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.
−Removed: 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.
+Added: 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.
The risks set forth below are not the only ones facing us.
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If any of the following risks actually materialize, our business, financial condition and/or operations could suffer.
−Removed: In such event, the value of our common stock could decline, and you could lose all or a substantial portion of the money that you pay for our common stock.
+Added: In such event, the value of our common stock could decline, and you could lose all or a substantial portion of the money that you paid for our common stock.
Risk Factors Summary
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Risks Related to Our Business and Operations
−Removed: • 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.
+Added: • 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.
−Removed: • 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.
−Removed: • 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.
−Removed: • 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.
+Added: • 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.
+Added: • Our business has and is expected to continue to have significant customer concentration.
+Added: • Changes in U.S.
+Added: 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.
+Added: • 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.
−Removed: • If our co-hosting customers determine not to use our co-hosting facility, our co-hosting operations may suffer from significant losses.
−Removed: • 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.
−Removed: • Our HPC Hosting Business is expected to have significant customer concentration.
−Removed: • Failure to attract, grow and retain a diverse and balanced customer base, including key magnet customers, could harm our business and operating results.
+Added: • 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.
+Added: • 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.
+Added: • 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.
+Added: • Failure to attract, grow and retain a diverse and balanced customer base, including key anchor customers, could harm our business and operating results.
+Added: • 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.
−Removed: • 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.
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• Various actual and potential conflicts of interest may be detrimental to our stockholders.
+Added: • 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.
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• We may not be able to compete with other companies, some of which have greater resources and experience.
−Removed: • 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.
+Added: • 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.
−Removed: • We face risks related to public health epidemics and pandemics, including COVID-19, which could significantly disrupt our business.
−Removed: • 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.
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• Uncertainty in the global economy and instability within international relations, including changes in governmental policies relating to technology, and any potential downturn in the semiconductor and electronics industries, may negatively impact our business.
+Added: • The use and continued pace of developments in AI are inherently uncertain.
+Added: Failure by us to keep up with evolving data center requirements and regulatory frameworks for AI, could have a material adverse effect on our business and financial condition.
• Banks and financial institutions may not provide banking services, or may cut off services, to businesses that engage in cryptocurrency-related activities, and turmoil among financial institutions arising from or relating to cryptoassets or in general can materially adversely affect us and our industry.
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this volatility may affect your ability to, and the price at which you could, sell our common stock.
−Removed: • We may not be able to maintain the listing of our common stock on Nasdaq, which may adversely affect the flexibility of holders of common stock to resell their securities in the secondary market.
−Removed: • If securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our common stock , its trading price and volume could decline.
• We have issued, and may in the future, issue new shares of our common stock, which has a dilutive effect on our stockholders.
−Removed: • Substantial blocks of our common stock may be sold into the market as a result of the Prepaid Advance Agreements .
+Added: • If securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our common stock , its trading price and volume could decline.
+Added: • Substantial blocks of our common stock may be sold into the market as a result of our Sales Agreements and the PEPA.
+Added: • The Convertible Notes may adversely affect the market price of our common stock.
+Added: • Conversion of the Convertible Notes will dilute the ownership interest of existing stockholders or may otherwise depress the price of our common stock.
+Added: • The prepaid forward transaction may affect the value of our common stock and may result in unexpected market activity in our common stock.
+Added: • The capped call transactions may affect the value of the Convertible Notes and our common stock.
Risks Related to Our Business and Operations
−Removed: 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.
+Added: 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 are subject to the risks and uncertainties of a new business, including the risk that we may never further develop, complete development of or successfully market any of our proposed services.
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Accordingly, in March 2022, we ceased all crypto mining operations.
−Removed: We began generating revenue from our hosting operations when our first co-hosting facility came online in February 2022.
+Added: We began generating revenue
+Added: 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.
As we grow and develop as a business, we are attempting to reduce the impact of variability on our revenue and hosting costs by entering into long term contracts with the goal of having one blue chip anchor tenant that has signed a 3-5 year long-term contract at each site and filling the rest of the facility with customers with 18-36 month terms.
−Removed: In our cloud hosting business, we provide cloud infrastructure for highly scalable General Processing Unit (“GPU”) accelerated applications, or GPU clusters, to our customers under contracts spanning 24–36 months.
−Removed: As these are novel products in the industry, the value and longevity of the GPUs remain uncertain in this rapidly evolving market.
−Removed: In our HPC Hosting Business, we plan to enter into long-term contracts of approximately 10 years to host customers’ GPU clusters.
−Removed: Given that we have not previously operated an HPC data center of this scale, the profitability of these contracts cannot be determined at this time.
−Removed: If we are unable to successfully implement our development plan or to increase our generation of revenue, we will not become profitable in the future and may be unable to continue our operations.
+Added: In our HPC Hosting Business, we plan to enter into long-term leases of approximately 15 years to host tenants’ compute infrastructures encompassing GPU clusters or other high-performance computing resources (and have recently entered into two such leases).
+Added: Given that we have not previously operated an HPC data center of this scale, the profitability of these leases cannot be determined at this time.
+Added: If we are unable to successfully implement our development plan or to increase our generation of revenue, we will not be profitable in the future and may be unable to continue our operations.
Furthermore, we have a history of operating losses and our proposed operations continue to be subject to all business risks associated with new enterprises.
−Removed: We incurred net losses of $149.3 million and $44.6 million for the fiscal years ended May 31, 2024 and 2023, respectively.
+Added: We incurred net losses of $231.1 million, $149.7 million, and $45.6 million for the fiscal years ended May 31, 2025, 2024, and 2023, respectively.
We expect to continue to incur net losses for the foreseeable future as we grow our business.
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We will also incur increased compliance costs associated with growth, expanding our customer base, and being a public company.
−Removed: Our efforts to grow our business may be costlier than we expect, or the revenue growth rate may be slower than we expect.
−Removed: As we pivot towards new markets such as cloud services and HPC data center hosting, we acknowledge that our limited experience in these areas may impact our ability to accurately assess our prospects.
−Removed: The likelihood of our success must be considered in light of the expenses, difficulties, complications, problems and delays frequently encountered in connection with the expansion of a business, operating a business in a competitive industry, and the continued development of advertising, promotions and a corresponding customer base.
−Removed: There can be no assurance that we will ever operate profitably.
+Added: As we pivot towards new markets, such as HPC data center hosting, we acknowledge that our limited experience in this area may impact our ability to accurately assess our prospects.
+Added: The likelihood of our success must be considered in light of the expenses, difficulties, complications, problems and delays frequently encountered in connection with the expansion of a business, operating a business in a competitive industry, and the development of a customer base.
+Added: There can be no assurance that we will operate profitably in the future.
We may be unable to access sufficient additional capital needed to grow our business.
We expect to need to raise substantial additional capital to expand our operations, pursue our growth strategies and to respond to competitive pressures or unanticipated working capital requirements.
−Removed: Construction of our facilities, including the construction of the HPC Ellendale Facility, are capital-intensive projects, and we anticipate that our current and future strategic growth initiatives will likewise continue to be capital-intensive.
−Removed: We intend to use the SEPA (as defined below) to provide additional capital to us.
−Removed: However, market conditions and certain restrictions contained in the agreement governing the SEPA may limit our ability to access capital under such agreement.
+Added: Construction of our facilities, including the construction of the Polaris Forge 1 campus, are capital-intensive projects, and we anticipate that our current and future strategic growth initiatives will likewise continue to be capital-intensive.
We expect to raise additional capital to fund these and other future strategic growth initiatives, however, we may be unable to do so in a timely manner, in sufficient quantities, or on terms acceptable to us, if at all, which could impair our growth and adversely affect our existing operations.
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If we are unable to raise the additional capital needed to execute our future strategic growth initiatives, we may be less competitive in our industry and the results of our operations and financial condition may suffer.
−Removed: In addition, under the terms of the Prepaid Advance Agreements (as defined below), until the YA Notes (as defined below) are repaid in full, we are prohibited, subject to certain exceptions, from obtaining additional financing through a “Variable Rate Transaction” (as defined in the Prepaid Advance Agreements), including sales of our common stock or Common Stock Equivalents (as defined in the Prepaid Advance Agreements), that are convertible into, exchangeable or exercisable for common stock (A) where the conversion price, exercise price, exchange rate or other price fluctuates upon and/or varies with the trading prices of or quotations for our common stock at any time after the initial issuance thereof, or (B) with a conversion, exercise price or exchange rate that is subject to being reset at some future date after the initial issuance of such equity or debt security or upon the occurrence of specified or contingent events directly or indirectly related to our business or the market for our common stock, in each case, subject to certain exceptions, including for an at-the-market offering.
−Removed: These provisions could make investing in our securities less attractive to investors and could limit our ability to obtain adequate financing on a timely basis or on acceptable terms in the future, which could have significant harmful effects on our financial condition and business and could include substantial limitations on our ability to continue to conduct operations.
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.
−Removed: We utilize debt financing in our capital structure and may incur additional debt.
+Added: We utilize debt financings in our capital structure and may incur additional debt in the future.
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;
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We also utilize convertible debt in our capital structure.
−Removed: 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.
+Added: 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 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;
−Removed: refinance our existing
+Added: 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.
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Our existing indebtedness arrangements contain several restrictive covenants and events of default that limit our corporate activities.
−Removed: The terms of the Ellendale Loan Agreement require APLD ELN-01 LLC, our wholly owned subsidiary (“ELN-01”) to meet certain financial covenants, contain other covenants and reference multiple potential events of default, including payment defaults, covenant defaults and material cross defaults to certain ELN-01 contracts.
−Removed: Among the restrictions imposed under the Ellendale Loan Agreement, ELN-01 has agreed to maintain a minimum debt services coverage ratio after distributions of 1.25:1.00.
−Removed: The terms of the Cornerstone Bank Loan require APLD GPU-01, LLC, our wholly owned subsidiary of the Company (“GPU-01”) to meet certain financial covenants, contain other affirmative and negative covenants and reference multiple potential events of default, including payment defaults, covenant defaults (subject to applicable cure periods), and payment cross default to other GPU-01 indebtedness.
−Removed: Among the restrictions imposed under the Ellendale Loan Agreement, ELN-01 has agreed to maintain a minimum debt services coverage ratio (i) pre-distributions, of 1.20:1.00 and (ii) post-distributions, of 1.00:1.00.
−Removed: The terms of the CIM Promissory Note restrict APLD Holdings 2 LLC, our wholly owned subsidiary (“Holdings 2”) and each other Note Party (as defined in the CIM Promissory Note) from incurring additional indebtedness, incurring liens, disposing of property and creating subsidiaries in violation of the note and reference multiple potential events of default, including payment defaults, covenant defaults and cross default to certain other indebtedness.
−Removed: The terms of the YA Notes reference multiple potential events of default including payment defaults, covenant defaults, cross default to certain other indebtedness, failure to deliver shares upon conversion and failure to timely file certain reports with the SEC.
+Added: The terms of the Credit and Guaranty Agreement, dated as of February 11, 2025, by and among APLD HPC Holdings LLC, the subsidiary guarantors, the lenders party thereto and Sumitomo Mitsui Banking Corporation, as administrative agent (the "SMBC Credit Agreement"), require us to meet certain financial covenants, contain other covenants and reference multiple potential events of default, including payment and covenant defaults.
+Added: Furthermore, the terms of our Loan Agreement with Starion Bank, dated February 16, 2023 (the "Ellendale Loan Agreement") require APLD ELN-01 LLC, our wholly owned subsidiary (“ELN-01”) to meet certain financial covenants, contain other covenants and reference multiple potential events of default, including payment defaults, covenant defaults and material cross defaults to certain ELN-01 contracts.
+Added: On February 28, 2024, APLD GPU-01, LLC, our wholly owned subsidiary, entered into a Loan Agreement with Cornerstone Bank and the Company as Guarantor (the “Cornerstone Bank Loan”).
+Added: The terms of the Cornerstone Bank Loan require APLD GPU-01, LLC, our wholly owned subsidiary (“GPU-01”), to comply with certain affirmative and negative covenants and include multiple potential events of default, including payment defaults, covenant defaults (subject to applicable cure periods), and payment cross default to other GPU-01 indebtedness.
Even if we are able to meet our obligations under these debt instruments, the amount of debt we have could adversely affect us by limiting our ability to obtain any necessary financing in the future for our working capital needs, as well as other capital expenditures, debt service obligations, dividend payments, if any, or other purposes.
It also places us at a disadvantage relative to our competitors who may have lower levels of debt, while making us more vulnerable to a downturn in our business or the economy in general.
−Removed: Upon the occurrence of an Amortization Event (as defined in the YA Notes (defined below)), we may be required to make payments that could cause us financial hardship.
−Removed: On March 27, 2024, we entered into a Prepaid Advance Agreement (as amended, the “March PPA”) with YA II PN, LTD.
−Removed: (“YA Fund”) .
−Removed: In accordance with the terms of the March PPA, on March 27, 2024, YA Fund agreed to advance to us up to $50 million, pursuant to two unsecured promissory notes (as amended, the “Initial YA Notes”).
−Removed: In addition, on May 24, 2024, we entered into another Prepaid Advance Agreement with YA Fund (as amended, the “May PPA”) and together with the March PPA (the “Prepaid Advance Agreements”), pursuant to which we issued an unsecured promissory note to YA Fund to advance up to $ 42.1 million (as amended, the “May Note” and collectively with the Initial YA Notes, the “YA Notes”).
