into the market depending on prevailing market prices.
We have financed much of our strategic growth through our at-the-market (“ATM”) offerings and issuances of our common stock and preferred stock. Our ATM offerings allow us to raise capital as needed by tapping into the existing trading market for our shares by selling newly issued shares into the market depending on prevailing market prices.
Unless full cumulative dividends on our shares of Series E Preferred Stock for all past dividend periods have been paid (or set apart for payment), we will not declare or pay dividends with respect to any shares of our 42 common stock for any period.
Unless full cumulative dividends on our shares of Series E and E-1 Preferred Stock for all past dividend periods have been paid (or set apart for payment), we will not declare or pay dividends with respect to any shares of our common stock for any period.
In the event that holders of our convertible debt exercise conversion rights, we will be required to settle the principal amount of any converted notes in cash.
In the event that holders of our convertible debt exercise conversion rights, we may be required to settle the principal amount of any converted notes in cash.
If the number of Ether/Bitcoin awarded for solving a block in a blockchain decreases, our customers’ ability to earn revenue worsens. Decreased use and demand for Ether/Bitcoin rewards may adversely affect their incentive to expend processing power to solve blocks.
If the number of Bitcoin awarded for solving a block in a blockchain decreases, our customer's ability to earn revenue worsens. Decreased use and demand for Bitcoin rewards may adversely affect their incentive to expend processing power to solve blocks.
Cambridge Bitcoin Electricity Consumption Index reported that as of February 1, 2021 more than 6GW of Bitcoin was mined in China (or $4.3 billion of power cost, assuming $0.08 per kWh average hosting cost). China has since banned 34 cryptoasset mining related activity. China has already made transacting in cryptoassets illegal.
Cambridge Bitcoin Electricity Consumption Index reported that as of February 1, 2021 more than 6 GW of Bitcoin was mined in China (or $4.3 billion of power cost, assuming $0.08 per kWh average hosting cost). China has since banned cryptoasset mining related activity. China has already made transacting in cryptoassets illegal.
Depending on the number of shares of our Series E Preferred Stock we sell and the number of holders of Series E Preferred Stock who redeem their stock, the Excise Tax could also be applicable to the Company and adversely affect the cash we have available for our operations.
Depending on the number of shares of our Series E and E-1 Preferred Stock we sell and the number of holders of Series E Preferred Stock who redeem their stock, the Excise Tax could also be applicable to us and adversely affect the cash we have available for our operations.
Any failure to maintain effective controls or any difficulties encountered in our implementation or improvement of our internal controls over financial reporting could result in material misstatements that are not prevented or detected on a timely basis, which could potentially subject us to sanctions or investigations by the SEC or other regulatory authorities.
Any failure to maintain effective controls or any difficulties we may encounter in our implementation or improvement of our internal controls over financial reporting could result in material misstatements that are not prevented or detected on a timely basis, which could potentially subject us to sanctions or investigations by the SEC or other regulatory authorities.
Item 1A. Risk Factors An investment in our common stock is speculative and illiquid and involves a high degree of risk including the risk of a loss of your entire investment. You should carefully consider the risks and uncertainties described below and the other information contained in this report and our other reports filed with the Securities and Exchange Commission.
Item 1A. Risk Factors An investment in our common stock is speculative and illiquid and involves a high degree of risk including the risk of a loss of your entire investment. You should carefully consider the risks and uncertainties described below and the other information contained in this report and our other reports filed with the SEC.
Failure to attract, grow and retain a diverse and balanced customer base, including key magnet customers, could harm our business and operating results.
Failure to attract, grow and retain a diverse and balanced customer base, including key anchor customers, could harm our business and operating results.
We previously identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, any of which may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations.
We have identified a material weakness in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, any of which may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations.
Beginning in December 2023, we encountered a series of outages at our Ellendale and Garden City locations which had a significant adverse impact on our revenue in the third and fourth quarter of fiscal 2024 until the repairs and upgrades necessary to restore full operational capacity were substantially complete.
While we had no material outages in fiscal year 2025, beginning in December 2023, we encountered a series of outages at our Ellendale and Garden City locations which had a significant adverse impact on our revenue in the third and fourth quarter of fiscal year 2024 until the repairs and upgrades necessary to restore full operational capacity were substantially complete.
The effect of Nevada’s business combination law is to potentially discourage parties interested in taking control of us from doing so if it cannot obtain the approval of our Board. Substantial blocks of our common stock may be sold into the market as a result of the Prepaid Advance Agreements, the Sales Agreement, and the SEPA.
The effect of Nevada’s business combination law is to potentially discourage parties interested in taking control of us from doing so if it cannot obtain the approval of our Board. Substantial blocks of our common stock may be sold into the market as a result of our Sales Agreements and the PEPA.
If we are not able to secure additional financing to continue our construction efforts with respect to the HPC Ellendale Facility, the completion of this project may be delayed and our ability to collect any potential renal revenue or to otherwise monetize this facility may be compromised, which could have an adverse effect on our expansion strategy and our ability to generate significant or any revenue from our HPC Hosting Business segment.
If we are not able to secure additional financing to continue our construction efforts with respect to Polaris Forge 1, the completion of this project may be delayed and our ability to collect any potential rental revenue or to otherwise monetize this facility may be compromised, which could have an adverse effect on our expansion strategy and our ability to generate significant or any revenue from our HPC Hosting Business segment.
Our level of debt could have significant consequences, including limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions or other general corporate purposes; requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes; imposing financial and other restrictive covenants on our operations, including debt service coverage requirements and limitations on our ability to (i) declare or pay dividends or repurchase shares of our common stock; (ii) purchase assets, make investments, complete acquisitions, consolidate or merge with or into, or sell, transfer or lease all or substantially all of our assets to, another person; (iii) enter into sale/leaseback transactions or certain transactions with affiliates; (iv) incur additional indebtedness; and (v) incur liens, making us more vulnerable to economic downturns and limiting our ability to withstand competitive pressures or take advantage of new opportunities to grow our business.
Our level of debt could have significant consequences, including limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions or other general corporate purposes; requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes; imposing financial and other restrictive covenants on our operations, including debt service coverage requirements and limitations on our ability to (i) declare or pay dividends or repurchase shares of our common stock; (ii) purchase assets, make investments, complete acquisitions, consolidate or merge with or into, or sell, transfer or lease all or substantially all of our assets to, another person; (iii) enter into sale/leaseback transactions or certain transactions with affiliates; (iv) incur additional indebtedness; and (v) incur liens, making us more vulnerable to economic downturns and limiting our ability to withstand competitive pressures or take advantage of new opportunities to grow our business. 12 Our ability to meet our debt service obligations, comply with our debt covenants and deleverage depends on our cash flows and financial performance, which are affected by financial, business, economic and other factors.
Competitive conditions within the cryptoasset industry require that our customers use sophisticated technology in the operation of their business. The industry for blockchain technology is characterized by rapid technological changes, new product introductions, enhancements and evolving industry standards.
Competitive conditions within the cryptoasset industry require that our customer uses sophisticated technology in the operation of their business. The industry for blockchain technology is characterized by rapid technological changes, new product introductions, enhancements and evolving industry standards.
Our level of debt may negatively impact our liquidity, restrict our operations and ability to respond to business opportunities, and increase our vulnerability to adverse economic and industry conditions. We utilize debt financing in our capital structure and may incur additional debt.
Our level of debt may negatively impact our liquidity, restrict our operations and ability to respond to business opportunities, and increase our vulnerability to adverse economic and industry conditions. We utilize debt financings in our capital structure and may incur additional debt in the future.
We have concentrated our operations and, thus, are particularly exposed to changes in the regulatory environment, market conditions and natural disasters in the state of North Dakota where our data centers are located. We currently operate data centers in the state of North Dakota.
We have concentrated our operations in the state of North Dakota and, thus, are particularly exposed to the regulatory framework and changes in the regulatory environment, market conditions and natural disasters in that state. We currently operate data centers in the state of North Dakota.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAdditionally, our program includes privacy and cybersecurity training for all employees. Training occurs prior to accessing the system or performing assigned duties, when required by system changes, and annually thereafter. Governance Our Board is responsible for the oversight of cybersecurity risk management. The Board delegates oversight of the cybersecurity risk management program to the Audit Committee.
Biggest changeAs a result of these assessments and testing, we have responded to all known medium, high, and critical risks and are constantly hardening our environment. Additionally, our program includes privacy and cybersecurity training for all employees. Training occurs prior to accessing the system or performing assigned duties, when required by system changes, and annually thereafter.
We utilize a third party, and our in-house staff for monitoring and support of security incident management and user support. We have implemented and maintain a cybersecurity risk management program that is designed to identify, assess, and mitigate risks from cybersecurity threats to this data and our systems and ensure the effectiveness of our security controls.
We have implemented and maintain a cybersecurity risk management program that is designed to identify, assess, and mitigate risks from cybersecurity threats to this data and our systems and ensure the effectiveness of our security controls. Our cybersecurity risk management program is intended to address applicable SOC2 and SOX requirements.
