What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-04-14 compared with 2025-01-14 · 353 added, 267 removed, 646 unchanged (49% of the section changed)

3 unchanged sentences

(In thousands, except share and par value data)

November 30, 2024 May 31, 2024

February 28, 2025 May 31, 2024

Current assets:

1 unchanged sentence

Restricted cash:

Funds for construction

Letters of credit

31,342 21,349

Accounts receivable 14,619 3,847

28 unchanged sentences

Temporary equity

Series E preferred stock, $ 0.001 par value, 2,000,000 shares authorized, 301,673 shares issued and outstanding at November 30, 2024, and no shares authorized, issued or outstanding at May 31, 2024

Series F preferred stock, $ 0.001 par value, 53,191 shares authorized and issued, 43,000 outstanding at November 30, 2024, and no shares authorized, issued or outstanding at May 31, 2024

Series E-1 preferred stock, $ 0.001 , 62,500 shares authorized, 6,359 shares issued and outstanding at November 30, 2024, and no shares authorized, issued or outstanding at May 31, 2024

Series E preferred stock, $ 0.001 par value, 2,000,000 shares authorized, 301,673 shares issued and outstanding at February 28, 2025, and no shares authorized, issued or outstanding at May 31, 2024

Series E-1 preferred stock, $ 0.001 , 62,500 shares authorized, 39,763 shares issued and outstanding at February 28, 2025, and no shares authorized, issued or outstanding at May 31, 2024

Stockholders' equity:

Common stock, $ 0.001 par value, 400,000,000 shares authorized, 225,846,268 shares issued and 216,555,069 shares outstanding at November 30, 2024, and 144,083,944 shares issued and 139,051,142 shares outstanding at May 31, 2024

Treasury stock, 9,291,199 shares at November 30, 2024 and 5,032,802 shares at May 31, 2024, at cost

Common stock, $ 0.001 par value, 400,000,000 shares authorized, 233,682,359 shares issued and 224,391,160 shares outstanding at February 28, 2025, and 144,083,944 shares issued and 139,051,142 shares outstanding at May 31, 2024

Treasury stock, 9,291,199 shares at February 28, 2025 and 5,032,802 shares at May 31, 2024, at cost

( 31,400 ) ( 62 )

8 unchanged sentences

(In thousands, except share and per share data)

Three Months Ended Six Months Ended

November 30, 2024 November 30, 2023 November 30, 2024 November 30, 2023

Three Months Ended Nine Months Ended

February 28, 2025 February 29, 2024 February 28, 2025 February 29, 2024

Revenue $ 52,921 $ 40,284 $ 175,567 $ 110,993

8 unchanged sentences

Loss on abandonment of assets — — 769 —

Loss from legal settlement — 80 — 2,380

Loss on legal settlement

Total costs and expenses 71,864 98,804 205,567 192,610

3 unchanged sentences

Loss on conversion of debt

25,410 — 33,612 —

Loss on change in fair value of debt — — 85,439 —

Loss on change in fair value of related party debt — 2,612 — 2,612

Loss on extinguishment of debt

1,177 — 1,177 —

Loss on extinguishment of related party debt

Loss on change in fair value of warrants

6,421 — 6,421 —

Net loss before income tax expenses ( 35,438 ) ( 62,838 ) ( 178,410 ) ( 85,221 )

Income tax expense (benefit) 1 — 1 —

Income tax expense 117 — 118 —

Net loss ( 35,555 ) ( 62,838 ) ( 178,528 ) ( 85,221 )

4 unchanged sentences

Basic and diluted weighted average number of shares outstanding 222,454,578 121,426,622 193,405,721 110,500,556

(1) Includes related party selling, general and administrative expense of $ 0.1 million and $ 0.2 million for the three months ended November 30, 2024 and November 30, 2023, respectively, and $ 0.1 million and $ 0.3 million for the six months ended November 30, 2024 and November 30, 2023, respectively.

See Note 5 - Related Party Transactions for further discussion of related party transactions.

(2) Includes $ 25 million received in connection with the sale of our Garden City facility for the six months ended November 30, 2024.

See Note 10 - Commitments and Contingencies for further discussion.

(3) Includes related party interest expense of $ 0.7 million for the three and six months ended November 30, 2023.

There was no related party debt outstanding during the three and six months ended November 30, 2024 and as such, no interest expense was incurred related to related party debt.

(1) Includes related party selling, general and administrative expense of $ 0.1 million and $ 0.1 million for the three months ended February 28, 2025 and February 29, 2024, respectively, and $ 0.2 million and $ 0.5 million for the nine months ended February 28, 2025 and February 29, 2024, respectively.

See Note 5 - Related Party Transactions for further discussion of related party transactions.

(2) Includes $ 25 million received in connection with the sale of our Garden City facility once conditional approval requirements were met and escrowed funds were released during the nine months ended February 28, 2025.

The three and nine months ended February 29, 2024 includes $ 21.7 million loss on classification of held for sale related to the sale of the Garden City facility.

(3) There was no related party debt outstanding during the three and nine months ended February 28, 2025 and as such, no interest expense was incurred related to related party debt.

For the three and nine months ended February 29, 2024, amounts include related party interest expense of $ 0.2 million and $ 0.8 million, respectively.

See accompanying notes to the unaudited condensed consolidated financial statements

1 unchanged sentence

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

For the Three Months ended November 30, 2024 and November 30, 2023

For the Three Months ended February 28, 2025 and February 29, 2024

(In thousands, except share data)

5 unchanged sentences

Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

Balance, August 31, 2024 301,673 $ 6,932 53,191 $ 48,350 — $ — 162,471,048 $ 162 ( 5,032,802 ) $ ( 62 ) $ 496,027 $ ( 254,281 ) $ 241,846

Shares issued in offering, net of costs — — — — — — 49,382,720 49 — — 149,768 — 149,817

Balance, November 30, 2024 301,673 $ 6,932 43,000 $ 43,000 6,359 $ 5,850 225,846,268 $ 222 ( 9,291,199 ) $ ( 31,400 ) $ 858,713 $ ( 392,963 ) $ 434,572

Issuance of common stock from stock plans — — — — — — 641,585 1 — — ( 1 ) — —

Conversions of debt — — — — — — 7,657,226 8 — — 48,736 — 48,744

Issuance of shares — — — — — — 528,541 1 — — ( 1 ) — —

Tax payments for restricted stock upon vesting — — — — — — — — — — ( 2,970 ) — ( 2,970 )

Issuance of warrants, at fair value — — — — — — — — — — 6,471 — 6,471

Conversion of warrants — — — — — — 1,051,651 1 — — ( 1 ) — —

Preferred Series F Stock issuance costs — — — — — — — — — — ( 4,841 ) — ( 4,841 )

Preferred Series E-1 Stock, net of issuance costs — — — — 33,404 30,437 — — — — — — —

2 unchanged sentences

Stock-based compensation — — — — — — — — — — 9,691 — 9,691

Share repurchase — — — — — — — ( 4 ) ( 4,258,397 ) ( 31,338 ) — — ( 31,342 )

Purchase of capped call options — — — — — — — — — — ( 51,750 ) — ( 51,750 )

Purchase of prepaid forward contract — — — — — — — — — — ( 52,736 ) — ( 52,736 )

Reclass of conversion option — — — — — — — — — — 252,900 — 252,900

Common stock issuance costs — — — — — — — — — — ( 21 ) — ( 21 )

Net loss — — — — — — — — — — — ( 35,555 ) ( 35,555 )

Balance, November 30, 2024 301,673 $ 6,932 43,000 $ 43,000 6,359 $ 5,850 225,846,268 $ 222 ( 9,291,199 ) $ ( 31,400 ) $ 858,713 $ ( 392,963 ) $ 434,572

Balance, February 28, 2025 301,673 $ 6,932 — $ — 39,763 $ 36,287 233,682,359 $ 230 ( 9,291,199 ) $ ( 31,400 ) $ 914,336 $ ( 428,518 ) $ 454,648

Common Stock Treasury Stock Additional

1 unchanged sentence

Shares Amount Shares Amount

Balance, August 31, 2023 110,850,885 $ 110 ( 5,001,728 ) $ ( 62 ) $ 240,073 $ ( 112,173 ) $ 127,948 $ 127,948

Balance, November 30, 2023 122,734,060 $ 123 ( 5,001,728 ) $ ( 62 ) $ 278,299 $ ( 122,702 ) $ 155,658 $ 155,658

Shares issued in offering, net of costs 4,158,243 4 — — 23,076 — 23,080 23,080

Issuance of common stock from stock plans 594,634 — — — — — — —

Tax payments for restricted stock upon vesting — — — — ( 606 ) — ( 606 ) ( 606 )

Share cancellations — — ( 67,370 ) — — — — —

Stock-based compensation — — — — 3,194 — 3,194 3,194

Net loss — — — — — ( 62,838 ) ( 62,838 ) ( 62,838 )

Balance, November 30, 2023 122,734,060 $ 123 ( 5,001,728 ) $ ( 62 ) $ 278,299 $ ( 122,702 ) $ 155,658 $ 155,658

Balance, February 29, 2024 127,486,937 $ 127 $ ( 5,069,098 ) $ ( 62 ) $ 303,963 $ ( 185,540 ) $ 118,488 $ 118,488

See accompanying notes to the unaudited condensed consolidated financial statements

1 unchanged sentence

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

For the Six Months ended November 30, 2024 and November 30, 2023

For the Nine Months ended February 28, 2025 and February 29, 2024

(In thousands, except share data)

8 unchanged sentences

Issuance of common stock from stock plans — — — — — — 1,908,764 3 — — ( 3 ) — —

Tax payments for restricted stock upon vesting — — — — — — — — — — ( 2,970 ) — ( 2,970 )