−Removed: In connection with our entry into the Prepaid Purchase Agreements with YA Fund and under the terms of the YA Notes, an “Amortization Event” is deemed to have occurred if:
−Removed: (1) the daily VWAP of our common stock is lower than the Floor Price (as defined in each respective YA Note) then in effect for three trading days during a period of five consecutive trading days, (2) we have issued to the Investor pursuant to the PPA in excess of 99% of all of the Conversion Shares available under the Exchange Cap (as such terms are defined under the YA Notes), or (3) at any time after (a) May 1, 2024 for the Initial YA Notes, or (b) August 15, 2024 for the May Note, any of the Conversion Shares to be issued under the YA Notes are not eligible to be sold pursuant to the registration statement related to such notes for a period of ten consecutive trading days.
−Removed: Within three trading days of an Amortization Event, we must pay to YA Fund an amount in cash equal to:
−Removed: (i) $9.0 million of principal amount among both YA Notes plus (ii) a 5% payment premium, plus (iii) accrued and unpaid interest (if any), which payments would continue monthly thereafter until such “Amortization Event” is no longer continuing.
−Removed: In the event that the Company fails to pay any amount when and as due and payable under the YA Notes, including any amounts owed as a result of an “Amortization Event,” and such failure is not cured within five days after written notice thereof, an event of default will have deemed to occur, and the full unpaid principal amount of the YA Notes, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become, at YA Fund’s election, immediately due and payable in cash.
−Removed: These financial obligations may impose an undue and unsustainable burden on us and may have a material adverse effect on our operations and financial condition.
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.
−Removed: It is likely that we will need to refinance at least a portion of our outstanding debt as it matures.
−Removed: If we are unable to refinance or extend principal payments due at maturity or pay them with proceeds of other capital transactions, then our cash flow may not be sufficient in all years to repay all such maturing debt and to pay distributions.
−Removed: 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.
−Removed: 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.
−Removed: We are a recently public company and are now required to comply with the SEC’s rules implementing Section 302 of the Sarbanes-Oxley Act (“SOX”), which requires our management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting.
−Removed: To comply with the requirements of being a public company, we will need to upgrade our systems, including information technology, implement additional financial and management controls, reporting systems and procedures and hire additional accounting, finance and legal staff.
−Removed: We have identified the following material weaknesses in the design of our internal controls:
−Removed: • We have not designed and implemented controls to ensure we can record, process, summarize, and report financial data.
−Removed: • We have not yet designed and implemented user access controls to ensure appropriate segregation of duties that would adequately restrict user and privileged access to the financially relevant systems and data to appropriate personnel.
−Removed: • We did not design and maintain effective controls associated with related party transactions and disclosures.
−Removed: Controls in place were not designed or implemented at a sufficient level of precision or rigor to effectively identify related party relationships and disclose their related transactions in our financial statements.
−Removed: • We also do not have a properly designed internal control system that identifies critical processes and key controls.
−Removed: We are in the process of remediating such material weaknesses and there can be no assurance as to when or if we will fully remediate such material weaknesses.
−Removed: Our efforts to develop and maintain our internal controls may not be successful, and we may be unable to maintain effective controls over our financial processes and reporting in the future and comply with the certification and reporting obligations under Sections 302 and 404 of SOX.
−Removed: 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.
+Added: It is likely that we will need to refinance at least a portion of our outstanding debt, and we plan to replace the SMBC Credit Agreement with permanent project financing.
+Added: If we are unable to refinance or extend principal payments due at maturity or pay them with proceeds of other capital transactions or obtain project financing, as the case may be, then our cash flow may not be sufficient in all years to repay all such maturing debt and to pay distributions.
+Added: 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,
+Added: result in higher interest rates upon refinancing, then the interest expense relating to that refinanced indebtedness would increase.
+Added: 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.
+Added: Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for evaluating and reporting on the effectiveness of our system of internal control.
+Added: Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America (“U.S.
+Added: As a public company, we are required to comply with the Sarbanes-Oxley Act and other rules that govern public companies.
+Added: In particular, we are required to review on an annual basis our internal control over financial reporting, and on a quarterly and annual basis to evaluate and disclose changes in our internal control over financial reporting.
+Added: We are also required to certify our compliance with Section 404 of the Sarbanes-Oxley Act, which requires us to furnish annually a report by management on the effectiveness of our internal control over financial reporting.
+Added: In the event that we are unable to maintain or achieve compliance with the applicable provisions of the Sarbanes-Oxley Act and related rules, we may incur significant and additional expenses for remedial efforts that may negatively impact our financial performance, and such process may result in a diversion of management’s time and attention.
+Added: We have identified a material weakness in the design of our internal controls as we did not design and maintain effective controls over the assessment of and accounting for complex financial instruments.
+Added: In order to remediate this material weakness, we have hired additional qualified accounting personnel as well as engaged with a third-party consultant to assist with analyzing and documenting the treatment of complex financial instruments.
+Added: While we are in the process of remediating this material weakness, there can be no assurance as to when or if we will fully remediate such material weakness.
+Added: For further discussion of the material weaknesses identified and our remedial efforts, see Item 9A, Controls and Procedures.
+Added: We may be unable to maintain effective controls over our financial processes and reporting in the future and comply with the certification and reporting obligations under Sections 302 and 404 of SOX.
+Added: 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.
Ineffective internal controls could also cause investors to lose confidence in our reported financial information..
−Removed: We are subject to a highly evolving regulatory landscape and any adverse changes to or our co-hosting customers’ failure to comply with any laws or regulations could adversely affect our business, prospects or operations.
+Added: Our business has and is expected to continue to have significant customer concentration .
+Added: We generate a large portion of our revenue from a small number of customers.
+Added: If we were to lose one or more of our large customers, our operating results could suffer dramatically.
+Added: Data Center Hosting Business
+Added: During fiscal year 2025, this business segment was comprised of four customers accounting for 100% of our revenue from continuing operations.
+Added: One of such customers accounted for 93% of our revenue during fiscal year 2025.
+Added: No other customers accounted for more than 10% of revenue.
+Added: As of the date of this report, we have only one customer in this business segment.
+Added: As a result of the risks our crypto mining customer faces, it is not possible for us to predict the future level of demand for our services that will be generated by this customer or the future demand for the products and services of this customer.
+Added: Should this customer suffer from harm or loss due to a set of circumstances, their business could be negatively impacted.
+Added: Further, although this customer is currently under a five year contract with us, with 2.5 years remaining, they may choose to unilaterally reduce or discontinue their contract with us at any time (subject to notice and certain other provisions).
+Added: If our customer experiences declining mining operations for any reason or determines to stop utilizing our facilities altogether, and we are not able to timely replace this customer with one or more comparable revenue-generating customers, our ability to generate any revenue from this business segment could be materially adversely affected, which in turn would have a material adverse effect on our financial condition, results of operations and cash flows.
+Added: HPC Hosting Business
+Added: 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.
+Added: As of the date of this report, we entered into two lease agreements with one customer for a combined capacity of 250 MW.
+Added: However, we cannot assure you that this business segment will begin generating any revenue when expected, or at all.
+Added: Furthermore, we expect that the limited number of customers will continue to account for a high percentage of our revenue for the foreseeable future.
+Added: In addition, demand for our services generated by these customers may fluctuate significantly from quarter to quarter.
+Added: The concentration of our customer base increases risks related to the financial condition of our customers, and the deterioration in financial condition of a single customer or the failure of a single customer to perform its obligations could have a material adverse effect on our results of operations and cash flow.
+Added: If a subset or all of our customers were to experience harm or loss due to unforeseen circumstances, it could negatively impact their businesses.
+Added: 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.
+Added: Such developments could adversely affect our profit margins and financial position, leading to a negative impact on our revenue and operating results.
+Added: Changes in U.S.
+Added: 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.
+Added: Operating and growing our business demands significant electrical infrastructure components and construction materials.
+Added: 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.
+Added: 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, nor can we predict future trade policy or the terms of any renegotiated trade agreements and their impact on our business.
+Added: government has adopted new approaches to trade policy and in some cases, may renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements.
+Added: government has also imposed tariffs on certain foreign goods and has raised the possibility of imposing significant, additional tariff increases or expanding the tariffs to capture other countries and types of foreign goods.
+Added: Any such current and future tariff increases, expanding the tariffs to capture other countries and types of foreign goods or other changes in U.S.
+Added: trade policy may make it more difficult or costly for us to procure construction materials and specialized electricity distribution equipment required to develop our HPC and AI facilities.
+Added: As a result, the timely completion of our HPC and AI projects may be delayed and our ability to collect any potential revenue from the HPC Hosting Business segment in the future may be compromised, which could have a material adverse effect on our expansion strategy and our ability to generate significant or any revenue from this business segment.
+Added: In addition, in response to tariffs, other countries have implemented retaliatory tariffs on U.S.
+Added: Political tensions as a result of trade policies could reduce trade volume, investment, technological exchange, and other economic activities between major international economies, resulting in a material adverse effect on global economic conditions and the stability of global financial markets, which could in turn have a material adverse impact on our business and financial condition.
+Added: 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 customers’ businesses are subject to extensive laws, rules, regulations, policies and legal and regulatory guidance, including those governing securities, commodities, cryptoasset custody, exchange and transfer, data governance, data protection, cybersecurity and tax.
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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.
−Removed: As cryptoasset has grown in popularity and in market size, the Federal Reserve Board, U.S.
+Added: As cryptoassets have grown in popularity and in market size, the Federal Reserve Board, U.S.
Congress and certain U.S.
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Our business depends upon the demand for data centers.
−Removed: We are in the business of owning, acquiring, developing and operating data centers.
+Added: 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.
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Our financial condition, results of operations, cash flow, cash available for distribution and ability to satisfy our debt service obligations could be materially adversely affected as a result of any or all of these factors.
−Removed: Our business has and is expected to continue to have significant customer concentration .
−Removed: We generate a large portion of our revenue from a small number of customers.
−Removed: If we were to lose one or more of our large customers, our operating results could suffer dramatically.
−Removed: Data Center Hosting Business
−Removed: During fiscal year 2024, this business segment was comprised of seven customers accounting for approximately 83% of our revenue.
−Removed: One of such customers accounted for 62% of our revenue during fiscal year 2024.
−Removed: During fiscal year 2023, six customers accounted for 100% of our revenue, all of which accounted for over 10% of our total revenue.
−Removed: No other customers accounted for more than 10% of revenue for any of these periods.
−Removed: Cloud Services Business
−Removed: During fiscal year 2024, two customers accounted for approximately 17% of our revenue;
−Removed: neither of these two customers accounted for more than 10% of our revenue.
−Removed: We expect that the limited number of customers will continue to account for a high percentage of our revenue for the foreseeable future.
−Removed: In addition, demand for our services generated by these customers may fluctuate significantly from quarter to quarter.
−Removed: The concentration of our customer base increases risks related to the financial condition of our customers, and the deterioration in financial condition of a single customer or the failure of a single customer to perform its obligations could have a material adverse effect on our results of operations and cash flow.
−Removed: If a subset or all of our customers were to experience harm or loss due to unforeseen circumstances, it could negatively impact their businesses.
−Removed: 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.
−Removed: Such developments could adversely affect our profit margins and financial position, leading to a negative impact on our revenue and operational results.
+Added: 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.
+Added: We are currently in the process of constructing Polaris Forge 1 and we may in the future continue to build out additional HPC hosting facilities on a speculative basis at significant cost.
+Added: Our successful development of this and future projects is subject to many risks, including those associated with:
+Added: • delays in construction, or changes to the plans or specifications;
+Added: • financing availability, including our ability to obtain construction financing and permanent financing, or increases in interest rates or credit spreads;
+Added: • 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;
+Added: • 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;
+Added: • construction site accidents and other casualties;
+Added: • labor availability, costs, disputes and work stoppages with contractors, subcontractors or others that are constructing the project;
+Added: • failure of contractors to perform on a timely basis or at all, or other misconduct on the part of contractors;
+Added: • access to sufficient power and related costs of providing such power to our customers;
+Added: • environmental issues;
+Added: • supply chain constraints;
+Added: • fire, flooding, earthquakes and other natural disasters;
+Added: • geological, construction, excavation and equipment problems.
+Added: 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.
+Added: In addition, development activities, regardless of whether they are ultimately successful, also typically require a substantial portion of our management’s time and attention.
+Added: This may distract our management from focusing on other operational activities of our business.
+Added: If we are unable to complete development projects successfully, our business may be adversely affected.
+Added: Our inability to market and 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 .
+Added: Our Cloud Services Business currently meets the criteria for held for sale and discontinued operations.
+Added: To be successful in marketing and selling our Cloud Services Business, we and any counterparty must conduct due diligence to identify valuation issues and potential loss contingencies, negotiate transaction terms, and complete and close a potentially complex transaction.
+Added: A sale of our Cloud Services Business may require substantial management time and resources and has the potential to divert our attention from our continuing business.
+Added: A successful sale of our Cloud Services Business will also require the transfer of certain assets and agreements, the transfer of which may be outside of our control.
+Added: If we are unable to market and sell our Cloud Services Business, including the transfer of certain assets and agreements, it may have a material adverse impact on our business and financial condition.
+Added: 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.
+Added: We currently operate data centers in the state of North Dakota.
+Added: The revenue we collected from operating these data centers was responsible for the majority of our revenue in the fiscal years ended May 31, 2025, 2024, and 2023.
+Added: We are also in the process of constructing Polaris Forge 1, which we expect to begin generating revenue in calendar year 2025.
+Added: Consequently, our business operations and financial condition are particularly reliant on the performance of these data centers, which are all located in North Dakota.