Our cybersecurity risk management program is intended to address applicable SOC2 and SOX requirements. Our cybersecurity risk management program incorporates several components, including information security program assessments, a risk register, continuous monitoring of critical risks from cybersecurity threats using automated tools, backup testing, periodic threat testing, and employee training.
Our cybersecurity risk management program incorporates several components, including information security program assessments, a risk register, continuous monitoring of critical risks from cybersecurity threats using automated tools, backup testing, periodic threat testing, and employee training. We deploy a wide range of security tools, use single sign-on, and require multi factor authentication across all systems.
The cyber risk management program falls under the responsibility of our Vice President of Security who has over 18 years of experience in cybersecurity and compliance. Under the guidance of a third party consultant and our Vice President of Security, we developed and maintain policies, standards, and processes in a manner consistent with applicable legal requirements.
Under the guidance of a third party consultant and our Vice President of Security, we developed and maintain policies, standards, and processes in a manner consistent with applicable legal requirements. We utilize a third party, and our in-house staff for monitoring and support of security incident management and user support.
In the ordinary course of our business, we collect and store sensitive data, including intellectual property. To effectively prevent, detect, and respond to cybersecurity threats, we maintain a cyber risk management program, which is comprised of a wide array of policies, standards, architecture, and processes.
To effectively prevent, detect, and respond to cybersecurity threats, we maintain a cyber risk management program, which is comprised of a wide array of policies, standards, architecture, and processes. The cyber risk management program falls under the responsibility of our Vice President of Security who has over 19 years of experience in cybersecurity and compliance.
The management of the program is the responsibility of our Risk Management Committee, comprised of our Chief Executive Officer, Chief Financial Officer and Chief Technology Officer.
Governance Our Board is responsible for the oversight of cybersecurity risk management. The Board delegates oversight of the cybersecurity risk management program to the Audit Committee. The management of the program is the responsibility of our Risk Management Committee, comprised of our Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and General Counsel.
Item 1C. Cybersecurity Cybersecurity Risk Management We, like other companies in our industry, face several cybersecurity risks in connection with our business.
Item 1C. Cybersecurity Cybersecurity Risk Management We, like other companies in our industry, face several cybersecurity risks in connection with our business. Our business strategy, results of operations, and financial condition have not, to date, been affected by risks from cybersecurity threats.
Our business strategy, results of operations, and financial condition have not, to date, been affected by risks from cybersecurity threats. 43 During the fiscal year ended May 31, 2024, we have not experienced any material cyber incidents, nor have we experienced a series of immaterial incidents, which would require disclosure.
During the fiscal year ended May 31, 2025, we have not experienced any material cyber incidents, nor have we experienced a series of immaterial incidents, which would require disclosure. In the ordinary course of our business, we collect and store sensitive data, including intellectual property.
We periodically engage third parties, which are subject to our standards, policies, and procedure, to conduct audits, risk assessments, including penetration testing and other system vulnerability analyses. As a result of these assessments and testing, we have responded to all known medium, high, and critical risks and are constantly hardening our environment.
We also utilize access control policies to further limit access to data within the systems, including quarterly reviews, generally, and on a weekly basis for financial operations. We periodically engage third parties, which are subject to our standards, policies and procedure, to conduct audits, risk assessments, including penetration testing and other system vulnerability analyses.
Removed
We deploy a wide range of security tools, use single sign-on, and require multifactor authentication across all systems. We also utilize access control policies to further limit access to data within the systems, including quarterly reviews, generally, and on a weekly basis for financial operations.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur wholly owned subsidiary, APLD Hosting LLC, owns in fee simple a 40-acre parcel of land located in Jamestown, Stutsman County, North Dakota. Our subsidiary APLD ELN-01, LLC owns 40 acres of land in Ellendale, North Dakota. Our subsidiary APLD ELN-02 LLC owns 277 acres in Ellendale, North Dakota.
Biggest changeIn addition, we lease approximately 22,100 square feet of office and warehouse space in Irving, Texas that serves as our hosting operations control center. 41 Our subsidiary APLD Hosting, LLC owns in fee simple a 40-acre parcel of land located in Jamestown, North Dakota. Our subsidiary APLD ELN-01 LLC owns 40 acres of land in Ellendale, North Dakota.
Item 2. Properties We lease approximately 13,700 square feet of office space at 3811 Turtle Creek Blvd., Suite 2100, Dallas, Texas 75219. We use this location as our principal office. In addition, we lease approximately 22,100 square feet of office and warehouse space in Irving, Texas that serve as our hosting operations control center.
Item 2. Properties We lease approximately 13,700 square feet of office space for our principal offices located at 3811 Turtle Creek Blvd., Suite 2100, Dallas, Texas 75219.
The Company has built data centers on each of the properties in Jamestown, North Dakota and Ellendale, North Dakota.
The Company has built data centers on each of these properties. Our subsidiaries APLD HPC Holdings LLC, APLD ELN-02 LLC and APLD ELN-02 LandCo LLC own 197 acres, 55 acres and 25 acres, respectively, in Ellendale, North Dakota.
Removed
We lease 1.5 MW, 12.5 MW, 2.25 MW, and 4.5 MW of power capacity and space from third-party-owned colocation data centers in Minnesota, Utah, Nevada, and Colorado, respectively. We use these locations as operating space in our Cloud Services business.
Added
The Company is currently constructing data centers on each of the properties owned by APLD HPC Holdings LLC and APLD ELN-02 LandCo LLC.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeOn February 27, 2024, the derivative plaintiff filed an amended complaint asserting the same claims as the original complaint. On June 5, 2024, the Court entered an order granting the defendants’ motion to dismiss without prejudice and dismissing all claims against all defendants, including the Company.
Biggest changeOn June 5, 2024, following briefing and argument on the defendants’ motion to dismiss the Derivative Lawsuit, the Court entered an order granting the defendants’ motion without prejudice and dismissing all claims against all defendants, including the Company, on the grounds that the plaintiff failed to plead (1) demand futility as to each of plaintiff’s claims or (2) a claim for breach of fiduciary duty.
Item 3. Legal Proceedings From time to time, we may become involved in legal proceedings. 44 The Company, Wes Cummins, the Company's Chief Executive Officer, and David Rench, the Company's Chief Financial Officer, have been named as defendants in a putative securities class action lawsuit in the matter styled, McConnell v.
Item 3. Legal Proceedings From time to time, we may become involved in legal proceedings. The Company, Wes Cummins, the Company's Chief Executive Officer, and David Rench, the Company's then Chief Financial Officer, have been named as defendants in a putative securities class action lawsuit in the matter styled, McConnell v.
The complaint asserts claims for breach of fiduciary duties, corporate waste and unjust enrichment based upon allegations that the defendants caused or allowed the Company to make materially false and misleading statements regarding the Company’s business, operations and compliance policies.
The complaint asserted claims for breach of fiduciary duties, corporate waste and unjust enrichment based upon allegations that the defendants caused or allowed the Company to make materially false and misleading statements regarding the Company’s business, operations, and compliance policies.
On May 22, 2024, the court appointed Lead plaintiff and approved lead counsel, and on July 22, 2024, Lead Plaintiff filed an amended complaint which asserts the same claims based on similar allegations in the original complaint. The Company’s response to the Complaint is due on September 20, 2024.
On May 22, 2024, the court appointed Lead plaintiff and approved lead counsel, and on July 22, 2024, Lead Plaintiff filed an amended complaint which asserts the same claims based on similar allegations in the original complaint. On September 20, 2024, the defendants filed a motion to dismiss the amended complaint.
If an unfavorable action were to occur, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable. There are no other pending lawsuits that could reasonably be expected to have a material adverse effect on the results of the Company’s consolidated operations.
If an unfavorable action were to occur, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable.
As of the date of this filing, the plaintiff has not sought leave to file an amended complaint or filed an appeal of the order dismissing the action. The Company is unable to estimate a range of loss, if any, that could result were there to be an adverse final decision in these actions.
The plaintiff can seek leave to file an amended complaint but to date has not done so. The Company is unable to estimate a range of loss, if any, that could result were there to be an adverse final decision in these actions.
The Weich complaint names as defendants certain members of the Company’s Board Wes Cummins, the Company’s Chief Executive Officer and purports to name David Rench, the Company’s Chief Financial Officer, as a defendant.
Cummins, et al., Case No. A-23-881629-C in the District Court of Clark County, Nevada (the “Derivative Lawsuit”). The Weich complaint named as defendants certain members of the Company’s Board of Directors and its Chief Executive Officer Wesley Cummins and purports to name the Company’s then Chief Financial Officer David Rench as a defendant.
Removed
On November 15, 2023, a putative derivative action was filed in the matter styled, Weich v. Cummins, et al., Case No. A-23-881629-C in the District Court of Clark County, Nevada.
Added
On November 20, 2024, Lead Plaintiff filed his opposition to the Motion to Dismiss. On January 3, 2025, the defendants filed their reply in further support of the Motion to Dismiss. See further discussion in "Note 15 - Commitments and Contingencies." On November 15, 2023, a derivative action was filed in the matter styled, Weich v.