Conversions of debt — — — — — — 19,050,204 19 — — 104,926 — 104,945

14 unchanged sentences

Net loss — — — — — — — — — — — ( 178,528 ) ( 178,528 )

Balance, November 30, 2024 301,673 $ 6,932 43,000 $ 43,000 6,359 $ 5,850 225,846,268 $ 222 ( 9,291,199 ) $ ( 31,400 ) $ 858,713 $ ( 392,963 ) $ 434,572

Balance, February 28, 2025 301,673 $ 6,932 — $ — 39,763 $ 36,287 233,682,359 $ 230 ( 9,291,199 ) $ ( 31,400 ) $ 914,336 $ ( 428,518 ) $ 454,648

Common Stock Treasury Stock Additional

5 unchanged sentences

Issuance of common stock from stock plans 6,129,471 5 — — ( 5 ) — — — —

Tax payments for restricted stock upon vesting — — — — ( 606 ) — ( 606 ) — ( 606 )

Share cancellations — — ( 67,370 ) — — — — — —

Stock-based compensation — — — — 13,634 — 13,634 — 13,634

Stock issuance costs — — — — ( 234 ) — ( 234 ) — ( 234 )

Extinguishment of noncontrolling interest 1,484,267 1 — — 9,764 — 9,765 ( 9,765 ) —

Net loss — — — — — ( 84,824 ) ( 84,824 ) ( 397 ) ( 85,221 )

Balance, November 30, 2023 122,734,060 $ 123 ( 5,001,728 ) $ ( 62 ) $ 278,299 $ ( 122,702 ) $ 155,658 $ — $ 155,658

s ee accompanying notes to the unaudited condensed consolidated financial statements

Balance, February 29, 2024 127,486,937 $ 127 ( 5,069,098 ) $ ( 62 ) $ 303,963 $ ( 185,540 ) $ 118,488 $ — $ 118,488

See accompanying notes to the unaudited condensed consolidated financial statements

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

Six Months Ended

November 30, 2024 November 30, 2023

Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands)

Nine Months Ended

February 28, 2025 February 29, 2024

CASH FLOW FROM OPERATING ACTIVITIES

5 unchanged sentences

Loss on extinguishment of debt 1,177 —

Loss on extinguishment of related party debt

Loss on legal settlement — 2,380

Amortization of debt issuance costs 11,515 498

Gain on classification of held for sale

Loss/(gain) on classification of held for sale ( 24,616 ) 21,723

Loss on change in fair value of related party debt — 2,612

Loss on conversion of debt 33,612 —

1 unchanged sentence

Loss on abandonment of assets 769 —

Loss on change in fair value of warrants issued

Changes in operating assets and liabilities:

15 unchanged sentences

Finance lease prepayments

( 4,840 ) ( 35,132 )

Purchases of investments ( 2,498 ) ( 390 )

7 unchanged sentences

Payment of deferred financing costs ( 42,903 ) —

Tax payments for restricted stock upon vesting ( 2,970 ) ( 606 )

Proceeds from issuance of common stock 191,590 121,237

191,590 98,156

Common stock issuance costs ( 10,253 ) ( 235 )

15 unchanged sentences

(In thousands)

Six Months Ended

November 30, 2024 November 30, 2023

Nine Months Ended

February 28, 2025 February 29, 2024

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

6 unchanged sentences

Extinguishment of non-controlling interest $ — $ 9,765

Loss from legal settlement $ — $ 2,300

Loss on legal settlement

Conversion of preferred stock to common stock $ 53,191 $ —

4 unchanged sentences

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended November 30, 2024

For the Three and Nine Months Ended February 28, 2025

Business and Organization

19 unchanged sentences

The Company provides energized space to customers who locate their hardware within the Company’s co-hosting facility.

All Data Center Hosting performance obligations are achieved simultaneously by providing the hosting environment for the customers’ operations.

Performance obligations are achieved simultaneously by providing the hosting environment for the customers’ operations.

Customers pay a fixed rate to the Company in exchange for a managed hosting environment supported by customer-provided equipment.

9 unchanged sentences

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended November 30, 2024

For the Three and Nine Months Ended February 28, 2025

The Company has identified three reportable segments:

4 unchanged sentences

Customer-owned hardware is installed in the Company’s facilities and the Company provides operational and maintenance services for a fixed fee.

The Cloud Services Business operates through our wholly-owned subsidiary, Applied Digital Cloud Corporation, and provides cloud services to customers at third party colocation centers located in Colorado, Minnesota, Nevada and Utah, such as artificial intelligence and machine learning developers, to develop their advanced products.

The Cloud Services Business primarily operates through our wholly-owned subsidiary, Applied Digital Cloud Corporation, and provides cloud services to customers at third party colocation centers located in Colorado, Minnesota, Nevada and Utah, such as artificial intelligence and machine learning developers, to develop their advanced products.

Customers pay a fixed rate to the Company in exchange for an energized space supported by Company-provided equipment.

1 unchanged sentence

See Note 2 - Basis of Presentation and Significant Accounting Policies to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended May 31, 2024, as filed with the SEC, for additional information regarding the Company’s significant accounting policies and use of estimates.

Recent Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes ("Topic 740"):

Improvements to Income Tax Disclosures.

This ASU is intended to enhance the transparency and decision usefulness of income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction.

The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and can be applied either prospectively or retrospectively.

The Company is currently evaluating the impact of adopting this ASU on its disclosures and plans to adopt this pronouncement beginning with our fiscal year beginning June 1, 2025.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

The ASU is intended to enhance transparency of income statement disclosures primarily through additional disaggregation of relevant expense captions.

The standard is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with prospective or retrospective application permitted.

The Company is currently evaluating the impact of this ASU on its financial statement presentation and disclosures and plans to adopt this pronouncement beginning with our fiscal year beginning June 1, 2027.

Reclassifications

1 unchanged sentence

We have reclassified certain prior period amounts in our unaudited condensed consolidated statements of operations to conform to our current period presentation.

Specifically, we have reclassified certain amounts of “Selling, general and administrative” expenses to “Cost of revenues”.

Additionally, we have reclassified certain amounts of “Selling, general and administrative” expense and “Cost of revenues” to “Interest expense, net.” We have also condensed the presentation of segment revenue into a single “Revenue” caption as segment disclosures are presented in Note 11 - Business Segments.

Specifically, we have reclassified certain amounts of “Selling, general and administrative” expenses to “Interest expense, net.” We have also condensed the presentation of segment revenue into a single “Revenue” caption as segment disclosures are presented in Note 11 - Business Segments.

These reclassifications had no impact on reported net loss, cash flows, or total assets and liabilities.

Cash, Cash Equivalents, and Restricted Cash

The Company has restricted cash related to its letters of credit totaling $ 28.3 million, which is held in money market funds.

The Company is required to keep these balances in separate accounts for the duration of the letter of credit agreements, which have terms of up to two years .

These letters of credit were issued in lieu of security deposits.

The Company’s restricted cash balances consist of funds for construction and letters of credit.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Nine Months Ended February 28, 2025

The funds for construction are held in a construction reserve account to fund the construction of the Company’s 400 MW Ellendale, North Dakota data center campus (the “Ellendale Campus”), in accordance with the SMBC Credit Agreement (as defined below).

See further discussion in Note 6 - Debt.

Additionally, the Company has restricted cash related to its letters of credit totaling $ 38.3 million presented on our unaudited condensed consolidated balance sheets within restricted cash and other assets.

The Company is required to keep these balances, which are held in money market funds, in separate accounts for the duration of the letter of credit agreements, which have terms of up to two years .

The letters of credit were issued in lieu of security deposits.

The Company considers the money market funds to be Level 1 which the Company believes approximates fair value.

Cash, cash equivalents, and restricted cash within the unaudited condensed consolidated balance sheets that are included in the unaudited condensed consolidated statements of cash flows as of November 30, 2024 and May 31, 2024 were as follows (in thousands):

November 30, 2024 May 31, 2024

Cash, cash equivalents, and restricted cash within the unaudited condensed consolidated balance sheets that are included in the unaudited condensed consolidated statements of cash flows as of February 28, 2025 and May 31, 2024 were as follows (in thousands):

February 28, 2025 May 31, 2024

Cash and cash equivalents $ 68,743 $ 3,339

Restricted cash 21,342 21,349

Restricted cash - funds for construction

Restricted cash - letters of credit

31,342 21,349

Restricted cash included in other assets 7,000 7,000

Total cash, cash equivalents, and restricted cash $ 261,224 $ 31,688

The Company had a working capital deficit of $ 119.3 million as of February 28, 2025 which raised substantial doubt about the Company's ability to continue as a going concern.

Historically, we have incurred losses and have relied on equity and debt financings to fund our operations.

We have primarily generated cash in the last 12 months from the proceeds of our term loans, issuances of common stock, preferred stock, convertible promissory notes, senior unsecured convertible notes, debt facilities and the receipt of contractual deposits and revenue payments from customers.

The Company has the ability and intent to sell additional shares of Series E-1 Preferred Stock which would generate proceeds of approximately $ 12.0 million.

Also, as disclosed in “Note 13 - Subsequent Events”, the Board of Directors has approved the potential sale of the Cloud Services Business, which will reclassify certain non-current assets and long-term liabilities on the balance sheet to current assets and current liabilities and will result in a net working capital surplus of $ 117.6 million.

Finally, the Company has the ability to modify the timing of its capital spending and extend its payment terms with vendors, if necessary.

Based on the above analysis, the Company believes the substantial doubt to continue as a going concern for at least 12 months from the date these financial statements were issued is reasonably alleviated.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended November 30, 2024

As noted above, the Company had a working capital deficit of $ 96.0 million which raises substantial doubt about the Company's ability to continue as a going concern.

