Legal Proceedings
+Added: 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 Chief Financial Officer, have been named as defendants in a putative securities class action lawsuit in the matter styled, McConnell v.
−Removed: Applied Digital Corporation, et al.
+Added: Applied Digital Corporation, et al., Case No.
3:23-cv-1805, filed in August 2023 in the U.S.
District Court for the Northern District of Texas (the “Securities Lawsuit”).
−Removed: Specifically, the complaint asserts claims pursuant to Section 10(b) of the Securities and Exchange Act of 1934 based on allegedly false or misleading statements regarding the company’s business, operations, and compliance policies, including claims that the Company overstated the profitability of its Datacenter hosting business and its ability to successfully transition into a low-cost cloud services provider and that the Company’s board of directors was not “independent” within the meaning of NASDAQ listing rules.
−Removed: The case is in an early stage, and the Court has not appointed a lead plaintiff nor has any class been certified.
−Removed: The Company has not yet responded to the complaint and no response is currently due.
−Removed: At this time, the Company is unable to estimate potential losses, if any, related to this action.
−Removed: While it is not possible to predict the outcome of these matters with certainty, we do not currently expect this action to have a material adverse effect on our results of operations or financial position.
−Removed: However, this matter is subject to uncertainties, and we could ultimately incur judgments or enter into settlements of claims that could have a material adverse effect our financial position, results of operations or cash flows.
+Added: Specifically, the complaint asserts claims pursuant to Section 10(b) and 20(a) of the Securities and Exchange Act of 1934, based on allegedly false or misleading statements regarding the company’s business, operations, and compliance policies, including claims that the Company overstated the profitability of its Data Center Hosting Business and its ability to successfully transition into a low-cost cloud services provider and that the Company’s board of directors was not “independent” within the meaning of NASDAQ listing rules.
+Added: 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.
+Added: On September 20, 2024, the defendants filed a motion to dismiss the amended complaint.
+Added: See discussion in “Note 11 - Commitments and Contingencies”.
+Added: The Company is unable to estimate a range of loss, if any, that could result were there to be an adverse final decision in this action.
+Added: 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.
On November 15, 2023, a derivative action was filed in the matter styled, Weich v.
2 unchanged sentences
The Weich complaint names as defendants certain members of the Company’s Board of Directors and its Chief Executive Officer Wesley Cummins and purports to name Chief Financial Officer David Rench as a defendant.
−Removed: The complaint asserts claims for breaches of fiduciary duties, unjust enrichment, and corporate waste against the individual defendants largely based on the same fact allegations as the Securities Lawsuit.
−Removed: On February 27, 2024, the plaintiff filed an amended complaint, asserting the same causes of action against the same defendants as the original complaint.
−Removed: The deadline to file or otherwise respond to the amended complaint is April 12, 2024.
−Removed: At this time, the Company is unable to estimate potential losses, if any, related to this action.
−Removed: While it is not possible to predict the outcome of these matters with certainty, we do not currently expect the results of this action to have a material adverse effect on our results of operations or financial position.
−Removed: However, this matter is subject to uncertainties, and we could incur judgments or enter into settlements of claims that could have a material adverse effect on our financial position, results of operations or cash flows.
+Added: 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.
+Added: Specifically, the complaint alleged that the Company overstated the profitability of the Data Center Hosting Business and its ability to successfully transition into a low-cost cloud services provider and that the Board was not “independent” within the meaning of NASDAQ listing rules.
+Added: On February 27, 2024, the derivative plaintiff filed an amended complaint asserting the same claims as the original complaint.
+Added: 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.
+Added: On June 5, 2024, following briefing and argument on the defendants’ motion to dismiss, 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.
+Added: The order dismissed all claims against all defendants, including the Company.
+Added: The plaintiff can seek leave to file an amended complaint but to date has not done so.
+Added: The Company is unable to estimate a range of loss, if any, that could result were there to be an adverse final decision in this action.
+Added: 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.
+Added: 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.
+Added: A description of the risk factors associated with our business is contained in the “Risk Factors” section of our Annual Report.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.