Removed
Item 4. Mine Safety Disclosures Not applicable. 45 Part II
Added
On February 27, 2024, the derivative plaintiff filed an amended complaint asserting the same claims as the original complaint.
Added
As of May 31, 2025, there were no other pending or threatened lawsuits that could reasonably be expected to have a material adverse effect on the results of the Company’s consolidated operations.
Added
There are also no legal proceedings in which any of the Company's management or affiliates is an adverse party or has a material interest adverse to the Company's interest. Item 4. Mine Safety Disclosures Not applicable. 42 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+2 added−3 removed0 unchanged
Biggest changeDuring the fiscal year ended May 31, 2024, there were no other unregistered sales of our securities except as previously reported in a Current Report on Form 8-K or a Quarterly Report on Form 10-Q Item 6. [Reserved] 46
Biggest changeRecent Sales of Unregistered Securities During the fiscal year ended May 31, 2025, there were no unregistered sales of our securities except as previously reported in a Current Report on Form 8-K or a Quarterly Report on Form 10-Q. Item 6. [Reserved] 43
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Primary Market The Company's Common Stock is traded on the Nasdaq Global Select Market under the symbol "APLD". Holders As of May 31, 2024, we had approximately 290 shareholders of record of our common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Primary Market The Company's Common Stock is traded on the Nasdaq Global Select Market under the symbol "APLD." Holders As of May 31, 2025, we had approximately 105 shareholders of record of our common stock.
Removed
Repurchases of Equity Securities by the Issuer and Affiliated Purchasers We and our affiliates have not undertaken any share repurchases during the year ended May 31, 2024.
Added
Repurchases of Equity Securities by the Issuer and Affiliated Purchasers The following table sets forth information regarding our purchases of shares of our common stock during the year ended May 31, 2025: Period Total Number of Shares Purchased Average Price Paid per Share June 1, 2024 through August 31, 2024 ̶ ̶ September 1, 2024 through November 30, 2024 4,258,397 (1) $7.36 December 1, 2024 through February 28, 2025 ̶ ̶ March 1, 2025 through May 31, 2025 ̶ ̶ Total 4,258,397 (1) (1) In addition to the purchase of shares of common stock reflected in the above table, on October 30, 2024, in connection with the Convertible Notes offering, with an effective date of November 4, 2024, we entered into a transaction with a forward counterparty thereto (the “Counterparty”) pursuant to which, on or before November 3, 2025, the Counterparty is obligated to deliver to us an aggregate of 7,165,300 shares of our common stock (the “Prepaid Forward Transaction”).
Removed
Recent Sales of Unregistered Securities During the fiscal year ended May 31, 2024, we issued and sold the following unregistered securities: On January 31, 2024, the Company issued an aggregate 10,461 shares to Chris Schuler as partial payment for construction services performed at the Company's Ellendale, North Dakota facility.
Added
On October 30, 2024, in connection with the Prepaid Forward Transaction, we paid the Counterparty approximately $52.7 million, which equates to $7.36 per share of common stock.
Removed
The foregoing issuance of securities was not registered under the Securities Act of 1933, as amended (the “Securities Act”) or the securities laws of any state, and the securities were offered and issued in reliance on the exemption from registration under the Securities Act afforded by Section 4(a)(2).

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeReconciliation of GAAP to Non-GAAP Measures Fiscal Year Ended $ in thousands May 31, 2024 May 31, 2023 Adjusted operating loss Operating loss (GAAP) $ (99,023) $ (44,055) Stock-based compensation 17,108 32,072 Non-recurring repair expenses (a) 1,224 — Diligence, acquisition, disposition and integration expenses (b) 5,838 2,164 Litigation expenses (c) 1,589 — Research and development expenses (d) 169 893 Loss on classification as held for sale 15,417 — Accelerated depreciation and amortization (e) 4,307 — Loss on legal settlement 2,380 — Other non-recurring expenses (f) — 1,606 Adjusted operating loss (Non-GAAP) $ (50,991) $ (7,320) Adjusted operating margin (31) % (13) % 57 Adjusted net loss attributable to Applied Digital Corporation Net loss attributable to Applied Digital Corporation (GAAP) $ (149,274) $ (44,646) Stock-based compensation 17,108 32,072 Non-recurring repair expenses (a) 1,224 — Diligence, acquisition, disposition and integration expenses (b) 5,838 2,164 Litigation costs (c) 1,589 — Research and development expenses (d) 169 893 Loss on classification as held for sale 15,417 — Accelerated depreciation and amortization (e) 4,307 — Loss on change in fair value of debt 7,401 — Loss on change in fair value of related party debt 8,116 — Loss on fair value of warrants issued to related parties 5,696 — Loss on extinguishment of debt 2,507 94 Loss on legal settlement 2,380 — Other non-recurring expenses (f) — 1,511 Adjusted net loss attributable to Applied Digital Corporation (Non-GAAP) $ (77,522) $ (7,912) Adjusted net loss attributable to Applied Digital Corporation per diluted share (Non-GAAP) $ (0.68) $ (0.08) EBITDA and Adjusted EBITDA Net loss attributable to Applied Digital Corporation (GAAP) $ (149,274) $ (44,646) Interest expense, net 26,832 1,980 Income tax expense (benefit) 96 (523) Depreciation and amortization (e) 79,360 7,267 EBITDA (Non-GAAP) $ (42,986) $ (35,922) Stock-based compensation 17,108 32,072 Non-recurring repair expenses (a) 1,224 — Diligence, acquisition, disposition and integration expenses (b) 5,838 2,164 Litigation expenses (c) 1,589 — Research and development expenses (d) 169 893 Loss on classification as held for sale 15,417 — Loss on change in fair value of debt 7,401 — Loss on change in fair value of related party debt 8,116 — Loss on fair value of warrants issued to related parties 5,696 — Loss on extinguishment of debt 2,507 94 Loss on legal settlement 2,380 — Other non-recurring expenses (f) — 1,511 Adjusted EBITDA (Non-GAAP) $ 24,459 $ 812 (a) Represents costs incurred in the repair and replacement of equipment at the Company's Ellendale data center hosting facility as a result of the previously disclosed power outage.
Biggest changeReconciliation of GAAP to Non-GAAP Measures Fiscal Year Ended $ in thousands May 31, 2025 May 31, 2024 May 31, 2023 Adjusted operating income (loss) Operating loss (GAAP) $ (16,845) $ (32,852) $ (42,911) Stock-based compensation 22,492 6,973 32,072 Non-recurring repair expenses (1) 173 1,224 — Diligence, acquisition, disposition and integration expenses (2) 17,269 5,545 2,164 Litigation expenses (3) 1,389 1,589 — Loss on abandonment of assets 1,138 — — (Gain) loss on classification as held for sale (24,616) 15,417 — Accelerated depreciation and amortization (4) 45 4,307 — Loss on legal settlement — 2,380 — Restructuring expenses (5) 711 — — Other non-recurring expenses (6) 627 169 1,777 Adjusted operating income (loss) (Non-GAAP) $ 2,383 $ 4,752 $ (6,898) Adjusted operating margin 2 % 3 % (12) % Adjusted net loss from continuing operations attributable to common stockholders Net loss from continuing operations attributable to common stockholders (GAAP) $ (160,950) $ (73,979) $ (43,528) Stock-based compensation 22,492 6,973 32,072 Non-recurring repair expenses (1) 173 1,224 — Diligence, acquisition, disposition and integration expenses (2) 17,269 5,545 2,164 Litigation expenses (3) 1,389 1,589 — Loss on abandonment of assets 1,138 — — (Gain) loss on classification as held for sale (24,616) 15,417 — Accelerated depreciation and amortization (4) 45 4,307 — Loss on conversion of debt 33,612 — — Loss on change in fair value of debt 85,439 7,401 — Loss on change in fair value of related party debt — 8,116 — Loss on change in fair value of warrants 6,421 — — — Loss on change in fair value of warrants issued to related parties — — 5,696 — Loss on extinguishment of debt 1,177 — 94 Loss on extinguishment of related party debt — 2,507 — Loss on legal settlement — 2,380 — Preferred dividends 2,615 — — Restructuring expenses (5) 711 — — Other non-recurring expenses (6) 627 169 1,777 58 Adjusted net loss from continuing operations attributable to common stockholders (Non-GAAP) $ (12,458) $ (12,655) $ (7,421) Adjusted net loss from continuing operations attributable to common stockholders per diluted share (Non-GAAP) $ (0.06) $ (0.11) $ (0.08) EBITDA and Adjusted EBITDA Net loss from continuing operations attributable to common stockholders (GAAP) $ (160,950) $ (73,979) $ (43,528) Interest expense, net 14,739 17,708 2,006 Income tax expense (benefit) 102 96 (523) Depreciation and amortization (4) 17,289 21,477 7,113 EBITDA (Non-GAAP) $ (128,820) $ (34,698) $ (34,932) Stock-based compensation 22,492 6,973 32,072 Non-recurring repair expenses (1) 173 1,224 — Diligence, acquisition, disposition and integration expenses (2) 17,269 5,545 2,164 Litigation expenses (3) 1,389 1,589 — (Gain) loss on classification as held for sale (24,616) 15,417 — Loss on abandonment of assets 1,138 — — Loss on conversion of debt 33,612 — — — Loss on change in fair value of debt 85,439 7,401 — Loss on change in fair value of related party debt — 8,116 — Loss on change in fair value of warrants 6,421 — — Loss on change in fair value of warrants issued to related parties — 5,696 — Loss on extinguishment of debt 1,177 — 94 Loss on extinguishment of related party debt — 2,507 — Loss on legal settlement — 2,380 — Preferred dividends 2,615 — — Restructuring expenses (5) 711 — — Other non-recurring expenses (6) 627 169 1,777 Adjusted EBITDA (Non-GAAP) $ 19,627 $ 22,319 $ 1,175 (1) Represents costs incurred in the repair and replacement of equipment at Ellendale Data Center Hosting facility as a result of the previously disclosed power outage.