+Added: As a result of the concentrated nature of our operations in this state, the operation of our business is particularly exposed to the regulatory framework, including but not limited to state utility permitting regulations, and changes in the regulatory environment, market conditions and natural disasters in the state, any of which may cause delays in the construction and operation of our data center facilities, including completion of Polaris Forge 1, or prevent us from executing on our expansion strategy.
+Added: In addition, historically, North Dakota, through its regulatory and economic incentives, has encouraged Bitcoin mining companies to locate their operations in the state.
+Added: As such, in our Data Center Hosting Business, we face substantial competition in North Dakota for suitable Bitcoin mining data center sites and skilled workers.
+Added: Conversely, if the regulatory and economic environment in North Dakota were to become less favorable to Bitcoin mining companies, including by way of increased taxes, and such Bitcoin mining companies were to relocate out of the state, we could lose our current customer or fail to attract new customers in this business segment in the future, either of which would have a material adverse effect on our business, financial condition and results of operations.
Our success depends on external factors in the crypto mining industry.
We have a material concentration of customers in the crypto mining industry.
−Removed: 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:
−Removed: • 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;
−Removed: • 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;
+Added: 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:
+Added: • 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;
+Added: • 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;
−Removed: • 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;
+Added: • 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;
−Removed: • 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;
−Removed: • 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;
−Removed: • 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;
+Added: • 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;
+Added: • 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;
+Added: • 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;
−Removed: • a disruption of the Internet on which our customers’ business of mining cryptoassets is dependent;
+Added: • 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;
−Removed: • 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.
+Added: • 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.
Even if we can diversify our customer base, negative impacts to the crypto mining industry may negatively affect our business, financial condition, operating results, liquidity, and prospects.
−Removed: If our co-hosting customers determine not to use our co-hosting facility, our co-hosting operations may suffer from significant losses.
−Removed: We currently have material customer concentration of crypto mining customers.
−Removed: As a result of the risks our crypto mining customers face, it is not possible for us to predict the future level of demand for our services that will be generated by these customers or the future demand for the products and services of these customers.
−Removed: Should some or all of our co-hosting customers suffer from harm or loss due to a set of circumstances, their businesses could be negatively impacted or prevented.
−Removed: Further, our contracts with these customers permit them to terminate our services at any time (subject to notice and certain other provisions).
−Removed: If any of our customers experience declining mining operations for any reason or determine to stop utilizing our co-hosting facilities, we could be pressured to reduce the prices we charge for our services or we could lose a major customer.
−Removed: Any such development could have an adverse effect on our margins and financial position and would negatively affect our revenues and results of operations.
−Removed: 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.
−Removed: We are currently in the process of constructing the HPC Ellendale Facility, which requires significant capital expenditures.
−Removed: 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.
We may be unable to lease vacant or development space, renew leases, or re-lease space as leases expire.
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of operations, cash flow, cash available for distribution and ability to satisfy our debt service obligations could be materially adversely affected.
−Removed: Failure to attract, grow and retain a diverse and balanced customer base, including key magnet customers, could harm our business and operating results.
+Added: Failure to attract, grow and retain a diverse and balanced customer base, including key anchor customers, could harm our business and operating results.
Our ability to attract, grow and retain a diverse and balanced customer base, consisting of enterprises, cloud service providers, network service providers, and digital economy customers, some of which we consider to be key magnets drawing in other customers, may affect our ability to maximize our revenues.
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Our inability to develop, provide or effectively execute any of these factors may hinder the development, growth and retention of a diverse and balanced customer base and adversely affect our business, financial condition and results of operations.
+Added: 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.
+Added: We expect to continue to expand our data center footprint.
+Added: In connection with our expansion plans, we may be required to commit significant operational and financial resources, but there can be no guarantee we will have sufficient customer demand in those markets to support the data centers once they are built.
+Added: This risk may be greater in a market where we have not operated previously.
+Added: Once development of a data center facility is complete, we incur certain operating expenses even if there are no customers occupying any space.
+Added: Consequently, if any of our properties have significant vacancies for an extended period of time, our results of operations and business and financial condition will be adversely affected, the impact of which could be material.
+Added: In addition, unanticipated technological changes could affect customer requirements for data centers, and we may not have built such requirements into our new data centers.
+Added: If any of these developments or contingencies were to occur, it could make it difficult for us to realize expected or reasonable returns on our investments.
Our new services and changes to existing services could fail to attract or retain users or generate revenue and profits, or otherwise adversely affect our business.
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We may introduce significant changes to our existing services or acquire or introduce new and unproven services, including using technologies with which we have little or no prior development or operating experience.
−Removed: For example, we are making significant investments in AI, including providing computing capacity to support AI.
These efforts, including the introduction of new services or changes to existing services, may result in new or enhanced governmental or regulatory scrutiny, litigation, ethical concerns, or other complications that could adversely affect our business, reputation, or financial results.
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We are subject to risks associated with our need for significant electrical power.
−Removed: Our operations require significant amounts of electrical power and we anticipate our demand for electrical power will continue to grow.
+Added: Our operations require significant amounts of electrical power and we anticipate our demand for electrical power will continue to grow as we begin to operate Polaris Forge 1.
The fluctuating price of electricity required for our operations and to power our expansion may inhibit our profitability.
If we are unable to continue to obtain sufficient electrical power on a cost-effective basis, we may not realize the anticipated benefits of our significant capital investments.
+Added: Furthermore, we currently have a minimum commitment of approximately $47.2 million related to the energy services agreement for our Jamestown, North Dakota co-hosting facility payable over the remaining term of the services agreement of approximately 1.7 years as of May 31, 2025.
+Added: Any delay or failure to make timely payments under this agreement could risk the operation of our Jamestown, North Dakota co-hosting facility, which would have a material adverse effect on our business.
+Added: Additionally, our operations could be materially adversely affected by prolonged power outages.
+Added: Although certain critical functions of our facilities may be powered by backup generators on a temporary basis, it may not be feasible or cost-
+Added: effective to run on back-up power generators for extended periods of time.
+Added: Therefore, we may have to reduce or cease our operations in the event of an extended power outage, or as a result of the unavailability or increased cost of electrical power.
+Added: If this were to occur, our business and results of operations could be materially and adversely affected.
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.
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Our operations could be materially adversely affected by prolonged power outages at any of our facilities.
−Removed: 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.
−Removed: The outage had no impact on the HPC Ellendale Facility under construction, which is being designed to provide higher levels of availability in accordance with industry standards.
−Removed: The outage also had no impact on our Cloud Services Business as those services are currently being hosted using third-party facilities.
−Removed: Despite our concentrated efforts towards remediation and recent return to full operational capacity, there can be no assurance that similar or greater power outages will not occur at our facilities in the future.
+Added: 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.
+Added: The outage had no impact on Polaris Forge 1, which is being designed to provide higher levels of availability in accordance with industry standards.
+Added: Despite our concentrated efforts towards remediation and return to full operational capacity, there can be no assurance that similar or greater power outages will not occur at our facilities in the future.
If and as they occur, we may have to reduce or cease our operations at such impacted facility, which may materially adversely affect our business, financial condition, and operating results.
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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.
−Removed: Substantially all of our customer agreements include terms requiring us to meet certain service level commitments.
−Removed: 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.
+Added: Our customer agreements include terms requiring us to meet certain service level commitments.
+Added: 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
+Added: 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.
Service interruptions, equipment failures or security breaches could also materially impact our brand and reputation globally and lead to customer contract terminations or non-renewals and an inability to attract customers in the future.
Any disruption of service experienced by certain of our third-party service providers, or our ineffective management of relationships with third-party service providers could harm our business, financial condition, operating results, cash flows, and prospects.
−Removed: We rely on several third-party service providers for services that are essential to our business model, the most important of which are our suppliers of power, electrical equipment (including GPU servers), building materials, and construction services.
−Removed: Additionally, as we build our Cloud Services Business, we also expect to rely on third parties to lease or sell us equipment which we then lease to certain of our Cloud services customers.
+Added: We rely on several third-party service providers for services that are essential to our business model, the most important of which are our suppliers of power, electrical equipment, building materials, and construction services.
In addition, we may depend upon outside advisors who may not be available on reasonable terms as needed, or at all.
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.
−Removed: 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.
+Added: 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.
Furthermore, it is anticipated that such persons may be engaged on an “as needed” basis without a continuing fiduciary or other obligation to us.
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If these third parties or other outside advisors experience difficulty providing the services we require, or if they experience disruptions or financial distress or cease operations temporarily or permanently, or if the products they supply are defective or cease to operate for any reason, it could make it difficult for us to execute our operations.
−Removed: If we are unsuccessful in identifying or finding highly qualified third-party service providers or employees, if we fail to negotiate cost-effective
−Removed: 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.
−Removed: Any delays or unexpected costs in the development of our existing space and developable land and new properties acquired for development may delay and harm our growth prospects, future operating results and financial condition.
−Removed: We are currently in the process of building the HPC Ellendale Facility and we may in the future continue to build out additional HPC hosting facilities on a speculative basis at significant cost.
−Removed: Our successful development of this and future projects is subject to many risks, including those associated with:
−Removed: • delays in construction, or changes to the plans or specifications;
−Removed: • 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;
−Removed: • construction site accidents and other casualties;
−Removed: • financing availability, including our ability to obtain construction financing and permanent financing, or increases in interest rates or credit spreads;
−Removed: • labor availability, costs, disputes and work stoppages with contractors, subcontractors or others that are constructing the project;
−Removed: • failure of contractors to perform on a timely basis or at all, or other misconduct on the part of contractors;
−Removed: • access to sufficient power and related costs of providing such power to our customers;
−Removed: • environmental issues;
−Removed: • supply chain constraints;
−Removed: • fire, flooding, earthquakes and other natural disasters;
−Removed: • geological, construction, excavation and equipment problems;
−Removed: • delays or denials of entitlements or permits, including zoning and related permits, or other delays resulting from requirements of public agencies and utility companies.
−Removed: In addition, development activities, regardless of whether they are ultimately successful, also typically require a substantial portion of our management’s time and attention.
−Removed: This may distract our management from focusing on other operational activities of our business.
−Removed: If we are unable to complete development projects successfully, our business may be adversely affected.
+Added: 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 we incorrectly estimate our hosting capacity requirements and related capital expenditures, our results of operations could be adversely affected.
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If we underestimate these requirements, we may not be able to provide sufficient service to existing customers or may be required to limit new customer acquisition, both of which may materially and adversely impair our results of operations.
−Removed: Similarly, we have entered into multi-year contract commitments with colocation service providers.
−Removed: If we overestimate our capacity requirements and therefore secure excess capacity and have excess capital expenditures, our operating material could be materially reduced.
We depend on third parties to provide network connectivity to the customers in our data centers and any delays or disruptions in connectivity may materially adversely affect our operating results and cash flow.
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Further, some carriers are experiencing business difficulties or have announced consolidations.
−Removed: As a result, some carriers
−Removed: 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.
+Added: 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.
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From time to time, we may be involved in strategic joint ventures and other joint ownership arrangements.
−Removed: We may not always be in complete alignment with our joint venture or joint owner counterparties;
+Added: 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.
−Removed: As a result, when we enter into joint ventures or joint ownership arrangements, we may be subject to a number of risks.
+Added: When we pursue joint ventures or joint ownership arrangements, we may be subject to a number of risks, including risks around ultimately closing the contemplated transactions.
+Added: For example, our anticipated partnership with MIP VI HPC Holdings, LLC ("MAM") is subject to closing conditions and no assurance can be given that the closing conditions will be met and that the transactions contemplated by the Unit Purchase Agreement entered into by and between APLD HPC Holdings ("APLDH") and MAM will be consummated.
In some joint ventures and joint ownership arrangements we may not be responsible for the operation of projects and will rely on our joint venture or joint owner counterparties for such services.
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If we fail to effectively manage our growth, our business, financial condition and results of operations could be harmed.
−Removed: We are a development stage company with a small management team and are subject to the strains of ongoing development and growth, which will place significant demands on our management and our operational and financial infrastructure.
−Removed: Although we may not grow as we expect, if we fail to manage our growth effectively or to develop and expand our managerial, operational and financial resources and systems, our business and financial results would be materially harmed.
−Removed: We may not be able to manage growth effectively, which could damage our reputation, limit our growth and negatively affect our operating results.
+Added: As we implement our growth strategy, we are subject to the strains of ongoing development and growth, which has placed, and will continue to place, significant demands on our management team and our operational and financial infrastructure.
+Added: If we fail to manage our growth effectively or to develop and expand our managerial, operational and financial resources and systems, our business and financial results would be materially harmed.
Further, we cannot provide any assurance that we will successfully identify emerging trends and growth opportunities in this business sector and we may lose out on opportunities.
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If the price of cryptoassets declines, our customers could incur future losses and these losses could be significant as they incur costs and expenses associated with our hosting of their miners at our facilities and other costs and expenses.
−Removed: If our co-hosting customers’ losses are significant enough, they may be unable to continue to pay our fees, we may experience a decline in revenue from our co-hosting operations and our expansion of co-hosting operations could be delayed or prevented, which could have a material adverse effect on our business, prospects or operations.
+Added: If our co-hosting customers’
+Added: losses are significant enough, they may be unable to continue to pay our fees and we may experience a decline in revenue from our co-hosting operations, which could have a material adverse effect on our business, prospects or operations.
We have an evolving business model which is subject to various uncertainties.
As cryptoassets and blockchain technologies become more widely available, we expect the services and products associated with them to evolve.
−Removed: Future regulations may require our co-hosting customers to change their business in order to comply fully with federal and state laws regulating cryptoasset (including Ethereum and Bitcoin) mining.