Based on an analysis of subsequent events which are disclosed in "Note 13 - Subsequent Events", the Company believes that substantial doubt to continue as a going concern has been alleviated.

Therefore, the Company has sufficient liquidity to meet its obligations as they become due for at least twelve months from the date these financial statements were issued.

For the Three and Nine Months Ended February 28, 2025

Property and Equipment

Property and equipment consisted of the following as of November 30, 2024 and May 31, 2024 (in thousands):

Estimated Useful Life November 30,

Property and equipment consisted of the following as of February 28, 2025 and May 31, 2024 (in thousands):

Estimated Useful Life February 28,

Networking equipment, electrical equipment, and software

11 unchanged sentences

Property and equipment, net $ 1,002,206 $ 340,381

Depreciation expense totaled $ 3.1 million and $ 6.1 million for the three and six months ended November 30, 2024, respectively, and $ 2.6 million and $ 4.9 million for the three and six months ended November 30, 2023, respectively.

Depreciation expense totaled $ 3.2 million and $ 9.3 million for the three and nine months ended February 28, 2025, respectively, and $ 7.9 million and $ 12.9 million for the three and nine months ended February 29, 2024, respectively.

Revenue from Contracts with Customers

Below is a summary of the Company’s revenue concentration by major customers for the three and six months ended November 30, 2024 and November 30, 2023, respectively.

Three Months Ended Six Months Ended

November 30, 2024 November 30, 2023 November 30, 2024 November 30, 2023

Below is a summary of the Company’s revenue concentration by major customers for the three and nine months ended February 28, 2025 and February 29, 2024, respectively.

Three Months Ended Nine Months Ended

February 28, 2025 February 29, 2024 February 28, 2025 February 29, 2024

Customer A 66 % 68 % 54 % 69 %

Customer G 16 % 11 % 16 % — %

Customer H 28 % — % 27 % — %

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended November 30, 2024

— % 10 % 11 % — %

34 % — % 29 % — %

Deferred Revenue

Changes in the Company's deferred revenue balances for the six months ended November 30, 2024 and November 30, 2023, respectively, are shown in the following table (in thousands):

Six Months Ended

November 30, 2024 November 30, 2023

Changes in the Company's deferred revenue balances for the nine months ended February 28, 2025 and February 29, 2024, respectively, are shown in the following table (in thousands):

Nine Months Ended

February 28, 2025 February 29, 2024

Balance, beginning of period $ 39,366 $ 48,692

4 unchanged sentences

Balance, end of period $ 4,879 $ 63,121

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Nine Months Ended February 28, 2025

Customer Deposits

Changes in the Company's customer deposits balances for the six months ended November 30, 2024 and November 30, 2023, respectively, are shown in the following table (in thousands):

Six Months Ended

November 30, 2024 November 30, 2023

Changes in the Company's customer deposits balances for the nine months ended February 28, 2025 and February 29, 2024, respectively, are shown in the following table (in thousands):

Nine Months Ended

February 28, 2025 February 29, 2024

Balance, beginning of period $ 15,367 $ 36,370

2 unchanged sentences

Customer deposits applied

Other adjustments — ( 8,547 )

Related party balances — ( 3,810 )

2 unchanged sentences

Related Party Revenue

The following table illustrates related party revenue for the three and six months ended November 30, 2024 and November 30, 2023 (in thousands):

Three Months Ended Six Months Ended

November 30, 2024 November 30, 2023 November 30, 2024 November 30, 2023

The following table illustrates related party revenue for the three and nine months ended February 28, 2025 and February 29, 2024 (in thousands):

Three Months Ended Nine Months Ended

February 28, 2025 February 29, 2024 February 28, 2025 February 29, 2024

Customer D* $ — $ 1,662 $ 992 $ 5,980

4 unchanged sentences

As of July 25, 2024, the individual filed a Schedule 13G to report the fact that as of the date thereof, the individual had ceased to be a beneficial owner of more than 5 % of such class of securities.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended November 30, 2024

The following table illustrates related party deferred revenue and deposits balances as of November 30, 2024 and May 31, 2024 (in thousands):

The following table illustrates related party deferred revenue and deposits balances as of February 28, 2025 and May 31, 2024 (in thousands):

Customer D balances as of Customer E balances as of

November 30, 2024 May 31, 2024 November 30, 2024 May 31, 2024

February 28, 2025 May 31, 2024 February 28, 2025 May 31, 2024

Deferred revenue $ — $ 993 $ — $ 699

2 unchanged sentences

Related Party Sublease Income

The Company received sublease income from B.

Riley Asset Management, which is also a wholly-owned subsidiary of B.

During the three and nine months ended February 29, 2024, the Company received sublease income from B.

Riley Asset Management, which is a wholly-owned subsidiary of B.

Riley Financial, Inc.

As previously disclosed, the Company’s Chairman and Chief Executive Officer served as the President of B.

Riley Asset Management, and effective February 5, 2024, resigned from that position and as such, B.

Riley ceased being a related party as of May 31, 2024.

Sublease income is included in selling, general and administrative expenses in our unaudited condensed consolidated statements of operations.

Related party sublease income for the three and six months ended November 30, 2023 was $ 24,000 and $ 47,100 , respectively.

Riley Asset Management.

Effective February 5, 2024, he resigned from that position and as such, B.

Riley Asset Management ceased being a related party.

Sublease income of

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Nine Months Ended February 28, 2025

$ 22,800 and $ 69,900 is included in selling, general and administrative expenses in our unaudited condensed consolidated statements of operations for the three and nine months ended February 29, 2024, respectively.

Other Related Party Transactions

Related party transactions included within selling, general and administrative expense on the unaudited condensed consolidated statement of operations include the following:

• construction and consulting costs of $ 0.1 million and $ 0.2 million during the three and six months ended November 30, 2023 were incurred with a company owned by a family member of the Company’s Chief Administrative Officer.

There were no transactions with this related party during the three and six months ended November 30, 2024.

• software license fees of $ 0.1 million and $ 0.1 million, during the three and six months ended November 30, 2024, respectively, and $ 60.8 thousand and $ 0.1 million during the three and six months ended November 30, 2023, respectively, were incurred with a company whose chairman is also a member of the Company’s Board of Directors.

• construction and consulting costs of $ 44.4 thousand and $ 0.3 million during the three and nine months ended February 29, 2024 were incurred with a company owned by a family member of the Company’s former Chief Administrative Officer.

There were no transactions with this related party during the three and nine months ended February 28, 2025.

• software license fees of $ 0.1 million and $ 0.2 million during the three and nine months ended February 29, 2024, respectively, and $ 0.1 million and $ 0.2 million during the three and nine months ended February 28, 2025, respectively, were incurred with a company whose chairman is also a member of the Company’s Board of Directors.

• consulting fees of $ 23 thousand during the three and nine months ended February 29, 2024 were incurred with a former member of the Company’s Board of Directors for sales consulting work.

There were no transactions with this related party during the three and nine months ended February 28, 2025.

Long-term debt consisted of the following components (in thousands):

Interest Rate Maturity Date November 30, 2024 May 31, 2024

Interest Rate Maturity Date February 28, 2025 May 31, 2024

Senior Unsecured Convertible Notes

2.75 % June 2030

Macquarie Promissory Note (1)

0.25 % May 2026

$ 450,000 $ —

SMBC Loan (1)

See below August 2026

Starion Ellendale Loan (2)

13 unchanged sentences

Long-term debt, net $ 678,988 $ 79,472

(1) The Macquarie Promissory Note is guaranteed by APLD Holdings 2 LLC, a wholly-owned subsidiary of the Company, and is secured by a continuing security interest in all of the membership interests of the borrower, APLD ELN-02 Holdings LLC, and all related proceeds.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended November 30, 2024

(2) The Starion Ellendale Loan is guaranteed by APLD ELN-01 LLC, a wholly-owned subsidiary of the Company, and is secured by the Ellendale facility, a security interest in substantially all of the assets of APLD ELN-01 LLC, and a security interest in the form of a collateral assignment of the Company’s rights and interests in all master hosting agreements related to the Ellendale Facility.

(1) The SMBC Loan is guaranteed by APLD HPC TopCo LLC, a wholly-owned subsidiary of the Company, and is secured by a continuing security interest in all of the membership interests of the borrower, APLD HPC Holdings LLC, including a mortgage on certain properties as defined in the collateral agency, security and depositary agreement.

(2) The Starion Ellendale Loan is guaranteed by APLD ELN-01 LLC, a wholly-owned subsidiary of the Company, and is secured by the first 100 MW HPC facility in Ellendale, North Dakota (the “Ellendale HPC Facility”), a security interest in substantially all of the assets of APLD ELN-01 LLC, and a security interest in the form of a collateral assignment of the Company’s rights and interests in all master hosting agreements related to the Ellendale HPC Facility.

(3) The Cornerstone Bank Loan is guaranteed by APLD GPU-01, LLC, a wholly-owned subsidiary of the Company, and is secured by a security interest in multiple Terms of Service Agreements for HPC based systems related to AI Cloud Computing Services, which are to be serviced at the Jamestown hosting facility.

(4) The Starion Term Loan is guaranteed by APLD Hosting, LLC, a wholly-owned subsidiary of the Company, and is secured by the Jamestown hosting facility, a security interest in substantially all of the assets of APLD Hosting LLC, and interests in all master hosting agreements related to the Jamestown hosting facility.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Nine Months Ended February 28, 2025

(5) Inclusive in this number is $ 12.0 million of proceeds from the issuance of two SAFE agreements which were accounted for as liabilities.