In addition, from time to time in the future there may be items that we may exclude for purposes of our non-GAAP financial 56 measures and we may in the future cease to exclude items that we have historically excluded for purposes of our non-GAAP financial measures.
In addition, from time to time in the future there may be items that we may exclude for purposes of our non-GAAP financial measures and we may in the future cease to exclude items that we have historically excluded for purposes of our non-GAAP financial measures.
On August 11, 2024, we and the CIM Lender entered into a Waiver Agreement (the “Waiver”), whereby the CIM Lender agreed to waive the satisfaction of certain conditions for the subsequent borrowings, allowing us to draw an additional $20 million (net of original discount and fees) of borrowings under the CIM Promissory Note.
On August 11, 2024, we and the CIM Lender entered into a waiver agreement (the “Waiver Agreement”), whereby the CIM Lender agreed to waive the satisfaction of certain conditions for the subsequent borrowings, allowing us to draw an additional $20 million (net of original discount and fees) of borrowings under the CIM Promissory Note.
In connection with the execution of the SEPA, the Company agreed to pay a structuring fee (in cash) to YA Fund in the amount of $25,000.
In connection with the execution of the SEPA, we agreed to pay a structuring fee (in cash) to YA Fund in the amount of $25,000.
These non-GAAP financial measures are provided as supplemental measures to the Company’s performance measures calculated in accordance with GAAP and therefore, are not intended to be considered in isolation or as a substitute for comparable GAAP measures.
These non-GAAP financial measures are provided as supplemental measures to our performance measures calculated in accordance with GAAP and therefore, are not intended to be considered in isolation or as a substitute for comparable GAAP measures.
Further, investors should be aware that when evaluating these non-GAAP financial measures, these measures should not be construed as an inference that the Company’s future results will be unaffected by unusual or non-recurring items.
Further, investors should be aware that when evaluating these non-GAAP financial measures, these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
Loss on classification of held for sale Loss on classification of held for sale was $15.4 million for the fiscal year ended May 31, 2024 due to the write down of the Garden City assets to their fair market value as part of the planned sale of that facility.
Comparatively, there was a $15.4 million loss on classification as held for sale due to the write down of the Garden City assets to their fair market value as part of the planned sale of that facility during the fiscal year ended May 31, 2024.
The CIM Promissory Note provides for an initial borrowing of $15 million, which was drawn on June 7, 2024, and subsequent borrowings of up to $110 million, which will be available subject to the satisfaction of certain conditions as outlined in the CIM Promissory Note.
The CIM Promissory Note provided for an initial borrowing of $15 million, which was drawn on June 7, 2024, and subsequent borrowings of up to $110 million (the “Subsequent Tranches”), available subject to the satisfaction of certain conditions as outlined in the CIM Promissory Note.
We expect to have sufficient liquidity, including cash on hand, payments from customers, access to debt financing, and access to public capital markets, to support ongoing operations and meet our working capital needs for at least the next 12 months and all of our known requirements and plans for cash.
Our transition to profitability is dependent on the successful operation of our business. 59 We expect to have sufficient liquidity, including cash on hand, payments from customers, access to debt financing, and access to public capital markets, to support ongoing operations and meet our working capital needs for at least the next 12 months and all of our known requirements and plans for cash.
Series E Preferred Stock On May 16, 2024, we entered into a Dealer Manager Agreement (the “Dealer Manager Agreement”) with Preferred Capital Securities, LLC (the “Dealer Manager”), pursuant to which the Dealer Manager has agreed to serve as the Company’s agent and dealer manager for our offering of up to 2,000,000 shares of Series E Redeemable Preferred Stock, par value $0.001 (the “Series E Preferred Stock”).
Series E Preferred Stock On May 16, 2024, we entered into a Dealer Manager Agreement with Preferred Capital Securities, LLC (the “Dealer Manager”) pursuant to which the Dealer Manager agreed to serve as our agent and dealer manager for an offering (the 45 “Series E Offering”) of up to 2,000,000 shares of our Series E Redeemable Preferred Stock (the “Series E Preferred Stock”) (the “Series E Dealer Manager Agreement”).
(e) Represents the acceleration of expense related to transformers that were abandoned by the Company due to operational failure or other reasons. Depreciation and amortization in this amount is included in Depreciation and Amortization expense within the Company’s calculation of EBITDA, and therefore is not added back as a management adjustment in the Company’s calculation of Adjusted EBITDA.
(4) Represents the acceleration of expense related to assets that were abandoned by us due to operational failure or other reasons. Depreciation and amortization in this amount is included in Depreciation and Amortization expense within our calculation of EBITDA, and therefore is not added back as a management adjustment in our calculation of Adjusted EBITDA.
Additionally, the Company agreed to pay a commitment fee of $2,125,000 to YA Fund, payable on the date of the SEPA, in the form of the issuance of 456,287 shares of common stock (the “Commitment Shares”), representing $2,125,000 divided by the average of the daily VWAPs of the common stock during the three trading days immediately prior to August 28, 2024.
Additionally, we agreed to pay a commitment fee of $2,125,000 to YA Fund, (the Commitment Fee”), in the form of 456,287 shares of common stock (the “Commitment Shares”), representing $2,125,000 divided by the average of the daily VWAPs of the common stock during the three trading days immediately prior to the date of the SEPA.
Likewise, we may determine to modify the nature of the adjustments to arrive at our non-GAAP financial measures. Investors should review the non-GAAP reconciliations provided below and not rely on any single financial measure to evaluate the Company’s business. Change in Presentation Beginning in the fiscal third quarter of 2024, the Company updated its presentation of non-GAAP financial measures.
Likewise, we may determine to modify the nature of the adjustments to arrive at our non-GAAP financial measures. Investors should review the non-GAAP reconciliations provided below and not rely on any single financial measure to evaluate our business.
We believe that the significant investments in property and equipment will remain throughout fiscal year 2025 as we continue construction of our HPC hosting facilities and acquire assets to support our Cloud Services Business.
We believe that the significant investments in property and equipment will remain throughout fiscal year 2026 as we continue construction of our HPC hosting facilities.
On July 30, 2024, we announced that it has met the conditional approval requirements related to the release of the escrowed funds from the sale of our Garden City hosting facility. As of the date of this report, we have received the remaining $25 million of the purchase price held in escrow pending such conditional approval.
On July 30, 2024, we announced that the conditional approval requirements related to the release of the escrowed funds from the sale of our Garden City hosting facility had been met. During the quarter ended August 31, 2024, we received the remaining $25 million of the purchase price, previously held in escrow pending such conditional approval.
CIM Arrangement On June 7, 2024, APLD Holdings 2 LLC (“APLD Holdings 2”), one of our subsidiaries, entered into a promissory note (the “CIM Promissory Note”) with CIM APLD Lender Holdings, LLC (the “CIM Lender”).
CIM Arrangement As previously reported, on June 7, 2024, APLD Holdings 2 LLC (“APLD Holdings”), our subsidiary, entered into a promissory note (as amended, the “CIM Promissory Note”) with CIM APLD Lender Holdings, LLC (the “CIM Lender”).
(2) Includes related party interest expense of $5.7 million and $0.1 million for the fiscal years ended May 31, 2024 and May 31, 2023, respectively. (3) Amounts included in the fiscal year ended May 31, 2024 are related to the extinguishment of related party debt. 54 (4) Adjusted Amounts and Other Financial Data are non-GAAP performance measures.
(3) For the fiscal years ended May 31, 2024 and May 31, 2023, amount includes related party interest expense of $5.7 million and $0.1 million, respectively. (4) Adjusted Amounts and Other Financial Data are non-GAAP performance measures. A reconciliation of reported amounts to adjusted amounts can be found in the "Non-GAAP Measures and Reconciliation" section of Management's Discussion and Analysis.