+Added: Future regulations may require our co-hosting customers to change their business in order to comply fully with federal and state laws regulating cryptoasset (including Bitcoin) mining.
In order to stay current with the industry, our business model may need to continue to evolve as well.
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Various actual and potential conflicts of interest may be detrimental to our stockholders.
−Removed: We do not currently have specific procedures in place with respect to potential conflicts of interest, however, in determining to engage with potential competitors and entities with whom our officers or directors may have relationships, we considered the risks and risk mitigation factors, including requiring that transactions valued at over $120,000 in which our officers, directors and holders of more than 5% of our common stock have an interest be approved or ratified by our Audit Committee.
+Added: In determining to engage with potential competitors and entities with whom our officers or directors may have relationships, we considered the risks and risk mitigation factors, including requiring that transactions valued at over $120,000 in which our officers, directors and holders of more than 5% of our common stock have an interest be approved or ratified by our Audit Committee.
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.
−Removed: We cannot, however, guarantee that the conflicts of interest described above, or other future conflicts of interest, will not manifest in advice or decisions that negatively impact our financial results and our operations.
+Added: We cannot, however, guarantee that any conflicts of interest will not manifest in advice or decisions that negatively impact our financial results and our operations.
Our company maintains business relationships with several companies, including those involved in software development.
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We continuously monitor and manage such situations to ensure compliance with legal and regulatory requirements.
+Added: We may become subject to regulatory inquiry relating to trading activity and/or short selling strategies in our common stock.
+Added: Short selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender.
+Added: The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale.
+Added: As it is therefore in the short seller’s best interests for the price of the stock to decline, many short sellers publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects to create negative market momentum and generate profits for themselves after selling a stock short.
+Added: These short attacks have, in the past, led to selling of shares in the market.
+Added: We are, and may in the future be, the subject of unfavorable allegations made by short sellers.
+Added: For example, in 2023, short sellers published reports that contained certain allegations against us that we believe to be misleading.
+Added: Any such allegations may be followed by periods of instability in the market price of our shares of common stock and negative publicity.
+Added: We may be constrained in the manner in which we can proceed against the relevant short seller by principles of freedom of speech, applicable federal or state law or issues of commercial confidentiality.
+Added: In addition, any related inquiry or formal investigation from a governmental organization or other regulatory body, including any inquiry from the SEC or the U.S.
+Added: Department of Justice, could result in a material diversion of our management’s time and could have a material adverse effect on our business and results of operations.
+Added: Such a situation could be costly and time-consuming and could distract our management from operating our business.
+Added: We previously received in 2023 an inquiry from the SEC into these reports, we cooperated fully with this inquiry and received a closure letter from the SEC in late 2023 concluding this matter with no further action.
We and our third-party providers may be vulnerable to cyberattacks and security breaches that could materially disrupt or compromise our operations, data and results.
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We face evolving risks that threaten the confidentiality, integrity, and availability of Information Systems and data, including from state-sponsored espionage actors, financially motivated hackers, hacktivists and insiders, as well as through diverse attack vectors, such as social engineering/phishing, malware (including ransomware), human or technological error, or due to “bugs,” misconfigurations and known and unknown vulnerabilities in hardware, software, systems and processes that support our business.
−Removed: Attacks, breaches or disruptions to our, or any providers’ or customers’, Information Systems or controls could result in, among other things, unauthorized access to our or customers’ physical assets or Information Systems, misappropriation of our or customers’ sensitive or proprietary information, disruptions to our or our customers’ operations, breaches of legal and regulatory (e.g., privacy laws such as GDPR) or contractual obligations, and/or other operational and business impacts.
+Added: Attacks, breaches or disruptions to our, or any providers’ or customers’, Information Systems or controls could result in, among other things, unauthorized access to our or our customers’ physical assets or Information Systems, misappropriation of our or our customers’ sensitive or proprietary information, disruptions to our or our customers’ operations, breaches of legal and regulatory (e.g., privacy laws such as the General Data Protection Regulation) or contractual obligations, and/or other operational and business impacts.
The foregoing could expose us to material lawsuits, regulatory actions, penalties or fines, monetary damages, loss of existing or potential customers, harm to our reputation and significant increases in our security and insurance costs, and other adverse effects on our business and financial results.
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Attending to such matters can be time-consuming, divert management’s attention and resources, cause us to incur significant expenses or liability or require us to change our business practices.
−Removed: 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.
+Added: 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
+Added: on our business.
Adverse outcomes in such proceedings or claims could result in significant liabilities, monetary damages, fines, or injunctive relief, which may materially impact our financial condition, results of operations, or cash flows.
Additionally, the uncertainty surrounding litigation and the potential for adverse publicity related to such matters could harm our reputation and brand image, affecting customer confidence and investor perception.
−Removed: In August 2023, the Company and several of its executives were named as defendants in a putative class action lawsuit that was filed in the U.S.
−Removed: District Court for the Northern District of Texas (McConnell v.
−Removed: Applied Digital Corporation et al., Case No.
−Removed: 3:23-cv-1805).
−Removed: Specifically, the complaint asserted claims pursuant to Section 10(b) and 20(a) of the Exchange Act 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
−Removed: 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: 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.
−Removed: The Company’s response to the Complaint is due on September 20, 2024.
−Removed: In November 2023, a putative derivative complaint (No.
−Removed: A-23-881629-C) was filed in the U.S.
−Removed: District Court for the District of Nevada against certain members of the Board and two of its executive officers, asserting 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.
−Removed: 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.
−Removed: On February 27, 2024, the derivative plaintiff filed an amended complaint asserting the same claims as the original complaint.
−Removed: 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.
−Removed: 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.
−Removed: At this time, the Company is unable to estimate potential losses, if any, related to either of these actions.
−Removed: While we do not expect the results of either of these actions to have a material adverse effect on our results of operations or financial position, it is not possible to predict the outcome of these matters with certainty, and we could incur judgments or enter into settlements of claims in connection with these actions that could materially adversely affect our financial position, results of operations and cash flows.
Employee disputes or litigation and related unfavorable publicity may negatively affect our future business, financial condition, and operating results.
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Certain companies that have faced employment- or harassment-related lawsuits have had to terminate management or other key personnel and have borne economic and other costs and suffered reputational harm that has negatively impacted their business.
−Removed: As previously disclosed, in June 2023, the Company announced an internal investigation with respect to a potential sexual harassment claim between two of our executive officers.
−Removed: Based on information obtained through the investigation, the Audit Committee of our Board determined that the relationship between the parties was consensual, and the allegations of workplace harassment are unfounded.
−Removed: On October 6, 2023, the parties entered into a confidential settlement agreement and, in connection with such agreement, the claimant provided a complete release of all claims.
−Removed: If we were to face any employment-related claims in the future, our business could be negatively affected.
−Removed: 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.
−Removed: Companies across many industries are facing increasing scrutiny related to their ESG practices.
−Removed: 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.
+Added: 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.
+Added: Companies across many industries are facing scrutiny related to their ESG practices.
+Added: 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.
Furthermore, increased public awareness and concern regarding environmental risks, including global climate change, has resulted and may continue to result in increased public scrutiny of our business and our industry, and our management team may divert significant time and energy away from our operations and towards responding to such scrutiny and reassuring our employees.
−Removed: The SEC has proposed rule changes that would require companies to include certain climate-related disclosures such as climate-related risks that are reasonably likely to have a material impact on business, results of operations, or financial conditions.
−Removed: Should such proposed rules be adopted, increased public scrutiny of our business may affect our operations, competitive position, and financial condition.
In addition, the physical risks of climate change may impact the availability and cost of materials and natural resources, sources and supply of energy, demand for Bitcoin and other cryptocurrencies, and could increase our insurance and other operating costs, including, potentially, to repair damage incurred as a result of extreme weather events or to renovate or retrofit facilities to better withstand extreme weather events.
−Removed: If environmental laws or regulations or industry standards are either changed or adopted and impose significant operational restrictions and compliance requirements on our operations,
−Removed: 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.
+Added: 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.
We could incur significant costs related to environmental matters, including from government regulation, private litigation, and existing conditions at some of our properties.
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Site assessments are intended to discover and evaluate information regarding the environmental condition of the surveyed property and surrounding properties.
−Removed: 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.
+Added: These assessments, however, do not generally include soil samplings, subsurface investigations or
+Added: 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.
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In addition, sea level rise and more frequent and severe weather events caused or contributed to by climate change pose physical risks to our facilities.
−Removed: Under the Inflation Reduction Act of 2022, we may have liability for the 1% stock buyback tax to the extent holders of Series E Preferred Stock (as defined below) require that we redeem such stock.
−Removed: On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law.
−Removed: The IR Act provides for, among other things, a new U.S.
−Removed: federal 1% excise tax (the “Excise Tax”) on certain repurchases of stock by publicly traded U.S.
−Removed: domestic corporations and certain U.S.
−Removed: domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023.
−Removed: The Excise Tax is imposed on the repurchasing corporation itself, not its stockholders from which shares are repurchased.
−Removed: The amount of the Excise Tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase.
−Removed: However, for purposes of calculating the Excise Tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year.
−Removed: In addition, certain exceptions apply to the Excise Tax.
−Removed: Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the Excise Tax.
−Removed: Any share redemption or other share repurchase that occurs after December 31, 2022 may be subject to the Excise Tax.
−Removed: Whether and to what extent we would be subject to the Excise Tax will depend on a number of factors, including (i) the fair market value of any redemptions and repurchases, (ii) the nature and amount of any equity issuances, and (iii) the content of regulations and other guidance from the Treasury.
−Removed: Depending on the number of shares of our Series E Redeemable Preferred Stock, par value $0.001 per share (the “Series E Preferred Stock”) we sell and the number of holders of Series E Preferred Stock who redeem their stock, the Excise Tax could be applicable to the Company and adversely affect the cash we have available for our operations.
−Removed: As of the date of this report, the Company sold approximately 301,673 shares of Series E Preferred Stock for net proceeds of approximately $6.9 million.
−Removed: On June 28, 2024, the Internal Revenue Service ("IRS") issued final regulations with respect to the timing and payment of the Excise Tax.
−Removed: Pursuant to those regulations, the Company would need to file a return and remit payment for any liability incurred during the period from January 1, 2023 to March 31, 2024 on or before October 31, 2024.
We maintain cash deposits in excess of federally insured limits.
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There can be no assurance that our deposits in excess of the FDIC or other comparable insurance limits will be backstopped by the U.S., or that any bank or financial institution with which we do business will be able to obtain needed liquidity from other banks, government institutions or by acquisition in the event of a failure or liquidity crisis.
−Removed: Accounting for our power purchase agreements could cause variability in the results we report.
−Removed: With respect to certain of our power purchase agreements, it is both possible and probable that we will net settle them, meaning that we have the ability and intent to sell power back into the grid in lieu of taking full physical delivery of all of the contracted power.
−Removed: Accordingly, these agreements will meet the definition of an accounting derivative.
−Removed: This means that these agreements will be accounted for at fair value at each quarterly measurement period, and these values may fluctuate significantly.
−Removed: As a result, our consolidated financial statements and results of operations may fluctuate quarterly based on factors outside of our control.
−Removed: We could have substantial variability in our financial results and disclosures, which, if material, could affect our operating results and in turn could impact our stock price.
−Removed: Investors should consider such derivative accounting matters when evaluating our financial results.
Our customers frequently make advance deposits based on anticipated future usage.
−Removed: In our Cloud Services Business, customers often make deposits to finance the equipment they intend to lease from us.
−Removed: If we are unable to meet the contract requirements or deliver GPU clusters to their satisfaction for any reason, we may be obligated to refund these deposits.
−Removed: In our Data Center Hosting Business, customers typically pay a month in advance based on their projected demand.
+Added: In our Data Center Hosting Business, customers typically pay in advance based on their projected demand.
If we are unable to provide the services as expected for any reason, we would be required to issue a credit or refund the difference to the customer.
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We do not have the resources to compete with larger providers of similar products or services at this time.
−Removed: The cryptoasset industry has attracted various high-profile and well-established operators, some of which have substantially greater liquidity and financial resources than we do.
+Added: The cryptoasset industry has attracted various high-profile and well-established operators, some of which have substantially greater liquidity and financial resources than
With the limited resources we have available, we may experience great difficulties in expanding and improving our services and product offerings to remain competitive.
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If one of our customers were to obtain exclusive rights to the technologies we employ across our businesses , our ability to realize significant operating efficiencies could be jeopardized .
−Removed: Our business model leverages our ability to share significant technological innovations for solutions in the ultra-low temperature immersion cooling and high-power applications spaces across our data centers and hosting customers.
−Removed: 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.
+Added: Our business model leverages our ability to share significant technological hardware innovations for solutions in the ultra-low temperature immersion cooling and high-power applications spaces across our data centers and hosting customers.
+Added: 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.
As a result, our ability to realize significant operating efficiencies by modifying our existing or new data centers utilizing these technologies and our ability to serve all our customers could be jeopardized, which could materially adversely affect our business, results of operations and future prospects.
−Removed: Our and our customers’ operations, investment strategies and profitability may be adversely affected by competition from other methods of investing in Bitcoin, Ether and other cryptoassets.
−Removed: Our customers compete with other users and/or companies that are mining Bitcoin, Ether and other cryptoassets and other potential financial vehicles, including securities backed by or linked to cryptoassets through entities similar to them.
−Removed: 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.
+Added: Our and our customer's operations, investment strategies and profitability may be adversely affected by competition from other methods of investing in Bitcoin and other cryptoassets.