1 unchanged sentence

Remaining Principal Payments

Below is a summary of the remaining principal payments due over the life of the term loans as of November 30, 2024 (in thousands):

Below is a summary of the remaining principal payments due over the life of the term loans as of February 28, 2025 (in thousands):

Remainder of FY25 $ 2,492

4 unchanged sentences

Letters of Credit

As of November 30, 2024, the Company had letters of credit totaling $ 28.3 million.

As of February 28, 2025, the Company had letters of credit totaling $ 38.3 million.

The Company has restricted cash related to its letters of credit and is required to keep these balances in separate accounts for the duration of the letter of credit agreements.

4 unchanged sentences

The YA Notes were convertible into shares of the Company’s common stock.

During the three months ended November 30, 2024, $ 23.3 million of the YA Notes were converted into approximately 7.7 million shares of common stock and during the six months ended November 30, 2024, $ 71.3 million of the YA Notes were converted into approximately 19.1 million shares of common stock.

The Company recorded a loss on conversion of debt of $ 25.4 million and $ 33.6 million during the three and six months ended November 30, 2024, respectively, in its unaudited condensed consolidated statements of operations.

For the nine months ended February 28, 2025, the Company recognized a gain on fair value of debt of $ 4.1 million associated with the YA Notes which is included on the unaudited condensed consolidated statements of operations.

During the nine months ended February 28, 2025, $ 71.3 million of the YA Notes were converted into approximately 19.1 million shares of common stock.

The Company recorded a loss on conversion of debt of $ 33.6 million during the nine months ended February 28, 2025, in its unaudited condensed consolidated statements of operations.

The fair value of the YA Notes was calculated on an as-converted basis using quoted market prices of the Company's outstanding common stock;

however, as of November 30, 2024, YA Fund had converted the maximum amount of shares allowable under Nasdaq rules and regulations and as such, the remaining balance of $ 4.8 million under the March Note was payable in cash.

Subsequent to the quarter end, the Company repaid the $ 4.8 million in full, including all outstanding and unpaid principal, accrued interest, fees, and expenses, as well as the $ 2.1 million Commitment Fee under SEPA (as defined below).

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended November 30, 2024

however, YA Fund had converted the maximum amount of shares allowable under Nasdaq rules and regulations and as such, the remaining balance of $ 4.8 million under the March Note was payable in cash.

During the quarter ended February 28, 2025, the Company repaid the $ 4.8 million in full, including all outstanding and unpaid principal, accrued interest, fees, and expenses, as well as the $ 2.1 million Commitment Fee under SEPA (as defined below).

CIM Arrangement & Warrants

On June 7, 2024, APLD Holdings 2 LLC (the “Borrower”), a subsidiary of the Company, entered into a promissory note (the “CIM Promissory Note”) with CIM APLD Lender Holdings, LLC, a Delaware limited liability company (the “Lender”).

The CIM Promissory Note provides for borrowings up to $ 125 million.

During the six months ended November 30, 2024, the total amount borrowed under the CIM Promissory Note was $ 125 million.

The CIM Promissory Note provided for borrowings up to $ 125 million.

The total amount borrowed under the CIM Promissory Note was $ 125 million.

On November 27, 2024, in connection with the issuance of the Macquarie Promissory Note and receipt by the Company of the proceeds related thereto (as described below), the Company repaid the CIM Promissory Note in full, including all outstanding and unpaid principal, accrued interest, fees, and expenses.

The associated extinguishment costs were capitalized directly into Construction in Progress (CIP), as the CIM Promissory Note was tied to the ELN-02 Project and was therefore considered part of the construction cost.

As of November 30, 2024, the CIP balance includes $ 9.4 million related to the extinguishment of the CIM Promissory Note.

The associated extinguishment costs were capitalized directly into Construction in Progress (CIP), as the CIM Promissory Note were tied to the ELN-02 Project and

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Nine Months Ended February 28, 2025

were therefore considered part of the construction cost.

As of February 28, 2025, the CIP balance includes $ 9.4 million related to the extinguishment of the CIM Promissory Note.

Pursuant to the CIM Promissory Note, the Company issued warrants to purchase up to 9,265,366 shares of common stock (the “CIM Warrants”).

The CIM Warrants were issuable in two tranches for the purchase of up to 6,300,449 Common Shares (the “Initial Warrants”) and 2,964,917 Common Shares (the “Additional Warrants”), respectively.

The Initial Warrants were issued June 17, 2024 and the Additional Warrants were issued August 11, 2024.

The CIM Warrants are exercisable upon issuance and have a five-year term.

The CIM Warrants have an exercise price of $ 4.8005 per share, which exercise price may be paid in cash, by net settlement or by a combination of cash and net settlement but must be exercised by net settlement if no registration covering the exercise of the Warrants remains effective.

The CIM Warrants were issued in two tranches:

for the purchase of up to 6,300,449 Common Shares (the “Initial Warrants”), issued on June 17, 2024, and 2,964,917 Common Shares (the “Additional Warrants”), issued on August 11, 2024.

The CIM Warrants were exercisable upon issuance and had a five-year term and an exercise price of $ 4.8005 per share.

The CIM Warrants were measured at fair value using a Black-Scholes Option Pricing model.

13 unchanged sentences

After the repayment of the CIM Promissory Note, the remaining value of the CIM Warrants recorded as a reduction of the CIM Promissory Note was capitalized to CIP.

During the quarter ended November 30, 2024, 7.0 million of the CIM Warrants were exercised on a cashless basis for approximately 3.9 million shares of the Company’s common stock in a net settlement transaction.

As of November 30, 2024, approximately 2.3 million of Additional Warrants are outstanding.

During the nine months ended February 28, 2025, all 9,265,366 of the CIM Warrants were exercised on a cashless basis for approximately 4.9 million shares of the Company’s common stock in a net settlement transaction.

As of February 28, 2025, there are no CIM Warrants outstanding.

Yorkville Amendments

In connection with the CIM Promissory Note, the Company also entered into a Consent, Waiver and First Amendment to Prepaid Advance Agreements (the “Consent”) with YA Fund.

In connection with the CIM Promissory Note, the Company also entered into a Consent, Waiver and First Amendment to the Prepaid Advance Agreements (the “Consent”) with YA Fund.

In exchange for giving its consent to the transaction with the CIM Lender, the Company agreed to issue an aggregate of 100,000 shares of common stock to YA Fund and to conditionally lower the floor price from $ 3.00 to $ 2.00 so long as the daily Volume Weighted Average Price (“VWAP”) is less than $ 3.00 per share of common stock for five out of seven trading days.

The Company further agreed to deliver a security agreement whereby its subsidiary, Applied Digital Cloud Corporation, would grant a springing lien on substantially all of its assets subject to customary carve-outs to secure the YA notes issued in favor of YA Fund.

Pursuant to the Consent, YA Fund also consented to future project-level financing at the HPC Ellendale facility.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended November 30, 2024

pursuant to the terms of the Consent, certain provisions of the March PPA and the May PPA were amended.

Pursuant to the Consent, YA Fund also consented to future project-level financing at the Ellendale HPC Facility.

In addition, pursuant to the terms of the Consent, certain provisions of the March PPA and the May PPA were amended.

Upon issuance of the 100,000 shares, the Company recorded the value of the shares at their grant date fair value as an increase in the loss on change in fair value of debt caption on the unaudited condensed consolidated statements of operations.

On October 16, 2024, the Company entered into a letter agreement with YA Fund, whereby the Company agreed to satisfy its obligations with respect to the Commitment Fee (as defined below) in cash by increasing the principal amount due under the March Note in an equivalent amount, instead of issuing the Commitment Shares (as defined below).

The Commitment Fee has been paid in full subsequent to November 30, 2024 as part of the repayment by the Company of the March Note.

The Commitment Fee was paid in full during the quarter ended February 28, 2025 as part of the repayment by the Company of the March Note.

On October 29, 2024, the Company entered into certain amendments to the March prepaid advance agreement and the March Note.

The amendments (i) provided consent to the Convertible Notes (as defined below) offering and share repurchase transactions (as described below) and (ii) removed certain prior restrictions on redemption of the March Note before January 1, 2025.

The amendments (i) provided consent to the Convertible Notes (as defined below) offering and share

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Nine Months Ended February 28, 2025

repurchase transactions (as described below) and (ii) removed certain prior restrictions on redemption of the March Note before January 1, 2025.

In the first fiscal quarter of 2025, Applied Digital Cloud Corporation (“ADCC”), a wholly-owned subsidiary of the Company, entered into two SAFE agreements totaling $ 12.0 million with an investor (the “Investor”).

14 unchanged sentences

On November 4, 2024, the Company issued $ 450.0 million aggregate principal amount of 2.75 % Senior Unsecured Convertible Notes due June 2030 (the “Convertible Notes”).

The net proceeds from the sale of the Convertible Notes was approximately $ 435.2 million after deducting the initial purchasers’ discounts and commissions and estimated offering

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended November 30, 2024

expenses payable by the Company.

The net proceeds from the sale of the Convertible Notes was approximately $ 435.2 million after deducting the initial purchasers’ discounts and commissions and estimated offering expenses payable by the Company.

The Company used approximately $ 84 million of the net proceeds from the offering to fund share repurchases of common stock in connection with the offering including (i) $ 52.7 million to fund the cost of entering into a prepaid forward repurchase transaction (as described below) and (ii) $ 31.3 million to repurchase shares of common stock with which the Company repurchased approximately 4.3 million shares at $ 7.36 a share, the stock price on October 30, 2024, the trading day preceding the transaction close.

1 unchanged sentence

Also on November 4, 2024, the Company entered into an indenture with respect to the Convertible Notes with Wilmington Trust, National Association, as trustee (the “Indenture”).

The Convertible Notes are senior unsecured obligations of the Company and bear interest at a rate of 2.75 % per year payable semiannually in arrears on June 1 and December 1 of each year, beginning on June 1, 2025.