Related party revenue increased $0.4 million, or 2%, from $14.4 million for the fiscal year ended May 31, 2023 to $14.8 million for the fiscal year ended May 31, 2024, primarily driven by increased uptime at the Company’s Jamestown, North Dakota facility throughout the period.
Related party revenue decreased $12.8 million, or 87%, from $14.8 million for the fiscal year ended May 31, 2024 to $1.9 million for the fiscal year ended May 31, 2025, driven by certain related parties terminating their contracts during the first fiscal quarter of fiscal year 2025. 53 Comparatively, related party revenue increased $0.4 million, or 2%, from $14.4 million for the fiscal year ended May 31, 2023 to $14.8 million for the fiscal year ended May 31, 2024, primarily driven by increased uptime at the Company’s Jamestown, North Dakota facility throughout the period.
Loss on change in fair value of debt Loss on change in fair value of debt was $7.4 million for the fiscal year ended May 31, 2024 due to the valuation associated with the Company’s borrowings under the Yorkville Advisors Loan. There were no such losses recorded in the prior year comparative period.
Loss on change in fair value of related party warrants Loss on change in fair value of related party warrants was $5.7 million for the fiscal year ended May 31, 2024, due to the valuation associated with warrants issued to a related party. There were no such losses recorded in the current year comparative period.
Fiscal Year Ended $ in thousands May 31, 2024 May 31, 2023 Net cash provided by operating activities $ 13,793 $ 58,735 Net cash used in investing activities (172,436) (132,088) Net cash provided by financing activities 146,757 70,628 Net decrease in cash and cash equivalents (11,886) (2,725) Cash, cash equivalents, and restricted cash at beginning of year 43,574 46,299 Cash, cash equivalents, and restricted cash at end of period $ 31,688 $ 43,574 Commentary on the change in cash flows between the Fiscal Years Ended May 31, 2024 and May 31, 2023 Operating Activities The net cash provided by operating activities decreased by $44.9 million, or 77%, from $58.7 million for the fiscal year ended May 31, 2023 to $13.8 million for the fiscal year ended May 31, 2024.
Fiscal Year Ended $ in thousands May 31, 2025 May 31, 2024 May 31, 2023 Net cash (used in) provided by operating activities $ (115,402) $ 13,794 $ 58,735 Net cash used in investing activities (667,654) (172,437) (132,088) Net cash provided by financing activities 874,686 146,757 70,628 Net increase (decrease) in cash, cash equivalents, and restricted cash 91,630 (11,886) (2,725) Cash, cash equivalents, and restricted cash at beginning of year, including cash from discontinued operations 31,688 43,574 46,299 Cash, cash equivalents, and restricted cash at end of period, including cash from discontinued operations 123,318 31,688 43,574 Less: Cash, cash equivalents, and restricted cash from discontinued operations 2,398 — — Cash, cash equivalents, and restricted cash from continuing operations $ 120,920 $ 31,688 $ 43,574 Commentary on the change in cash flows between the fiscal years ended May 31, 2025 and May 31, 2024: Operating Activities The net cash (used in) provided by operating activities decreased by $129.2 million, or 937%, from $13.8 million provided by operating activities for the fiscal year ended May 31, 2024 to $115.4 million used in operating activities for the fiscal year ended May 31, 2025.
As of May 31, 2024, we sold approximately 2.7 million shares for net proceeds of approximately $9.6 million in total. Commission and legal fees related to the issuance totaled $0.3 million for the fiscal year ended May 31, 2024. The at the market offering was completed in June 2024.
During the fiscal year ended May 31, 2025, we sold approximately 3.1 million shares for net proceeds of approximately $14.6 million with commission and legal fees related to the issuance of approximately $0.5 million. This offering was completed as of August 31, 2024.
Financing Activities The net cash provided by financing activities increased by $76.1 million, or 108%, from $70.6 million for the fiscal year ended May 31, 2023 to $146.8 million for the fiscal year ended May 31, 2024.
Financing Activities The net cash provided by financing activities increased by $727.9 million, or 496%, from $146.8 million for the fiscal year ended May 31, 2024 to $874.7 million for the fiscal year ended May 31, 2025.
Public Offerings and Changes to Equity Craig-Hallum ATM During the fiscal year ended May 31, 2024, we completed sales of common stock under an "at the market" sale agreement with Craig-Hallum Capital Group LLC pursuant to which we could sell up to $125 million in aggregate proceeds of common stock.
Public Offerings and Changes to Equity May 2024 At-the-Market Sales Agreement On May 6, 2024, we began sales of common stock under an "at the market" sale agreement with Roth Capital Partners, LLC (the “May 2024 Sales Agreement”) pursuant to which we could sell up to $25 million in aggregate proceeds of common stock.
As partial consideration for the CIM Promissory Note, we issued warrants to purchase up to 9,265,366 shares of common stock to the CIM Lender in a registered direct offering.
As consideration for the CIM Promissory Note, we agreed to issue to the CIM Lender warrants to purchase up to an aggregate of 9,265,366 shares of our common stock.
(b) Represents legal, accounting and consulting costs incurred in association with certain discrete transactions and projects. (c) Represents non-recurring litigation expense associated with the Company’s defense of class action lawsuits and legal fees related to matters with certain former employees.
(2) Represents legal, accounting and consulting costs incurred in association with certain discrete transactions and projects. (3) Represents non-recurring litigation expense associated with our defense of class action lawsuits and legal fees related to matters with certain former employees. We do not expect to incur these expenses on a regular basis.
There were no such losses recorded in the prior year comparative period. 55 Loss from Legal Settlement Loss from legal settlement was $2.4 million for the fiscal year ended May 31, 2024 primarily due to a settlement agreement entered into by the Company with respect to employment-related claims by a former executive.
Loss from legal settlement Loss from legal settlement was $2.4 million for the fiscal year ended May 31, 2024 primarily due to a settlement agreement entered into by us with respect to employment-related claims by a former executive. The terms of the settlement included payment to the claimant of $2.3 million.
Pursuant to the SEPA, subject to certain conditions and limitations, the Company has the option, but not the obligation, to sell to YA Fund, and YA Fund must subscribe for, an aggregate amount of up to $250.0 million of common stock, at the Company’s request any time during the commitment period commencing on September 30, 2024, and terminating on the first day of the month next following the 36-month anniversary of September 30, 2024, as further described in Item 9B(a) below.
Pursuant to the SEPA, subject to certain conditions and limitations, we had the option, but not the obligation, to sell to YA Fund, and YA Fund was obligated to subscribe for, an aggregate amount of up to $250.0 million of common stock, at our request any time during the commitment period commencing on September 30, 2024.
In addition to the initial borrowing, the Note includes an accordion feature that allows for up to an additional $75 million of borrowings. Principal amounts repaid under the Note will not be available for reborrowing. As of the date of this report, the total balance outstanding under the CIM Promissory Note is approximately $105 million.
In addition to the initial borrowing, the CIM Promissory Note included an accordion feature that allowed for up to an additional $75 million of borrowings. Principal amounts repaid under the CIM Promissory Note were not available for reborrowing.
Historically we have incurred losses and have relied on equity and debt financings to fund our operations. We have primarily generated cash in the last 12 months from the proceeds of our term and related party loans, issuance of common stock, and the receipt of contractual deposits and revenue payments from customers.
We have primarily generated cash in the last 12 months from the proceeds of our term loans, issuance of common stock, preferred stock, convertible promissory notes, senior unsecured convertible notes, debt facilities and the receipt of contractual deposits and revenue payments from customers.
Business Update Data Center Hosting Business Our Data Center Hosting Business operates data centers to provide energized space to crypto mining customers. Our 106 MW facility in Jamestown, North Dakota operated at full capacity during the fiscal year ended May 31, 2024; however, our 180 MW facility in Ellendale, North Dakota experienced a power outage starting in January 2024.
Business Update Data Center Hosting Business Our Data Center Hosting Business builds and operates data centers to provide energized space to crypto mining customers. As of May 31, 2025, our 106 MW facility in Jamestown, North Dakota and our 180 MW facility in Ellendale, North Dakota continue to operate at full capacity.
Our conclusion as to the probability of achievement is complex and requires judgment. In addition, we make estimates around the service period for certain performance awards that are probable of being achieved. We may revise our estimate when we determine that it is probable that the performance condition will be achieved within a different time period.
Our conclusion as to the probability of achievement is complex and requires significant judgment by management. In addition, estimates around the service period for performance awards that are probable of being achieved require significant judgement by management.
“Adjusted EBITDA” is defined as EBITDA adjusted for stock-based compensation, non-recurring repair expenses, diligence, acquisition, disposition and integration expenses, litigation expenses, non-recurring research and development expenses, loss on classification as held for sale, accelerated depreciation and amortization, the losses associated with changes in fair value of debt, related party debt and warrants issued to related parties, as well as the loss on extinguishment of debt and the loss on legal settlement.