+Added: Our customer competes with other users and/or companies that are mining Bitcoin and other cryptoassets and other potential financial vehicles, including securities backed by or linked to cryptoassets through entities similar to them.
+Added: 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.
The emergence of other financial vehicles and exchange-traded funds have been scrutinized by regulators and such scrutiny and the negative impressions or conclusions resulting from such scrutiny could be applicable to our customers and impact their ability to successfully operate.
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Rapidly changing technology or platform methods, rules and access may render our crypto mining and related equipment and facilities obsolete, unprofitable or unusable.
−Removed: Competitive conditions within the cryptoasset industry require that our customers use sophisticated technology in the operation of their business.
+Added: 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.
New technologies, techniques or products could emerge that might offer better performance than the software and other technologies we currently utilize, and we may have to manage transitions to these new technologies to remain competitive.
−Removed: 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.
+Added: 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.
During the course of implementing any such new technology into their operations, they may experience system interruptions and failures and may find existing crypto mining equipment and infrastructure investments become obsolete.
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Additionally, the methods, rules and access to the platforms which they mine change rapidly and could result in the platforms becoming obsolete or unusable by them.
−Removed: As a result of such changes to technology and/or platforms, our customers’ and our business and operations may suffer.
−Removed: 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.
−Removed: If the number of Ether/Bitcoin awarded for solving a block in a blockchain decreases, our customers’ ability to earn revenue worsens.
−Removed: Decreased use and demand for Ether/Bitcoin rewards may adversely affect their incentive to expend processing power to solve blocks.
−Removed: 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.
−Removed: Additionally, miners ceasing operations would reduce the collective processing power on the network, which would adversely affect the confirmation process for transactions (i.e., temporarily decreasing the speed at which blocks are added to a blockchain until the next scheduled adjustment in difficulty for block solutions) and make the Ethereum network more vulnerable to a malicious actor or botnet obtaining control in excess of 50% of the processing power active on a blockchain, potentially permitting such actor or botnet to manipulate a blockchain in a manner that adversely affects our activities.
+Added: As a result of such changes to technology and/or platforms, our customer's and our business and operations may suffer.
+Added: If the award of Bitcoin reward for solving blocks and transaction fees is not sufficiently high, our customer 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.
+Added: If the number of Bitcoin awarded for solving a block in a blockchain decreases, our customer's ability to earn revenue worsens.
+Added: Decreased use and demand for Bitcoin rewards may adversely affect their incentive to expend processing power to solve blocks.
+Added: 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.
+Added: Additionally, miners ceasing operations would reduce the collective processing power on the network, which would adversely affect the confirmation process for transactions (i.e., temporarily decreasing the speed at which blocks are added to a blockchain until the next scheduled adjustment in difficulty for block solutions).
A reduction in confidence in the confirmation process or processing power of the network could result and be irreversible.
−Removed: Such events could have a material adverse effect on our and our customers’ ability to continue to pursue our strategy at all, which could have a material adverse effect on our customers’ and our business, prospects or operations and potentially the value of any cryptoasset we mined prior to cessation of our mining operations.
+Added: Such events could have a material adverse effect on our and our customer's ability to continue to pursue our strategy at all, which could have a material adverse effect on our customer's and
+Added: our business, prospects or operations.
In addition, such events could have a material adverse effect on our co-hosting facilities, particularly any investment or commitments made by us for co-hosting facilities.
−Removed: 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.
+Added: 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.
In order to incentivize miners to continue to contribute to the network, the network may either formally or informally transition from a set reward to transaction fees earned upon solving a block.
This transition could be accomplished by miners independently electing to record in the blocks they solve only those transactions that include payment of a transaction fee.
−Removed: 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.
−Removed: Either the requirement from miners of higher transaction fees in exchange for recording transactions in a blockchain or a software upgrade that automatically charges fees for all transactions may decrease demand for Ether or Bitcoin and prevent the expansion of these networks to retail merchants and commercial businesses, resulting in a reduction in the price of Bitcoin, Ether and other cryptoassets that could adversely impact the price of and decreased use and demand for Bitcoin, Ether or other cryptoassets that our customers mine or that we accumulated prior to cessation of our mining operations which may adversely affect their value, our customers’ business, our business and an investment in us.
−Removed: 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.
+Added: 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.
+Added: Either the requirement from miners of higher transaction fees in exchange for recording transactions in a blockchain or a software upgrade that automatically charges fees for all transactions may decrease demand for Bitcoin and prevent the expansion of these networks to retail merchants and commercial businesses, resulting in a reduction in the price of Bitcoin and other cryptoassets that could adversely impact the price of and decreased use and demand for Bitcoin or other cryptoassets that our customer mines which may adversely affect their value, our customer's business, our business and an investment in us.
+Added: 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.
The award of new Bitcoin for solving blocks continually declines, so that Bitcoin miners must invest in increasing processing power in order to maintain or increase their yield of Bitcoin.
−Removed: 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.
−Removed: 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.
+Added: 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.
+Added: 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.
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The FCPA and similar anti‑corruption laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or generating business.
−Removed: We cannot provide assurance that our internal controls and procedures will protect us from the reckless or criminal acts that may be committed by our employees or third parties with whom we work.
−Removed: If we are found to be liable for
−Removed: violations of the FCPA or similar anti-corruption laws in international jurisdictions, criminal or civil penalties could be imposed on us.
+Added: We cannot provide assurance that our internal controls and procedures will protect us from reckless or criminal acts that may be committed by our employees or third parties with whom we work.
+Added: If we are found to be liable for violations of the FCPA or similar anti-corruption laws in international jurisdictions, criminal or civil penalties could be imposed on us.
Intellectual property rights claims may adversely affect the operation of some or all cryptoasset networks.
Third parties may assert intellectual property claims relating to the holding and transfer of cryptoassets and their source codes.
−Removed: 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.
−Removed: 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.
+Added: 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.
+Added: 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.
−Removed: We face risks related to public health epidemics and pandemics, including COVID-19, which could significantly disrupt our business.
−Removed: We are subject to risks associated with public health crises, such as pandemics and epidemics, which may have a material adverse effect on our business.
−Removed: Global health outbreaks, such as COVID-19, have and may continue to adversely affect our employees, disrupt our business operations and practices, as well those of our customers, partners, vendors and suppliers.
−Removed: Public health measures by government authorities such as travel bans, social-distancing, lockdown measures, vaccination requirements may cause us to incur additional costs, limit our operations, modify our business practices, diminish employee productivity or disrupt our supply chain, which may have a material adverse effect on our business.
−Removed: To the extent a public health crisis will impact our business, financial condition and results of operations depends on factors outside of our control, including severity, duration and the measures to contain the health outbreak.
−Removed: 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.
−Removed: We currently operate data centers in the state of North Dakota.
−Removed: The revenue we collected from operating these data centers was responsible for the majority of our revenue in the year ended May 31, 2024, and 2023.
−Removed: Consequently, our business operations and financial condition are particularly reliant on the performance of these data centers.
−Removed: If any critical equipment fails or there are delays in repairing failed equipment, our business operations and financial results may be severely affected.
−Removed: Additionally, we are particularly exposed to changes in the regulatory environment, market conditions and natural disasters in this state.
−Removed: North Dakota, through its regulatory and economic incentives, has encouraged Bitcoin mining companies, like ours, to locate their operations in the state.
−Removed: As such, we face increased competition in North Dakota for suitable Bitcoin mining data center sites and skilled workers.
−Removed: If we experience delays in construction or operation of data centers, supply chain disruptions (such as the global microchip and semiconductor shortage, or the COVID-related supply chain issues of recent years), increased costs of component parts or raw materials, increased costs or lack of skilled labor, or disputes with our third party contractors or service providers, or if other unforeseen events occur, our business, financial condition and results of operations could be adversely impacted.
−Removed: Additionally, if the regulatory and economic environment in North Dakota were to become less favorable to Bitcoin mining companies, including by way of increased taxes, our heavy concentration of sites in North Dakota means our business, financial condition and results of operations could be adversely affected.
We are establishing data centers in remote areas, which may adversely affect our ability to retain staff and increase our compensation costs.
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Risks Related to Our Industry
−Removed: The price of Ether/Bitcoin may be affected by the sale of Ether/Bitcoin by other vehicles investing in Ether/Bitcoin or tracking Ether/Bitcoin markets .
−Removed: The global market for Ether/Bitcoin is characterized by supply constraints that differ from those present in the markets for commodities or other assets such as gold and silver.
−Removed: 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.
−Removed: 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
+Added: Uncertainty in the global economy and instability within international relations, including changes in governmental policies relating to technology, and any potential downturn in the semiconductor and electronics industries, may negatively impact our business.
+Added: There is inherent risk, based on the complex relationships between certain countries and within regions, that political, diplomatic or military events could result in trade disruptions and other disruptions in the markets and industries we serve and our supply chain.
+Added: For example, the ongoing geopolitical and economic uncertainty between the U.S.
+Added: and China, the unknown impact of current and future U.S.
+Added: and Chinese trade regulations, and geopolitical risks with respect to Taiwan, which serves as a central hub for the technology industry supply chain, could, directly or indirectly, materially harm our business, financial condition and results of operations.
+Added: In addition, as a result of the current global semiconductor shortage, the ability to export or import products or services by the semiconductor or electronics systems industry is adversely restricted causing delays in supplies of hardware components and products, which may adversely impact our revenue, results of operations and financial condition.
+Added: Furthermore, political or economic conflicts between various global actors, and responsive measures that have been or could be taken, have created and can further create significant global economic uncertainty that could prolong or expand such conflicts, which could have a lasting impact on regional and global economies and harm our business and operating results.
+Added: Inflation in the global economy, increased interest rates, political dissension and adverse global economic conditions, like the ones we are currently experiencing, could negatively affect our business and financial condition.
+Added: We are in the process of completing Polaris Forge 1.
+Added: Fluctuations in long-term interest rates can materially impact the cost of capital required to finance the remainder of this and future projects.
+Added: Inflation is impacting various aspects of our business.
+Added: We are also experiencing an increase in our costs to procure power and supply chain issues globally.
+Added: Rising prices for materials related to the construction of Polaris Forge 1 and our data center offerings, energy and gas prices, as well as rising wages and benefits costs negatively impact our business by increasing our operating costs.
+Added: Further, disagreement in the U.S.
+Added: Congress on government spending levels could increase the possibility of a government shutdown, further adversely affecting global economic conditions.
+Added: The adverse economic conditions we are currently experiencing may cause a decrease in sales as some customers may need to take cost cutting measures or scale back their operations.
+Added: This could result in churn in our customer base, reductions in revenues from our offerings, adverse effects to our days of sales outstanding in accounts receivable, longer sales cycles, slower adoption of new technologies and increased price competition, which could adversely affect our liquidity.
+Added: Customers and vendors filing for bankruptcy could also lead to costly and time-intensive actions with adverse effects, including greater difficulty or delay in accounts receivable collection.
+Added: The uncertain economic environment could also have an impact on our foreign exchange forward contracts if our counterparties' credit deteriorates or if they are otherwise unable to perform their obligations.
+Added: Further, volatility in the financial markets and rising interest rates like we are currently experiencing could affect our ability to access the capital markets at a time when we desire, or need, to do so which could have an impact on our flexibility to pursue additional expansion opportunities and maintain our desired level of revenue growth in the future.
+Added: Our efforts to mitigate the risks associated with these adverse conditions may not be successful and our business and growth could be adversely affected.
+Added: The use and continued pace of developments in AI are inherently uncertain.
+Added: Failure by us to keep up with evolving data center requirements and regulatory frameworks for AI, could have a material adverse effect on our business and financial condition.
+Added: AI has been developing at a rapid pace, and continues to evolve and change.
+Added: As demand continues for AI services, our prospective tenants have sought increased power and compute capacity to enable advancements in AI models and service the demands of end users.
+Added: We cannot predict whether additional electric and computing power will continue to be required to develop larger, more powerful AI models, or if the practical limits of AI will stagnate in the future.
+Added: If we are unable to keep up with the changing AI landscape or in developing data centers to meet our prospective tenants’ evolving needs, or if
+Added: AI does not develop to the extent we or our prospective tenants expect, our business, and financial condition may be adversely impacted.
+Added: Additionally, we may incur significant costs and experience significant delays in developing existing or new data centers to adapt to the changing AI landscape, and may not achieve a return on investment or capitalize on the opportunities presented by demand for AI.
+Added: Moreover, while AI adoption is likely to continue and may accelerate, the long-term trajectory of this technological trend is uncertain.
+Added: Furthermore, the rapid pace of innovation in AI has led to developing and evolving regulatory frameworks, which are expected to become increasingly complex as AI continues to evolve.
+Added: Regulators and lawmakers have started proposing and adopting, or are currently considering, regulations and guidance specifically on the use of AI.
+Added: Regulations related to AI have been introduced in the United States at the federal level and are also enacted and advancing at the state level.
+Added: Additional regulations may adversely affect our business and financial condition.
+Added: The price of Bitcoin may be affected by the sale of Bitcoin by other vehicles investing in Bitcoin or tracking Bitcoin markets .
+Added: The global market for Bitcoin is characterized by supply constraints that differ from those present in the markets for commodities or other assets such as gold and silver.
+Added: 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.
+Added: 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.
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These potential consequences of a digital asset exchange’s failure could adversely affect an investment in us.
−Removed: Uncertainty in the global economy and instability within international relations, including changes in governmental policies relating to technology, and any potential downturn in the semiconductor and electronics industries, may negatively impact our business.
−Removed: There is inherent risk, based on the complex relationships between certain countries and within regions, that political, diplomatic or military events could result in trade disruptions and other disruptions in the markets and industries we serve and our supply chain.