The Convertible Notes are senior unsecured obligations of the Company and bear interest at a rate of 2.75 % per year payable semiannually in arrears on June 1 and December 1 of each

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Nine Months Ended February 28, 2025

year, beginning on June 1, 2025.

The Convertible Notes will mature on June 1, 2030, unless earlier converted, redeemed or repurchased in accordance with terms described below.

15 unchanged sentences

Subsequently, on November 20, 2024, the stockholders of the Company approved an increase to the number of authorized shares of common stock to an amount sufficient to settle the Conversion Option of the Convertible Notes fully in shares.

As a result of the increase to the number of authorized shares of common stock, the Company revalued the Conversion Option to its fair value as of November 20, 2024 of $ 252.9 million and reclassified the embedded derivative to additional

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended November 30, 2024

paid-in capital on its unaudited condensed consolidated balance sheets.

In doing so, the Company recognized a $ 103.0 million loss on change in fair value of debt as of November 20, 2024.

This loss combined with the gain recognized at issuance resulted in a total loss on fair value of debt of $ 89.6 million which is included on the unaudited condensed consolidated statements of operations.

As of November 30, 2024, the embedded Conversion Option derivative is included in additional paid-in capital in the unaudited condensed consolidated balance sheets and is not required to be remeasured provided the requirements to qualify for the scope exception in ASC 815-10-15-74(a) continue to be met.

As of February 28, 2025, the embedded Conversion Option derivative is included in additional paid-in capital in the unaudited condensed consolidated balance sheets and is not required to be remeasured provided the requirements to qualify for the scope exception in ASC 815-10-15-74(a) continue to be met.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Nine Months Ended February 28, 2025

Prepaid Forward Repurchase Transaction

3 unchanged sentences

The maturity date for the Prepaid Forward is November 3, 2025, although it may be settled earlier in whole or in part.

As of November 30, 2024, the purchase price of the Prepaid Forward is included in additional paid-in capital in the unaudited condensed consolidated balance sheets and is not required to be remeasured provided the requirements to qualify for the scope exception in ASC 815-10-15-74(a) continue to be met.

As of February 28, 2025, the purchase price of the Prepaid Forward is included in additional paid-in capital in the unaudited condensed consolidated balance sheets and is not required to be remeasured provided the requirements to qualify for the scope exception in ASC 815-10-15-74(a) continue to be met.

Capped Call Transaction

4 unchanged sentences

The Capped Call Transactions are separate transactions entered into by the Company and are not part of the terms of the Convertible Notes.

As of November 30, 2024, the purchase price of the Capped Call Transaction is included in additional paid-in capital in the unaudited condensed consolidated balance sheets and is not required to be remeasured provided the requirements to qualify for the scope exception in ASC 815-10-15-74(a) continue to be met.

As of February 28, 2025, the purchase price of the Capped Call Transaction is included in additional paid-in capital in the unaudited condensed consolidated balance sheets and is not required to be remeasured provided the requirements to qualify for the scope exception in ASC 815-10-15-74(a) continue to be met.

Macquarie Promissory Note

1 unchanged sentence

(the “Macquarie Promissory Note”).

The Macquarie Promissory Note provides for a loan of $ 150 million and matures on the earlier of (i) the date of acceleration of the loan or (ii) May 27, 2026.

However, to the extent that the ELN-02 Project (as defined therein) is not completed by December 6, 2025, the Company must repay the full outstanding principal balance of the Macquarie Promissory Note together with accrued interest and any other amounts then due and payable.

Additionally, the Macquarie Promissory Note has a multiple on invested capital (“MOIC”) of (i) 1.11 to 1.00 if such prepayment occurs on or prior to the date that is four months after the closing date, (ii) 1.20 to 1.00 if such prepayment occurs after the date that is four months after the closing date but on or prior to the date that is seven months after the closing date, or (iii) 1.35 to 1.00 if such prepayment occurs after the date that is seven months after the closing date.

The same 1.35 x return hurdle applies to repayment at maturity.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended November 30, 2024

anticipates repaying the Macquarie Promissory Note at maturity and as such, has recorded a MOIC liability of $ 16.5 million, representing the value of the MOIC liability as of the quarter ended November 30, 2024.

The Macquarie Promissory Note provided for a loan of $ 150 million and matures on the earlier of (i) the date of acceleration of the loan or (ii) May 27, 2026.

However, to the extent that the ELN-02 Project (as defined therein) was not completed by December 6, 2025, the Company must repay the full outstanding principal balance of the Macquarie Promissory Note together with accrued interest and any other amounts then due and payable.

Additionally, the Macquarie Promissory Note had a multiple on invested capital (“MOIC”) of (i) 1.11 to 1.00 if such prepayment occured on or prior to the date that is four months after the closing date, (ii) 1.20 to 1.00 if such prepayment occured after the date that is four months after the closing date but on or prior to the date that is seven months after the closing date, or (iii) 1.35 to 1.00 if such prepayment occured after the date that is seven months after the closing date.

The same 1.35 x return hurdle applied to repayment at maturity.

The Company recorded a MOIC liability of $ 16.5 million, representing the value of the MOIC liability the day after the closing date.

Proceeds of the loan under the Macquarie Promissory Note were used, in part, to repay in full and terminate the CIM Promissory Note.

1 unchanged sentence

Additionally, proceeds were used to satisfy remaining obligations of the Company under the March Note.

As partial consideration for the Macquarie Promissory Note, the Company issued warrants (the “Macquarie Warrants”) to purchase up to 1,035,197 shares of common stock.

The Macquarie Warrants will be exercisable from and after the date that is six months following the date of issuance thereof and will have a five and one-half-year term and an exercise price of $ 9.66 per share, which exercise price must be paid in cash.

As partial consideration for the Macquarie Promissory Note, the Company issued warrants (the “Macquarie Warrants”) to purchase up to 1,035,197 shares of the Company’s common stock.

The Macquarie Warrants will be exercisable from and

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Nine Months Ended February 28, 2025

after the date that is six months following the date of issuance thereof and will have a five and one-half-year term and an exercise price of $ 9.66 per share, which exercise price must be paid in cash.

The Macquarie Warrants were measured at fair value using a Black-Scholes Option Pricing model.

7 unchanged sentences

The fair value of the Macquarie Warrants was $ 7.38 per warrant, totaling $ 7.6 million which was recorded as additional paid-in capital on the Company’s unaudited condensed consolidated balance sheets.

The Company deferred the recognition of the fair value of the Macquarie Warrants as a reduction in the net carrying amount of the Macquarie Promissory Note and subsequently will amortize this balance into interest expense or CIP, as noted above, using the effective interest rate method.

The Company deferred the recognition of the fair value of the Macquarie Warrants as a reduction in the net carrying amount of the Macquarie Promissory Note and subsequently amortized this balance into interest expense or CIP, as noted above, using the effective interest rate method.

On February 11, 2025, in connection with the Company’s entry into the SMBC Credit Agreement (as defined below) and receipt by the Company of the proceeds related thereto (as described below), the Company repaid the Macquarie Promissory Note in full, including all outstanding and unpaid principal, accrued interest, and multiple on invested capital.

As a result, there was a loss on the extinguishment of the Macquarie Promissory Note of $ 11.8 million.

Commensurate with the use of proceeds associated with construction from the Macquarie Promissory Note, the Company capitalized approximately 90 %, or $ 10.6 million, to CIP and the remainder, 10 %, or $ 1.2 million, was recorded to loss on extinguishment of debt on the unaudited condensed consolidated statements of operations.

The Macquarie Warrants survived the termination of the Macquarie Promissory Note and remain outstanding as of February 28, 2025.

SMBC Credit Agreement

On February 11, 2025, APLD HPC Holdings LLC, a wholly-owned subsidiary of the Company, entered into a credit and guaranty agreement (the “SMBC Credit Agreement”) with Sumitomo Mitsui Banking Corporation (“SMBC”).

The SMBC Credit Agreement provides for an aggregate of $ 375 million of term loans, which includes base rate loans and SOFR loans, and matures 18 months after the closing date.

Base rate loans bear interest at the base rate plus (i) 2.50 % from the closing date until the six month anniversary of the closing date, (ii) 3.50 % after the six month anniversary of the closing date until the one year anniversary of the closing date, and (iii) 4.50 % after the one year anniversary of the closing date while SOFR loans bear interest at the daily simple SOFR plus (i) 3.50 % from the closing date until the six month anniversary of the closing date, (ii) 4.50 % after the six month anniversary of the closing date until the one year anniversary of the closing date, and (iii) 5.50 % after the one year anniversary of the closing date.

The Company may voluntarily prepay all or any part of the loans at any time or from time to time without premium or penalty with no less than three business days’ notice.

Additionally, as more particularly described in the credit agreement and the certain collateral agency, security and depositary agreement, the Company is required to prepay all or a part of the loans under certain circumstances.

Amounts repaid under the Loans will not be available to be re-borrowed.

The Company used the proceeds of the loans to (i) prepay in full the Macquarie Promissory Note, (ii) pay for certain data center project development costs at the Ellendale Campus, and (iii) fund the Interest Reserve Account as defined in the SMBC Credit Agreement.

Remaining proceeds have been deposited into a separate bank account for future construction costs at the Ellendale Campus.

Commensurate with the use of proceeds associated with construction, the Company will capitalize 100 % of the interest expense recognized each period.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Nine Months Ended February 28, 2025

Stockholders' Equity

11 unchanged sentences

Riley Securities, Inc., BTIG, LLC, Lake Street Capital Markets, LLC, Northland Securities, Inc.

and Roth Capital Partners, LLC (collectively, the

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended November 30, 2024

“Agents”), pursuant to which the Company may offer and sell, from time to time, through the Agents, up to $ 125,000,000 in shares of the Company’s common stock.

and Roth Capital Partners, LLC (collectively, the “Agents”), pursuant to which the Company may offer and sell, from time to time, through the Agents, up to $ 125.0 million in shares of the Company’s common stock.