“Adjusted EBITDA” is defined as EBITDA adjusted for stock-based compensation, non-recurring repair expenses, 57 diligence, acquisition, disposition and integration expenses, litigation expenses, (gain) loss on classification as held for sale, loss on abandonment of assets, loss on conversion of debt, loss on change in fair value of debt and related party debt, respectively, loss on change in fair value of warrants and warrants issued to related parties, respectively, loss on extinguishment of debt and related party debt, respectively, loss on legal settlement, preferred dividends, restructuring expenses and other non-recurring expenses that Management believes are not representative of our expected ongoing costs.
We reassess the probability related to vesting and the requisite service period at each reporting period, and recognize a cumulative catch up adjustment for such changes in our probability assessment in subsequent reporting periods. Our determination of probability is based on historical metrics, future projections, and our historical performance against such projections.
We may revise our estimate when we determine that it is probable that the performance condition will be achieved within a different time period. We reassess the probability related to vesting and the requisite service period at each reporting period, and recognize a cumulative catch up adjustment for such changes in our probability assessment in subsequent reporting periods.
While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements. 63 Stock-based Compensation We account for stock-based compensation with performance conditions by recognizing expense ratably over the requisite service period once we conclude that it is probable that the performance conditions will be achieved.
Loss on change in fair value of related party debt Loss on change in fair value of related party debt was $13.8 million for the fiscal year ended May 31, 2024.
Loss on change in fair value of related party debt Loss on change in fair value of related party debt was $8.1 million for the fiscal year ended May 31, 2024, due to the change in fair value of one of our previously held related party loans. There were no such losses recorded in the current year comparative period.
We sold approximately 18.9 million shares for net proceeds of approximately $121.2 million in total. Commission and legal fees related to the issuance totaled $4.0 million for the fiscal year ended May 31, 2024. The at the market offering was completed in December 2023.
During the fiscal year ended May 31, 2025, under the May 2024 Sales Agreement, we sold approximately 3.1 million shares for net proceeds of approximately $14.6 million with commission and legal fees related to the issuance of approximately $0.5 million. This offering was completed as of August 31, 2024.
We provide digital infrastructure solutions and Cloud services to the rapidly growing industries of High-Performance Computing ("HPC") and Artificial Intelligence ("AI").
We provide digital infrastructure solutions to the rapidly growing industries of high-performance computing ("HPC") and artificial intelligence ("AI"). As of May 31, 2025, we operated in two distinct business segments, Blockchain data center hosting (the "Data Center Hosting Business") and HPC data center hosting (the "HPC Hosting Business"), as further discussed below.
Cost of revenues Cost of revenues increased by $104.0 million, or 234%, from $44.4 million for the fiscal year ended May 31, 2023 to $148.3 million for the fiscal year ended May 31, 2024.
Cost of revenues Cost of revenues decreased by $5.2 million, or 5%, from $106.7 million for the fiscal year ended May 31, 2024 to $101.5 million for the fiscal year ended May 31, 2025.
Adjusted Operating Loss, Adjusted Net Loss, and Adjusted Net Loss per Diluted Share “Adjusted Operating Loss” and “Adjusted Net Loss” are non-GAAP financial measures that represent operating loss and net loss, respectively, excluding stock-based compensation, non-recurring repair expenses, diligence, acquisition, disposition and integration expenses, litigation expenses, non-recurring research and development expenses, loss on classification of held for sale, accelerated depreciation and amortization, and loss on legal settlement.
Adjusted Operating Income (Loss) is Operating loss excluding stock-based compensation, non-recurring repair expenses, diligence, acquisition, disposition and integration expenses, litigation expenses, loss on abandonment of assets, (gain) loss on classification as held for sale, accelerated depreciation and amortization, loss on legal settlement, restructuring expenses and other non-recurring expenses that Management believes are not representative of the Company's expected ongoing costs.
Summary of Cash Flows The following table provides information about the Company’s net cash flow for the fiscal year ended May 31, 2024 and May 31, 2023, respectively.
(6) Preferred share dividends represent future dividend payments in accordance with preferred stock that has been issued. Summary of Cash Flows The following table provides information about our net cash flow for the fiscal years ended May 31, 2025, May 31, 2024, and May 31, 2023 respectively.
Selling, general and administrative expense Selling, general and administrative expense increased by $43.4 million, or 79%, from $55.1 million for the fiscal year ended May 31, 2023 to $98.5 million for the fiscal year ended May 31, 2024. The increase was primarily due to the overall growth in the business.
Selling, general and administrative expense Selling, general and administrative expense increased by $38.0 million, or 85%, from $45.0 million for the fiscal year ended May 31, 2024 to $83.1 million for the fiscal year ended May 31, 2025.
Income tax benefit Income tax benefit decreased $0.6 million, or 118%, from a $0.5 million benefit for the fiscal year ended May 31, 2023 to a $0.1 million expense for the fiscal year ended May 31, 2024.
HPC Hosting Business Operating Loss HPC Hosting Business operating loss increased $4.6 million, or 1,856%, from a loss of $0.2 million for the fiscal year ended May 31, 2023 to a loss of $4.8 million for the fiscal year ended May 31, 2024.
As of the date of this report, $38.0 million of the May Note had been converted into approximately 8.8 million shares of common stock.
As of the date of this report, all 156,000 shares of Series G Preferred Stock have been issued, of which all 156,000 shares of Series G Preferred Stock have been converted into approximately 21.0 million shares of our common stock.
The primary reason for the change was an increase in lease prepayments made for leases on hosting equipment to support the Company’s Cloud Services Business during the fiscal year ended May 31, 2024.This increase was partially offset by a decrease in investments in property and equipment during the fiscal year ended May 31, 2024 as the Company’s payments in the comparative periods for construction of the Ellendale, North Dakota and Garden City, Texas data center hosting facilities outpaced current period construction payments for the Garden City hosting facility and the Company’s HPC data centers.
This increase was primarily due to an increase of approximately $539.8 million in investments in property and equipment during the fiscal year ended May 31, 2025 as our payments in the current periods for construction of Polaris Forge 1 outpaced the comparative period construction payments for the Garden City hosting facility and our HPC data centers in the prior year.
See "Note 6 - Related Party Transactions" and "Note 7 - Debt" in the notes to the consolidated financial statements included in this Annual Report on Form 10-K for more information on our term and related party loans. On May 23, 2023, we received funding of $36.5 million, net of issuance fees, pursuant to the B.
Recent Financing Activities See "Note 7 - Debt" in the notes to the consolidated financial statements included in this Annual Report on Form 10-K for more information on our term loans and other debt instruments. On June 7, 2024, we entered into the CIM Promissory Note with the CIM Lender for borrowings of up to $125 million.
Loss on extinguishment of debt Loss on extinguishment of debt increased $2.4 million from $0.1 million for the fiscal year ended May 31, 2023 to $2.5 million for the fiscal year ended May 31, 2024. The increase was driven by the termination fees to extinguish the B. Riley related party loan during the fiscal year ended May 31, 2024.
Loss on extinguishment of related party debt Loss on extinguishment of related party debt was $2.5 million for the fiscal year ended May 31, 2024, due to the termination fees related to a previously held related party loan. There were no such losses recorded in the current year comparative period.
In accordance with the terms of the May PPA, YA Fund agreed to advance $42.1 million, less a five percent original issue discount, to the Company pursuant the May Note. 59 On May 16, 2024, we entered into the Dealer Manager Agreement with the “Dealer Manager, pursuant to which the Dealer Manager has agreed to serve as our agent and dealer manager for our offering of up to 2,000,000 shares of Series E Preferred Stock.
On September 23, 2024, we entered into the Series E-1 Dealer Manager Agreement with the Dealer Manager pursuant to which the Dealer Manager agreed to serve as our agent and dealer manager for the offering of up to 62,500 shares of our Series E-1 Preferred Stock, at a price per share of $1,000 per share, pursuant to our Registration Statement on Form S-1, filed with the SEC on September 23, 2024.
Recent Developments Series E Preferred Stock The Company has closed on several offerings of the Series E Preferred Stock subsequent to May 31, 2024. As of the date of this report, we sold approximately 301,673 shares of Series E Preferred Stock for net proceeds of approximately $6.9 million in total.
During the fiscal year ended May 31, 2025, we closed on four offerings of the Series E Preferred Stock in which we sold total shares of 301,673 for proceeds of $6.9 million net of issuance costs of $0.6 million. The Series E Dealer Manager Agreement was terminated upon the termination of the Series E Offering on August 9, 2024.
HPC Hosting Applied Digital’s HPC Hosting Business designs, builds, and operates next-generation data centers, which are designed to provide massive computing power and support HPC applications within a cost-effective model. During the fiscal second quarter 2024, we broke ground on our first 100 MW HPC data center facility in Ellendale, North Dakota.
This business segment accounts for all of the revenue we generated from our continuing operations for the fiscal year ended May 31, 2025. HPC Hosting Business Our HPC Hosting Business designs, constructs, and operates next-generation data centers, which are designed to provide massive computing power and support HPC applications within a cost-effective model.