−Removed: For example, the ongoing geopolitical and economic uncertainty between the U.S.
−Removed: and China, the unknown impact of current and future U.S.
−Removed: and Chinese trade regulations, and geopolitical risks with respect to Taiwan, which serves as a central hub for the technology industry supply chain, could, directly or indirectly, materially harm our business, financial condition and results of operations.
−Removed: In addition, as a result of the current global semiconductor shortage, the ability to export or import products or services by the semiconductor or electronics systems industry is adversely restricted causing delays in supplies of hardware components and products, which may adversely impact our revenue, results of operations and financial condition.
−Removed: Furthermore, political or economic conflicts between various global actors, and responsive measures that have been or could be taken, have created and can further create significant global economic uncertainty that could prolong or expand such conflicts, which could have a lasting impact on regional and global economies and harm our business and operating results.
Banks and financial institutions may not provide banking services, or may cut off services, to businesses that engage in cryptocurrency-related activities, and turmoil among financial institutions arising from or relating to cryptoassets or in general can materially adversely affect us and our industry.
A number of companies that engage in cryptoasset and/or other cryptocurrency-related activities have been unable to find banks or financial institutions that are willing to provide them with bank accounts and other services.
−Removed: 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,
−Removed: including in China where regulatory response to cryptocurrencies has been to exclude their use for ordinary consumer transactions within China.
+Added: 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.
Government action in the U.S.
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We also may be unable to obtain or maintain these services for our business.
−Removed: 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.
+Added: Many businesses that
+Added: 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.
As an example of adverse events affecting the crypto landscape, in November 2023, Binance, the world’s largest crypto exchange, undertook to exit the U.S.
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The impact of geopolitical and economic events on the supply and demand for cryptoassets is uncertain.
−Removed: Geopolitical crises may motivate large-scale purchases of cryptoassets, which could increase the price of Bitcoin, Ether and other cryptoassets rapidly.
+Added: 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.
Such risks are similar to the risks of purchasing commodities in general uncertain times, such as the risk of purchasing, holding or selling gold.
−Removed: 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.
−Removed: 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.
+Added: 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.
+Added: 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.
−Removed: Political or economic crises may motivate large-scale acquisitions or sales of Bitcoin, Ether and other cryptoasset either globally or locally.
+Added: Political or economic crises may motivate large-scale acquisitions or sales of Bitcoin and other cryptoasset either globally or locally.
Such events could have a material adverse effect on our customers’ businesses and 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 cryptoasset we have mined prior to cessation of our mining operations.
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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).
−Removed: China has since banned
−Removed: cryptoasset mining related activity.
+Added: China has since banned cryptoasset mining related activity.
China has already made transacting in cryptoassets illegal.
−Removed: 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).
+Added: 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
+Added: 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).
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.
−Removed: Acceptance and/or widespread use of Bitcoin, Ether and other cryptoassets is uncertain.
−Removed: 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.
+Added: Acceptance and/or widespread use of Bitcoin and other cryptoassets is uncertain.
+Added: 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.
Banks and other established financial institutions may refuse to process funds for cryptoasset transactions, process wire transfers to or from cryptoasset exchanges, cryptoasset-related companies or service providers, or maintain accounts for persons or entities transacting in cryptoasset.
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Such lack of acceptance or decline in acceptances could have a material adverse effect on our customers’ businesses and 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 Bitcoin, Ether or other cryptoassets we mined.
−Removed: 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.
+Added: 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.
Although currently cryptocurrencies generally are not regulated or are lightly regulated in most countries, one or more countries such as China and Russia, which have taken harsh regulatory action, may take regulatory actions in the future that could severely restrict the right to acquire, own, hold, sell or use these Bitcoin assets or to exchange for fiat currency.
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Halving is when the number of new Bitcoin awarded for solving a block is cut in half – hence, “halving” – at mathematically predetermined intervals.
−Removed: The recent halving for the Bitcoin blockchain occurred in April of 2024.
+Added: The most recent halving for the Bitcoin blockchain occurred in April of 2024.
While Bitcoin prices have historically increased around these halving events, there is no guarantee that the price change will be favorable or would compensate for the reduction in mining rewards.
If a corresponding and proportionate increase in the price of Bitcoin does not follow future halving events, the revenue our customers earn could decrease, which could have a material adverse effect on their ability to continue mining at our facilities.
−Removed: The crypto economy is novel and has little to no access to policymakers or lobbying organizations, which may harm our ability to effectively react to proposed legislation and regulation of cryptoassets or cryptoasset platforms adverse to our business.
−Removed: As cryptoassets have grown in both popularity and market size, various U.S.
−Removed: federal, state, and local and foreign governmental organizations, consumer agencies and public advocacy groups have been examining the operations of crypto networks, users and platforms, with a focus on how cryptoassets can be used to launder the proceeds of illegal activities, fund criminal or terrorist enterprises, and the safety and soundness of platforms and other service providers that hold
−Removed: cryptoassets for users.
−Removed: Many of these entities have called for heightened regulatory oversight, and have issued consumer advisories describing the risks posed by cryptoassets to users and investors.
−Removed: For instance, in July 2019, then-U.S.
−Removed: Treasury Secretary Steven Mnuchin stated that he had “very serious concerns” about cryptoassets.
−Removed: Members of Congress have made inquiries into the regulation of cryptoassets, and Gary Gensler, Chair of the SEC, has made public statements regarding increased regulatory oversight of cryptoassets.
−Removed: Outside the U.S., several jurisdictions have banned so-called initial coin offerings, such as China and South Korea, while Canada, Singapore, and Hong Kong have opined that token offerings may constitute securities offerings subject to local securities regulations.
−Removed: In July 2019, the United Kingdom’s Financial Conduct Authority proposed rules to address harm to retail customers arising from the sale of derivatives and exchange-traded notes that reference certain types of cryptoassets, contending that they are “ill-suited” to retail investors due to extreme volatility, valuation challenges and association with financial crimes.
−Removed: In May 2021, the Chinese government called for a crackdown on Bitcoin mining and trading, and in September 2021, Chinese regulators instituted a blanket ban on all crypto mining and transactions, including overseas crypto exchange services taking place in China, effectively making all crypto-related activities illegal in China.
−Removed: In January 2022, the Central Bank of Russia called for a ban on cryptocurrency activities ranging from mining to trading, and on March 9, 2022, President Biden signed an executive order on cryptocurrencies which calls on federal agencies to take a unified approach to regulation and oversight of digital assets.
−Removed: The crypto economy is novel and has little to no access to policymakers and lobbying organizations in many jurisdictions.
−Removed: Competitors from other, more established industries, including traditional financial services, may have greater access to lobbyists or governmental officials, and regulators that are concerned about the potential for cryptoassets for illicit usage may affect statutory and regulatory changes with minimal or discounted inputs from the crypto economy.
−Removed: As a result, new laws and regulations may be proposed and adopted in the U.S.
−Removed: and internationally, or existing laws and regulations may be interpreted in new ways, that harm the crypto economy or cryptoasset platforms, which could adversely impact our business.
−Removed: Inflation in the global economy, increased interest rates, political dissension and adverse global economic conditions, like the ones we are currently experiencing, could negatively affect our business and financial condition.
−Removed: We are in the process of financing a large data center.
−Removed: Fluctuations in long-term interest rates can materially impact the cost of capital required to finance this and future projects.
−Removed: Inflation is impacting various aspects of our business.
−Removed: We are also experiencing an increase in our costs to procure power and supply chain issues globally.
−Removed: Rising prices for materials related to the construction of our HPC Ellendale Facility and our data center offerings, energy and gas prices, as well as rising wages and benefits costs negatively impact our business by increasing our operating costs.
−Removed: Further, disagreement in the U.S.
−Removed: Congress on government spending levels could increase the possibility of a government shutdown, further adversely affecting global economic conditions.
−Removed: The adverse economic conditions we are currently experiencing may cause a decrease in sales as some customers may need to take cost cutting measures or scale back their operations.
−Removed: This could result in churn in our customer base, reductions in revenues from our offerings, adverse effects to our days of sales outstanding in accounts receivable, longer sales cycles, slower adoption of new technologies and increased price competition, which could adversely affect our liquidity.
−Removed: Customers and vendors filing for bankruptcy could also lead to costly and time-intensive actions with adverse effects, including greater difficulty or delay in accounts receivable collection.
−Removed: The uncertain economic environment could also have an impact on our foreign exchange forward contracts if our counterparties' credit deteriorates or if they are otherwise unable to perform their obligations.
−Removed: Further, volatility in the financial markets and rising interest rates like we are currently experiencing could affect our ability to access the capital markets at a time when we desire, or need, to do so which could have an impact on our flexibility to pursue additional expansion opportunities and maintain our desired level of revenue growth in the future.
−Removed: Our efforts to mitigate the risks associated with these adverse conditions may not be successful and our business and growth could be adversely affected.
−Removed: The open-source structure of the Ethereum and Bitcoin network protocols means that the contributors to the protocol are generally not directly compensated for their contributions in maintaining and developing the protocol.
−Removed: A failure to properly monitor and upgrade the protocol could damage the Ethereum network and an investment in us.
−Removed: The Ethereum and Bitcoin networks, for example, operate based on an open-source protocol maintained by contributors.
−Removed: As open-source projects, Ethereum and Bitcoin are not represented by an official organization or authority.
−Removed: As the network
−Removed: protocol is not sold and its use does not generate revenues for contributors, contributors are generally not compensated for maintaining and updating the network protocols.
+Added: The open-source structure of the Bitcoin network protocols means that the contributors to the protocol are generally not directly compensated for their contributions in maintaining and developing the protocol.
+Added: A failure to properly monitor and upgrade the protocol could damage the Bitcoin network and an investment in us.
+Added: The Bitcoin network, for example, operates based on an open-source protocol maintained by contributors.
+Added: As an open-source project, Bitcoin is not represented by an official organization or authority.
+Added: As the network protocol is not sold and its use does not generate revenues for contributors, contributors are generally not compensated for maintaining and updating the network protocols.
The lack of guaranteed financial incentive for contributors to maintain or develop the networks and the lack of guaranteed resources to adequately address emerging issues with the networks may reduce incentives to address the issues adequately or in a timely manner.
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.
−Removed: We may face risks of Internet disruptions, which could have an adverse effect on the price of Bitcoin, Ether and other cryptoassets.
−Removed: 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.
−Removed: Generally, Bitcoin, Ether and our customers’ business of mining cryptoassets is dependent upon the Internet.
+Added: We may face risks of Internet disruptions, which could have an adverse effect on the price of Bitcoin and other cryptoassets.
+Added: 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.
+Added: Generally, Bitcoin and our customers’ business of mining cryptoassets is dependent upon the Internet.
A significant disruption in Internet connectivity could disrupt our ability to provide services and a currency’s network operations until the disruption is resolved and have an adverse effect on the price of cryptoassets, our customers’ ability to mine them, demand for our co-hosting services and our ability to perform our obligations under our contracts with our co-hosting customers.
There are risks related to technological obsolescence, the vulnerability of the global supply chain to cryptoasset hardware disruption, and our customers’ difficulty in obtaining new hardware which may have a negative effect on our business.
−Removed: 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.
+Added: 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.
As our customers’ mining equipment operates, it experiences ordinary wear and tear and general hardware breakdown and may also face more significant malfunctions caused by a number of extraneous factors beyond our or their control.
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Prices for both new and older models of miners have been on the rise and these supply constraints are expected to continue for the foreseeable future.
−Removed: China, a major supplier of cryptoasset miners, has seen a production slowdown as a result of COVID-19.
−Removed: Should similar outbreaks or other disruptions to the China-based global supply chain for hardware occur, our customers may not be able to obtain adequate replacement parts for their existing miners or to obtain additional miners on a timely basis, if at all, or they may only be able to acquire miners at premium prices.
−Removed: Such events could have a material adverse effect on our customers’ business and operations.
If a malicious actor or botnet obtains control in excess of 50% of the processing power active on any cryptoasset network, it is possible that such actor or botnet could manipulate the blockchain in a manner that adversely affects an investment in us.
−Removed: 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.
+Added: 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.
In such alternate blocks, the malicious actor or botnet could control, exclude or modify the ordering of transactions, though it could not generate new cryptoassets or transactions using such control.
17 unchanged sentences
• changes in laws and regulations affecting our business or our industry;
−Removed: • commencement of, or involvement in, litigation involving us;
+Added: • commencement of, or involvement in, litigation;
• changes in our capital structure, such as future issuances of securities or the borrowing of additional debt;
3 unchanged sentences
• general economic and political conditions such as recessions, interest rates, international currency and crypto currency fluctuations and acts of war or terrorism;
−Removed: • securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our common stock;
+Added: • 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;
• failure to meet certain Nasdaq conditions to maintain our listing status.
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A decline in the market price of our common stock also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.
−Removed: We may not be able to maintain the listing of our common stock on Nasdaq, which may adversely affect the flexibility of holders of our common stock to resell their securities in the secondary market.
−Removed: Our common stock is presently listed on Nasdaq, which requires us to meet certain corporate governance and financial conditions to maintain our listing status.
−Removed: If the Company is unable to meet the continued listing criteria of Nasdaq and our
−Removed: common stock became delisted, trading of our common stock could thereafter be conducted in the over-the-counter markets in the OTC Pink, also known as “pink sheets” or, if available, on another OTC trading platform.
−Removed: We cannot assure you that we will meet the criteria for continued listing, in which case our common stock could become delisted.
−Removed: Any such delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the loss of confidence in our financial stability by suppliers, customers and employees.