During the fiscal quarter ended August 31, 2024, approximately 3.0 million shares of the Company’s common stock has been issued and sold under the Sales Agreement for proceeds of $ 16.4 million net of issuance costs of $ 0.5 million.

6 unchanged sentences

On October 16, 2024, the Company entered into a letter agreement with YA Fund, whereby the Company agreed to satisfy its obligations with respect to the Commitment Fee in cash by increasing the principal amount due under the March Note in an equivalent amount, instead of issuing the Commitment Shares.

The Commitment Fee has been paid in full subsequent to November 30, 2024 as part of the repayment by the Company of the March Note.

The Commitment Fee was paid in full during the quarter ended February 28, 2025 as part of the repayment by the Company of the March Note.

Pursuant to the SEPA, the Company agreed to file a registration statement with the SEC for the resale under the Securities Act by YA Fund of the common stock issued under the SEPA.

2 unchanged sentences

Private Placement

On September 5, 2024, the Company 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 the Company’s 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.

During the quarter ended November 30, 2024, the Private Placement closed with aggregate gross proceeds to the Company of approximately $ 160 million, before deducting offering expenses.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Nine Months Ended February 28, 2025

shares of the Company’s 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.

The Private Placement closed during the three months ended November 30, 2024, with aggregate gross proceeds to the Company of approximately $ 160 million, before deducting offering expenses.

Warrant Issuance

On February 27, 2025, the Company issued a warrant to STB Applied Holdings LLC to purchase 1,000,000 shares of the Company’s common stock at the exercise price of $ 7.83 per share (the “STB Warrant”).

The warrant is exercisable beginning on February 27, 2027 (the “Initial Exercise Date”), upon payment of the applicable exercise price in cash or through cashless exercise for a period of five years from the Initial Exercise Date.

The STB Warrant was measured at fair value using a Black-Scholes Option Pricing model.

Inherent in pricing models are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield, which are considered Level 3 inputs.

The estimated fair value of the STB Warrant was based on the following significant inputs:

Contractual term

Volatility 95 %

Risk-free rate 4.15 %

Dividend yield — %

The resulting fair value of the STB Warrant was $ 6.42 per warrant, totaling $ 6.4 million and was recorded in the unaudited condensed consolidated statements of changes in temporary equity and stockholders’ equity with a commensurate loss of $ 6.4 million on change in fair value of warrants on the unaudited condensed consolidated statements of operations.

On October 8, 2024, the Company’s Board of Directors approved the Applied Digital Corporation 2024 Omnibus Equity Incentive Plan (the “2024 Plan”), which the Company’s stockholders approved on November 20, 2024.

2 unchanged sentences

provided that all awards (as defined in the 2022 Plans) outstanding under the 2022 Incentive Plan and the 2022 Non-Employee Director Stock Plan shall continue in effect in accordance with their terms.

As of November 30, 2024, there were no awards granted under the 2024 Plan.

On October 9, 2021, the Company’s Board of Directors (the “Board”) approved two equity incentive plans, which the Company’s stockholders approved on January 20, 2022.

The two plans consist of the 2022 Incentive Plan, previously referred to in the Company’s SEC filings as the 2021 Incentive Plan (the “Incentive Plan”), which provides for grants of various equity awards to the Company’s employees and consultants, and the 2022 Non-Employee Director Stock Plan previously referred to in the Company’s SEC filings as the 2021 Non-Employee Director Stock Plan (the “Director Plan” and, together with the Incentive Plan, the “2022 Plans”), which provides for grants of restricted stock to non-employee directors and for deferral of cash and stock compensation if such deferral provisions are activated at a future date.

As of February 28, 2025, the Company had issued awards of approximately 22.0 million shares of common stock of the Company under the 2022 Plans and 3.0 million under the 2024 Plan.

The Company recognized stock-based compensation associated with the 2022 and 2024 Plans of $ 9.7 million and $ 10.2 million during the three and nine months ended February 28, 2025, respectively, and stock-based compensation associated with the 2022 Plans of $ 3.2 million and $ 13.6 million during the three and nine months ended February 29, 2024, respectively.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended November 30, 2024

As of November 30, 2024, the Company had issued awards of approximately 20.4 million shares of common stock of the Company under the Plans.

The Company recognized $ 3.5 million and $ 0.5 million of stock based compensation during the three and six months ended November 30, 2024, respectively, and $ 4.8 million and $ 10.4 million during the three and six months ended November 30, 2023, respectively.

During the three months ended August 31, 2024, the Board determined that the performance criteria associated with certain performance stock units granted to certain executives in the third fiscal quarter of 2024 were not met.

As such, 2.8 million performance stock unit awards were cancelled and the Company recognized a reversal of the expense previously recognized for the awards of approximately $ 6.0 million.

For the Three and Nine Months Ended February 28, 2025

Restricted Stock Awards

The following is a summary of the activity and balances for unvested restricted stock awards granted for the six months ended November 30, 2024:

The following is a summary of the activity and balances for unvested restricted stock awards granted for the nine months ended February 28, 2025:

Number of Shares Weighted Average Grant Date Fair Value Per Share

3 unchanged sentences

Forfeited ( 15,650 ) 8.52

Outstanding as of November 30, 2024

Outstanding as of February 28, 2025

432,255 $ 3.49

As of November 30, 2024, total remaining expense to be recognized related to these awards was $ 1.4 million and the weighted average remaining recognition period for the unvested awards was 2.1 years.

As of February 28, 2025, total remaining expense to be recognized related to these awards was $ 1.1 million and the weighted average remaining recognition period for the unvested awards was 2.0 years.

Restricted Stock Units

The following is a summary of the activity and balances for unvested restricted stock units granted during the six months ended November 30, 2024:

The following is a summary of the activity and balances for unvested restricted stock units granted during the nine months ended February 28, 2025:

Number of Shares Weighted Average Grant Date Fair Value Per Share

4 unchanged sentences

Forfeited ( 1,117,756 ) 3.08

Outstanding as of November 30, 2024

Outstanding as of February 28, 2025

7,632,196 $ 6.32

As of November 30, 2024, total remaining expense to be recognized related to these awards was $ 33.9 million and the weighted average remaining recognition period for the unvested awards was 2.2 years.

As of February 28, 2025, total remaining expense to be recognized related to these awards was $ 42.5 million and the weighted average remaining recognition period for the unvested awards was 2.1 years.

Performance Stock Units

Performance stock units (“PSUs”) represent a right to receive a certain number of shares of common stock based on the achievement of company performance goals and continued employment during the vesting period.

Performance stock units cliff-vest at the end of a service period of three years depending on the achievement of performance measures at the end of each vesting period.

Such performance measures are based on the Company entering into data center leases with a hyperscaler, the consummation of project financing, and receipt of sustainable revenue with respect to the data center leases that implies positive net operating income.

The fair value of PSUs is based on the closing price on the date of grant.

The compensation expense related to these PSUs is recognized over the vesting period when the achievement of the performance conditions becomes probable.

The total compensation cost for the PSUs is determined based on the most likely outcome of the performance condition and the number of awards expected to vest.

As such, 2.8 million performance stock unit awards were cancelled and the Company recognized a reversal of the expense previously recognized for the awards of approximately $ 6.0 million during the nine-months ended February 28, 2025.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Nine Months Ended February 28, 2025

Number of Shares

Weighted Average Grant Date Fair Value Per Share

Outstanding as of May 31, 2024

3,110,011 $ 2.69

2,827,500 7.23

( 272,511 ) 6.80

( 2,800,000 ) 2.22

Outstanding as of February 28, 2025

2,865,000 $ 7.24

As of February 28, 2025, total remaining expense to be recognized related to these awards was $ 20.9 million and the weighted average remaining recognition period for the unvested awards was 2.8 years.

Temporary Equity

1 unchanged sentence

Series E Redeemable Preferred Stock

During the six months ended November 30, 2024, the Company closed on four offerings of the Series E Redeemable Preferred Stock (the “Series E Preferred Stock”).

During the nine months ended February 28, 2025, the Company closed on four offerings of the Series E Redeemable Preferred Stock (the “Series E Preferred Stock”).

The Company sold total shares of 301,673 for proceeds of $ 6.9 million net of issuance costs of $ 0.6 million.

The Series E Preferred Stock offering was terminated on August 9, 2024.

The shares of Series E Preferred Stock have no voting or conversion rights.

2 unchanged sentences

Dividends must be fully paid for all past periods before any distributions can be made to common stockholders or any junior series of equity securities.

During the three and six months ended November 30, 2024, the Company declared and

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended November 30, 2024

paid approximately $ 0.2 million and $ 0.3 million, respectively, of dividends related to Series E Preferred Stock as presented on the unaudited condensed consolidated statements of operations.

During the three and nine months ended February 28, 2025, the Company declared and paid approximately $ 0.2 million and $ 0.4 million, respectively, of dividends related to Series E Preferred Stock as presented on the unaudited condensed consolidated statements of operations.

The Series E Preferred Stock ranks senior to all classes of common stock and junior to all existing and future debt of the Company.

11 unchanged sentences

If the Company elects to pay the redemption amount in shares, then the number of shares to be delivered will be calculated as the Company Optional Redemption Settlement Amount divided by the closing price per share of the common stock on the date of the Company Optional Redemption exercise, subject to the Share Cap.

The Series E Preferred Stock offering was terminated on August 9, 2024.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Nine Months Ended February 28, 2025

Series F Convertible Preferred Stock

6 unchanged sentences

Dividends must be fully paid for all past periods before any distributions can be made to common stockholders or any junior series of equity securities.