The change in selling, general and administrative expense is categorized as follows: • approximately $27.7 million increase in depreciation and amortization expense due to an increase in owned and leased assets that are not yet being used to generate revenue; • approximately $13.0 million increase in other expenses such as operating leases expense for data center space not yet being used to generate revenue; • approximately $9.0 million increase in professional service expenses related to legal services provided on discrete transactions and projects as well as general support of the business; • approximately $6.8 million increase in personnel expenses largely driven by increases in headcount to support the business; and • approximately $4.0 million increase in other selling, general, and administrative expense such as insurance premiums and computer and software expenses.
The increase was primarily due to the overall growth in the business, categorized as follows: • approximately $14.5 million increase in stock-based compensation due to accelerated vesting of certain employee stock awards and the recognition of expense related to performance stock units granted during the fiscal year ended May 31, 2025; • approximately $11.5 million increase in professional service expenses primarily related to legal services provided on discrete transactions and projects as well as general support of the business; • approximately $8.4 million increase in personnel expenses largely driven by increases in headcount to support the business; and • approximately $3.7 million increase in other selling, general, and administrative expense primarily due to insurance premiums and computer and software expenses.
Fiscal Year Ended May 31, 2024 May 31, 2023 Revenues Revenue $ 150,814 $ 40,984 Related party revenue 14,761 14,408 Total revenue 165,575 55,392 Costs and expenses: Cost of revenues 148,340 44,388 Selling, general and administrative (1) 98,461 55,059 Loss on classification as held for sale 15,417 — Loss from legal settlement 2,380 — Total costs and expenses 264,598 99,447 Operating loss (99,023) (44,055) Interest expense, net (2) 26,832 1,980 Loss on change in fair value of debt 7,401 — Loss on change in fair value of related party debt 13,812 — Loss on extinguishment of debt (3) 2,507 94 Net loss before income tax expenses (149,575) (46,129) Income tax expense (benefit) 96 (523) Net loss (149,671) (45,606) Net loss attributable to noncontrolling interest (397) (960) Net loss attributable to Applied Digital Corporation $ (149,274) $ (44,646) Basic and diluted net loss per share attributable to Applied Digital Corporation $ (1.31) $ (0.48) Basic and diluted weighted average number of shares outstanding 114,061,414 93,976,233 Adjusted Amounts (4) Adjusted operating (loss) income $ (50,991) $ (7,320) Adjusted operating margin (31) % (13) % Adjusted net (loss) income attributable to Applied Digital Corporation $ (77,522) $ (7,912) Adjusted net (loss) income attributable to Applied Digital Corporation per diluted share $ (0.68) $ (0.08) Other Financial Data (4) EBITDA $ (42,986) $ (35,922) as a percentage of revenues (26) % (65) % Adjusted EBITDA $ 24,459 $ 812 as a percentage of revenues 15 % 1 % (1) Includes related party selling, general and administrative expense of $0.6 million and $0.1 million for the fiscal years ended May 31, 2024 and May 31, 2023, respectively.
Fiscal Year Ended May 31, 2025 May 31, 2024 May 31, 2023 Revenues Revenue $ 142,267 $ 121,857 $ 40,984 Related party revenue 1,926 14,761 14,408 Total revenue 144,193 136,618 55,392 Costs and expenses: Cost of revenues 101,451 106,653 44,388 Selling, general and administrative (1) 83,065 45,020 53,915 (Gain) loss on classification as held for sale (2) (24,616) 15,417 — Loss on abandonment of assets 1,138 — — Loss from legal settlement — 2,380 — Total costs and expenses 161,038 169,470 98,303 Operating loss (16,845) (32,852) (42,911) Interest expense, net (3) 14,739 17,708 2,006 Loss on conversion of debt 33,612 — — Loss on change in fair value of debt 85,439 7,401 — Loss on change in fair value of related party debt — 8,116 — Loss on extinguishment of debt 1,177 — 94 Loss on extinguishment of related party debt — 2,507 — Loss on change in fair value of warrants 6,421 — — Loss on change in fair value of related party warrants — 5,696 — Net loss from continuing operations before income tax expenses (158,233) (74,280) (45,011) Income tax expense (benefit) 102 96 (523) Net loss from continuing operations (158,335) (74,376) (44,488) Net loss from discontinued operations (72,730) (75,295) (1,118) Net loss (231,065) (149,671) (45,606) Net loss attributable to noncontrolling interest — (397) (960) Preferred dividends (2,615) — — Net loss attributable to common stockholders $ (233,680) $ (149,274) $ (44,646) Net loss attributable to common stockholders Continuing operations $ (160,950) $ (73,979) $ (43,528) Discontinued operations (72,730) (75,295) (1,118) Net loss $ (233,680) $ (149,274) $ (44,646) 52 Basic and diluted net loss per share attributable to common stockholders Continuing operations $ (0.80) $ (0.65) $ (0.46) Discontinued operations (0.36) (0.66) (0.01) Basic and diluted net loss per share $ (1.16) $ (1.31) $ (0.47) Basic and diluted weighted average number of shares outstanding 201,194,451 114,061,414 93,976,233 Adjusted Amounts (4) Adjusted operating income (loss) $ 2,383 $ 4,752 $ (6,898) Adjusted operating margin 2% 3% (12)% Adjusted net loss attributable to common stockholders $ (12,458) $ (12,655) $ (7,421) Adjusted net loss attributable to common stockholders per diluted share $ (0.06) $ (0.11) $ (0.08) Other Financial Data (4) EBITDA $ (128,820) $ (34,698) $ (34,932) as a percentage of revenues (89)% (25)% (63)% Adjusted EBITDA $ 19,627 $ 22,319 $ 1,175 as a percentage of revenues 14% 16% 2% (1) Includes related party selling, general and administrative expense of $0.3 million, $0.6 million and $0.1 million for the fiscal years ended May 31, 2025, May 31, 2024, and May 31, 2023 respectively.
Inherent in pricing models are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield, which are considered Level 3 inputs. Yorkville Convertible Debt The fair value of the YA Notes was calculated on an as-converted basis using quoted market prices of our outstanding common stock as of May 31, 2024.
We engaged a third party valuation specialist to assist management in its determination of the fair value of the warrants using a Black-Scholes Option Pricing model. Inherent in pricing models are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield, which are considered Level 3 inputs.
Pursuant to the Certificate of Amendment, the number of authorized shares of common stock was increased to 300,000,000. The Certificate of Amendment became effective upon filing on June 11, 2024. At-the-Market Sales Agreement On July 9, 2024, we entered into the Sales Agreement.
The Certificate of Amendment became effective upon filing on June 11, 2024. Additionally, on November 20, 2024, we filed an amendment to our Articles of Incorporation, increasing the number of shares of common stock authorized for issuance to 400,000,000 shares and the number of shares of preferred stock authorized for issuance to 10,000,000 shares.
EBITDA, Adjusted EBITDA, Adjusted net loss attributable to Applied Digital Corporation, and Adjusted net loss attributable to Applied Digital Corporation per diluted share are non-GAAP financial measures and are defined below.
Adjusted Operating Income (Loss), Adjusted Net Loss From Continuing Operations Attributable to Common Stockholders, and Adjusted Net Loss From Continuing Operations Attributable to Common Stockholders per Diluted Share “Adjusted Operating Income (Loss)” and “Adjusted net loss from continuing operations attributable to common stockholders” are non-GAAP financial measures that represent operating loss and net loss from continuing operations attributable to common stockholders, respectively.
Up to $125,000,000 of shares of our common stock may be issued if and when sold pursuant to the Sales Agreement. As of the date of this report, approximately 2.9 million shares of our common stock have been issued and sold under the Sales Agreement for approximate proceeds to us of $16.4 million.
As of the date of this report, we issued and sold 60 approximately 3.0 million shares of our common stock under the July 2024 Sales Agreement for proceeds of $16.4 million net of issuance costs of $0.5 million. This offering is no longer active.
Adjusted Net Loss is Adjusted Operating Loss further adjusted for the losses associated with changes in fair value of debt, related party debt and warrants issued to to related parties, as well as the loss on extinguishment of debt. We define “Adjusted Net Loss per Diluted Share” as Adjusted Net Loss divided by weighted average diluted share count.
Adjusted net loss from continuing operations attributable to common stockholders is Adjusted Operating Income (Loss) further adjusted for the loss on conversion of debt, loss on change in fair value of debt and related party debt, respectively, loss on fair value of warrants and warrants issued to related parties, respectively, loss on extinguishment of debt and related party debt, respectively, and preferred dividends.
Commentary on Results of Operations for the fiscal year ended May 31, 2024 compared to the fiscal year ended May 31, 2023 Revenues Revenue increased $109.8 million, or 268%, from $41.0 million for the fiscal year ended May 31, 2023 to $150.8 million for the fiscal year ended May 31, 2024, which increase was primarily driven by increased capacity across the Company’s three Data Center Hosting facilities between the periods, as well as the Company beginning to recognize revenue from its Cloud Services Business segment in the third quarter of the fiscal year ended May 31, 2024 as a result of the launch of services provided by the Cloud Services Business during that year.