−Removed: Investors would likely find it more difficult to dispose of, or to obtain accurate market quotations for, our common stock, as the liquidity that Nasdaq provides would no longer be available to investors.
−Removed: In addition, the failure of our common stock to continue to be listed on the Nasdaq could adversely impact the market price for our common stock and our other securities, and we could face a lengthy process to re-list our common stock, if we are able to re-list our common stock.
−Removed: We are a public reporting company.
−Removed: There are ongoing costs in maintaining compliance with being a public reporting company and our management will spend a significant amount of time ensuring such compliance.
−Removed: If we are unable to maintain compliance with our public reporting company obligations, our common stock may be delisted and we may be unable to re-list our common stock on another national stock exchange or quotation system.
+Added: We have issued, and may in the future issue, new shares of our common stock, which has a dilutive effect on our stockholders.
+Added: We have financed much of our strategic growth through our at-the-market (“ATM”) offerings and issuances of our common stock and preferred stock.
+Added: 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.
+Added: On May 6, 2024, we entered into a Sales Agreement with Roth Capital Partners, LLC (the “May 2024 Sales Agreement”) whereby up to $25,000,000 of shares of our common stock was available to be issued.
+Added: The Company sold approximately 3.1 million shares under the May 2024 Sales Agreement, which was completed as of August of 2024.
+Added: In addition, on July 9, 2024, we entered into a Sales Agreement with B.
+Added: Riley Securities, Inc., BTIG, LLC, Lake Street Capital Markets, LLC, Northland Securities, Inc.
+Added: Roth Capital Partners, LLC (the “July 2024 Sales Agreement”) whereby up to $125,000,000 of shares of our common stock were available to be issued and sold.
+Added: The Company sold approximately 3.0 million shares under the July 2024 Sales Agreement.
+Added: As of August 31, 2024, this offering was completed.
+Added: Further, on June 2, 2025, we entered into a Sales Agreement with Northland Securities, Inc.
+Added: and Wells Fargo Securities, LLC (the “June 2025 Sales Agreement," and together with the May 2024 Sales Agreement, and the July 2024 Sales Agreement, the "Sales Agreements").
+Added: Up to $200,000,000 of shares of our common stock may be issued if and when sold pursuant to the June 2025 Sales Agreement.
+Added: The Company has sold approximately 15.1 million shares under the June 2025 Sales Agreement as of June 11, 2025.
+Added: On August 29, 2024, we entered into a securities purchase agreement (the “Series F Purchase Agreement”) with YA Fund (as defined below) for the private placement (the “Series F Offering”) of 53,191 shares of Series F Convertible Preferred Stock of the Company, par value $0.001 per share (the “Series F Convertible Preferred Stock”), including 3,191 shares representing an original issue discount of 6%.
+Added: The transaction closed on August 30, 2024, for total proceeds of $50.0 million, prior to fees paid to Northland Securities, Inc.
+Added: for their role as placement agent in an amount equal to 3.5% of the total proceeds.
+Added: 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.
+Added: As of May 31, 2025, there was no outstanding Series F Preferred Stock.
+Added: On September 5, 2024, we entered into a securities purchase agreement with a group of institutional and accredited investors, NVIDIA and Related Companies, for the private placement (the “Private Placement”) of 49,382,720 shares of our common stock, par value $0.001 per share, at a purchase price of $3.24 per share, representing the last closing price of the common stock on the Nasdaq Global Select Market on September 4, 2024.
+Added: The Private Placement closed during the three months ended November 30, 2024, with aggregate gross proceeds to us of approximately $160 million, before deducting offering expenses.
+Added: On April 30, 2025, we entered into a preferred equity purchase agreement (the “PEPA”) with the investors signatory thereto, for the issuance and sale of up to 156,000 shares of our Series G Preferred Stock, par value $0.001 (the “Series G Preferred Stock”) at our option during the period commencing on April 30, 2025 and terminating on the earlier of (i) the 36-month anniversary of the Commitment Date or (ii) such date as there ceases to be a sufficient number of authorized but unissued shares of common stock remaining under the Exchange Cap (as defined in the PEPA).
+Added: As of the date of this report, we have issued 156,000 shares of Series G Preferred Stock, for aggregate gross proceeds of $150.0 million , of which, 156,000 shares of Series G Preferred Stock were subsequently converted into approximately 21.0 million shares of our common stock.
+Added: Our efforts to raise capital is for the purpose of executing on development plans and strategic growth opportunities as they arise;
+Added: 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.
+Added: O n October 8, 2024, our Board of Directors approved the Applied Digital Corporation 2024 Omnibus Equity Incentive Plan (the “2024 Plan”), which our stockholders approved on November 20, 2024 .
+Added: We have reserved 4,216,054 shares of our common stock for future issuance under our equity plan.
+Added: As of May 31, 2025, there were 271,444 shares outstanding underlying unvested restricted stock awards and 13,867,330 shares underlying unvested restricted stock units and performance stock units.
+Added: Vesting of these restricted stock awards, restricted stock units and performance stock units, as well as future issuances under our plans, would also result in dilution of current stockholders’ relative ownership of us.
+Added: We may also issue other securities that are convertible into or exercisable for equity in our company in connection with hiring or retaining employees or consultants, future acquisitions or future sales of our securities.
If securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our common stock, its trading price and volume could decline.
8 unchanged sentences
There is no assurance that stockholders will be able to sell shares when desired.
−Removed: We have issued and may in the future issue new shares of our common stock, which has a dilutive effect on our stockholders.
−Removed: We have primarily financed our strategic growth through our at-the-market (“ATM”) offerings and issuances of our common stock.
−Removed: 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.
−Removed: On June 27, 2023, the Company began issuing and selling shares of our common stock under an ATM sale agreement, with Craig-Hallum Capital Group LLC, pursuant to which the Company may sell up to $125 million in shares of our common stock, par value $0.001 per share.
−Removed: The Company sold approximately 18.9 million shares under the ATM, which was completed in December 2023.
−Removed: On May 6, 2024, we entered into a Sales Agreement with Roth Capital Partners, LLC (the “May Sales Agreement”).
−Removed: Up to $25,000,000 of shares of our common stock may be issued pursuant to the May Sales Agreement.
−Removed: The Company sold approximately 2.7 million shares under the May Sales Agreement, which was completed in June of 2024.
−Removed: In addition, on July 9, 2024, we entered into a Sales Agreement with B.
−Removed: Riley Securities, Inc., BTIG, LLC, Lake Street Capital Markets, LLC, Northland Securities, Inc.
−Removed: and Roth Capital Partners, LLC (the “Sales Agreement”).
−Removed: Up to $125,000,000 of shares of our common stock may be issued if and when sold pursuant to the Sales Agreement.
−Removed: As of the date of this report, the Company has sold approximately 3.0 million shares under the Sales Agreement.
−Removed: On August 28, 2024, we entered into the Standby Equity Purchase Agreement with YA Fund, which was amended on August 29, 2024 (as amended, the "SEPA").
−Removed: Under the SEPA, we agreed to issue and sell to YA Fund, from time to time, and YA Fund agreed to purchase from us, up to $250 million of our common stock, subject to certain obligations and limitations.
−Removed: Our efforts to raise capital is for the
−Removed: purpose of executing on development plans and strategic growth opportunities as they arise;
−Removed: 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.
−Removed: In addition, our Board and stockholders have approved an employee incentive plan and a non-employee director incentive plan.
−Removed: We have reserved 15,773,839 shares of our common stock for future issuance under our plans.
−Removed: As of May 31, 2024, there are 638,895 shares outstanding underlying unvested restricted stock awards and 8,355,080 shares underlying unvested restricted stock units.
−Removed: Vesting of these restricted stock awards and restricted stock units, as well as future issuances under our plans, would also result in dilution of current stockholders’ relative ownership of us.
−Removed: We may also issue other securities that are convertible into or exercisable for equity in our company in connection with hiring or retaining employees or consultants, future acquisitions or future sales of our securities.
Provisions in our Articles (as defined below), our Bylaws (as defined below), and Nevada law may discourage a takeover attempt even if a takeover might be beneficial to our stockholders.
−Removed: Provisions contained in our Second Amended and Restated Articles of Incorporation (as amended, the “Articles”) and our Third Amended and Restated Bylaws (the “Bylaws”) could make it more difficult for a third party to acquire us if we have become a publicly traded company.
+Added: Provisions contained in our Second Amended and Restated Articles of Incorporation (as amended, the “Articles”) and our Third Amended and Restated Bylaws (the “Bylaws”) could make it more difficult for a third party to acquire us.
Provisions of our Articles and Bylaws impose various procedural and other requirements, which could make it more difficult for stockholders to effect certain corporate actions.
21 unchanged sentences
For purposes of Nevada law, an “interested stockholder” is any person who is (i) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation, or (ii) an affiliate or associate of the corporation and at any time within the two previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation.
−Removed: The definition of the term “business combination” is sufficiently broad to cover virtually any kind of
−Removed: 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.
+Added: 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
+Added: benefit its own interests rather than the interests of the corporation and its other stockholders.
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.
−Removed: 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.
+Added: Substantial blocks of our common stock may be sold into the market as a result of our Sales Agreements and the PEPA.
The price of our common stock could decline if there are substantial sales of shares of our common stock, if there is a large number of shares of our common stock available for sale, or if there is the perception that these sales could occur.
−Removed: The aggregate principal amount outstanding under the YA Notes, as of the date of this report, is $28.1 million.
−Removed: The YA Notes are convertible into shares of our common stock (the “YA Conversion Shares”), at the request and sole discretion of the holder, subject to a minimum floor conversion price (which may be reduced by us from time to time in our discretion, subject to the rules and regulations of Nasdaq).
−Removed: We have registered for resale (i) up to 23,585,000 shares underlying the convertible note issued by us to YA Fund on March 27, 2024, of which 7,413,950 have been issued and are outstanding, and (ii) up to 20,000,000 shares underlying the convertible note issued by us to YA Fund on May 24, 2024, of which approximately 8,771,609 have been issued and are outstanding.
−Removed: On July 9, 2024, we entered into the Sales Agreement.
−Removed: Up to $125,000,000 of shares of our common stock may be issued if and when sold pursuant to the Sales Agreement.
−Removed: Such shares of common stock are registered pursuant to a prospectus supplement that forms a part of that certain registration statement on Form S-3, Reg.
−Removed: Assuming a public offering price of $6.77 per share, which was the closing price of our common stock on Nasdaq on July 3, 2024, 18,463,811 shares of our common stock would be issued and sold under the Sales Agreement.
−Removed: The actual number of shares issued will vary depending on the prices at which the shares of our common stock are sold from time to time.
−Removed: As of the date of this report, approximately 3.0 million shares of our common stock have been issued and sold under the Sales Agreement.
−Removed: On August 28, 2024, we entered into the SEPA with YA Fund, which was amended on August 29, 2024.
−Removed: Under the SEPA, we agreed to issue and sell to YA Fund, from time to time, and YA Fund agreed to purchase from us, up to $250 million of our common stock, subject to certain obligations and limitations.
−Removed: Our shares of common stock that may be issued under the SEPA may be sold by us to YA Fund at our discretion from time to 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 (unless earlier terminated pursuant to the terms of the SEPA);
−Removed: provided, that there is an effective resale registration statement on file with the SEC covering the shares of common stock issued and issuable under the SEPA.
−Removed: We generally have the right to control the timing and amount of any sales of our common stock to YA Fund under the SEPA.
−Removed: Sales of our shares of common stock, if any, to YA Fund under the SEPA will depend upon market conditions and other factors to be determined by us.
−Removed: We may ultimately decide to sell to YA Fund all, some, or none of the shares of common stock that may be available for us to sell to YA Fund pursuant to the SEPA.
−Removed: Any issuances of shares of our common stock pursuant to the Prepaid Advance Agreements, YA Notes, the Sales Agreement, or the SEPA will dilute the percentage ownership of stockholders and may dilute the per share projected earnings (if any) or book value of our common stock.
+Added: On June 2, 2025, we entered into the June 2025 Sales Agreement.
+Added: Up to $200,000,000 of shares of our common stock may be issued if and when sold pursuant to the June 2025 Sales Agreement.
+Added: As of the date of this report, the Company has sold approximately 15.1 million shares under the June 2025 Sales Agreement for aggregate gross proceeds of $193.9 million.
+Added: On April 30, 2025, we entered into the PEPA.
+Added: Up to 156,000 shares of our Series G Preferred Stock were available to be issued and sold pursuant to the PEPA, which are convertible into shares of our common stock.
+Added: As of the date of this report, we have issued and sold 156,000 shares of Series G Preferred Stock, of which, all 156,000 shares of Series G Preferred Stock were subsequently converted into approximately 21.0 million shares of our common stock.
+Added: Any issuances of shares of our common stock pursuant to the June 2025 Sales Agreement or upon issuance and conversion of the Series G Preferred Stock under the PEPA will dilute the percentage ownership of stockholders and may dilute the per share projected earnings (if any) or book value of our common stock.
Sales of a substantial number of shares of our common stock in the public market or other issuances of shares of our common stock, or the perception that these sales or issuances could occur, could cause the market price of our common stock to decline and may make it more difficult for you to sell your shares at a time and price that you deem appropriate.
−Removed: We do not have the right to control the timing and amount of the issuance of our shares of common stock to YA Fund under the Prepaid Advance Agreements and the YA Notes, and accordingly, it is not possible to predict the actual number of shares we will issue pursuant to the Prepaid Advance Agreements at any one time or in total.
−Removed: Further, we may not have the ability to issue the full amount available under the Prepaid Advance Agreements without stockholder approval.