During the three and six months ended November 30, 2024, the Company declared and paid approximately $ 0.4 million, respectively, of dividends related to the Series F Convertible Preferred Stock as presented on the unaudited condensed consolidated statements of operations.

During the three months ended February 28, 2025, the Company did not declare nor pay any dividends related to the Series F Convertible Preferred Stock;

however, for the nine months ended February 28, 2025, the Company declared and paid approximately $ 0.4 million of dividends related to the Series F Convertible Preferred Stock as presented on the unaudited condensed consolidated statements of operations.

The Series F Convertible Preferred Stock ranks senior to all classes of common stock and junior to all existing and future debt of the Company.

1 unchanged sentence

Series F Convertible Preferred Stock is on parity with the Series E Preferred Stock, Series E-1 Preferred Stock and any future series of preferred stock with substantially identical terms.

Upon the receipt of shareholder approval on November 20, 2024, the Series F Convertible

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended November 30, 2024

Preferred Stock votes on an as-converted basis, subject to a cap equal to the greater of (x) the conversion price then in effect or (y) $ 4.0638 .

Upon the receipt of shareholder approval on November 20, 2024, the Series F Convertible Preferred Stock votes on an as-converted basis, subject to a cap equal to the greater of (x) the conversion price then in effect or (y) $ 4.0638 .

Holders have the right to require the Company to redeem the Series F Convertible Preferred Stock under certain conditions, including a Change of Control or Trading Failure, each as defined in the Series F Convertible Preferred Stock certificate of designation.

3 unchanged sentences

Further, upon receipt of shareholder approval of the conversion feature of the Series F Convertible Preferred Stock, which approval was received on November 20, 2024, if the VWAP for any 20 Trading Days during any 30 consecutive trading day period, beginning with the original issuance date of the applicable preferred stock, exceeds two hundred percent ( 200 %) of the conversion price then in effect, the Company may, at any time cause the holder to convert all or part of the holder’s preferred stock.

During the three months ended November 30, 2024, 10,191 shares of Series F Convertible Preferred Stock were converted into approximately 1.5 million shares of the Company’s common stock.

Subsequent to the quarter end, the remaining 43,000 shares of the Series F Convertible Preferred Stock were converted into approximately 6.1 million shares of the Company’s common stock.

Series E-1 Preferred Stock

During the three months ended February 28, 2025, 43,000 shares of Series F Convertible Preferred Stock were converted into approximately 6.1 million shares of the Company’s common stock.

During the nine months ended February 28, 2025, all 53,191 shares of Series F Convertible Preferred Stock were converted into approximately 7.6 million shares of the Company’s common stock.

As of February 28, 2025, there is no outstanding Series F Convertible Preferred Stock.

Series E-1 Redeemable Preferred Stock

On September 23, 2024, the Company entered into a dealer manager agreement for the offering of up to 62,500 shares of Series E-1 Redeemable Preferred Stock, par value $ 0.001 per share (“Series E-1 Preferred Stock”), at a price per share of $ 1,000 (the “Series E-1 Stated Value”).

During the three months ended November 30, 2024, the Company closed on two offerings of the Series E-1 Preferred Stock in which the Company issued and sold 6,359 shares for gross proceeds of $ 6.4 million.

During the three months ended February 28, 2025, the Company closed on four offerings of the Series E-1 Preferred Stock, in which the Company issued and sold 33,404 shares for gross proceeds of

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Nine Months Ended February 28, 2025

$ 33.4 million for a total of six offerings during the nine months ended February 28, 2025, in which the Company issued 39,763 shares for gross proceeds of $ 39.8 million.

The Series E-1 Preferred Stock offering remains ongoing as of the date of this report.

3 unchanged sentences

Dividends on the shares of Series E-1 Preferred Stock must be fully paid for all past periods before any distributions can be made to common stockholders or any junior series of equity securities.

During the three and six months ended November 30, 2024, the Company declared and paid approximately $ 48,000 of dividends related to the Series E-1 Preferred Stock as presented on the unaudited condensed consolidated statements of operations.

During the three and nine months ended February 28, 2025, the Company declared and paid approximately $ 0.4 million and $ 0.4 million, respectively, of dividends related to the Series E-1 Preferred Stock as presented on the unaudited condensed consolidated statements of operations.

The Series E-1 Preferred Stock ranks senior to all classes or series of common stock and junior to all existing and future debt of the Company.

2 unchanged sentences

The Series E-1 Preferred Stock has no stated maturity and remains outstanding indefinitely unless redeemed or repurchased by the Company.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended November 30, 2024

equal to a percentage of the Series E-1 Stated Value based on the year when the redemption occurs as follows:

Holders may require the Company to redeem any portion of their Series E-1 Preferred Stock at any time for a "Settlement Amount" calculated as the Series E-1 Stated Value plus any unpaid dividends, less a Holder Optional Redemption Fee equal to a percentage of the Series E-1 Stated Value based on the year when the redemption occurs as follows:

9.00 % prior to the first anniversary of the respective tranche closing date (the "Original Issuance Date");

9 unchanged sentences

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company presents operating and finance right of use assets and liabilities separately on the balance sheet as their own captions, with the liabilities split between current and long-term, respectively.

The Company presents operating and finance lease right of use assets and liabilities separately on the unaudited condensed consolidated balance sheets as their own captions, with the liabilities split between current and long-term.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Nine Months Ended February 28, 2025

Components of lease expense were as follows (in thousands):

Three Months Ended Six Months Ended

November 30, 2024 November 30, 2023 November 30, 2024 November 30, 2023

Three Months Ended Nine Months Ended

February 28, 2025 February 29, 2024 February 28, 2025 February 29, 2024

Operating lease cost:

11 unchanged sentences

(1) Amortization of right-of-use assets is included within cost of revenues and selling, general and administrative expense in the unaudited condensed consolidated statements of operations.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended November 30, 2024

The following table represents the Company’s future minimum lease payments as of November 30, 2024:

The following table represents the Company’s future minimum lease payments as of February 28, 2025:

Operating Leases Finance Leases Total

11 unchanged sentences

Supplemental cash flow and other information related to leases is as follows:

Six Months Ended

November 30, 2024 November 30, 2023

Nine Months Ended

February 28, 2025 February 29, 2024

Weighted-average years remaining (in years):

Finance leases 3.6 years 5.5 years

Operating leases 2.9 years 5.3 years

Finance leases 3.5 years 2.5 years

Weighted-average discount rate:

Finance leases 10.2 % 8.8 %

Operating leases 7.7 % 7.6 %

Finance leases 10.5 % 10.7 %

The Company has entered into leases which are executed but not yet commenced with total minimum payments of approximately $ 16.6 million.

The payments are for various leases with terms of 2 years.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Nine Months Ended February 28, 2025

Commitments and Contingencies

Energy Contracts

As of November 30, 2024, the Company had a minimum commitment of approximately $ 61.1 million related to the energy services agreement for its Jamestown, North Dakota co-hosting facility payable over, approximately, the next 2.2 years.

As of February 28, 2025, the Company had a minimum commitment of approximately $ 54.2 million related to the energy services agreement for its Jamestown, North Dakota co-hosting facility payable over, approximately, the next 1.9 years.

Construction Contracts

5 unchanged sentences

From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business.

The Company, Wes Cummins, the Company's Chief Executive Officer, and David Rench, the Company's then Chief Financial Officer, have been named as defendants in a putative securities class action lawsuit in the matter styled,

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended November 30, 2024

Securities Lawsuit

Applied Digital Corporation, et al., Case No.

5 unchanged sentences

On November 20, 2024, Lead Plaintiff filed his opposition to the Motion to Dismiss.

On January 3, 2025, the defendants filed their reply in further support of the Motion to Dismiss.

The Company is unable to estimate a range of loss, if any, that could result were there to be an adverse final decision in the Securities Lawsuit.

If an unfavorable action were to occur, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable.

Derivative Lawsuit

On November 15, 2023, a derivative action was filed in the matter styled, Weich v.

5 unchanged sentences

On February 27, 2024, the derivative plaintiff filed an amended complaint asserting the same claims as the original complaint.

On June 5, 2024, following briefing and argument on the defendants’ motion to dismiss the Derivative Lawsuit, the Court entered an order granting the defendants’ motion without prejudice and dismissing all claims against all defendants, including the Company, on the grounds that the plaintiff failed to plead (1) demand futility as to each of plaintiff’s claims or (2) a claim for breach of fiduciary duty.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Nine Months Ended February 28, 2025

or (2) a claim for breach of fiduciary duty.

The order dismissed all claims against all defendants, including the Company.

2 unchanged sentences

As of November 30, 2024, there were no other pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s consolidated operations.

As of February 28, 2025, there were no other pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s consolidated operations.

There are also no legal proceedings in which any of the Company’s management or affiliates is an adverse party or has a material interest adverse to the Company’s interest.

Garden City Release of Escrow Funds

On July 30, 2024, the Company announced that it had met the conditional approval requirements related to the release of the escrowed funds from the sale of its Garden City hosting facility.