The increase in revenue related to discontinued operations was due to the Cloud Services Business segment starting to generate revenue in the third quarter of fiscal year ended May 31, 2024, as a result of the launch of services provided by the Cloud Services Business during that year.
The primary reasons for the change were the receipt of net proceeds from the Company’s common stock offerings, the YA Notes and the increase in related party debt proceeds, which were partially offset by an increase in debt repayments and an increase in finance lease payments during the fiscal year ended May 31, 2024. Off Balance Sheet Arrangements None.
These increases were partially offset by the payment of approximately $42.4 million in debt financing costs, an increase of approximately $65.1 million in finance lease payments as well as approximately $104.5 million cash used for the capped call and prepaid forward related to the Convertible Notes offering during the fiscal year ended May 31, 2025. Off Balance Sheet Arrangements None.
If YA Fund elects to make such prepayments in shares of common stock, YA Fund will receive a number of shares of common stock equal to (x) $5 million, divided by (y) an amount equal to 95% of the lowest daily VWAP during the five trading day period ending on the trading day immediately before the payment date. 52 Increase In Authorized Shares On June 11, 2024, we filed a Certificate of Amendment to our Second Amended and Restated Articles of Incorporation, as amended (the “Certificate of Amendment”).
Increases in Authorized Shares On June 11, 2024, we filed a Certificate of Amendment (the “Certificate of Amendment”) to our Second Amended and Restated Articles of Incorporation, as amended (the “Articles of Incorporation”). Pursuant to the Certificate of Amendment, the number of authorized shares of common stock was increased to 300,000,000.
In connection with the May PPA, we and YA Fund agreed to amend certain terms of the YA Notes, including amending the Monthly Maximum Amount (as defined in the YA Notes) to $16.0 million per month, in the aggregate, across the YA Notes. The May Note is convertible into shares of the Company’s common stock.
Additionally, in connection with the Series F Offering, we agreed to eliminate the $16.0 million per month conversion limitation that existed in the aggregate across the YA Notes (as defined below). During the fiscal year ended May 31, 2025, all 53,191 shares of Series F Convertible Preferred Stock were converted into approximately 7.6 million shares of our common stock.
Fair Value Measurements AI Warrants We measure the AI Warrants issued to AI Bridge Funding LLC (See “Note 9 - Stockholders' Equity” for further discussion) at fair value. We engaged a third party valuation specialist to assist management in its determination of the fair value of the AI Warrants using a Black-Scholes Option Pricing model.
Convertible Notes We engaged a third party valuation specialist to assist management in its determination and allocation of the fair value of the embedded derivative, the Conversion Option, using a binomial lattice model in a risk-neutral framework.
The AI Warrants are exercisable upon payment of the applicable exercise price in cash or through cashless exercise for a period of five years. 1,500,000 AI Warrants have an exercise price of $10.00 per share of common stock and 1,500,000 AI Warrants have an exercise price of $7.50 per share of common stock.
The warrant is exercisable beginning on February 27, 2027 (the “Initial Exercise Date”), upon payment of the applicable exercise price in cash or through cashless exercise for a period of five years from the Initial Exercise Date.
As of the date of this report, we sold approximately 301,673 shares of Series E Preferred Stock for net proceeds of approximately $6.9 million in total.
During the fiscal year ended May 31, 2025, we closed on four offerings totaling 301,673 shares of Series E Preferred Stock for net proceeds of approximately $6.9 million. The Series E Dealer Manager Agreement and the associated offering were terminated on August 9, 2024.
On June 27, 2023, we began issuing and selling common stock under an "at the market" sales agreement, with Craig-Hallum Capital, pursuant to which we may sell up to $125 million in aggregate proceeds from sales of common stock. During the fiscal year ended May 31, 2024, we sold approximately 18.9 million shares in total.
During the fiscal year ended May 31, 2025, we issued and sold approximately 3.0 million shares of our common stock under the July 2024 Sales Agreement for proceeds of $16.4 million net of issuance costs of $0.5 million. On October 30, 2024, we terminated the July 2024 Sales Agreement with the Agents.
Approximately $8.1 million was due to the valuation associated with the Company’s borrowings under the AI Bridge Loan and $5.7 million was due to the valuation associated with warrants issued to AI Bridge Funding LLC. There were no such losses recorded in the prior year comparative period.
Loss on change in fair value of warrants Loss on change in fair value of warrants was $6.4 million for the fiscal year ended May 31, 2025, due to the initial valuation of the STB Warrants issued during the current period. There were no such losses recorded in the prior year comparative period.
The primary reasons for the change were a decrease in revenue prepayments received relative to revenue earned during the fiscal year ended May 31, 2024, as well as an increase in payments associated with our operating leases, partially offset by a large increase in accounts payable. 60 Investing Activities The net cash used in investing activities increased by $40.3 million, from $132.1 million for the fiscal year ended May 31, 2023 to $172.4 million for the fiscal year ended May 31, 2024.
This loss was offset by a gain of approximately $4.1 million related to the change in the fair value of the YA Notes. Investing Activities The net cash used in investing activities increased by $495.2 million, from $172.4 million for the fiscal year ended May 31, 2024 to $667.7 million for the fiscal year ended May 31, 2025.
Removed
We operate in three distinct business segments, including, Blockchain data center hosting (the "Data Center Hosting Business"), cloud services through a wholly owned subsidiary (the "Cloud Services Business") and HPC data center hosting (the "HPC Hosting Business"), as further discussed below.
Added
A comparison of our results of operations and cash flows for fiscal year 2024 and fiscal year 2023 can be found under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024, filed with the SEC on August 30, 2024.
Removed
In response to these challenges, our utility provider installed transformers to enable us to selectively power-down the affected portions of our site. Upon re-energization we have determined the failures were due to transformers not meeting industry standards. We have successfully procured new transformers and related components from North American manufacturers.
Added
During the fiscal year 2025, we determined that our Cloud Services Business met the criteria for held for sale and discontinued operations.
Removed
As of the date of this report, the HPC Ellendale Facility is operating at full capacity. Additionally, during fiscal year 2024, we increased our energy capacity at our 200 MW Garden City, Texas facility up to 132 MW.
Added
As such, the results of the Cloud Services Business, which was previously included as a reportable segment, are presented as discontinued operations in the consolidated statements of operations and have been excluded from both continuing operations and segment results for all periods presented.
Removed
During the third quarter of fiscal year 2024, we entered into a purchase and sale agreement (the "Purchase and Sale Agreement") with Mara Garden City LLC ("Mara"), a Delaware limited liability company and a subsidiary of Marathon Digital Holdings, Inc.
Added
We are currently building two HPC focused data center facilities to provide 100 MW and 150 MW, respectively, of capacity in Ellendale, ND. These facilities are being designed and purpose-built to host high-density GPU architecture or other HPC applications, such as artificial intelligence, natural language processing, machine learning, and additional HPC developments.
Removed
("Marathon"), pursuant to which we and related subsidiaries agreed to sell to Mara the Garden City hosting facility ("the Transaction") for total cash consideration of up to of $87.3 million and additional consideration of approximately $10.0 million in connection with the surrender of certain of Marathon’s revenue prepayments under its existing service agreements with us, payable at the closing of the Transaction, which occurred on April 1, 2024 (the "Closing").
Added
As previously disclosed and as further discussed below, on January 13, 2025, APLD HPC Holdings LLC (“APLDH”), our indirect wholly owned subsidiary, entered into a Unit Purchase Agreement (as amended, the “Unit Purchase Agreement” or “UPA”) for our HPC Hosting Business with MIP VI HPC Holdings, LLC, which is an affiliate of funds and investment vehicles managed by entities within Macquarie Asset Management (“MAM”).
Removed
We recognized a loss of approximately $15.4 million in connection with the Closing.
Added
The closing under the UPA is subject to certain closing conditions, including, APLDH executing a lease with a hyperscaler for the first 100 MW of Polaris Forge 1, in a form acceptable to MAM, the parties finalizing and executing a limited liability company agreement for APLDH (the “LLCA”), for us and APLDH to carry out an internal restructuring to segregate the HPC Hosting Business’ assets and liabilities before closing (the “Internal Restructuring”), as well as customary closing conditions.
Removed
In addition, pursuant to the terms and conditions of the Purchase and Sale Agreement, in the event the full intended additional megawatt energization for the Garden City hosting facility is not conditionally approved by the applicable regulatory authority within 120 days of the Closing, the total cash consideration was subject to a reduction of up to $34.0 million ($25 million of which was held in escrow), depending on the amount of the additional megawatt energization that is not conditionally approved.
Added
As set forth in an amendment to the UPA, entered into by the parties, effective as of April 4, 2025, the parties extended the dates (i) to 44 finalize the form of the LLCA (save for certain specified exhibits thereto) to April 7, 2025, (ii) to finalize the plan for the Internal Restructuring plan and the form of the Corporate Services Agreement to April 18, 2025, and (iii) by which either party may terminate the UPA if closing has not occurred, from July 13, 2025 to October 13, 2025.

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