−Removed: We do not have the right to control the timing and amount of any issuances of our shares of common stock to YA Fund under the Prepaid Advance Agreements and the YA Notes.
−Removed: Sales of our common stock, if any, to YA Fund under the Prepaid Advance Agreements and the YA Notes will depend upon market conditions and other factors, and the discretion of YA Fund.
−Removed: In addition, because the purchase price per share to be paid by YA Fund for the shares of our common stock that we may issue to YA Fund under the Prepaid Advance Agreements and the YA Notes, if any, will fluctuate based on
−Removed: the market prices of our common stock, it is not possible for us to predict, as of the date hereof and prior to any such conversion date, the conversion price per share at which YA Fund will convert any portion of the outstanding balance under the YA Notes and consequently the number of shares of our common stock that we will issue to YA Fund under the Prepaid Advance Agreements and the YA Notes in any such conversion.
−Removed: Furthermore, we have filed resale registration statements to register the resale by YA Fund of any shares of our common stock that it receives upon conversion.
−Removed: As of the date of this report, approximately 7,413,950 shares of common stock have been issued and are outstanding pursuant to the Initial YA Notes, and approximately 8,771,609 shares of common stock have been issued and are outstanding pursuant to the May Note.
−Removed: The resale by YA Fund of a significant amount of shares of our common stock at any given time, or the perception that these sales may occur, could cause the market price of our common stock to decline and to be highly volatile.
−Removed: In addition, under the applicable Nasdaq Listing Rules, in no event may we issue shares of our common stock to YA Fund to the extent that such shares would (i) when combined with all other shares issued in connection with the Prepaid Advance Agreements, exceed the “Exchange Cap” (which is the aggregate number of common stock that we may issue in a transaction in compliance with the our obligations under the rules or regulations of Nasdaq Stock Market LLC), unless we obtain stockholder approval to do so, or (ii) result in YA Fund (and its affiliates) beneficially owning more than 4.99% of all of the outstanding shares of our common stock.
−Removed: As a result, if it becomes necessary for us to issue and sell to YA Fund an aggregate number of shares that would exceed the Exchange Cap, then before we could issue any shares of common stock in excess of the Exchange Cap, we would also need to obtain the requisite stockholder approval.
−Removed: Obtaining the requisite stockholder approval can be time-consuming, divert management’s attention and resources, cause us to incur significant expenses.
−Removed: Pursuant to the terms of the Prepaid Advance Agreements, we are obligated to deliver shares of common stock within three trading days of the receipt of a conversion notice from YA Fund.
−Removed: Our failure to deliver shares of common stock within such time period, including as a result of seeking the requisite stockholder approval to issue shares in excess of the Exchange Cap, will result in an event of default.
−Removed: An event of default under the YA Notes could adversely affect our business, financial position, and results of operations.
−Removed: It is not possible to predict the actual number of shares we will sell under the SEPA, or the actual gross proceeds resulting from those sales.
−Removed: Further, we may not have the ability to issue the full amount available under the SEPA without stockholder approval.
−Removed: The SEPA provides that, during the term of the agreement, and subject to issuance and effective registration of the shares issued thereunder and certain obligations and limitations, we may, at our discretion, from time to time direct YA Fund to purchase our shares of common stock from us in one or more purchases under the agreement, for a maximum aggregate purchase price of up to $250 million.
−Removed: The purchase price per share to be paid by YA Fund for the shares of common stock that we may elect to sell to YA Fund under the SEPA, if any, will fluctuate based on the market prices of our shares of common stock at the time we elect to sell shares to YA Fund pursuant to the SEPA, if any, it is not possible for us to predict the number of shares of common stock that we will sell to YA Fund under the SEPA, the purchase price per share that YA Fund will pay for shares purchased from us under the SEPA, or the aggregate gross proceeds that we will receive from those purchases by YA Fund under the SEPA.
−Removed: We generally have the right to control the timing and amount of any sales of our shares of common stock to YA Fund under the SEPA, except that we shall not effect any sales under the SEPA to the extent that after giving effect to such sale:
−Removed: (i) YA Fund would beneficially own more than 4.99% of the Company’s outstanding common stock at the time of such issuance, or (ii) the aggregate number of shares of common stock issued under the SEPA, together with any shares issued under the March PPA or the May PPA would exceed 19.99% of the aggregate number of shares of outstanding common stock on March 26, 2024 without seeking stockholder approval in accordance with applicable Nasdaq rules.
−Removed: Thus, the Company may not have access to the right to sell the full $250 million of shares of common stock to YA Fund.
−Removed: The rights of holders of our Series E Preferred Stock rank senior to the rights of the holders of our common stock.
−Removed: 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.
−Removed: 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
−Removed: common stock for any period.
−Removed: Upon liquidation, dissolution or winding up of our affairs, the holders of shares of our Series E Preferred Stock are entitled to receive a liquidation preference of the stated value per share of $25, plus all accrued but unpaid dividends, prior and in preference to any distribution to the holders of shares of our common stock or any other class of our equity securities junior to the Series E Preferred Stock.
−Removed: 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.
−Removed: 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.
−Removed: Pursuant to the Certificate of Designations of Series E Redeemable Preferred Stock (as amended, the “Certificate of Designations”), each holder of shares of Series E Preferred Stock is entitled to redeem any portion of the outstanding Series E Preferred Stock held by such holder.
−Removed: 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.
+Added: The rights of holders of our Series E and E-1 Preferred Stock rank senior to the rights of the holders of our common stock.
+Added: 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.
+Added: 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.
+Added: Upon liquidation, dissolution or winding up of our affairs, the holders of shares of our Series E and E-1 Preferred Stock are entitled to receive a liquidation preference, plus all accrued but unpaid dividends, prior and in preference to any distribution to the holders of shares of our common stock or any other class of our equity securities junior to the Series E and E-1 Preferred Stock.
+Added: As of the date of this report, (i) 301,673 shares of Series E Preferred Stock are outstanding, and (ii) 62,485 shares of Series E-1 Preferred Stock are outstanding.
+Added: 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.
+Added: 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.
+Added: Pursuant to the relevant Certificate of Designations of the applicable series of Preferred Stock (as amended, the “Certificate of Designations”), each holder of shares of Series E and E-1 Preferred Stock is entitled to redeem any portion of the outstanding Preferred Stock held by such holder.
+Added: 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.
On August 16, 2022, the IR Act was signed into federal law.
−Removed: 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.
−Removed: As of the date of this report, the Company sold approximately 301,673 shares of Series E Preferred Stock for net proceeds of approximately $6.9 million.
+Added: 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.
+Added: As of the date of this report, we sold approximately 573,364 shares of Preferred Stock for net proceeds of approximately $259.4 million.
In addition, applicable Nevada law provides that no distribution (including dividends on, or redemption or repurchases of, shares of capital stock) may be made if, after giving effect to such distribution, the corporation would not be able to pay its debts as they become due in the usual course of business, or, except as specifically permitted by the company’s articles of incorporation, the company’s total assets would be less than the sum of its total liabilities plus the amount that would be needed at the time of a dissolution to satisfy the preferential rights of stockholders whose preferential rights are superior to those receiving the distribution.
−Removed: 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.
+Added: 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.
There can be no guarantee that we will have sufficient funds available to meet these obligations.
As a result, if it becomes necessary for us to issue and sell to the holders an aggregate number of shares that would exceed 19.99% of the outstanding shares of common stock , then before we could issue any shares of common stock in excess of such limit , we would also need to obtain the requisite stockholder approval.
−Removed: Additionally, our ability to issue common stock in the event of a redemption may be limited by our ability to enter into “Variable Rate Transactions.” If a redemption constitutes a “Variable Rate Transaction” under the terms of the Prepaid Advance Agreements, we may need to seek a waiver from YA Fund before we could issue any shares of common stock.
−Removed: The redemption of the Series E Preferred Stock could adversely affect our business, financial position, and results of operations, in the event our assets are not sufficient to meet our redemption obligations.
+Added: The redemption of the Series E Preferred Stock and Series E-1 Preferred Stock could adversely affect our business, financial position, and results of operations, in the event our assets are not sufficient to meet our redemption obligations.
+Added: The Convertible Notes may adversely affect the market price of our common stock.
+Added: The market price of our common stock is likely to be influenced by our 2.75% Convertible Senior Notes due 2030 (the “Convertible Notes”).
+Added: For example, the market price of our common stock could become more volatile and could be depressed by investors’ anticipation of the potential resale in the market of a substantial number of additional shares of our common stock received upon conversion of the Convertible Notes, and by hedging or arbitrage trading activity that may develop involving the Convertible Notes and our common stock.
+Added: Conversion of the Convertible Notes will dilute the ownership interest of existing stockholders or may otherwise depress the price of our common stock.
+Added: The conversion of some or all of the Convertible Notes will dilute the ownership interests of existing stockholders to the extent we deliver shares of our common stock upon conversion of any of the Convertible Notes.
+Added: The Convertible Notes may from time to time in the future be convertible at the option of their holders prior to their scheduled terms under certain circumstances.
+Added: Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.
+Added: The prepaid forward transaction may affect the value of our common stock and may result in unexpected market activity in our common stock.
+Added: In connection with the pricing of the offering of the Convertible Notes in a private placement to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”)., we entered into the prepaid forward transaction with one of the initial purchasers or its affiliates (the “forward counterparty”).
+Added: The prepaid forward transaction is generally intended to facilitate privately negotiated derivative transactions, including swaps, between the forward counterparty or its affiliates and investors in the Convertible Notes relating to shares of our common stock by which investors in the Convertible Notes will establish short positions relating to shares of our common stock and otherwise hedge their investments in the Convertible Notes.
+Added: As a result, the prepaid forward transaction is expected to allow the investors to establish short positions that generally correspond to (but may be greater than) commercially reasonable initial hedges of their investment in the Convertible Notes.
+Added: In the event of such greater initial hedges, investors may offset such greater portion by purchasing our common stock on the day we price the Convertible Notes.
+Added: Facilitating investors’ hedge positions by entering into the prepaid forward transaction, particularly if investors purchase our common stock on the pricing date, could increase (or reduce the size of any decrease in) the market price of our common stock and effectively raise the initial conversion price of the Convertible Notes.
+Added: In connection with establishing their initial hedges of the prepaid forward transaction, the forward counterparty or its affiliates generally
+Added: expect, but are not required, to enter into one or more derivative transactions with respect to our common stock with the investors of the Convertible Notes concurrently with or after the pricing of the Convertible Notes.
+Added: Our entry into the prepaid forward transaction with the forward counterparty and the entry by the forward counterparty into derivative transactions in respect of our common stock with the investors of the Convertible Notes could have the effect of increasing (or reducing the size of any decrease in) the market price of our common stock concurrently with, or shortly after, the pricing of the Convertible Notes and effectively raising the initial conversion price of the Convertible Notes.
+Added: Neither we nor the forward counterparty will control how investors of the Convertible Notes may use such derivative transactions.
+Added: In addition, such investors may enter into other transactions relating to our common stock or the Convertible Notes in connection with or in addition to such derivative transactions, including the purchase or sale of shares of our common stock.
+Added: As a result, the existence of the prepaid forward transaction, such derivative transactions and any related market activity could cause more purchases or sales of our common stock over the terms of the prepaid forward transaction than there otherwise would have been had we not entered into the prepaid forward transaction.
+Added: Such purchases or sales could potentially increase (or reduce the size of any decrease in) or decrease (or reduce the size of any increase in) the market price of our common stock and/or the price of the Convertible Notes.
+Added: In addition, the forward counterparty or its affiliates may modify their hedge positions by entering into or unwinding one or more derivative transactions with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions following the pricing of the Convertible Notes and prior to the maturity of the Convertible Notes.
+Added: These activities could also cause or avoid an increase or a decrease in the market price of our common stock or the Convertible Notes, which could, to the extent the activity occurs following conversion or during any observation period related to a conversion of Convertible Notes, affect the amount and value of the consideration that you will receive upon conversion of the Convertible Notes.
+Added: We do not make any representation or prediction as to the direction or magnitude of any potential effect that the transactions described above may have on the price of the Convertible Notes or our common stock.
+Added: In addition, we do not make any representation that the forward counterparty or its affiliates will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
+Added: The capped call transactions may affect the value of the Convertible Notes and our common stock.
+Added: In connection with the pricing of the Convertible Notes, we entered into privately negotiated capped call transactions with one or more of the initial purchasers or their affiliates and one or more other financial institutions (the “option counterparties”).
+Added: The capped call transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of the Convertible Notes and/or offset any potential cash payments we are required to make in excess of the principal amount of converted Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap.
+Added: In connection with establishing their initial hedges of the capped call transactions, the option counterparties or their respective affiliates expect to enter or have entered into various derivative transactions with respect to our common stock and/or purchase shares of our common stock concurrently with or shortly after the pricing of the Convertible Notes.
+Added: This activity could increase (or reduce the size of any decrease in) the market price of our common stock or the market value of the Convertible Notes at that time.
+Added: In addition, the option counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions following the pricing of the Convertible Notes and prior to the maturity of the Convertible Notes (and are likely to do so during the relevant valuation period under the capped call transactions or following any early conversion of Convertible Notes or repurchase of Convertible Notes by us on any fundamental change repurchase date, any redemption date or otherwise, in each case if we exercise our option to terminate the relevant portion of the capped call transactions).
+Added: We do not make any representation or prediction as to the direction or magnitude of any potential effect that the transactions described above may have on the price of the Convertible Notes or our common stock.
+Added: In addition, we do not
+Added: make any representation that the option counterparties will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
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.