As of the date of this report, the Company has received the remaining $ 25 million of the purchase price held in escrow pending such conditional approval which was included in gain on classification of held for sale in its unaudited condensed consolidated statements of operations.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended November 30, 2024

Business Segments

Revenue by segment (excluding HPC hosting as that segment has no revenue) was as follows (in thousands):

Three Months Ended Six Months Ended

November 30, 2024 November 30, 2023 November 30, 2024 November 30, 2023

Data center hosting segment

Revenue by segment (excluding the HPC Hosting Business as that segment has no revenue) was as follows (in thousands):

Three Months Ended Nine Months Ended

February 28, 2025 February 29, 2024 February 28, 2025 February 29, 2024

Data Center Hosting Business

$ 35,167 $ 37,795 $ 106,180 $ 109,720

Cloud services segment

Cloud Services Business

17,754 5,553 71,313 12,156

1 unchanged sentence

Segment profit (loss) and a reconciliation to net loss before income tax expenses is as follows (in thousands):

Three Months Ended Six Months Ended

November 30, 2024 November 30, 2023 November 30, 2024 November 30, 2023

Three Months Ended Nine Months Ended

February 28, 2025 February 29, 2024 February 28, 2025 February 29, 2024

Segment profit (loss)

Data center hosting segment (1)

Data Center Hosting Business (1)

$ 8,780 $ ( 24,443 ) $ 57,181 $ ( 4,647 )

Cloud services segment

Cloud Services Business

( 10,308 ) ( 21,565 ) ( 31,928 ) ( 40,694 )

HPC hosting segment ( 5,839 ) ( 908 ) ( 8,784 ) ( 1,662 )

Total segment profit (loss) 901 ( 1,571 ) 17,997 ( 729 )

HPC Hosting Business

( 222 ) ( 1,445 ) ( 9,022 ) ( 3,106 )

Total segment (loss) profit ( 1,750 ) ( 47,453 ) 16,231 ( 48,447 )

( 17,193 ) ( 8,003 ) ( 44,305 ) ( 22,287 )

Operating loss ( 18,943 ) ( 55,456 ) ( 28,074 ) ( 70,734 )

1 unchanged sentence

Loss on conversion of debt

25,410 — 33,612 —

Loss on change in fair value of debt — — 85,439 —

Loss on debt extinguishment — — — 2,353

Loss on change in fair value of related party debt — 2,612 — 2,612

Loss on extinguishment of debt

1,177 — 1,177 —

Loss on extinguishment of related party debt

$ — $ — $ — $ 2,353

Loss on change in fair value of warrants $ 6,421 $ — $ 6,421 $ —

Net loss before income tax expenses $ ( 35,438 ) $ ( 62,838 ) $ ( 178,410 ) $ ( 85,221 )

(1) The six months ended November 30, 2024 includes a $ 25 million gain on classification of held for sale related to the satisfaction of a contingency associated with the sale of the Garden City facility.

(1) The nine months ended February 28, 2025 includes $ 25 million received in connection with the sale of our Garden City facility once conditional approval requirements were met and escrowed funds were released.

The three and nine months ended February 29, 2024 includes $ 21.7 million loss on held for sale classification related to the sale of the Garden City facility.

(2) Other includes corporate related items not allocated to reportable segments.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Nine Months Ended February 28, 2025

We also provide the following additional segment disclosures (in thousands):

Three Months Ended Six Months Ended

November 30, 2024 November 30, 2023 November 30, 2024 November 30, 2023

Three Months Ended Nine Months Ended

February 28, 2025 February 29, 2024 February 28, 2025 February 29, 2024

Depreciation and amortization:

Data center hosting segment

Data Center Hosting Business

$ 3,333 $ 9,162 $ 9,990 $ 16,902

Cloud services segment

Cloud Services Business

14,403 16,534 66,355 29,824

HPC hosting segment 1,353 184 2,074 311

HPC Hosting Business

982 407 3,056 717

60 102 183 221

Total depreciation and amortization (2)

2 unchanged sentences

(2) Includes amortization of the finance lease right-of-use assets.

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended November 30, 2024

Information on segment assets and a reconciliation to consolidated assets are as follows (in thousands):

November 30, 2024 May 31, 2024

Data center hosting segment

February 28, 2025 May 31, 2024

Data Center Hosting Business

$ 135,648 $ 145,222

Cloud services segment

Cloud Services Business

386,608 374,216

HPC hosting segment 717,131 220,648

HPC Hosting Business

1,101,811 220,648

Total segment assets 1,624,067 740,086

7 unchanged sentences

The table below shows the calculation for earnings per share:

Three Months Ended Six Months Ended

November 30, 2024 November 30, 2023 November 30, 2024 November 30, 2023

Three Months Ended Nine Months Ended

February 28, 2025 February 29, 2024 February 28, 2025 February 29, 2024

Net loss $ ( 35,555 ) $ ( 62,838 ) $ ( 178,528 ) $ ( 85,221 )

5 unchanged sentences

Basic and diluted weighted average number of shares outstanding 222,454,578 121,426,622 193,405,721 110,500,556

As of November 30, 2024 and 2023, the Company had approximately 7.6 million and 8.5 million shares, respectively, of granted but unvested restricted stock and restricted stock units that would have a potentially dilutive effect on earnings per share.

As of November 30, 2024, the Company had approximately 7.5 million shares associated with the Preferred Stock which have been excluded from the calculation of earnings per share because the effect of those shares would be antidilutive.

Additionally, the Company had approximately 6.3 million warrants outstanding as of November 30, 2024, which have been excluded from the calculations of earnings per share because the effect of those shares would be antidilutive.

Subsequent Events

Unit Purchase Agreement

On January 13, 2025, APLD HPC Holdings LLC (“APLDH”), an indirect wholly owned subsidiary of the Company, entered into a Unit Purchase Agreement (the “Unit Purchase Agreement” or “UPA”) for its HPC Hosting Business with MIP VI HPC Holdings, LLC, which is an affiliate of funds and investment vehicles managed by entities within Macquarie Asset Management (“MAM”).

Pursuant to the terms of the UPA, MAM will invest up to $ 900 million to fund the equity portion of the construction costs for the Company’s 400 MW Ellendale, North Dakota datacenter campus (the “Ellendale Campus”), with the initial investment of $ 225 million payable at closing, and the remaining $ 675 million payable in

APPLIED DIGITAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the Three and Six Months Ended November 30, 2024

increments of $ 2.25 million for each executed lease of 1 MW of capacity.

MAM also has a right to invest up to an additional $ 4.1 billion in future HPC development projects.

MAM will receive preferred and common units for its investment.

The common units represent fifteen percent ( 15 %) of APLDH’s fully diluted common equity.

The preferred units will accrue a dividend at a rate of 12.75 % per annum, paid in stock or cash, at APLDH’s election, which will increase by 87.5 basis points on the fifth and sixth anniversaries of the closing, if still outstanding, and will carry a minimum 1.80x multiple of invested capital liquidation preference, inclusive of the value of the common equity.

The closing is conditioned upon, among other things, APLDH executing a lease with a hyperscaler for the first 100 MW on the Ellendale Campus, in a form acceptable to MAM, the parties finalizing and executing a limited liability company agreement for APLDH (the “LLCA”), for the Company and APLDH to carry out an internal restructuring to segregate the HPC Hosting Business’ assets and liabilities before closing, as well as other customary closing conditions.

In addition, the Unit Purchase Agreement provides for the Company to issue to MAM at closing two warrants to purchase 4,458,069 shares each, for a total of 8,916,138 shares of the Company’s common stock at the exercise price of $ 8.29 per share.

The common shares issuable upon exercise of the warrants are subject to customary registration rights pursuant to a registration rights agreement to be executed and delivered at closing.

The LLCA is expected to contain customary provisions for transactions of this nature, including, for example, co-sale rights, transfer restrictions, governance rights, redemption rights, forced sale rights, and step-in rights.

Other than the event described above and the events described in Note 6 - Debt, Note 7 - Stockholders' Equity and Note 8 - Temporary Equity, there are no additional subsequent events through the date of issuance of these unaudited condensed consolidated financial statements which require adjustment or disclosure.

For the Three and Nine Months Ended February 28, 2025

As of February 28, 2025 and February 29, 2024, the Company had approximately 10.9 million and 11.9 million shares, respectively, of granted but unvested restricted stock, performance stock, and restricted stock units that would have a potentially dilutive effect on earnings per share.

As of February 28, 2025, the Company had approximately 5.9 million shares associated with the Company’s preferred stock which have been excluded from the calculation of earnings per share because the effect of those shares would be antidilutive.

Additionally, the Company had approximately 4.0 million warrants outstanding as of February 28, 2025, which have been excluded from the calculations of earnings per share because the effect of those shares would be antidilutive.

Subsequent Events

Potential Sale of Cloud Services Business

During the quarter ended February 28, 2025, the Company began discussions for the possible sale of the Cloud Services Business and on February 26, 2025, the Board of Directors approved the negotiation of a potential transaction.

As of April 10, 2025, the Company determined that the Cloud Services Business met the criteria to be classified as “held for sale,” as the Board of Directors approved further plans for the sale of the segment.

The potential sale of the Cloud Services Business represents a strategic shift in the Company’s operations and financial results.

As such, beginning in the fourth quarter of fiscal 2025, the Company will report the Cloud Services Business as discontinued operations.

On March 27, 2025, the compensation committee of the Board of Directors of the Company approved the following grants, under the Company’s 2024 Omnibus Equity Incentive Plan, of performance stock units, subject to time- and performance-based vesting conditions:

(i) 1,600,000 to Wes Cummins, the Company’s Chief Executive Officer and Chairman of the Board of Directors, (ii) 245,000 to Saidal Mohmand, the Company’s Chief Financial Officer, and (iii) 600,000 to Laura Laltrello, the Company’s Chief Operating Officer.

Withdrawal of Designation

On April 11, 2025, the Company filed a Withdrawal of Designation relating to the Series F Convertible Preferred Stock with the Secretary of State of the State of Nevada and terminated the designation of the Series F Convertible Preferred Stock.

At the time of the filing of the Withdrawal of Designation, no shares of Series F Convertible Preferred Stock were outstanding.

Other than the events described above, there are no additional subsequent events through the date of issuance of these unaudited condensed consolidated financial statements which require adjustment or disclosure.

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.

What changed 10-Q

Item 1. Financial Statements